Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements, balance sheets,

accounts in the basic financial statements disclosed in Japan have beenstatements of income, shareholders' equity and cash flows, have been

made for presentation in a form which is more familiar to readers

prepared from accounts and records maintained by Toyoda Automatic

outside Japan. These reclassifications do not affect the values of total

Loom Works, Ltd. (the “Company”), and its domestic and overseas

assets, shareholders' equity, net sales or net income.

subsidiaries (together, hereinafter referred to as the “Companies”) in

These financial statements presented herein are stated in Japanese

accordance with generally accepted accounting principles in Japanyen, the currency of the country in which the Company is incorporated

and, for overseas consolidated subsidiaries, in conformity withand operates, and solely for the convenience of readers outside Japan,

accounting principles of the countries of their domicile. Furthermore,they have been translated into U.S. dollars at the rate of ¥120.55 tothese consolidated financial statements have been prepared based on

U.S.$1, the approximate exchange rate on the Tokyo Foreign

the consolidated financial statements prepared in accordance with

Exchange Market on March 31, 1999. These translations should not“Regulations Concerning the Terminology, Forms and Preparation

be construed as representations that all the yen amounts have been or

Methods of the Consolidated Financial Statements” of Japan.

could be converted into U.S. dollars.

Relevant notes have been added and certain reclassifications of the

2. Summary of Significant Accounting Policies(a) Consolidation(b) Investments in non-consolidated subsidiaries and affiliates

The Company had 30, 26 and 25 majority-owned subsidiaries as of

The Company had 3 (16 for 1998 and 16 for 1997) non-consolidated

March 31, 1999, 1998 and 1997, respectively. The accompanying

subsidiaries and 11 (13 for 1998 and 12 for 1997) affiliates (meaning

consolidated financial statements include the accounts of the

20% to 50% ownership of company's equity interest). The equity

Company and 27, 10 and 9 of its major subsidiaries as of March 31,

method is applied to the investments in 2 major affiliates since

1999, 1998 and 1997, respectively. The 27 consolidated subsidiaries

investments in the remaining non-consolidated subsidiaries andare listed on page 34.

affiliates are not material for the consolidated financial statements.

The remaining 3 (16 for 1998 and 16 for 1997) non-consolidated

The major affiliates accounted for by the equity method are listed on

subsidiaries, whose combined assets, net sales, net income andpage 34.

retained earnings in the aggregate are not significant in relation to
those of the consolidated financial statements of the Companies, have(c) Cash and cash equivalents

not been consolidated with the Company.

Cash and cash equivalents include all highly liquid debt instruments.

The fiscal years of the subsidiaries are not necessarily the same as
the Company's. Accounts of those subsidiaries which have different
fiscal periods have been adjusted for significant transactions toproperly reflect their financial positions as of March 31, 1999, 1998
and 1997, respectively.
For the purpose of preparing the consolidated financial statements,(d) Marketable and Investment Securities
Securities that are quoted on stock exchanges are stated mainly at thelower of cost, as determined by the moving average method, or market
value. Other securities are stated at cost, as determined by the moving
average method, or less.

all significant inter-company transactions, account balances and(e) Inventories

unrealized profits among the Companies have been eliminated, andInventories are stated mainly at cost determined by the moving

the portion attributable to minority interest has been credited/charged

average method.

against it.
The differences between the cost and underlying net equity ofinvestments in consolidated subsidiaries at acquisition are presented as“consolidation difference” and are amortized on a straight-line basis
over five years.

T O Y O D A
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(f) Property, plant and equipment, and depreciation(k) Ttranslation adjustments

Property, plant and equipment are stated at cost.

Accounts of overseas consolidated subsidiaries and affiliates

Depreciation of property, plant and equipment, for the Company andaccounted for under the equity method have been translated into yen

domestic subsidiaries and affiliates, is computed mainly by theas follows:

declining-balance method with provisions of “Japanese Tax Laws”

1. Assets and liabilities have been translated at the prevailing fiscal

and, for overseas subsidiaries and affiliates, is computed mainly by thestraight-line method based on the estimated useful lives of the assets.
Due to the amendment of “Japanese Tax Laws” in fiscal 1999,
depreciation of buildings (excluding appendices to them) has been
computed at rates based on new estimated useful lives those are

year-end rate.
2. Shareholders' equity has been translated at the rate prevailing whenequity was acquired or when a change in equity occurred.
3. Revenue and expenses have been translated at the prevailing fiscal
year-end rate.

shorter than in the previous year.

In fiscal 1997, the Company adopted the amended “Accounting

If this change of the depreciation period was not made, depreciation

Standard for Foreign Currency Translations, etc.”, however, it gave nois ¥33,932 million ($281,477 thousand), operating income is ¥25,262

effects on income before income taxes.

million ($209,552 thousand), income before income taxes is ¥23,620
million ($195,936 thousand).

