FORM 6-K
Table of Contents

No. 1-7628

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF February 2012

COMMISSION FILE NUMBER: 1-07628

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(Name of registrant)

HONDA MOTOR CO., LTD.

(Translation of registrant’s name into English)

1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  x    Form 40-F  ¨            

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

 

 

 


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Contents

Exhibit 1:

Honda Motor Co., Ltd. filed its consolidated financial statements for the fiscal three months ended December 31, 2011 with Financial Services Agency in Japan.

Exhibit 2:

On February 16, 2012, Honda Siel Cars India Ltd. announced that it has resumed normal production with two shift operations from February 15, 2012

Exhibit 3:

The Board of Directors of Honda Motor Co., Ltd. (the “Company”), at its meeting held on February 21, 2012 has decided on changes of Operating Officers as of April 1, 2012 and has decided a plan for changes to its management as of late June 2012. Those changes as of late June 2012 are subject to approval at the General Meeting of Shareholders of the Company scheduled to be held in late June 2012 and/or decision at the meeting of the Board of Directors to be held immediately thereafter.


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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

HONDA GIKEN KOGYO KABUSHIKI KAISHA (HONDA MOTOR CO., LTD.)

/s/ Fumihiko Ike

Fumihiko Ike

Senior Managing Officer and Director

Chief Financial Officer

Honda Motor Co., Ltd.

Date: March 9, 2012


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 2011


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2011 and December 31, 2011

 

     Yen (millions)  
Assets    March 31,
2011
     December 31,
2011
 
     audited      unaudited  

Current assets:

     

Cash and cash equivalents

   ¥ 1,279,024       ¥ 1,142,719   

Trade accounts and notes receivable, net of allowance for doubtful accounts of ¥7,904 million at March 31, 2011 and ¥6,706 million at December 31, 2011 (notes 3 and 7)

     787,691         605,522   

Finance subsidiaries-receivables, net (notes 2, 3, 4 and 7)

     1,131,068         1,048,114   

Inventories (notes 5 and 7)

     899,813         882,931   

Deferred income taxes (note 8)

     202,291         194,277   

Other current assets (notes 3, 6, 7 and 11)

     390,160         335,796   
  

 

 

    

 

 

 

Total current assets

     4,690,047         4,209,359   
  

 

 

    

 

 

 

Finance subsidiaries-receivables, net (notes 2, 3, 4 and 7)

     2,348,913         2,234,563   

Investments and advances:

     

Investments in and advances to affiliates

     440,026         456,666   

Other, including marketable equity securities (notes 3, 4 and 6)

     199,906         155,924   
  

 

 

    

 

 

 

Total investments and advances

     639,932         612,590   
  

 

 

    

 

 

 

Property on operating leases:

     

Vehicles

     1,645,517         1,630,150   

Less accumulated depreciation

     287,885         277,034   
  

 

 

    

 

 

 

Net property on operating leases

     1,357,632         1,353,116   
  

 

 

    

 

 

 

Property, plant and equipment, at cost (note 7):

     

Land

     483,654         477,697   

Buildings

     1,473,067         1,442,417   

Machinery and equipment

     3,166,353         3,089,143   

Construction in progress

     202,186         207,583   
  

 

 

    

 

 

 
     5,325,260         5,216,840   

Less accumulated depreciation and amortization

     3,385,904         3,369,151   
  

 

 

    

 

 

 

Net property, plant and equipment

     1,939,356         1,847,689   
  

 

 

    

 

 

 

Other assets, net of allowance for doubtful accounts of ¥23,275 million at March 31, 2011 and ¥23,095 million at December 31, 2011 (notes 3, 4, 8 and 11)

     594,994         624,979   
  

 

 

    

 

 

 

Total assets

   ¥ 11,570,874       ¥ 10,882,296   
  

 

 

    

 

 

 


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2011 and December 31, 2011

 

     Yen (millions)  
Liabilities and Equity    March 31,
2011
    December 31,
2011
 
     audited     unaudited  

Current liabilities:

    

Short-term debt (note 4)

   ¥ 1,094,740      ¥ 1,019,866   

Current portion of long-term debt (note 4)

     962,455        966,466   

Trade payables:

    

