TOYOTA MOTOR CREDIT CORP - FORM 10-Q

Attached files

file	filename
EX-12.1 - EXHIBIT 12.1 - RATIO OF EARNINGS TO FIXED CHARGES - TOYOTA MOTOR CREDIT CORP	exhibit_12-1.htm
EX-32.1 - EXHIBIT 32.1 - 906 CERTIFICATION - TOYOTA MOTOR CREDIT CORP	exhibit_32-1.htm
EX-32.2 - EXHIBIT 32.2 - 906 CERTIFICATION - TOYOTA MOTOR CREDIT CORP	exhibit_32-2.htm
EX-31.1 - EXHIBIT 31.1 - 302 CERTIFICATION - TOYOTA MOTOR CREDIT CORP	exhibit_31-1.htm
EX-31.2 - EXHIBIT 31.2 - 302 CERTIFICATION - TOYOTA MOTOR CREDIT CORP	exhibit_31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-9961

TOYOTA MOTOR CREDIT CORPORATION

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)	95-3775816 (I.R.S. Employer Identification No.)

19001 S. Western Avenue Torrance, California (Address of principal executive offices)	90501 (Zip Code)

Registrant's telephone number, including area code: (310) 468-1310

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No __

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes __ No __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer __ Accelerated filer __

Non-accelerated filer x Smaller reporting company __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes __ No x

As of January 31, 2010, the number of outstanding shares of capital stock, par value $10,000 per share, of the registrant was 91,500, all of which shares were held by Toyota Financial Services Americas Corporation.

Reduced Disclosure Format

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

TOYOTA MOTOR CREDIT CORPORATION

FORM 10-Q

For the quarter ended December 31, 2009

INDEX
Part I		3
Item 1	Financial Statements	3
	Consolidated Statement of Income	3
	Consolidated Balance Sheet	4
	Consolidated Statement of Shareholder’s Equity	5
	Consolidated Statement of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis	47
Item 3	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4T	Controls and Procedures	74
Part II		75
Item 1	Legal Proceedings	75
Item 1A	Risk Factors	76
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3	Defaults Upon Senior Securities	76
Item 4	Submission of Matters to a Vote of Security Holders	76
Item 5	Other Information	76
Item 6	Exhibits	76
	Signatures	77
	Exhibit Index	78

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(Dollars in millions)

(Unaudited)

	Three months ended December 31,		Nine months ended December 31,
	2009	2008	2009	2008
Financing revenues:
Operating lease	$1,179	$1,257	$3,550	$3,688
Retail financing	778	847	2,349	2,510
Dealer financing	80	157	251	450
Total financing revenues	2,037	2,261	6,150	6,648

Depreciation on operating leases	897	1,078	2,626	3,103
Interest expense	438	1,830	1,555	2,514
Net financing revenues	702	(647)	1,969	1,031

Insurance earned premiums and contract revenues	112	104	336	314
Investment and other income	66	111	171	182
Net financing revenues and other revenues	880	(432)	2,476	1,527

Expenses:
Provision for credit losses	(5)	670	334	1,397
Operating and administrative	192	195	543	613
Insurance losses and loss adjustment expenses	51	42	164	143
Total expenses	238	907	1,041	2,153

Income (loss) before income taxes	642	(1,339)	1,435	(626)
Provision for (benefit from) income taxes	248	(527)	555	(251)

Net income (loss)	$394	($812)	$880	($375)

See Accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED BALANCE SHEET

(Dollars in millions)

(Unaudited)

	December 31, 2009	March 31, 2009
ASSETS

Cash and cash equivalents	$4,760	$6,298
Investments in marketable securities	2,618	2,187
Finance receivables, net	54,459	54,574
Investments in operating leases, net	16,971	17,980
Other assets	2,306	2,640
Total assets	$81,114	$83,679

LIABILITIES AND SHAREHOLDER'S EQUITY

Debt	$69,178	$72,983
Deferred income taxes	3,230	2,454
Other liabilities	3,598	4,149
Total liabilities	76,006	79,586

