Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements havebeen prepared based on the accounts maintained by Toyota
Industries Corporation (the “Company”) and its consolidated
subsidiaries (together, hereinafter referred to as “Toyota
Industries”) in accordance with the provisions set forth in theCommercial Code of Japan and the Securities and Exchange
Law, and in conformity with accounting principles andpractices generally accepted in Japan, which are different incertain respects from the application and disclosure
requirements of International Accounting Standards.
Certain items presented in the consolidated financial
statements submitted to the Director of Kanto Finance Bureau
in Japan have been reclassified in these accounts for theconvenience of readers outside Japan.
The consolidated financial statements are not intended topresent the consolidated financial position, results ofoperations and cash flows in accordance with accounting
principles and practices generally accepted in countries andjurisdictions other than Japan.
Amounts in U.S. dollars are included solely for theconvenience of readers outside Japan. The rate of ¥120.20 =US $1, the approximate rate of exchange prevailing at March
31, 2003, 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 the accounts of
the Company and its 118 subsidiaries (33 domestic subsidiaries
and 85 overseas subsidiaries, which are listed on page 98 and99) in 2003, 111 subsidiaries (26 domestic subsidiaries and 85
overseas subsidiaries) in 2002 and 100 subsidiaries (22domestic subsidiaries and 78 overseas subsidiaries) in 2001.
For the year ended March 31, 2003, eight subsidiaries were
newly added to the scope of consolidation and one company
was excluded from the scope of consolidation. Since two
subsidiaries out of eight subsidiaries are deemed as being
acquired by the Company as of the semi-annual period end
and as of October 1, 2002, respectively, the results ofoperations of the latter half of the year of those subsidiaries
are consolidated in the consolidated financial statements. Two
subsidiaries are excluded from the scope of consolidation due
to temporary investments.
For the year ended March 31, 2002, 15 subsidiaries were
newly added to the scope of consolidation and four companies
were excluded from the scope of consolidation. Since fivesubsidiaries out of 15 subsidiaries were deemed as being
acquired by the Company as of the semi-annual period end,
the results of operations of the latter half of the year of thosesubsidiaries were consolidated in the consolidated financial

statements. One subsidiary was excluded from the scope of
consolidation due to temporary investments.
For the year ended March 31, 2001, 72 subsidiaries,
including 63 BT Industries group companies, were newly added
to the scope of consolidation. Since 64 subsidiaries out of 72
subsidiaries were deemed as being acquired by the Company
as of the semi-annual period end, the results of operations of
the latter half of the year of those subsidiaries wereconsolidated in the consolidated financial statements. Two
subsidiaries were excluded from the scope of consolidation
due to temporary investments.
The fiscal years of certain subsidiaries are different from thefiscal year of the Company. Since the difference is not morethan three months, the Company is using those subsidiaries’
statements for those fiscal years, making adjustments for
significant transactions that materially affect the financial
position or results of operations.
All significant intercompany transactions, balances andunrealized 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 of acquisitionof control.

(2) Investments in unconsolidated subsidiaries and affiliates
Investments in two unconsolidated subsidiaries and 16 majoraffiliates in 2003, one unconsolidated subsidiary and 18 majoraffiliates in 2002 and two unconsolidated subsidiaries and 17
major affiliates in 2001 are accounted for by the equity
method of 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 arelisted on page 99.

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

55

(3) Translation of foreign currencies
Foreign currency denominated receivables and payables aretranslated into Japanese yen at the year-end exchange rates
and the resulting transaction gains or losses are included inincome statements.
All asset and liability accounts of foreign subsidiaries andaffiliates are translated into Japanese yen at year-end

exchange rates and all revenue and expense accounts aretranslated at prevailing fiscal average rates. The resulting
translation adjustments are included as a separate componentof shareholders’ equity from the year ended March 31, 2001.
Changes in accounting policies are discussed in Note 3.

(4) Cash and cash equivalents
Cash and cash equivalents include all highly liquid
investments, generally with original maturities of three months
or less, that are readily convertible to known amounts of cash

and are so near maturity that they present insignificant risk ofchanges in value because of changes in interest rates.

(5) Marketable securities and investment in securities
Effective beginning the year ended March 31, 2001, Toyota
Industries adopted new accounting standards for financial
instruments that include accounting for marketable securities
and investment in securities. The new accounting standards
require Toyota Industries to classify securities into four
categories by purpose of holding: trading securities, held-tomaturity securities, other securities and investments inunconsolidated subsidiaries and affiliates. Toyota Industries did
not have trading securities or held-to-maturity securities as ofMarch 31, 2003 and 2002.
Other securities with readily determinable fair values arestated at fair value based on market prices at the end of theyear. Unrealized gains and losses are included in “Netunrealized gains on other securities” as a separate componentof shareholders’ equity. Cost of sales of such securities isdetermined by the moving-average method. Other securities
without readily determinable fair values are stated at cost, as
determined by the moving-average method.

(6) Inventories
Inventories are stated mainly at cost determined by the moving-average method.

(7) Property, plant and equipment, and depreciation
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 andJapanese subsidiaries and by the straight-line method forforeign subsidiaries.
Significant renewals and additions are capitalized at cost.
Repair and maintenance are charged to income as incurred.