Notes

     25,216        24,190   

Accounts

     691,520        653,315   

Accrued expenses (note 12)

     525,540        430,591   

Income taxes payable

     31,960        22,992   

Other current liabilities (notes 8 and 11)

     236,761        196,218   
  

 

 

   

 

 

 

Total current liabilities

     3,568,192        3,313,638   
  

 

 

   

 

 

 

Long-term debt, excluding current portion (note 4)

     2,043,240        1,849,536   

Other liabilities (notes 4, 8 and 12)

     1,376,530        1,359,954   
  

 

 

   

 

 

 

Total liabilities

     6,987,962        6,523,128   
  

 

 

   

 

 

 

Equity:

    

Honda Motor Co., Ltd. shareholders’ equity (note 9):

    

Common stock, authorized 7,086,000,000 shares at March 31, 2011 and at December 31, 2011; issued 1,811,428,430 shares at March 31, 2011 and at December 31, 2011

     86,067        86,067   

Capital surplus

     172,529        172,529   

Legal reserves

     46,330        46,843   

Retained earnings (note 13(a))

     5,666,539        5,724,811   

Accumulated other comprehensive income (loss), net (notes 6 and 11)

     (1,495,380     (1,758,752

Treasury stock, at cost 9,126,716 shares at March 31, 2011 and 9,128,231 shares at December 31, 2011

     (26,110     (26,115
  

 

 

   

 

 

 

Total Honda Motor Co., Ltd. shareholders’ equity

     4,449,975        4,245,383   
  

 

 

   

 

 

 

Noncontrolling interests (note 9)

     132,937        113,785   
  

 

 

   

 

 

 

Total equity (note 9)

     4,582,912        4,359,168   
  

 

 

   

 

 

 

Commitments and contingent liabilities (note 12)

    

Total liabilities and equity

   ¥ 11,570,874      ¥ 10,882,296   
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Income

For the nine months ended December 31, 2010 and 2011

 

     Yen (millions)  
     December 31,
2010
    December 31,
2011
 
     unaudited     unaudited  

Net sales and other operating revenue

   ¥ 6,723,788      ¥ 5,543,033   

Operating costs and expenses:

    

Cost of sales (note 1(f))

     4,849,409        4,141,925   

Selling, general and administrative (notes 1(e) and 1(f))

     987,045        909,418   

Research and development

     363,765        372,302   
  

 

 

   

 

 

 
     6,200,219        5,423,645   
  

 

 

   

 

 

 

Operating income

     523,569        119,388   

Other income (expenses):

    

Interest income

     16,836        25,119   

Interest expense

     (6,264     (7,509

Other, net (notes 6 and 11)

     19,792        27,348   
  

 

 

   

 

 

 
     30,364        44,958   
  

 

 

   

 

 

 

Income before income taxes and equity in income of affiliates

     553,933        164,346   

Income tax expense (notes 1(d) and 8):

    

Current

     40,511        57,346   

Deferred

     117,165        29,451   
  

 

 

   

 

 

 
     157,676        86,797   
  

 

 

   

 

 

 

Income before equity in income of affiliates

     396,257        77,549   

Equity in income of affiliates

     114,742        67,111   

Net income

     510,999        144,660   

Less: Net income attributable to noncontrolling interests

     21,465        4,772   
  

 

 

   

 

 

 

Net income attributable to Honda Motor Co., Ltd.

   ¥ 489,534      ¥ 139,888   
  

 

 

   

 

 

 
     Yen  
     December 31,
2010
    December 31,
2011
 

Basic net income attributable to Honda Motor Co., Ltd. per common share (note 15):

   ¥ 270.82      ¥ 77.62   
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Income

For the three months ended December 31, 2010 and 2011

 

     Yen (millions)  
     December 31,
2010
    December 31,
2011
 
     unaudited     unaudited  

Net sales and other operating revenue (note 1(e))

   ¥ 2,110,414      ¥ 1,942,545   

Operating costs and expenses:

    

Cost of sales (notes 1(e) and 1(f))

     1,517,648        1,446,474   

Selling, general and administrative (notes 1(e) and 1(f))

     343,003        317,354   

Research and development

     124,110        134,419   
  

 

 

   

 