(l) Consumption tax

The effect on the segment information is listed on page 29 (Note 9.

Principally, the consumption tax withheld by the Companies on sales

Segment Information).

of goods is not included in the amount of “net sales” in theaccompanying consolidated statements of income. And the(g) Bond issue expenses

consumption tax borne by the Companies on purchases of goods andBond issue expenses is charged to income as incurred.

services, and expenses is not included in the related amount, either.

(h) Allowance for doubtful accounts(m) Appropriation of retained earnings

The allowance for doubtful accounts is provided mainly at theIn the accompanying consolidated statements of shareholders' equity,

maximum amount deductible under “Japanese Tax Laws”.

approved amount during the relevant fiscal year is reflected for theappropriations of retained earnings of the consolidated subsidiaries.

(i) Retirement and severance benefits
The annual provision for retirement and severance benefits is(n) Income taxes

calculated to state liability at the present value, based on the amount

Income taxes are principally provided in amounts currently payable

which would be required if all employees voluntarily terminated theirfor each year. Deferred income taxes arising from timing differences

employment at each balance sheet date, less amounts compensated by

between reporting for accounting purposes and for tax purposes are

the retirement pension plan which cover a 50% portion of the benefits

not required under Japanese accounting principles and therefore haveof the retired employees.

not been recorded by the Company and its domestic subsidiaries andaffiliates.

(j) Lease transaction

However, for overseas subsidiaries and affiliates, deferred income

Finance leases other than those that are deemed to transfer thetaxes have been recorded and reflected in the consolidated financial

ownership of the leased assets to lessees are mainly accounted for bystatements.

the method similar to that applicable to ordinary operating leases.

For your information, “Tax Effect Accounting” is to be adopted inJapan from the fiscal year ending March 31, 2000.
(o) Amounts per share
Net income per share is computed based on the average number ofoutstanding common shares during the fiscal year.

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T O Y O D A
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3. Change in Accounting
Until fiscal 1997, the Companies traditionally have included the sum

and “cost of sales” decreased by ¥31,006 million ($257,203 thousand),of the sales of materials or semi-finished goods, which were sold to¥33,430 million and ¥26,938 million for 1999, 1998 and 1997,

suppliers for processing, in “net sales” and the cost of repurchasing therespectively, compared with the old method. However, it gives noprocessed goods in “cost of sales”. From fiscal 1998, the Companies

effects on operating income, income before income taxes or net

have excluded the sum of sales of such goods from “net sales” and theincome. Also, the receivable amount of such goods for suppliers,

identical amount from “cost of sales”, and for 1997, “net sales” andwhich had been entered in “receivables-trade” on the balance sheets“cost of sales” were recalculated in accordance with the accounting

was entered in “other current assets” from fiscal 1998, and thepolicy after change, and those amounts are reflected on thereceivable amounts of such goods as of March 31, 1999 and 1998 wereconsolidated financial statements. Due to this change, both “net sales”¥6,115 million ($50,723 thousand) and ¥5,991 million, respectively.

4. Additional Information
From fiscal 1999, the Companies have presented consolidated

they have been included and presented in “income taxes” from 1999.

financial statements in conformity with the amended “Regulations“Amortization of consolidation difference” (¥120 million ($999

Concerning the Terminology, Forms and Preparation Methods of thethousand) for 1999) which was classified as a deductible item from

Consolidated Financial Statements”. In preparing these consolidated

income before income taxes in the previous year has been included

financial statements, following adjustments have been made toand presented in “selling, general and administrative expenses”.

conform to the consolidated financial statements issued for 1999.

“Equity in earnings of affiliates” (¥(3,763) million ($(31,217)

In the consolidated balance sheets, “legal reserve” and “retained

thousand) for 1999) which was added to income before income taxes

earnings” have been combined and shown as “retained earnings”.

in the previous year, has been included and presented in “other, net”

And, “consolidation difference” which had been placed betweenof “other income or expenses”. And, these adjustments have not been

liabilities section and shareholders’ equity section until the previous

applied to financial statements presented prior to 1999 retroactively.

year has been presented into “long-term liabilities” from 1999.

In the case of presenting based on the same method used in the

In the consolidated statements of income, “enterprise taxes” (¥2,088

previous year, operating income and income before income taxes formillion ($17,321 thousand) for 1999) were included in “selling,

1999 are ¥22,846 million ($189,516 thousand) and ¥24,968 million

general and administrative expenses” in the previous year. However,($207,117 thousand).