Accumulated depreciation as of March 31, 2003 and 2002
was ¥465,151 million (US$3,869,809 thousand) and ¥447,600
million, respectively.
Estimated useful lives are mainly as follows:
Building and structures ................................ 5 – 50 years
Machinery, equipment and vehicles............... 3 – 22
Tools, furniture and fixtures........................... 2 – 20(8) Intangible assets and amortization
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 less than
20 years on a straight-line basis, while immaterial goodwill ischarged to income as incurred. Goodwill incurred before April 1,
2000 has been amortized over five years on a straight-line basis.
Accumulated amortization of intangibles and goodwill as ofMarch 31, 2003 and 2002 was ¥23,579 million (US$196,165
thousand) and ¥16,185 million, respectively.

(9) Allowances for doubtful accounts
Toyota Industries adopted the policy of providing anallowance for doubtful accounts in an amount sufficient tocover possible losses on collection by estimating individually

56

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

uncollectible amounts and applying to the remaining
accounts a percentage determined by certain factors such as
historical collection experiences.

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

(11) Allowance for retirement benefits
Effective beginning the year ended March 31, 2001, Toyota
Industries adopted new accounting standards for retirement
benefits for employees. Toyota Industries accrues an amountwhich is considered to be incurred in the period based on theestimated projected benefit obligations and estimatedpension assets at the end of the year. To provide for theretirement benefits for directors and corporate auditors, anamount which is required at the end of the year by an internal
rule describing the retirement benefits for directors is accrued.
The change in accounting policy is described in Note 3.

(12) Lease transactions
Finance leases other than those that are deemed to transfer
the ownership of the leased assets to lessees are accounted formainly by a method similar to that applicable to ordinary
operating leases.

(13) Consumption tax
The consumption tax under the Japanese Consumption Tax
Law withheld by Toyota Industries on sales of goods is notincluded in the amount of net sales in the accompanying

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

(14) Hedge accounting(a) Method of hedge accounting
Mainly the deferral method of hedge accounting is applied. In
the case of foreign currency forward contracts and foreign
currency option contracts, the hedged items are translated atcontracted forward rates if certain conditions are met.
(b) Hedging instruments and hedged items
Hedging instruments: derivatives instruments (interest rate
swaps, foreign currency forwards andforeign currency option contracts)
Hedged items:
risk of change in interest rate on
borrowings and risk of change inforward exchange rate on transactions
denominated in foreign currencies(assets and liabilities, and forecasted
transactions)(c) Hedging policy
Hedging transactions are executed and controlled based on

Toyota Industries’ internal rule and Toyota Industries is
hedging 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 accumulatedchanges 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 is considered that there are highcorrelations 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.

(15) Appropriation of retained earnings
In the accompanying consolidated statements of shareholders’equity, the approved amount during the relevant fiscal year isreflected for the appropriation of retained earnings ofconsolidated subsidiaries. In Japan, the payment of bonuses todirectors and corporate auditors is made out of retained
earnings through an appropriation, instead of being charged toincome for the year.

(16) Income taxes
The provision for income taxes is computed based on thepretax income included in the consolidated statement ofincome. The asset and liability approach is used to recognize
deferred tax liabilities and assets for the 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.

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

57

(17) Net income per share
The computation of basic net income per share is based on theweighted-average number of outstanding shares of common
stock. The calculation of diluted net income per share is similar
to the calculation of basic net income per share, except thatthe weighted-average number of shares outstanding includes

the additional dilution from potential 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. The change in accounting
policy is described in Note 3.

(18) Reclassification
Certain prior year amounts have been reclassified to conformto the 2003 presentation. These changes had no impact onpreviously reported results of operation or cash flows orshareholders’ equity.

3. Changes in accounting policies and adoption of new accounting standards(1) For the year ended March 31, 2003
Accounting standard for earnings per share
Effective beginning the year ended March 31, 2003, Financial
Accounting Standard No. 2 “Accounting Standard for Earnings
Per Share” and Financial Accounting Standards
Implementation Guidance No. 4 “Implementation Guidance for

Accounting Standards for Earnings Per Share” issued by the
Accounting Standards Board of Japan have been applied. The
impact of adoption for new accounting standards is describedin “20. Net income per share” below.

(2) For the year ended March 31, 2001(a) Allowance for retirement and severance benefits for
directors and corporate auditors
The Company’s retirement and severance benefits for directors
and corporate auditors were previously recorded as expenses
at the time they were awarded. However, in order to makeperiod earnings more appropriate, beginning the year ended
March 31, 2001, these expenses are accrued based on the
directors’ retirement benefit rule. Compared to the previous
method, operating income and ordinary income decreased by¥196 million and income before income taxes decreased by¥2,525 million.
(b) Accounting for retirement benefits
Effective beginning the year ended March 31, 2001, the new
accounting standards for retirement benefits have been
applied. As a result, operating income and ordinary income
decreased by ¥1,005 million and income before income taxes
decreased by ¥4,982 million. Also, cumulative effect of changein accounting standards for retirement benefits of ¥19,057
million was charged to income and recorded as an
extraordinary loss, and gain on securities contribution toemployee retirement benefit trust of ¥15,080 million was
charged to income and recorded as an extraordinary gain.
Allowance for retirement and severance benefits andunamortized prior service cost are included in allowance forretirement benefits.