 

 
     1,984,761        1,898,247   
  

 

 

   

 

 

 

Operating income

     125,653        44,298   

Other income (expenses):

    

Interest income

     6,069        8,775   

Interest expense

     (2,017     (2,445

Other, net (notes 6 and 11)

     1,875        7,864   
  

 

 

   

 

 

 
     5,927        14,194   
  

 

 

   

 

 

 

Income before income taxes and equity in income of affiliates

     131,580        58,492   

Income tax expense (notes 1(d) and 8):

    

Current

     19,575        (904

Deferred

     67,461        34,151   
  

 

 

   

 

 

 
     87,036        33,247   
  

 

 

   

 

 

 

Income before equity in income of affiliates

     44,544        25,245   

Equity in income of affiliates

     43,443        22,911   

Net income

     87,987        48,156   

Less: Net income attributable to noncontrolling interests

     6,869        494   
  

 

 

   

 

 

 

Net income attributable to Honda Motor Co., Ltd.

   ¥ 81,118      ¥ 47,662   
  

 

 

   

 

 

 
     Yen  
     December 31,
2010
    December 31,
2011
 

Basic net income attributable to Honda Motor Co., Ltd. per common share (note 15):

   ¥ 45.01      ¥ 26.45   
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended December 31, 2010 and 2011

 

     Yen (millions)  
     December 31,
2010
    December 31,
2011
 
     unaudited     unaudited  

Cash flows from operating activities:

    

Net income

   ¥ 510,999      ¥ 144,660   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation excluding property on operating leases

     262,251        228,448   

Depreciation of property on operating leases

     160,036        154,054   

Deferred income taxes

     117,165        29,451   

Equity in income of affiliates

     (114,742     (67,111

Dividends from affiliates

     44,156        47,261   

Provision for credit and lease residual losses on finance subsidiaries-receivables

     11,328        7,905   

Impairment loss on investments in securities

     673        501   

Damaged and impairment loss on long-lived assets excluding property on operating leases (note 1(f))

     534        7,654   

Loss (gain) on derivative instruments, net

     (26,644     (27,380

Decrease (increase) in assets:

    

Trade accounts and notes receivable

     73,716        123,712   

Inventories

     (93,519     (45,264

Other current assets

     18,408        57,835   

Other assets

     (9,105     (11,115

Increase (decrease) in liabilities:

    

Trade accounts and notes payable

     (61,340     14,023   

Accrued expenses

     (28,242     (58,769

Income taxes payable

     10,226        (8,027

Other current liabilities

     (3,940     (28,872

Other liabilities

     (81,850     (22,696

Other, net

     (24,480     (38,309
  

 

 

   

 

 

 

Net cash provided by operating activities

     765,630        507,961   

Cash flows from investing activities:

    

Increase in investments and advances

     (7,432     (18,363

Decrease in investments and advances

     10,759        10,458   

Payments for purchases of available-for-sale securities

     (199     —     

Proceeds from sales of available-for-sale securities

     2,319        —     

Payments for purchases of held-to-maturity securities

     (164,145     (14,624

Proceeds from redemptions of held-to-maturity securities

     79,517        45,827   

Capital expenditures

     (204,193     (240,522

Proceeds from sales of property, plant and equipment

     18,311        21,921   

Proceeds from insurance recoveries for damaged property, plant and equipment (note 1(f))

     —          4,944   

Acquisitions of finance subsidiaries-receivables

     (1,629,600     (1,546,337

Collections of finance subsidiaries-receivables

     1,567,415        1,504,989   

Purchases of operating lease assets

     (586,391     (498,380

Proceeds from sales of operating lease assets

     298,308        272,504   
  

 

 

   

 

 

 

Net cash used in investing activities

     (615,331     (457,583

Cash flows from financing activities:

    

Increase (decrease) in short-term debt, net

     127,340        5,008   

Proceeds from long-term debt

     579,844        707,736   

Repayments of long-term debt

     (612,441     (711,590

Dividends paid (note 13(a))

     (65,136     (81,103

Dividends paid to noncontrolling interests

     (15,641     (15,060

Sales (purchases) of treasury stock, net

     (34,794     (5
  

 

 

   

 

 