5. Inventories
Inventories as of March 31, 1999 and 1998 were as follows :Finished goods

Thousands of
U.S. dollars

Millions of yen

1999

1998

1999

¥ 2,223¥ 1,973$ 18,438

Raw materials

3,421

1,375

28,379Work in process

18,062

16,531

149,828

Supplies

3,554

2,031

29,482¥ 27,260¥ 21,910$ 226,127T O Y O D A
1 9 9 927

6. Long-term Debt
Long-term debts as of March31, 1999 and 1998 were as follows :Thousands of
U.S. dollars

Millions of yen

1999

1998

1999

¥ 75,748¥ 75,838$ 628,353

30,00030,000248,860

1.5% bonds due 2003 without collateral

20,000-165,906

2.15% bonds due 2008 without collateral

20,000-165,906-

300-

Parent company:
0.35% convertible bonds due 2003 without collateral
2.7% bonds due 2008 without collateral

Consolidated subsidiaries:
5.7% bonds due 1998
1.8% bonds due 2005

300

-

2,489

Long-term bank loans

3,444

3,515

28,564

(874)

(351)

(7,247)¥148,618¥109,302$1,232,831

Less: current portion of long-term debt

7. Assets Pledged as Collateral
Investments in securities and term deposits at the book value of ¥12,824 million ($106,379 thousand) were pledged for bank loans or employees'saving deposits or other liabilities as of March 31, 1999.

8. Contingent Liabilities
Contingent liabilities for guarantees of loan of 2 companies and bond issue of 1 village in Michigan, U.S.A. amount to ¥3,109 million ($25,793
thousand) as of March 31, 1999.

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T O Y O D A
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9. Segment Information
Thousands of
U.S. dollars

Millions of yen(a)Business segments
1999

1998

1997

1999

¥ 364,269
2,431
366,700¥ 366,387
4,021
370,408¥ 358,127
3,106
361,233$ 3,021,727
20,161
3,041,888

151,370
151,370

160,117160,117

136,086
136,086

1,255,658
1,255,658

18,947
0
18,947--

157,1723
157,175

24,2902,974
27,264

46,194
1,060
47,254

36,639105
36,744201,493
24,671
226,164

564,281(5,405)

577,779(5,081)

534,063(3,211)4,680,885(44,836)¥ 558,876¥ 572,698¥ 530,852$ 4,636,049¥ 349,302
142,918
22,40225,064(5,624)¥ 351,635
147,386
45,895(4,947)¥ 336,819
127,731
36,838(3,211)$ 2,897,570
1,185,548
185,833
207,915(46,656)¥ 534,062¥ 539,969¥ 498,177$ 4,430,210¥ 17,397
8,452(3,455)2,200
220¥ 18,773
12,731
1,359(134)¥ 24,414
8,355
(94)
-

$

144,318
70,109(28,658)
18,250
1,820

Total

¥ 24,814¥ 32,729¥ 32,675$

205,839

AssetsAutomobiles
Logistics & Forklifts
Textile machinery
Other
Corporate¥ 254,087
78,51822,224
20,729241,513¥ 204,216
69,73043,877275,181¥ 185,408
64,58534,634
271,664$ 2,107,729
651,330
184,354
171,952
2,003,428

Total¥ 617,071¥ 593,004¥ 556,291$ 5,118,793¥ 26,518
5,548
1,024
1,404
(114)

¥ 21,473
4,549
1,959
(23)

¥ 22,384
3,874
1,785
-

$

219,972
46,025
8,492
11,647(945)¥ 34,380¥ 27,958¥ 28,043$

285,191¥ 47,635
11,691
663
875
(396)

¥ 50,918
7,660
3,586
(157)

¥ 22,078
10,7942,536-$

395,143
96,9795,502
7,265(3,285)¥ 60,468¥ 62,007¥ 35,408$

501,604

Sales
Automobiles
Outside customer sales
Inter-segment transactions
Logistics & Forklifts
Outside customer sales
Inter-segment transactions
Textile machinery
Outside customer sales
Inter-segment transactions
Other
Outside customer sales
Inter-segment transactions
Sub-total
Elimination of inter-segment transactions
Total
Operating Costs and Expenses
Automobiles
Logistics & Forklifts
Textile machinery
Other
Elimination of inter-segment transactions
Total
Operating Income
Automobiles
Logistics & Forklifts
Textile machinery
Other
Elimination of inter-segment transactions

Depreciation
Automobiles
Logistics & Forklifts
Textile machinery
Other
Corporate or elimination of inter-segment transactions
Total
Capital Investment
Automobiles
Logistics & Forklifts
Textile machinery
Other
Corporate or elimination of inter-segment transactions
Total