58

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003(c) Accounting for financial instruments
Effective beginning the year ended March 31, 2001, the new
accounting standards for financial instruments have been
applied. As a result, ordinary income and income before
income taxes increased by ¥359 million. At the beginning of
the year ended March 31, 2001, Toyota Industries reviewed theholding purposes of the securities it owned. As a result,marketable securities expiring within one year were classified
under current assets as marketable securities and the others
were classified as investment in securities. As a result,marketable securities decreased by ¥394 million andinvestment in securities increased by the same amount.
(d) Accounting for foreign currency transactions
Effective beginning the year ended March 31, 2001, theamended accounting standards for foreign currencytransactions have been applied. Neither profits nor losses
resulted from this change. Effective beginning the year ended
March 31, 2001, translation adjustments, which had been listed
under assets in the consolidated balance sheets as of March
31, 2000, have been shifted under shareholders’ equity andincluded in minority interest in consolidated subsidiaries dueto the amendment of Japanese Regulations Concerning the
Terminology, Forms and Preparation Methods of Consolidated
Financial Statements.

4. Acquisitions(1) For the year ended March 31, 2002
Summary of assets and liabilities that increased due to the acquisition of business (materials handling sales operation) from Toyota
Motor Corporation is as follows:
Millions of yen

Current assets¥11,912

Fixed assets

14,957

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

24,533

Less: cash and cash equivalents(814)

Cash payment for the acquisition¥23,719(2) For the year ended March 31, 2001
By May 31, 2000, the Company had acquired 97.1% of theshare capital of BT Industries AB, a holding company of BT
Industries group, which consists of materials handlingequipment manufacturing and sales companies. Due to thisacquisition, Toyota Industries recorded goodwill amounting to¥61,557 million, which is amortized over 20 years.
The summarized assets and liabilities arising from theacquisition, the acquisition cost to purchase BT Industries AB’sshares, and the net cash payment made for the acquisition are
as follows:
Millions of yen

Current assets¥ 56,289

Fixed assets

117,255

Current liabilities(33,559)

Long-term liabilities(49,450)

Minority interest(762)

Acquisition cost of BT Industries AB

89,773

Less: cash and cash equivalents in BT Industries AB(3,745)

Cash payment for the acquisition of BT Industries AB¥ 86,028

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

59

5. Marketable securities(1) As of and for the year ended March 31, 2003(a) Other securities with readily determinable fair value as of March 31, 2003 are as follows:
Thousands of U.S. dollars

Millions of yen

Acquisition
cost

Carrying
amountDifference

Acquisition
cost

Carrying
amount¥159,155¥713,979¥554,824$1,324,085 $5,939,925 $4,615,840

703

703

0

5,849

5,849

0

430

472

42

3,577

3,927

350

160,288715,154554,866

1,333,511

5,949,701

4,616,190

17,963

14,341(3,622)

149,443

119,310(30,133)

Government and municipal bonds, etc.

20,00020,000(0)

166,389

166,389(0)

Corporate bonds

2,002

2,002

(0)

16,656

16,656(0)

Difference

Securities with carrying amountexceeding acquisition cost:
Stocks
Bonds
Corporate bonds
Other
Subtotal
Securities with carrying amountnot exceeding acquisition cost:
Stocks
Bonds

Other bonds
Subtotal
Total

3

3

–

24

24

–

39,96836,346(3,622)

332,512302,379(30,133)¥200,256¥751,500¥551,244

In this year, Toyota Industries recorded ¥3,671 million(US$30,541 thousand) of impairment on an equity security$1,666,023 $6,252,080 $4,586,057

included in securities with carrying amount not exceeding thecost lines.

(b) Other securities sold during the year ended March 31, 2003 are as follows:
Millions of yen

Proceeds

Realized gains¥9,762¥1,558

Thousands of U.S. dollars

Realized losses¥5

Proceeds

Realized gains

Realized losses$81,215$12,962$42(c) Contents and carrying amount of securities (excluding held-to-maturity bonds within securities with fair value) without readily
determinable fair value as of March 31, 2003 are as follows:
Carrying amountMillions of yen

Held-to-maturity securities¥–

Thousands of
U.S. dollars$–

Other securities

60

Domestic unlisted stocks excluding over-the-counter stocks

17,117

142,404

Money management funds

30,073

250,191

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

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

Within1 yearThousands of U.S. dollars

Over 1 year
within5 years

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

Over 5 years
within
10 yearsOver
10 years

Bonds
Government bonds¥ 20,000

¥0

¥–

¥–

$166,389

$0

$–

$–

Corporate bonds

2,705

–

–

–

22,504

–

–

–

3

–

–

–

25

–

–

–

¥ 22,708

¥0

¥–

¥–

$188,918

$0

$–

$–

Other bonds
Total(2) As of and for the year ended March 31, 2002(a) Other securities with readily determinable fair value as of March 31, 2002 are as follows:
Millions of yen

Acquisition
cost

Carrying
amountDifference

Securities with carrying amount exceeding acquisition cost:
Stocks¥160,158¥941,875¥781,717

Bonds
Corporate bonds
Subtotal

2,999

3,000

1

163,157

944,875

781,718

15,324

10,014(5,310)

0

0

–

7,093

7,090

(3)

Securities with carrying amount not exceeding acquisition cost:
Stocks
Bonds
Government and municipal bonds, etc.
Corporate bonds
Other bonds
SubtotalTotal
In this year, Toyota Industries recorded ¥302 million of
impairment on an equity security included in securities with

3

3

–

22,42017,107(5,313)¥185,577¥961,982¥776,405

carrying amount not exceeding the cost lines.