 

Net cash used in financing activities

     (20,828     (95,014

Effect of exchange rate changes on cash and cash equivalents

     (90,704     (91,669
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     38,767        (136,305

Cash and cash equivalents at beginning of the period

     1,119,902        1,279,024   
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   ¥ 1,158,669      ¥ 1,142,719   
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


Table of Contents

 

1

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(1) General and Summary of Significant Accounting Policies

 

(a) Financial Statements

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). In the opinion of management, all adjustments which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the year. For further information, refer to the March 31, 2011 consolidated financial statements and notes thereto included in Honda Motor Co., Ltd. and Subsidiaries Annual Report for the year ended March 31, 2011. Consolidated financial statements for the year ended March 31, 2011 are derived from the audited consolidated financial statements, while consolidated financial statements for the nine months and the three months ended December 31, 2011 are unaudited.

 

(b) Basis of Presenting Consolidated Financial Statements

The Company and its Japanese subsidiaries maintain their books of account in conformity with financial accounting standards of Japan, and its foreign subsidiaries generally maintain their books of account in conformity with those of the countries of their domicile.

The consolidated financial statements presented herein have been prepared in a manner and reflect the adjustments which are necessary to conform them with U.S. GAAP.

 

(c) Changes in Accounting Procedures for Consolidated Quarterly Financial Results

None

 

(d) Accounting Policies Specifically Applied for Quarterly Consolidated Financial Statements

Income taxes

Honda computes interim income tax expense (benefit) by multiplying reasonably estimated annual effective tax rate, which includes the effects of deferred taxes, by year-to-date income before income taxes and equity in income of affiliates for the nine months ended December 31, 2011. If a reliable estimate cannot be made, Honda utilizes the actual year-to-date effective tax rate.

 

(e) Out-of-period adjustments

During the three months ended December 31, 2010, certain overstatements were found in trade accounts and notes receivable, inventories, net sales and other operating revenue, and cost of sales in previously issued consolidated financial statements, pertaining to the Company’s inventory management trading activities at a Japanese subsidiary. This Japanese subsidiary temporarily purchases sea food products from seafood companies with the promise that they will buy back such products after certain period, in order to bridge the gap between the purchasing period (the fishing season) and the sales period for sea food products. In the Company’s consolidated statements of income for the three months ended December 31, 2010, the Company adjusted net sales and other operating revenue amounted to ¥9,888 million and operating income amounted to ¥280 million overstated in the Company’s consolidated statements of income for the six months ended September 30, 2010, in conjunction with the related cumulative loss amounted to ¥14,123 million as of March 31, 2010. As a result, operating income for the nine months and three months ended December 31, 2010, decreased by ¥14,123 million and 14,403 million, respectively. Honda believes that these adjustments are immaterial to the Company’s consolidated financial statements or results of operations in prior periods.


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2

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(f) Impact on the Company’s consolidated financial position or results of operations of the flood in Thailand

Since October 2011, Thailand suffered from severe floods, which caused damage to inventories, and machineries and equipments of certain consolidated subsidiaries and affiliates of the Company. Accordingly, production activities in plant facilities at Honda and its affiliates have been affected by floods.

As a result, Honda recognized ¥17,348 million of costs and expenses, of which ¥9,387 million is included in cost of sales and ¥7,961 million is included in selling, general and administrative expenses in the accompanying consolidated statement of income for the three months ended December 31, 2011. These costs and expenses mainly consist of loss on inventories of ¥7,330 million which are included in cost of sales, and loss on damaged property, plant and equipment of ¥7,654 million which is included in selling, general and administrative expenses.

In addition, Honda recognized insurance recoveries of ¥11,838 million which is included in selling, general and administrative expenses in the accompanying consolidated statement of income for the three months ended December 31, 2011. The recognized insurance recovery is limited to the amount of the related incurred losses and Honda will recognize insurance recoveries in excess of the incurred losses when final settlements with insurance companies are reached.