Commitments and contingencies (See Note 12)

Shareholder's equity:
Capital stock, $10,000 par value (100,000 shares authorized;
91,500 issued and outstanding)	915	915
Additional paid-in-capital	1	1
Accumulated other comprehensive income (loss)	72	(63)
Retained earnings	4,120	3,240
Total shareholder's equity	5,108	4,093
Total liabilities and shareholder's equity	$81,114	$83,679

See Accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY

(Dollars in millions)

(Unaudited)

	Capital stock	Additional paid-in capital	Accumulated other comprehensive (loss) income	Retained earnings	Total

BALANCE AT MARCH 31, 2008	$915	$-	$-	$3,865	$4,780

Effects of accounting change for retirement benefits	-	-	-	(2)	(2)

Stock-based compensation	-	1	-	-	1

Comprehensive loss activity:
Net loss for the nine months ended December 31, 2008	-	-	-	(375)	(375)
Net unrealized loss on available-for-sale marketable securities, net of tax benefit of $95 million	-	-	(158)	-	(158)
Reclassification adjustment for net loss included in net income, net of tax benefit of $1 million	-	-	2	-	2
Total comprehensive loss	-	-	(156)	(375)	(531)

BALANCE AT DECEMBER 31, 2008	$915	$1	($156)	$3,488	$4,248


BALANCE AT MARCH 31, 2009	$915	$1	($63)	$3,240	$4,093

Net income for the nine months ended December 31, 2009	-	-	-	880	880
Net unrealized gain on available-for-sale marketable securities, net of tax provision of $78 million	-	-	127	-	127
Reclassification adjustment for net loss included in net income, net of tax benefit of $5 million	-	-	8	-	8
Total comprehensive income	-	-	135	880	1,015

BALANCE AT DECEMBER 31, 2009	$915	$1	$72	$4,120	$5,108

See Accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

(Unaudited)

	Nine months ended December 31,
	2009	2008
Cash flows from operating activities:
Net income (loss)	$880	($375)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,714	3,209
Recognition of deferred income	(758)	(755)
Provision for credit losses	334	1,397
Amortization of deferred origination fees	248	245
Fair value adjustments and amortization of premiums and discounts associated with debt, net	3,480	(2,746)
Net (gain) loss from sale of marketable securities	(7)	16
Impairment on marketable securities	7	7
Net change in:
Derivative assets	(629)	1,031
Other assets	(142)	(201)
Deferred income taxes	693	(414)
Derivative liabilities	(945)	480
Other liabilities	419	(227)
Net cash provided by operating activities	6,294	1,667
Cash flows from investing activities:
Purchase of investments in marketable securities	(880)	(1,567)
Disposition of investments in marketable securities	671	1,224
Acquisition of finance receivables	(15,954)	(19,830)
Collection of finance receivables	15,098	15,613
Net change in wholesale receivables	799	218
Acquisition of investments in operating leases	(5,009)	(6,468)
Disposals of investments in operating leases	3,641	3,046
Advances to affiliates	(1,731)	(5,199)
Repayments from affiliates	2,835	4,772
Other, net	(15)	-
Net cash used in investing activities	(545)	(8,191)
Cash flows from financing activities:
Proceeds from issuance of debt	5,424	12,843
Payments on debt	(13,831)	(12,737)
Net change in commercial paper	(853)	8,450
Net advances to TFSA (Note 14)	-	(27)
Advances from affiliates (Note 14)	2,001	-
Repayments to affiliates (Note 14)	(28)	1,679
Net cash (used in) provided by financing activities	(7,287)	10,208
Net (decrease) increase in cash and cash equivalents	(1,538)	3,684
Cash and cash equivalents at the beginning of the period	6,298	736
Cash and cash equivalents at the end of the period	$4,760	$4,420
Supplemental disclosures:
Interest paid	$1,636	$2,069
Income taxes (paid) received	($9)	$22
Non-cash financing:
Capital contribution for stock-based compensation	$-	$1

See Accompanying Notes to Consolidated Financial Statements.