(b) Other securities sold during the year ended March 31, 2002 are as follows:
Millions of yen

Proceeds

Realized gains

Realized losses

¥242

¥11

¥17,967(c) Contents and carrying amount of securities (excluding held-to-maturity bonds within securities with fair value) without readily
determinable fair value as of March 31, 2002 are as follows:
Millions of yen

Held-to-maturity securities¥–

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

14,996

Money management funds

20,440Foreign unlisted bonds

7

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

61

(d) Redemption schedule of securities which have maturities within other securities as of March 31, 2002 is as follows:
Millions of yen

Over 1 year
within5 years

Within1 yearOver 5 years
within
10 yearsOver
10 years

Bonds
Government bonds¥

Corporate bonds
Other bonds
Total

0

¥–

¥–

8,379

–

¥

1,711

–

–

2

7

–

–

¥8,381¥1,718¥–¥–

6. Inventories
Inventories as of March 31, 2003 and 2002 consist of the following:Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Finished goods¥28,524¥27,490$237,304

Raw materials

10,284

11,73385,557Work in process

22,95625,193

190,982

Supplies

7,377

6,095

61,373¥69,141¥70,511$575,216

Total

62

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

7. Long-term debt
(1) Long-term debt as of March 31, 2003 and 2002 consists of the following:Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

¥ 75,692¥ 75,742$ 629,717

2.70% bonds due 2008 without collateral

30,00030,000249,584

1.50% bonds due 2003 without collateral

20,00020,000166,389

2.15% bonds due 2008 without collateral

20,00020,000166,389

1.50% bonds due 2006 without collateral

15,00015,000124,792

1.94% bonds due 2009 without collateral

15,00015,000124,792

1.25% bonds due 2005 without collateral

20,00020,000166,389

1.91% bonds due 2010 without collateral

20,00020,000166,389

0.41% bonds due 2007 without collateral

30,000–249,584

1.13% bonds due 2012 without collateral

50,000–415,974

The Company:
0.35% convertible bonds due 2003 without collateral

Consolidated subsidiaries:
1.80% bonds due 2005

300

300

2,496

Long-term bank loans

39,90467,899331,980(99,019)(1,958)(823,785)¥236,877¥281,983$1,970,690

Less: current portion of long-term debt
Total
The conversion period of the 0.35% convertible bonds due
2003 is from May 1, 1996 to September 29, 2003 and theconversion price was ¥1,983.90 (US$16.50) per share as ofMarch 31, 2003. The aggregate number of shares issuable upon
conversion thereof at such conversion price was 38,153
thousand shares.

(2) Annual maturities of long-term debt as of March 31, 2003 are as follows:Year ending March 31

2004

Millions of yen

Thousands of
U.S. dollars¥ 99,019$ 823,785

2005

7,810

64,975

2006

22,935

190,8072007

16,058

133,594

2008

61,682

513,161

2009 and thereafter

128,392

1,068,153

Total¥335,896$2,794,475

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

63

8. Assets pledged as collateral(1) Assets pledged as collateral as of March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Investments in securities¥21,724¥21,854$180,732

Buildings and structures

3,713

4,213

30,890

Land

5,340

3,715

44,426

Machinery, equipment and vehicles

–

734

–

Trade notes and accounts receivable

519

449

4,318

Other

29

29

241

Total

¥31,325¥30,994$260,607(2) Secured liabilities as of March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Other current liabilities¥18,936¥18,468$157,537

Short-term bank loans

7,756

10,92364,526Long-term debt
Total

3,276

2,691

27,255¥29,968¥32,082$249,318

9. Contingent liabilities
Toyota Industries is contingently liable for guarantees as of March 31, 2003 and 2002 as follows:
Thousands of
U.S. dollars

Millions of yen

2003
Guarantees given by the Company

2002¥32,996

¥ 262

2003
$274,509

Guarantees given by consolidated subsidiaries

6,378

5,205

53,062

Guarantee forwards given by the Company

3,621

3,881

30,125

Guarantees given by consolidated subsidiaries consist of 467,278 and 421,480 thousand of Swedish krona.

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

64

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003of the fiscal year to which the dividend is applicable. In
addition, interim cash dividends may be paid upon resolutionof the Board of Directors, subject to limitations imposed by theJapanese Commercial Code.
Proceeds from the conversion of convertible bonds havebeen accounted for in approximately equal amounts ascommon stock and capital surplus. At least 50% of theproceeds have been accounted for as common stock, in
accordance with the provisions of the Japanese Commercial
Code.