(2) Allowances for Finance Subsidiaries-receivables

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Finance subsidiaries-receivables

     

Allowance for credit losses

   ¥ 24,890       ¥  19,991   

Allowance for losses on lease residual values

     7,225         5,166   


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3

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(3) Credit Quality of Finance Receivables and Allowance for Credit Losses

The finance subsidiaries of the Company provide retail lending and leasing to customers and wholesale financing to dealers primarily to support sales of our products. Honda classifies retail and direct financing lease receivables derived from those services as finance subsidiaries-receivables. Operating leases are classified as property on operating leases. Certain finance receivables related to sales of inventory are included in trade accounts and notes receivable and other assets in the consolidated balance sheets. Receivables on past due operating lease rental payments are included in other current assets in the consolidated balance sheets.

Finance subsidiaries-receivables, net, consisted of the following at March 31, 2011 and December 31, 2011:

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Retail

   ¥ 3,368,014       ¥ 3,193,835   

Direct financing lease

     362,136         335,940   

Wholesale flooring

     267,526         186,043   

Commercial loans

     34,116         36,073   
  

 

 

    

 

 

 

Total finance receivables

     4,031,792         3,751,891   

Less:

     

Allowance for credit losses

     28,437         23,329   

Allowance for losses on lease residual values

     7,225         5,166   

Unearned interest income and fees

     19,916         16,770   
  

 

 

    

 

 

 
     3,976,214         3,706,626   

Less:

     

Finance receivables included in trade accounts and notes receivable, net

     332,195         252,005   

Finance receivables included in other assets, net

     164,038         171,944   
  

 

 

    

 

 

 

Finance subsidiaries-receivables, net

     3,479,981         3,282,677   

Less current portion

     1,131,068         1,048,114   
  

 

 

    

 

 

 

Noncurrent finance subsidiaries-receivables, net

   ¥ 2,348,913       ¥ 2,234,563   
  

 

 

    

 

 

 

Allowance for Credit Losses

The majority of the credit risk is with consumer financing and to a lesser extent with dealer financing. Credit risk is affected by general economic conditions such as a rise in unemployment rates or declines in used vehicle prices. The finance subsidiaries of the Company estimate losses incurred on retail and direct financing lease receivables and recognize them in the allowance for credit losses. Consumer finance receivables consist of a large number of smaller-balance homogenous loans and leases. The finance subsidiaries of the Company segment these receivables into groups with common characteristics, and estimate collectively the allowance for credit losses on consumer finance receivables by the group. The finance subsidiaries of the Company take into consideration various methodologies when estimating the allowance including vintage loss rate analysis and delinquency roll rate analysis. When performing the vintage loss rate analysis, consumer finance receivables are segregated between retail and direct financing lease, and further segmented into groups with common risk characteristics including collateral type, credit grades and original terms. Loss rates are projected for these pools based on historical rates and adjusted for considerations of emerging trends and changing economic conditions. The roll rate analysis is used primarily by the finance subsidiaries of the Company in North America. This analysis tracks the migration of finance receivables through various stages of delinquency and ultimately to charge-offs. Roll rates are projected based on historical results while also taking into consideration trends and changing economic conditions.

Wholesale receivables are considered to be impaired when it is probable that they will be unable to collect all amounts due according to the original terms of the contract. The finance subsidiaries of the company recognize estimated losses on them in the allowance for credit losses. Credit risk on wholesale receivables is affected primarily by the financial strength of the dealers within the portfolio. Wholesale receivables are evaluated for impairment on an individual dealer basis. Ongoing evaluations of dealerships are performed to determine whether there is evidence of impairment. Factors can include payment performance, overall dealership financial performance, or known difficulties experienced by the dealership.


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4

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Honda regularly reviews the adequacy of the allowance for credit losses. The estimates are based on information available as of each reporting date. However actual losses may differ from the original estimates as a result of actual results varying from those assumed in our estimates with inherently uncertain items.

The following table presents the changes of the allowance for credit losses on finance receivables for the nine months ended December 31, 2011.