Certain prior period amounts have been reclassified to conform to the current period presentation.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Interim Financial Data

Basis of Presentation

The information furnished in these unaudited interim financial statements for the three and nine months ended December 31, 2009 and 2008 has been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, the unaudited financial information reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three and nine months ended December 31, 2009 do not necessarily indicate the results that may be expected for the full year.

These financial statements should be read in conjunction with the Consolidated Financial Statements, significant accounting policies, and other notes to the Consolidated Financial Statements included in Toyota Motor Credit Corporation’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, 2009 (“fiscal 2009”), which was filed with the Securities and Exchange Commission (“SEC”) on June 16, 2009. References herein to “TMCC” denote Toyota Motor Credit Corporation, and references herein to “we”, “our”, and “us” denote Toyota Motor Credit Corporation and its consolidated subsidiaries.

In preparing these financial statements, we have evaluated events and transactions for potential recognition or disclosure through February 5, 2010, the date the financial statements were issued.

Summary of Significant Accounting Policies

Investments in Marketable Securities

Investments in marketable securities consist of debt and equity securities. Debt and equity securities designated as available-for-sale (“AFS”) are carried at fair value using quoted market prices where available with unrealized gains or losses included in accumulated other comprehensive income, net of applicable taxes. We use the specific identification method to determine realized gains and losses related to our investment portfolio. Realized investment gains and losses are reflected in Investment and Other Income in the Consolidated Statement of Income.

Other-Than-Temporary Impairment

We periodically evaluate unrealized losses on our AFS debt securities portfolio for other-than-temporary impairment. If we have no intent to sell and we believe that it is more likely than not we will not be required to sell these securities prior to recovery, the credit loss component of the unrealized losses are recognized in earnings, while the remainder of the loss is recognized in Accumulated Other Comprehensive Income (“AOCI”). The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected using a credit cash flow analysis for debt securities.

We perform periodic reviews of our AFS equity securities to determine whether unrealized losses are temporary in nature. If losses are considered to be other-than-temporary, the cost basis of the security is written down to fair value and the write down is reflected in Investment and Other Income in the Consolidated Statement of Income.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Interim Financial Data (Continued)

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

New Accounting Guidance

In January 2010, the Financial Accounting Standards Board (“FASB”) amended the fair value measurements and disclosure guidance to provide increased disclosures about transfers of financial assets in and out of Levels 1 and 2. The new disclosure is effective for us March 31, 2010. Additionally, all activity in Level 3 must be presented separately. This disclosure is effective for us March 31, 2011. We do not expect these disclosures to have a material impact on our consolidated financial condition or results of operations.

In October 2009, the FASB issued accounting guidance that sets forth the requirements that must be met for a company to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. This accounting guidance is effective for us on April 1, 2011 and we do not expect it to have a material impact on our consolidated financial condition or results of operations.

In October 2009, the FASB issued accounting guidance that changes the accounting model for revenue arrangements that include both tangible products and software elements that function together to deliver the product’s essential functionality. The accounting guidance more closely reflects the underlying economics of these transactions. This accounting guidance is effective for us on April 1, 2011 and we do not expect it to have a material impact on our consolidated financial condition or results of operations.

In June 2009, the FASB issued accounting guidance which requires entities to provide greater transparency about transfers of financial assets and a company’s continuing involvement in those transferred financial assets. The accounting guidance also removes the concept of a qualifying special purpose entity. This accounting guidance is effective for us beginning April 1, 2010 and we do not expect it to have a material impact on our consolidated financial condition or results of operations.

In June 2009, the FASB issued accounting guidance which changes the existing consolidation model for variable interest entities to a new model based on a qualitative assessment of power and economics. This accounting guidance is effective for us beginning April 1, 2010 and we do not expect it to have a material impact on our consolidated financial condition or results of operations.