11. Research and development expenses
Research and development expenses, which are included inselling, general and administrative expenses andmanufacturing costs, amounted to ¥29,705 million(US$247,130 thousand), ¥29,985 million and ¥26,196 million
for the years ended March 31, 2003, 2002 and 2001,
respectively.

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

Millions of yen

2003

2002

2001

2003

¥ 1,851

¥ 242

¥

725

¥ 15,399

Rental income of fixed assets

2,036

2,214

1,475

16,939Exchange gain

1,709

2,324

453

14,218Other non-operating income:Gain on sales of marketable securities

Gain on sales of fixed assets

332

375

148

2,762

2,533

1,624

2,249

21,073¥ 8,461¥ 6,779¥ 5,050¥ 70,391¥¥¥

Sundries
Total
Other non-operating expenses:

–

¥ 302

Depreciation

Loss on impairment of securities

2,202

2,082

2,307

18,320Loss on disposal of fixed assets

3,101

1,941

2,996

25,799Exchange loss

1,224

557

525

10,183

Bond issue costs
Sundries
Total

430

–

329

19

227

2,737

5,425

4,914

5,124

45,133¥12,281¥ 9,815¥11,609¥102,172

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 and payables, 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 of fluctuations in interest
rates and in foreign currency exchange rates. Due to thefact that counterparties to Toyota Industries represent
major financial institutions which have highcreditworthiness, Toyota Industries believes that theoverall 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 rule and Toyota
Industries’ hedging activities are reported periodicallyto 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.

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

65

14. Retirement benefits(1) Outline of retirement benefit plans:
The Company and its domestic subsidiaries maintain tax
qualified pension plans and lump-sum indemnities plans, bothof which are non-contributory defined benefit pension plans.
In addition, certain foreign subsidiaries maintain noncontributory defined benefit pension plans. Since 1987, theCompany has been transferring the covering percentages ofpension plan from lump-sum indemnities plan to tax qualified
pension plan. As of March 31, 2003, tax qualified pension plan
covers 50% of total plans. Also, the Company established an
employee retirement benefit trust.

(2) Components of allowance for retirement benefits as of March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Benefit obligation¥ 95,904¥ 80,039$ 797,870

Plan assets(46,640)(49,105)(388,020)

Unfunded benefit obligation

49,26430,934

409,850

Unrecognized actuarial loss

(25,341)(9,581)(210,823)

Unrecognized loss in prior service obligation

(187)

–

(1,556)

Net amount recognized on the balance sheet

23,736

21,353

197,471

Prepaid pension expenses(7,626)(5,115)(63,444)¥ 31,362¥ 26,468$ 260,915

Allowance for retirement benefits
Certain subsidiaries use the simplified method to determine
benefit obligations. Prepaid pension expenses are included inother investments and other assets. Allowance for retirement
benefits on the balance sheets includes ¥2,738 million(US$22,779 thousand) and ¥2,372 million of allowance forretirement and severance benefits for directors and corporate
auditors as of March 31, 2003 and 2002, respectively.

(3) Components of retirement benefit expenses for the years ended March 31, 2003, 2002 and 2001 are as follows:
Thousands of
U.S. dollars

Millions of yen

2001

2003

Service cost

2003
¥6,615¥6,018¥ 3,799$55,033

Interest cost

2,036

1,843

1,677

16,939

Expected return on plan assets

(797)

(704)

(637)

(6,631)

Amortization of prior service obligation

12

–

–

100

Amortization of unrecognized actuarial gain or loss

484

225

–

4,027

Amortization of transition obligation
Retirement benefit expenses
Retirement expenses of subsidiaries which adopted thesimplified method are included in both service cost andamortization of transition obligation.
Due to the establishment of a retirement benefit trust in theyear ended March 31, 2001, which was the first year of

66

2002

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003––

19,057–¥8,350¥7,382¥23,896$69,468

accounting standards for retirement benefit’s adoption,amortization of transition obligation also included ¥17,845
million of one-time amortization of retirement benefit
obligation which was equivalent to fair value of trust
properties at the time of its contribution.

(4) Assumptions used for calculation of retirement benefits for the years ended March 31, 2003, 2002 and 2001 are as follows:
2003

2002

2001

Method of attribution of estimated retirement benefits
to periods of employee service: straight-line method
Discount rate

2.0%

3.0%

3.0%

Expected return on plan assets

3.0%

3.0%

3.0%

6–11 years––

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

Amortization period of unrecognized actuarial gains or losses

20 years

20 years

20 years— Straight-line method
over the averageremaining service
period of employees
starting from following
year

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

67

15. Income taxes(1) The significant components of deferred tax assets and liabilities as of March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Deferred tax assets:
Allowance for retirement benefits

¥

6,285

¥

4,090

$

52,288Trade receivables

5,122

3,282

42,612

Accrued expenses

4,644

3,272

38,636

Net operating loss carry-forwards for tax purposes

2,437

2,806

20,275

Depreciation

2,867

2,386

23,852

Securities

3,149

1,456

26,198Enterprise tax payable

1,124

709

9,351

Other

11,567

9,608

96,231

Subtotal

37,19527,609309,443

Less — valuation allowance(2,508)(2,382)(20,865)