 

     Yen (millions)  
     Retail     Direct
financing
lease
    Wholesale     Total  

Allowance for credit losses

        

Balance at beginning of the period

   ¥ 25,578      ¥ 1,455      ¥ 1,404      ¥ 28,437   

Provision (reversal)

     6,879        118        (53     6,944   

Charge-offs

     (16,074     (561     (71     (16,706

Recoveries

     6,404        231        43        6,678   

Adjustments from foreign currency translation

     (1,805     (89     (130     (2,024
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of the period

   ¥ 20,982      ¥ 1,154      ¥ 1,193      ¥ 23,329   
  

 

 

   

 

 

   

 

 

   

 

 

 

In the finance subsidiaries of the Company in North America, retail and direct financing lease receivables are charged off when they become 120 days past due or earlier if they have been specifically identified as uncollectible. Wholesale receivables are charged off when they have been individually identified as uncollectible. In the finance subsidiaries of the Company in other areas except for North America, finance receivables are charged off when they have been identified as substantially uncollectible according to the internal standards of each subsidiary.

Delinquencies

In the finance subsidiaries of the Company in North America, retail and direct financing lease receivables are considered delinquent if more than 10% of a monthly scheduled payment is contractually past due on a cumulative basis. Wholesale receivables are considered delinquent when any principal payments are past due. In the finance subsidiaries of the Company in other areas except for North America, finance receivables are considered delinquent when any principal payments are past due.


Table of Contents

 

5

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following tables present an age analysis of past due finance receivables at March 31, 2011 and December 31, 2011.

 

As of March 31, 2011    Yen (millions)  
     30-59 days
past due
     60-89 days
past due
     90 days and
greater

past due
     Total past
due
     Current *      Total
finance
receivables
 

Retail

                 

New auto

   ¥ 14,127       ¥ 1,625       ¥ 3,191       ¥ 18,943       ¥ 2,762,373       ¥ 2,781,316   

Used & certified auto

     5,325         591         474         6,390         421,605         427,995   

Others

     1,666         468         895         3,029         155,674         158,703   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total retail

     21,118         2,684         4,560         28,362         3,339,652         3,368,014   

Direct financing lease

     1,375         179         584         2,138         359,998         362,136   

Wholesale

                 

Wholesale flooring

     125         38         273         436         267,090         267,526   

Commercial loans

     —           —           —           —           34,116         34,116   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total wholesale

     125         38         273         436         301,206         301,642   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total finance receivables

   ¥ 22,618       ¥ 2,901       ¥ 5,417       ¥ 30,936       ¥ 4,000,856       ¥ 4,031,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2011    Yen (millions)  
     30-59 days
past due
     60-89 days
past due
     90 days and
greater

past due
     Total past
due
     Current *      Total
finance
receivables
 

Retail

                 

New auto

   ¥ 15,058       ¥ 2,512       ¥ 3,312       ¥ 20,882       ¥ 2,630,729       ¥ 2,651,611   

Used & certified auto

     6,876         1,045         414         8,335         395,871         404,206   

Others

     1,744         736         992         3,472         134,546         138,018   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total retail

     23,678         4,293         4,718         32,689         3,161,146         3,193,835   

Direct financing lease

     1,292         313         788         2,393         333,547         335,940   

Wholesale

                 

Wholesale flooring

     41         23         305         369         185,674         186,043   

Commercial loans

     —           —           —           —           36,073         36,073   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total wholesale

     41         23         305         369         221,747         222,116   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total finance receivables

   ¥ 25,011       ¥ 4,629       ¥ 5,811       ¥ 35,451       ¥ 3,716,440       ¥ 3,751,891   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Includes recorded investment of finance receivables that are less than 30 days past due.

Credit Quality Indicators

The collection experience of consumer finance receivables provides an indication of the credit quality of consumer finance receivables. The likelihood of accounts charging off becomes significantly higher once an account becomes 60 days delinquent. The table below segments the Company’s portfolio of consumer finance receivables between groups the Company considers to be performing and nonperforming. Accounts that are delinquent for 60 days or greater are included in the nonperforming group and all other accounts are considered to be performing.


Table of Contents

 

6

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following tables present the balances of consumer finance receivables by the credit quality indicator at March 31, 2011 and December 31, 2011.