Recently Adopted Accounting Guidance

In January 2010, the FASB issued accounting guidance that addresses the accounting and reporting for an entity that experiences a decrease in ownership of a subsidiary, including the deconsolidation of a subsidiary and the exchange of assets for an equity interest in another entity. This accounting guidance was effective for us upon issuance, and its adoption did not have a material impact on our consolidated financial condition or results of operations.

In August 2009, the FASB issued accounting guidance which provided clarification that, in the absence of a quoted price for a liability, companies may apply methods that use the quoted price of an investment traded as an asset or other valuation techniques consistent with the fair-value measurement principle. The adoption of this accounting guidance did not have a material impact on our consolidated financial condition or results of operations.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Interim Financial Data (Continued)

In June 2009, the FASB issued The Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the “Codification”) as the single source of authoritative accounting guidance for public companies. The Codification did not change generally accepted accounting principles but rather enhanced the way accounting principles are organized. The Codification was effective for us July 1, 2009 and its adoption did not have a material impact on our consolidated financial condition or results of operations.

In May 2009, the FASB issued accounting guidance on subsequent events which requires companies to address the accounting and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of this accounting guidance did not have a material impact on our consolidated financial condition or results of operations.

In December 2007, the FASB issued accounting guidance which requires all companies to report noncontrolling interests in subsidiaries as equity in the consolidated financial statements and to account for transactions between an entity and noncontrolling owners as equity transactions if the parent retains its controlling interest in the subsidiary. The adoption of this accounting guidance did not have a material impact on our consolidated financial condition or results of operations.

In April 2009, the FASB issued accounting guidance requiring disclosure about the method and significant assumptions used to establish the fair value of financial instruments for interim reporting periods as well as annual statements. The adoption of this accounting guidance did not have a material impact on our consolidated financial condition or results of operations.

In April 2009, the FASB issued additional accounting guidance for other-than-temporary impairments to improve the consistency in the timing of impairment recognition, as well as provide greater clarity to investors about credit and non-credit components of impaired debt securities that are not expected to be sold. The adoption of this accounting guidance did not have a material impact on our consolidated financial condition or results of operations.

In April 2009, the FASB issued accounting guidance which primarily addressed the measurement of fair value of financial assets and liabilities when there is no active market or where the price inputs being used could be indicative of distressed sales. The adoption of this accounting guidance did not have a material impact on our consolidated financial condition or results of operations.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements

Fair Value Measurement – Definition and Hierarchy

The accounting guidance for fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This accounting guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs by requiring that observable inputs be used when available. Fair value should be based on assumptions that market participants would use, including a consideration of nonperformance risk. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted (unadjusted) prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Examples of assets currently utilizing Level 1 inputs are most U.S. government securities, actively exchange-traded equity mutual funds, and money market funds.

Level 2: Quoted prices in active markets for similar assets and liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Examples of assets and liabilities currently utilizing Level 2 inputs are U.S. government agency securities, corporate bonds, most mortgage-backed and asset-backed securities, private placement investments in fixed income mutual funds, and most over-the-counter (“OTC”) derivatives.

Level 3: Unobservable inputs that are supported by little or no market activity may require significant judgment in order to determine the fair value of the assets and liabilities. Examples of assets and liabilities currently utilizing Level 3 inputs are structured OTC derivatives and certain mortgage-backed and asset-backed securities.

The use of observable and unobservable inputs is reflected in the fair value hierarchy assessment disclosed in the tables within this section. The availability of observable inputs can vary based upon the financial instrument and other factors, such as instrument type, market liquidity and other specific characteristics particular to the financial instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires additional judgment by management. The degree of management’s judgment can result in financial instruments being classified as or transferred to the Level 3 category.

Controls over Valuation of Financial Assets and Financial Liabilities

We have internal controls to ensure the appropriateness of fair value measurements including validation processes, review of key model inputs, and reconciliation of period-over-period fluctuations based on changes in key market inputs. All fair value measurements are subject to analysis. Review and approval by management is required as part of the validation processes.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Fair Value Methods

Fair value is based on quoted market prices, if available. If listed prices or quotes are not available, fair value is based upon internally developed models that primarily use as inputs market-based or independently sourced market parameters. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the availability of prices and inputs may be reduced for certain financial instruments. This condition could result in a financial instrument being reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

Valuation Adjustments

Counterparty Credit Valuation Adjustments – Adjustments are required when the market price (or parameter) is not indicative of the credit quality of the counterparty.