34,68725,227

288,578

Total deferred tax assets
Deferred tax liabilities:
Other securities

219,413319,819

1,825,399

Depreciation

4,513

4,290

37,546

Land

2,650

1,138

22,047

Reserve for advanced depreciation

337

338

2,804

Reserve for special depreciation

549

290

4,567

3,837

3,506

31,922

Other
Total deferred tax liabilities

231,299

329,381

1,924,285

Net deferred tax liabilities¥(196,612)¥(304,154)$(1,635,707)

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

Millions of yen

Current assets — deferred tax assets

2002

2003

¥ 14,072¥ 10,081

Investments and other assets — deferred tax assets

2,863

2,237

23,819Current liabilities — deferred tax liabilities(1,192)(494)(9,917)Long-term liabilities — deferred tax liabilities(212,355)(315,978)(1,766,681)

Net deferred tax liabilities¥(196,612)¥(304,154)$(1,635,707)

In conjunction with promulgation of “The act that amends
part of local tax regulations that stipulate change of enterprisetax rate” (No. 9, 2003) on March 31, 2003, effective tax rate thatis used for calculation of deferred tax assets and liabilities as ofMarch 31, 2003, which will be realized on and after April 1,

68

2003

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003$

117,072

2004 has been changed from 41.2% to 39.8%. As a result, net
assets as of March 31, 2003 increased by ¥7,290 million and net
income for the year then ended decreased by ¥421 million,
respectively.

(2) Reconciliations of differences between the statutory rate of income taxes and the effective rate of income taxes for the years
ended March 31, 2003, 2002 and 2001 are as follows:
2003
Statutory rate of income taxes

2002

2001

41.2%

41.2%

41.2%

Equity in losses of affiliates

4.0

0.8

1.0

Net pre-tax losses of subsidiaries

1.2

0.6

1.4

Elimination of dividend income

0.8

0.7

0.9

Dividends income and others permanently not recognized as taxable income

(3.5)

(5.4)

(6.7)

Amortization of goodwill

3.1

4.1

–

Other

0.9

(0.8)

1.0

47.7%

41.2%

38.8%

Addition (reduction) in taxes resulting from:

Effective rate of income taxes

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 notreflected in the accompanying consolidated balance sheets as of March 31, 2003 and 2002 is as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Machinery and equipment:
Acquisition cost equivalents¥8,258¥5,849$68,702

Accumulated depreciation equivalents

2,772

1,391

23,061

5,486

4,458

45,641

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

5,277

5,313

43,902

Accumulated depreciation equivalents

2,911

2,530

24,218Tools, furniture and fixtures net balance equivalents

2,366

2,783

19,684

Total net leased properties¥7,852¥7,241$65,325

Acquisition cost equivalents include the imputed interest
expense portion because the percentage which is computedby dividing future minimum lease payments by total balanceof property, plant and equipment at year-end is immaterial.

(b) Pro forma information regarding future minimum lease payments as of March 31, 2003 and 2002 is as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Due within 1 year

¥2,274¥1,937$18,918

Due after 1 year

5,577

5,304

46,398

Total¥7,851¥7,241$65,316

The amount equivalent to future minimum lease payments asof the end of the year includes the imputed interest expense
portion because the percentage which is computed by

dividing future minimum lease payments by total balance ofproperty, plant and equipment at year-end is immaterial.

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

69

(c) Total lease payments for the years ended March 31, 2003, 2002 and 2001 are as follows:
Millions of yen

Thousands of
U.S. dollars

2003¥2,566$21,348

2002

1,842

–

2001

1,505

–

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 for theyear ended 2003, 2002 and 2001, and are equivalent to theamount of total lease payments of the above.

(2) Operating leases (as a lessee)
Pro forma future lease payments under operating leases as of March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Due within 1 year

¥ 2,878¥ 2,545$ 23,943

Due after 1 year

10,084

9,696

83,894

Total¥12,962¥12,241$ 107,837(3) Finance leases (as a lessor) which do not transfer ownership of leased properties to lessees(a) Information regarding leased properties such as acquisition cost and accumulated depreciation under finance leases as ofMarch 31, 2003 and 2002 is as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Machinery and equipment:
Acquisition cost

¥7,306¥6,975$60,782

Accumulated depreciation

4,284

4,005

35,641¥3,022¥2,970$25,141

Total net leased property(b) Pro forma information regarding future minimum lease income as of March 31, 2003 and 2002 is as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2003

¥1,816¥1,658$15,108

Due after 1 year

2,657

2,966

22,105

Total¥4,473¥4,624$37,213

The amount equivalent to future minimum lease income
includes the imputed interest income portion because thepercentage which is computed by dividing future minimum

70

2002

Due within 1 year

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

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, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Total lease payments to be received¥1,930¥2,220$16,057

Depreciation expenses

1,631

1,112

13,569(4) Operating leases (as a lessor)
Pro forma information regarding future minimum rentals under operating leases as of March 31, 2003 and 2002 is as follows:
Thousands of
U.S. dollars

Millions of yen

Due within 1 year
Due after 1 year
Total

2003

2002

2003

¥ 5,431¥ 4,525$ 45,183

9,320

7,147

77,538¥14,751¥11,672$122,721

17. Subsequent events
On May 15, 2003, the Company exercised a warrant issued by
Aichi Corporation on May 15, 2002. As a result, the Company
increased its share of Aichi Corporation by 17.0% to 51.0%,
making Aichi Corporation a subsidiary of the Company.
On June 27, 2003, the Ordinary General Meeting of
Shareholders of the Company authorized payment of a year-

end cash dividend to shareholders of record as of March 31,
2003 of ¥12 (US$0.100) per share, or a total of ¥3,513 million(US$29,226 thousand), and bonuses to directors and corporate
auditors of ¥224 million (US$1,864 thousand). Cash dividends
for the year totaled ¥22 (US$0.183) per share, including a semiannual dividend of ¥10 (US$0.083).