T O Y O D A
1 9 9 929

Thousands of
U.S. dollars

Millions of yen(b)Geographical segments
1999

1998

1997

1999

Sales
Japan
Outside customer sales¥ 465,444--$ 3,861,001

Inter-segment transactions

18,860--156,455484,304--

4,017,456

78,264--649,221

-

-

-

-

78,264--649,221

Outside customer sales

15,168--125,827

Inter-segment transactions

551

-

-

4,568

15,719--130,395

578,287--

4,797,072(19,411)--(161,023)¥ 558,876¥ 572,698¥ 530,851$ 4,636,049¥ 465,139--$ 3,858,473

73,342--

608,395

Other

15,100--125,258

Elimination of inter-segment transactions(19,519)--(161,916)¥ 534,062¥ 539,969¥ 498,177$ 4,430,210¥ 19,166--$ 158,984

North America
Outside customer sales
Inter-segment transactions
Other

Sub-total
Elimination of inter-segment transactions
Total

Operating Costs and Expenses
Japan
North America

Total

Operating Income
Japan
North America

4,922

-

-

40,826

Other

619

-

-

5,137

Elimination of inter-segment transactions

107

-

-

892

¥ 24,814¥ 32,729¥ 32,675$ 205,839

Total

AssetsJapan¥ 349,787--$ 2,901,596

North America

39,113--

324,452

Other

15,846--

131,445

Corporate

212,325--

1,761,300¥ 617,071¥ 593,004¥ 556,291$ 5,118,793

Total

30

T O Y O D A
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Notes:(a) 1. Amounts of Textile machinery business were included in “Other”
in the previous year. However, from fiscal 1999, these amounts
have been separated from “Other” and presented as “Textile
machinery” business because these have become more material
than in the previous year.
2. Main products of each segment:
Automobiles ....................Automobiles, Engines,
Car air-conditioning compressors
Logistics & Forklifts........Forklifts, Shovel loaders,
Automatic guided vehicles
Textile machinery ...........Looms, Spinning machines
Other ................................Casting machines, etc.
3. Due to the amendment of “Japanese Tax Laws” in fiscal 1999,
depreciation of buildings has been computed at rates based on new
estimated useful lives which are shorter than in the previous year.
Also, due to the amendment of “Regulations Concerning the
Terminology, Forms and Preparation Methods of the Consolidated
Financial Statements”, “enterprise taxes” and “amortization of
consolidation difference” have been reclassified in the consolidated
statements of income.
If presentations of fiscal 1999 are made in conformity with themethods in the previous year, the figures for operating income,assets and depreciation are recalculated as follows:(b)

Automobiles
Operating income
AssetsDepreciation
Logistics & Forklifts
Operating income
AssetsDepreciation
Textile machineryOperating income
AssetsDepreciation
Other
Operating income
AssetsDepreciation

Millions ofyen

Thousands of
U.S. dollars¥

16,563
254,378
26,227$ 137,392
2,110,142
217,559¥

7,970
78,6295,437$

66,112652,250
45,105¥(3,478)22,243
1,004$(28,849)
184,515
8,331

¥

1,976
20,755
1,378$

16,392
172,171
11,428

Total (including corporate or elimination of inter-segment transactions)Operating income¥ 23,294$ 193,230
Assets617,518
5,122,507
Depreciation
33,932
281,477

For 1998 and 1997, both the amounts of the transactions within Japan and the assets belong to Japan are more than 90% of the total amounts ofall segments. Therefore, geographical segments information was omitted.

Report of Independent Public Accountants
To the Board of Directors of
Toyoda Automatic Loom Works, Ltd.
We have examined the consolidated balance sheets of Toyoda Automatic Loom Works, Ltd. and its consolidated subsidiaries asof March 31, 1999 and 1998, and the consolidated statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended March 31, 1999, expressed in Japanese yen. Our examinations were made in accordance with generally
accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
In our opinion, the aforementioned consolidated financial statements present fairly the financial position of Toyoda Automatic
Loom Works, Ltd. and its consolidated subsidiaries as of March 31, 1999 and 1998, and results of their operations and their cash
flows for each of the three years in the period ended March 31, 1999, in conformity with generally accepted accounting principles
in Japan consistently applied on a consistent basis, except in regard to the changes in accounting procedures, with which we
concur, described in Note 3 to the consolidated financial statements.
Our examinations also covered the translation of Japanese yen amounts into the United States dollar amounts included in the
consolidated financial statements and, in our opinion, such translation has been made in conformity with the basis stated in Note 1
to the consolidated financial statements. Such United States dollar amounts are presented solely for the convenience of readers
outside Japan.
ITOH AUDIT CORPORATION
June 29, 1999
Nagoya JapanT O Y O D A
1 9 9 931