Non-Performance Credit Valuation Adjustments – Adjustments reflect our own non-performance risk when our liabilities are measured at fair value.

Liquidity Valuation Adjustments – Adjustments are necessary when we are unable to observe prices for a financial instrument due to market illiquidity.

Valuation Methods

The following section describes the valuation methodologies used for financial instruments measured at fair value, key inputs and significant assumptions in addition to the general classification of such instruments pursuant to the valuation hierarchy.

Cash Equivalents

Cash equivalents, consisting of money market instruments, represent highly liquid investments with maturities of three months or less at purchase. Generally, quoted market prices are used to determine the fair value of money market instruments.

Marketable Securities

The marketable securities portfolio consists of debt and equity securities. Where available, we use quoted market prices to measure fair value for these financial instruments. If quoted prices are not available, prices for similar assets and matrix pricing models are used. Some securities may have limited transparency or less observability; in these situations, fair value may be estimated using various assumptions such as default rates, loss severity and credit ratings.

Derivatives

As part of our risk management strategy, we enter into derivative transactions to mitigate our interest rate and foreign currency exposures. These derivative transactions are considered over-the-counter. All of our derivatives counterparties to which we had credit exposure at December 31, 2009 were assigned investment grade ratings by a nationally recognized statistical rating organization (“NRSRO”).

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

We estimate the fair value of our derivatives using industry standard valuation models that require observable market inputs, including market prices, yield curves, credit curves, interest rates, foreign exchange rates, volatilities and the contractual terms of the derivative instruments. For derivatives that trade in liquid markets, such as interest rate swaps, model inputs can generally be verified and do not require significant management judgment.

Certain other derivative transactions trade in less liquid markets with limited pricing information. For such derivatives, key inputs to the valuation process include quotes from counterparties, and other market data used to corroborate and adjust values where appropriate. Other market data includes values obtained from a market participant that serves as a third party pricing agent. In addition, pricing is validated internally using valuation models to assess the reasonableness of changes in factors such as market prices, yield curves, credit curves, interest rates, foreign exchange rates and volatilities.

Our derivative fair value measurements consider assumptions about counterparty credit risk and our own non-performance risk. Generally, we assume that a valuation that uses the London Interbank Offered Rate (“LIBOR”) curve to convert future values to present value is appropriate for derivative assets and liabilities. We consider counterparty credit risk and our own non-performance risk through credit valuation adjustments. In situations in which our net position with a derivative counterparty is an asset, the credit valuation adjustment calculation uses the credit default probabilities of our derivative counterparties over a particular time period. In situations in which our net position with a derivative counterparty is a liability, we use our own credit default probability to calculate the required non-performance credit valuation adjustment. We use a relative fair value approach to allocate the credit valuation adjustments to our derivatives portfolio.

As of December 31, 2009, we reduced our derivative liabilities in the amount of $4 million to account for our own non-performance risk. Derivative assets were reduced $15 million to account for counterparty credit risk.

Finance Receivables

Our finance receivables are not carried at fair value on a recurring basis on the balance sheet, nor are they actively traded. In certain instances, for finance receivables where there is evidence of impairment we may use an observable market price or the fair value of collateral if the loan is collateral dependent. The fair values of impaired finance receivables based on the collateral value or market prices where available are reported at fair value on a nonrecurring basis. Additional adjustments may be considered to reflect current market conditions when estimating fair value.

