Toyota 2010 Annual Report Download - page 45

43
TOYOTA ANNUAL REPORT 2010
keting expense.
The decrease in
the fi nancial ser-
vices operations
is primarily due to
the ¥140.0 billion
decrease in pro-
vision for credit
losses and net
charge-off s, which
is attributable to
the rise in the ra-
tio of credit losses
as a result of the
economic down-
turn mainly in the
United States in
the prior fi scal year, partially off set by the impact
from the recalls and other safety measures. The
decrease in marketing expense is attributable to
reduced marketing costs realized as a result of
the profi t improvement initiatives.
Operating Income and Loss
Yen in millions
2010 vs. 2009
change
Changes in operating income and loss:
Eff ect of decrease in vehicle unit
sales and changes in sales mix
and other operational factors ······· ¥ (370,000)
Eff ect of increase in parts sales ·········· 23,700
Eff ect of fl uctuation in foreign
currency translation rates ················ (23,600)
Eff ect of decrease in research
and development expenses ·········· 178,700
Eff ect of cost reduction eff orts,
decrease in fi xed costs and
other eff orts ············································ 799,727
Total ················································································
¥ 608,527
Toyotas operating income increased by ¥608.5
billion to an operating income of ¥147.5 billion
during fi scal 2010 compared with the prior year.
This operating income was favorably impacted
by the eff ects of a ¥799.7 billion cost reduction
eff orts, decrease in fi xed costs and other eff orts,
the ¥178.7 billion decrease in research and
development expenses, and the ¥23.7 billion
increase in parts sales, partially off set by the
¥380.0 billion decrease in vehicle unit sales and
the changes in sales mix. The cost reduction
eff orts, decrease in fi xed costs and other eff orts
are partially off set by the ¥105.7 billion increase
in costs resulting from a change in the estimation
model of expenses related to future recalls and
other safety measures.
During fi scal 2010, operating income (before the
elimination of intersegment profi ts), increased
by ¥475.6 billion in North America, increased by
¥27.5 billion, or 15.6%, in Asia, and increased by
¥27.9 billion, or 31.9% in Other compared with
the prior fi scal year. During fi scal 2010, operat-
ing loss (before the elimination of intersegment
profi ts) decreased by ¥12.3 billion in Japan and
decreased by ¥110.3 billion in Europe compared
with the prior fi s-
cal year.
The following is a
discussion of oper-
ating income and
loss in each geo-
graphic market.
󱛠Cost of Products Sold
Cost of products sold decreased by ¥1,496.9
billion, or 8.6%, to ¥15,971.5 billion during fi scal
2010 compared with the prior fi scal year. The
decrease in cost of products sold for automotive
operations is primarily attributed to the decrease
in fi xed costs including the decrease in research
and development expenses, the cost reduction
eff orts, the decrease in vehicle unit sales and
the changes in sales mix, and the impact of
fluctuations in foreign currency translation
rates partially off set by increases in parts sales.
The decrease in fixed costs was due mainly
to a decline in labor costs and research and
development expenses as a result of profit
improvement initiatives. The decrease in
vehicle unit sales and the changes in sales
mix were due to factors such as the substantial
contraction of the automotive market caused
by the financial crisis since the fall of 2008.
The decrease in research and development
expenses is attributable to reduced develop-
ment costs real-
ized as a result of
Toyotas more fo-
cused investment
decisions for the
future such as in
environmental
technologies, and
effective man-
agement over re-
search and devel-
opment expenses
spending.
󱛠Cost of Financing Operations
Yen in millions
2010 vs. 2009
change
Changes in cost of fi nancing operations:
Eff ect of fl uctuation in foreign
currency translation rates ················ ¥ (83,500)
Eff ect of changes in funding costs ·· (70,000)
Eff ect of increase in valuation
gains on interest rate swaps
stated at fair value ······························· (64,500)
Eff ect of decrease in provision for
residual value losses ··························· (50,000)
Other ································································ (7,083)
Total ······································································· ¥ (275,083)
Cost of fi nancing operations decreased by
¥275.1 billion, or 27.9%, to ¥712.3 billion during
fi scal 2010 compared with the prior year. The
decrease resulted primarily from the ¥83.5
billion impact of fl uctuations in foreign currency
translation rates, the ¥70.0 billion favorable
impact of changes in funding costs, the ¥64.5
billion recognition of valuation gains on
interest rate swaps stated at fair value, and the
¥50.0 billion decrease in provision for residual
value losses. The favorable impact of changes
in funding costs is attributable to a decline in
market interest rates. The decrease in provision
for residual value losses is primarily attributable
to the recovery of the used vehicles markets
particularly in the United States and other eff ects,
partially off set by the impact from the recalls and
other safety measures.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
decreased by ¥415.1 billion, or 16.4%, to ¥2,119.6
billion during fi scal 2010 compared with the
prior fi scal year. This decrease mainly refl ects the
¥173.8 billion decrease for the fi nancial services
operations and the ¥84.9 billion decrease of mar-
Cost of Products Sold
0
4,000
8,000
12,000
16,000
20,000
（¥ Billion）
7080 0960FY
0
20
40
60
80
100
（%）
% of sales of products
(Right scale)
10
R&D Expenses
0
250
500
750
1,000
（¥ Billion）
7080 0960FY
0
3
6
9
12
（%）
% of sales of products
(Right scale)
10
Operating Income (Loss)
2,500
2,000
1,500
500
（¥ Billion）
7080 1060FY
-500
1,000
0
20
16
12
4
-4
8
0
% of net revenues (Right scale)
（%）
09
Financial Section
Financial Section Investor Information
Corporate Information Special Feature
Consolidated
Performance Highlights
Business Overview
Top Messages
Management's Discussion and Analysis of
Financial Condition and Results of Operations