 

As of March 31, 2011    Yen (millions)  
     Performing      Nonperforming      Total consumer
finance receivables
 

Retail

        

New auto

   ¥ 2,776,500       ¥ 4,816       ¥ 2,781,316   

Used & certified auto

     426,930         1,065         427,995   

Others

     157,340         1,363         158,703   
  

 

 

    

 

 

    

 

 

 

Total retail

     3,360,770         7,244         3,368,014   

Direct financing lease

     361,373         763         362,136   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 3,722,143       ¥ 8,007       ¥ 3,730,150   
  

 

 

    

 

 

    

 

 

 
As of December 31, 2011    Yen (millions)  
     Performing      Nonperforming      Total consumer
finance receivables
 

Retail

        

New auto

   ¥ 2,645,787       ¥ 5,824       ¥ 2,651,611   

Used & certified auto

     402,747         1,459         404,206   

Others

     136,290         1,728         138,018   
  

 

 

    

 

 

    

 

 

 

Total retail

     3,184,824         9,011         3,193,835   

Direct financing lease

     334,839         1,101         335,940   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 3,519,663       ¥ 10,112       ¥ 3,529,775   
  

 

 

    

 

 

    

 

 

 

A credit quality indicator for wholesale receivables is the internal risk ratings for the dealerships. Dealerships are assigned an internal risk rating based primarily on their financial condition. At a minimum, risk ratings for dealerships are updated annually and more frequently for dealerships with weaker risk ratings. The table below presents outstanding wholesale receivables balances by the internal risk rating group. Group A includes the loans of dealerships with the highest credit quality characteristics in the strongest risk rating tier. Group B includes the loans of all remaining dealers and are considered to have weaker credit quality characteristics. Although the likelihood of losses can be higher for dealerships in Group B, the overall risk of losses is not considered to be significant.


Table of Contents

 

7

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following tables present the balance of wholesale receivables by credit quality indicators at March 31, 2011 and December 31, 2011.

 

As of March 31, 2011    Yen (millions)  
     Group A      Group B      Total  

Wholesale

        

Wholesale flooring

   ¥ 144,118       ¥ 123,408       ¥ 267,526   

Commercial loans

     14,024         20,092         34,116   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 158,142       ¥ 143,500       ¥ 301,642   
  

 

 

    

 

 

    

 

 

 
As of December 31, 2011    Yen (millions)  
     Group A      Group B      Total  

Wholesale

        

Wholesale flooring

   ¥  107,497       ¥ 78,546       ¥ 186,043   

Commercial loans

     25,144         10,929         36,073   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 132,641       ¥ 89,475       ¥ 222,116   
  

 

 

    

 

 

    

 

 

 

Other Finance Receivables

Except for the finance subsidiaries-receivables, the other finance receivables about which credit quality information and the allowance for credit losses are required to be disclosed by the FASB Accounting Standards Codification (ASC) 310 “Receivables” of ¥59,520 million and ¥61,206 million were included in other current assets, investments and advances-other and other assets in the consolidated balance sheets at March 31, 2011 and December 31, 2011, respectively. Honda estimates individually the collectibility of the other finance receivables based on the financial condition of the debtor. The impaired finance receivables amounted to ¥19,574 million and ¥20,296 million at March 31, 2011 and December 31, 2011, respectively, for which the allowance for credit losses were ¥19,574 million and ¥20,053 million at March 31, 2011 and December 31, 2011, respectively.

Regarding the other finance receivables which are not impaired, there are no past due receivables.

(4) Variable Interest Entities

Honda considers its involvement with a variable interest entity (VIE) under the FASB Accounting Standards Codification (ASC) 810 “Consolidation”. This standard prescribes that the reporting entity shall consolidate a VIE as its primary beneficiary when it deemed to have a controlling financial interest in a VIE, meeting both of the following characteristics:

 

(a) The power to direct the activities of a VIE that most significantly impact the VIE’s economic performance.

 

(b) The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The finance subsidiaries of the Company periodically securitize for liquidity and funding purposes and transfer finance receivables to the trust which is newly established to issue asset-backed securities. The finance subsidiaries of the Company deemed to have the power to direct the activities of these trusts that most significantly impact the trusts’ economic performance, as they retain servicing rights in all securitizations, and manage delinquencies and defaults of the underlying receivables. Furthermore, the finance subsidiaries of the Company deemed to have the obligation to absorb losses of these trusts that could potentially be significant to these trusts, as they would absorb the majority of the expected losses of these trusts by retaining certain subordinated interests of these trusts. Therefore, the Company has consolidated these trusts, as it deemed to have controlling financial interests in these trusts.