Other Assets

Other assets consist in part, of a net receivable from a money market mutual fund, which was adversely affected by the liquidity crisis in the marketplace during fiscal 2009. Since the net asset value of the money market mutual fund was no longer publicly available, we used net present value techniques adjusted for credit and liquidity risks and reported this in other assets. On March 31, 2009, we considered the money market mutual fund impaired and recorded a $35 million impairment. The net realizable value of $26 million was subsequently collected during the nine months ended December 31, 2009.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

The following table summarizes our financial assets and liabilities that were accounted for at fair value as of December 31, 2009, by level within the fair value hierarchy (dollars in millions):

	Fair value measurements on a recurring basis
	Level 1	Level 2	Level 3	Counterparty netting & collateral 1	Fair value

Cash equivalents	$4,508	$-	$-	$-	$4,508
Available-for-sale securities:
Debt instruments:
U.S. government and agency obligations	30	25	-	-	55
Municipal debt securities	-	11	-	-	11
Foreign government debt securities	-	22	-	-	22
Corporate debt securities	-	85	-	-	85
Mortgage-backed securities:
Agency mortgage-backed securities	-	117	-	-	117
Non-agency residential mortgage-backed securities	-	18	-	-	18
Non-agency commercial mortgage-backed securities	-	25	-	-	25
Asset-backed securities	-	701	-	-	701
Equity instruments:
Fixed income mutual funds	-	1,243	-	-	1,243
Equity mutual funds	341	-	-	-	341
Available-for-sale securities total	371	2,247	-	-	2,618
Derivatives:
Derivative assets2	-	4,294	179	(3,675)	798
Embedded derivative assets	-	-	6	-	6
Derivatives total	-	4,294	185	(3,675)	804
Total assets 3	4,879	6,541	185	(3,675)	7,930

Derivative liabilities2	-	(1,397)	(111)	1,147	(361)
Embedded derivative liabilities	-	-	(36)	-	(36)
Total liabilities 3	-	(1,397)	(147)	1,147	(397)
Total net assets and liabilities	$4,879	$5,144	$38	($2,528)	$7,533

1 We have met the accounting guidance for setoff criteria and have elected to net derivative assets and derivative liabilities and the related

cash collateral received and paid when legally enforceable master netting agreements exist.

2 Includes derivative asset counterparty credit valuation adjustment of $15 million and derivative liability non-performance credit valuation

adjustment of $4 million. Derivative assets and derivative liabilities include interest rate swaps, foreign currency swaps, foreign currency

forwards, and interest rate caps.

3 Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value

measurement.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

The following table summarizes our financial assets and liabilities that were accounted for at fair value as of March 31, 2009, by level within the fair value hierarchy (dollars in millions):

	Fair value measurements on a recurring basis
	Level 1	Level 2	Level 3	Counterparty netting, collateral 1	Fair value
Cash equivalents	$6,129	$-	$-	$-	$6,129
Available-for-sale securities:
Debt instruments:
U.S. government and agency obligations	44	27	-	-	71
Municipal debt securities	-	3	-	-	3
Foreign government debt securities	-	-	-	-	-
Corporate debt securities	-	63	-	-	63
Mortgage-backed securities:
Agency mortgage-backed securities	-	114	-	-	114
Non-agency residential mortgage-backed securities	-	37	-	-	37
Non-agency commercial mortgage-backed securities	-	32	-	-	32
Asset-backed securities	-	376	-	-	376
Equity instruments:
Preferred stock	1	-	-	-	1
Fixed income mutual funds	-	1,250	-	-	1,250
Equity mutual funds	240	-	-	-	240
Available-for-sale securities total	285	1,902	-	-	2,187
Derivatives:
Derivative assets2	-	2,020	159	(2,028)	151
Embedded derivative assets	-	-	24	-	24
Derivatives total	-	2,020	183	(2,028)	175
Total assets 3	6,414	3,922	183	(2,028)	8,491

Derivative liabilities2	-	(2,909)	(216)	1,808	(1,317)
Embedded derivative liabilities	-	-	(25)	-	(25)
Total liabilities 3	-	(2,909)	(241)	1,808	(1,342)
Total net assets and liabilities	$6,414	$1,013	($58)	($220)	$7,149

1 We have met the accounting guidance setoff criteria and have elected to net derivative assets and derivative liabilities and the related cash

collateral received and paid when legally enforceable master netting agreements exist.