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

71

18. Segment information(1) Business segments
As of and for the years ended March 31, 2003, 2002 and 2001:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

¥ 595,460¥ 563,599¥457,631$4,953,910

Sales:
Automobile
Outside customer sales
Intersegment transactions

15,523

15,412

4,097

129,143

610,983

579,011

461,728

5,083,053

373,008

353,043

236,5023,103,228

Materials handling equipment
Outside customer sales
Intersegment transactions

90

44

–

749

373,098

353,087

236,5023,103,977

48,74030,70533,238405,491

Textile machinery
Outside customer sales
Intersegment transactions

6

50

–

50

48,74630,75533,238405,541

Outside customer sales

52,01132,81640,012432,704

Intersegment transactions

13,078

11,056

4,531

108,802

OthersSubtotal
Elimination of intersegment transactions
Total

65,08943,87244,543

541,506

1,097,916

1,006,725

776,011

9,134,077(28,697)(26,562)(8,628)(238,744)¥1,069,219¥ 980,163¥767,383$8,895,333

Operating costs and expenses:¥ 580,875¥ 550,051¥433,203$4,832,571

Materials handling equipment

Automobile

356,923

339,721

221,955

2,969,410

Textile machinery

46,43731,14633,203386,331

Others61,17739,39040,178508,960

Elimination of intersegment transactions(28,671)(26,475)(8,460)(238,528)¥1,016,741¥ 933,833¥720,079$8,458,744¥¥

28,960¥ 28,525$ 250,482

Total
Operating income (loss):
Automobile
Materials handling equipment

16,175

13,366

14,547

134,567

Textile machinery

2,309

(391)

35

19,210

Others

3,912

4,482

4,365

32,546

(26)

(87)

(168)

(216)

46,330¥ 47,304$ 436,589

Elimination of intersegment transactions
Total

72

30,108TOYOTA INDUSTRIES CORPORATION¥ANNUAL REPORT 2003

52,478¥

Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

¥ 328,370¥ 317,133¥ 282,504$ 2,731,863

Materials handling equipment

337,453

319,335

270,975

2,807,429

Textile machinery

30,922

22,32325,404257,255

Assets:Automobile

Others

51,83931,640

15,487431,273

Corporate assets or elimination

901,8071,079,970

1,275,272

7,502,554¥1,650,391¥1,770,401¥1,869,642$13,730,374

¥

¥

¥

$

Total
Depreciation and amortization:
Automobile

34,15733,40331,764284,168

Materials handling equipment

20,801

18,882

10,766173,053

Textile machinery

1,006

797

1,034

8,370

Others

3,487

2,307

3,071

29,010

Corporate or elimination of intersegment transactions

(297)

(215)

(181)

(2,471)

Total¥

59,154¥55,174¥46,454$492,130¥

49,380¥61,023¥54,734$

410,815

Capital expenditures:
Automobile
Materials handling equipment

24,35026,33770,673

202,579

Textile machinery

2,164

523

320

18,003

Others

12,068903

2,311

100,400

(403)

(466)

(765)

(3,353)88,320¥ 127,273

Corporate or elimination of intersegment transactions
Total

¥

87,559¥$728,444

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

Corporate assets included in corporate assets or eliminationconsist mainly of cash and cash equivalents, short-term

investments and investments in securities held by theCompany.

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 200373

(2) Geographical segments
As of and for the years ended March 31, 2003, 2002 and 2001:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

¥ 733,869¥ 675,346¥586,087$6,105,399

78,51861,097

31,770653,228

812,387

736,443

617,857

6,758,627

192,385

180,535

123,355

1,600,541

Sales:
Japan
Outside customer sales
Intersegment transactions
North America
Outside customer sales
Intersegment transactions

1,411

1,392

337

11,739193,796

181,927

123,692

1,612,280

139,515

121,036

55,826

1,160,691

EuropeOutside customer sales
Intersegment transactions

4,899

5,426

749

40,757

144,414

126,462

56,5751,201,448

Outside customer sales

3,450

3,246

2,115

28,702

Intersegment transactions

1,034

652

478

8,602

4,484

3,898

2,593

37,304

1,155,081(85,862)

1,048,730(68,567)

800,717(33,334)

9,609,659(714,326)¥1,069,219¥ 980,163¥767,383$8,895,333

OthersSubtotal
Elimination of intersegment transactions
Total
Operating costs and expenses:
Japan¥ 767,342¥ 695,442¥577,381$6,383,877