2 Includes derivative asset counterparty credit valuation adjustment of $18 million and derivative liability non-performance credit valuation

adjustment of $69 million. Derivative assets and derivative liabilities include interest rate swaps, foreign currency swaps, foreign

currency forwards, and interest rate caps.

3 Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value

measurement.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

The determination in classifying a financial instrument within Level 3 of the valuation hierarchy is based upon the significance of the unobservable factors to the overall fair value measurement. The following tables summarize the reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (dollars in millions):

Three Months Ended December 31, 2009

	Fair value measurements using significant unobservable inputs (Level 3)
	Fair value, October 1, 2009	Total realized gains/ (losses)2	Purchases, issuances, and settlements, net3	Transfers in to Level 3	Transfers out of Level 3	Total unrealized gains/ (losses)4	Fair value December 31, 2009

Available-for-sale securities:
Debt Instruments:
Non-agency residential mortgage-backed securities	$1	$-	($1)	$-	$-	$-	$-
Asset-backed securities	1	-	(1)	-	-	-	-
Available-for-sale securities Total	2	-	(2)	-	-	-	-
Derivatives:
Derivative assets (liabilities), net3	144	(36)	49	-	-	(89)	68
Embedded derivative liabilities, net	(29)	1	-	-	-	(2)	(30)
Derivatives total	115	(35)	49	-	-	(91)	38
Total net assets (liabilities)1	$117	($35)	$47	$-	$-	($91)	$38

1 Level 3 recurring assets, as a percentage of total assets, were less than (0.1%) at December 31, 2009.

2 Realized gains and losses may occur when available-for-sale securities are sold; realized losses may also occur when available-for-sale

securities are considered other-than-temporarily impaired. Realized gains and losses may occur on derivative contracts when they

mature or are called or terminated early, and are recorded in interest expense in the Consolidated Statement of Income.

3 Net interest receipts or payments on derivative contracts are shown in purchases, issuances and settlements, net.

4 Represents the amount of unrealized gains or losses for the period included in earnings and/or accumulated other comprehensive

income that is attributable to the change in unrealized gains or losses for assets and liabilities classified as Level 3 at the end of the

period. Derivative contracts are recorded at fair value with changes in fair value recorded as either an unrealized gain or loss in

interest expense in the Consolidated Statement of Income. Unrealized gains or losses on available-for-sale securities are recorded

in accumulated other comprehensive income in the Consolidated Statement of Shareholder’s Equity.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Three Months Ended December 31, 2008

	Fair value measurements using significant unobservable inputs (Level 3)5
	Fair value, October 1, 2008	Total realized gains/ (losses)2	Purchases, issuances, and settlements, net3	Transfers in to Level 3	Transfers out of Level 3	Total unrealized gains/ (losses)4	Fair value December 31, 2008

Available-for-sale securities:
Debt Instruments:
Corporate debt securities	$-	$-	$2	$-	$-	$-	$2
Non-agency residential mortgage-backed securities	1	-	-	-	-	-	1
Asset-backed securities	1	-	-	-	-	-	1
Available-for-sale securities Total	2	-	2	-	-	-	4
Derivatives:
Derivative assets (liabilities), net 3	270	(32)	(1)	-	-	124	361
Embedded derivative liabilities, net	20	-	-	-	-	(23)	(3)
Derivatives Total	290	(32)	(1)	-	-	101	358
Other assets6	424	-	(334)	-	-	-	90
Total net assets (liabilities)1	$716	($32)	($333)	$-	$-	$101	$452

1 Level 3 recurring assets, as a percentage of total assets, were less than (0.6%) at December 31, 2008.

2 Realized gains and losses may occur when available-for-sale securities are sold; realized losses may also occur when available-for-sale

securities are considered other-than-temporarily impaired. Realized gains and losses may occur on derivative contracts when they

mature or are called or terminated early, and are recorded in interest expense in the Consolidated Statement of Income.