North America

187,596

177,442

118,422

1,560,699

Europe142,469

125,345

53,724

1,185,267

Others

4,560

4,011

2,841

37,936

Elimination of intersegment transactions
Total(85,226)(68,407)(32,289)(709,035)¥1,016,741¥ 933,833¥720,079$8,458,744¥¥

Operating income (loss):Japan

41,001¥ 40,476$ 374,750

North America

6,200

4,485

5,270

51,581

Europe

1,945

1,117

2,851

16,181Others

(76)

(113)

(248)

(632)

Elimination of intersegment transactions
Total

74

TOYOTA INDUSTRIES CORPORATION

(636)
¥

ANNUAL REPORT 2003

45,04552,478¥(160)(1,045)(5,291)

46,330¥ 47,304$ 436,589

Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

¥ 554,034¥ 511,856¥ 460,474$ 4,609,268

North America

144,739

156,188

126,520

1,204,151

Europe223,446

202,078

158,351

1,858,951

Assets:Japan

OthersCorporate assets or elimination
Total

9,759

5,757

4,987

81,190718,413894,522

1,119,310

5,976,814¥1,650,391¥1,770,401¥1,869,642$13,730,374

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

Corporate assets included in corporate assets or eliminationconsist mainly of cash and cash equivalents, short-term

investments and investments in securities held by theCompany.

(3) Overseas sales
For the years ended March 31, 2003, 2002 and 2001:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2001

2003

¥ 192,422¥181,177¥140,161$1,600,849

181,347

160,456

102,666

1,508,710

Overseas sales:
North America
Europe77,82554,83755,967647,463

Total

Others¥ 451,594¥396,470¥298,794$3,757,022

Total sales¥1,069,219¥980,163¥767,383$8,895,333

North America

18.0%

18.5%

18.2%

Europe

17.0

16.4

13.4

Others

7.2

5.5

7.3

42.2%

40.4%

38.9%

Ratio of overseas sales to total sales (%):

Total
Significant countries or areas belonging to each area as of March 31, 2003 are as follows:
North America ………………………… U.S.A., Canada
Europe ………………………………… Germany, France, U.K.
Others ………………………………… China, Indonesia, Pakistan

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 200375

19. Related party transactions
The following transactions were carried out with related parties:(1) Sales of goods and services for the years ended March 31, 2003, 2002 and 2001 were as follows:
Thousands of
U.S. dollars

Millions of yen

Toyota Motor Corporation
Toyota Motor Corporation held 24.7% of the Company’s shares
as of March 31, 2003, 2002 and 2001, respectively. The above

2003

2002

2001

2003

¥417,058¥410,995¥425,377$3,469,700

transactions were carried out on commercial terms andconditions.

(2) Purchase of goods and services for the years ended March 31, 2003, 2002 and 2001 were as follows:
Purchase of goods:
Thousands of
U.S. dollars

Millions of yen

Toyota Motor Corporation

2003

2002

2001

2003

¥293,853¥284,531¥195,514$2,444,700

Purchase of services:
Thousands of
U.S. dollars

Millions of yen

2003
Toyota Industries Health Insurance Society
Toyota Medical Corporation
Total
Toyota Industries Health Insurance Society’s chairman as ofMarch 31, 2003, 2002 and 2001 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, 2003,

2002

2001

2003

¥ 69

¥ 72

¥ 69

$574

39

42

33

325

¥108

¥114

¥102

$899

2002 and 2001 is Yoshitoshi Toyoda, who is a director of theCompany and holds 0.05% of the Company’s shares. The
transactions above were carried out on commercial terms andconditions.

(3) Outstanding balances arising from sale/purchase of goods/services as of March 31, 2003 and 2002 are as follows:
Receivables from a related party:
Millions of yen

Toyota Motor Corporation

Thousands of
U.S. dollars

2003

2002

2003

¥21,108¥20,873$175,607

Payable to a related party:
Millions of yen

Toyota Motor Corporation

76

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

Thousands of
U.S. dollars

2003

2002

2003

¥29,753¥30,527$247,504

20. Net income per share (EPS)
Bases of calculation for net income per share and net income per share diluted are as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2003

¥ 21,933$182,471

329

2,737

Net income attributable to common shareholders

21,603

179,725

Weighted-average shares (thousand)

307,813–

Net income per share (exact yen)

¥ 70.19

$

0.58

¥

$

1,306

$

0.52

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

Net income per share diluted:
Adjustment for effect of dilutive securities (interest expenses of convertible bond)

157

Weighted-average shares for diluted computation (thousand)

38,153

Net income per share diluted (exact yen)

¥ 62.90

In conjunction with the implementation of Financial
Accounting Standard No. 2 “Accounting Standard for Earnings
Per Share” and Financial Accounting Standards
Implementation Guidance No. 4 “Implementation Guidance for
Accounting Standards for Earnings Per Share” issued by the
Accounting Standards Board of Japan, the Company has–

adopted those standards for the fiscal year. Net income pershare for the year ended March 31, 2002 is changed from¥87.28 to ¥86.39 and net income per share diluted for the year
then ended is changed from ¥78.26 to ¥77.47, respectively, in
accordance with new standards.

TOYOTA INDUSTRIES CORPORATIONANNUAL REPORT 2003

77