3 Net interest receipts or payments on derivative contracts are shown in purchases, issuances and settlements, net.

4 Represents the amount of unrealized gains or losses for the period included in earnings and/or accumulated other comprehensive

income that is attributable to the change in unrealized gains or losses for assets and liabilities classified as Level 3 at the end of the

period. Derivative contracts are recorded at fair value with changes in fair value recorded as either an unrealized gain or loss in

interest expense in the Consolidated Statement of Income. Unrealized gains or losses on available-for-sale securities are recorded in

accumulated other comprehensive income in the Consolidated Statement of Shareholder’s Equity.

5 Prior period amounts have been reclassified to conform to the current period presentation.

6 Represents a money market mutual fund balance excluding the credit and liquidity valuation adjustments of $2 million.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Nine months ended December 31, 2009

	Fair value measurements using significant unobservable inputs (Level 3)5
	Fair value, April 1, 2009	Total realized gains/ (losses)2	Purchases, issuances, and settlements, net3	Transfers in to Level 3	Transfers out of Level 3	Total unrealized gains/ (losses)4	Fair value December 31, 2009

Available-for-sale securities:
Debt Instruments:
Non-agency residential mortgage-backed securities	$-	$-	$-	$1	($1)	$-	$-
Asset-backed securities	-	-	(1)	1	-	-	-
Available-for-sale securities Total	-	-	(1)	2	(1)	-	-
Derivatives:
Derivative assets (liabilities), net 3	(57)	(132)	146	-	(10)	121	68
Embedded derivative liabilities, net	(1)	(1)	-	-	-	(28)	(30)
Derivatives Total	(58)	(133)	146	-	(10)	93	38
Total net assets (liabilities)1	($58)	($133)	$145	$2	($11)	$93	$38

1 Level 3 recurring assets, as a percentage of total assets, were less than (0.1%) at December 31, 2009.

2 Realized gains and losses may occur when available-for-sale securities are sold; realized losses may also occur when available-for-sale

securities are considered other-than-temporarily impaired. Realized gains and losses may occur on derivative contracts when they

mature or are called or terminated early, and are recorded in interest expense in the Consolidated Statement of Income.

3 Net interest receipts or payments on derivative contracts are shown in purchases, issuances and settlements, net.

4 Represents the amount of unrealized gains or losses for the period included in earnings and/or accumulated other comprehensive

income that is attributable to the change in unrealized gains or losses for assets and liabilities classified as Level 3 at the end of the

period. Derivative contracts are recorded at fair value with changes in fair value recorded as either an unrealized gain or loss in interest

expense in the Consolidated Statement of Income. Unrealized gains or losses on available-for-sale securities are recorded in

accumulated other comprehensive income in the Consolidated Statement of Shareholder’s Equity.

5 Prior period amounts have been reclassified to conform to the current period presentation.

- 17 -

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Nine months ended December 31, 2008

	Fair value measurements using significant unobservable inputs (Level 3)5
	Fair value, April 1, 2008	Total realized gains/ (losses)2	Purchases, issuances, and settlements, net3	Transfers in to Level 3	Transfers out of Level 3	Total unrealized gains/ (losses)4	Fair value December 31, 2008

Available-for-sale securities:
Debt Instruments:
Corporate debt securities	$-	$-	$2	$-	$-	$-	$2
Non-agency residential mortgage-backed securities	-	-	-	1	-	-	1
Asset-backed securities	-	-	-	1	-	-	1
Available-for-sale securities Total	-	-	2	2	-	-	4
Derivatives:
Derivative assets (liabilities), net 3	295	(122)	21	293	-	(126)	361
Embedded derivative liabilities, net	(40)	-	-	-	-	37	(3)
Derivatives Total	255	(122)	21	293	-	(89)	358
Other assets6	-	-	(334)	424	-	-	90
Total net assets (liabilities)1	$255	($122)	($311)	$719	$-	($89)	$452