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8

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table presents the balances of the assets and liabilities of consolidated VIEs at March 31, 2011 and December 31, 2011.

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Finance subsidiaries-receivables, net

   ¥ 500,208       ¥ 487,807   

Restricted cash *1

     7,931         13,612   

Other assets

     1,688         1,450   
  

 

 

    

 

 

 

Total assets

   ¥ 509,827       ¥ 502,869   
  

 

 

    

 

 

 

Secured debt *2

   ¥ 495,695       ¥ 480,928   

Other liabilities

     532         253   
  

 

 

    

 

 

 

Total liabilities

   ¥ 496,227       ¥ 481,181   
  

 

 

    

 

 

 

 

*1 

Restricted cash as collateral for the payment of the related secured debt obligation was included in Investments and advances-Other on the consolidated balance sheets.

*2 

Secured debt was included in short-term and long-term debt on the consolidated balance sheets.

The creditors of these trusts do not have recourse to the finance subsidiaries’ general credit with the exception of representations and warranties customary in the industry provided by the finance subsidiaries to these trusts.

There is no VIE in which Honda holds a significant variable interest but is not the primary beneficiary as of March 31, 2011 and December 31, 2011.

(5) Inventories

Inventories at March 31, 2011 and December 31, 2011 are summarized as follows:

 

     Yen (millions)  
     March  31,
2011
     December  31,
2011
 

Finished goods

   ¥ 531,071       ¥ 462,270   

Work in process

     49,606         45,813   

Raw materials

     319,136         374,848   
  

 

 

    

 

 

 
   ¥ 899,813       ¥ 882,931   
  

 

 

    

 

 

 


Table of Contents

 

9

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(6) Investments and Advances-Other

Investments and advances at March 31, 2011 and December 31, 2011 consist of the following:

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Current

     

Corporate debt securities

   ¥ 331       ¥ 543   

U.S. government and agency debt securities

     —           777   

Advances

     790         914   

Certificates of deposit

     1,366         1,468   
  

 

 

    

 

 

 
   ¥ 2,487       ¥ 3,702   
  

 

 

    

 

 

 

Investments and advances due within one year are included in other current assets.

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Noncurrent

     

Auction rate securities (non-marketable)

   ¥ 6,948       ¥ 6,418   

Marketable equity securities

     92,421         80,915   

Government bonds

     1,999         1,999   

U.S. government and agency debt securities

     37,029         2,549   

Non-marketable equity securities accounted for under the cost method

     

Non-marketable preferred stocks

     969         969   

Other

     12,178         10,752   

Guaranty deposits

     23,735         22,726   

Advances

     1,159         1,117   

Other

     23,468         28,479   
  

 

 

    

 

 

 
   ¥ 199,906       ¥ 155,924   
  

 

 

    

 

 

 

Certain information with respect to available-for-sale securities and held-to-maturity securities at March 31, 2011 and December 31, 2011 is summarized below:

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Available-for-sale

     

Cost

   ¥ 46,017       ¥ 44,324   

Fair value

     99,369         87,333   

Gross unrealized gains

     56,019         46,897   

Gross unrealized losses

     2,667         3,888   

Held-to-maturity

     

Amortized cost

   ¥ 40,725       ¥ 7,336   

Fair value

     40,649         7,420   

Gross unrealized gains

     91         85   

Gross unrealized losses

     167         1   


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10

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Maturities of debt securities classified as held-to-maturity at December 31, 2011 are as follows:

 

     Yen (millions)  

Due within one year

   ¥ 2,788   

Due after one year through five years

     4,548   

Due after five years through ten years

     —     
  

 

 

 

Total

   ¥ 7,336   
  

 

 

 

There was no amount of significant realized gains and losses from available-for-sale securities included in other income (expenses) – other, net for the nine months and the three months ended December 31, 2010 and 2011.

Gross unrealized losses on available-for-sale securities and held-to-maturity securities, and fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss position at March 31, 2011 and December 31, 2011 are as follows:

 

     Yen (millions)  
     March 31, 2011      December 31, 2011  
     Fair value      Unrealized
losses
     Fair value      Unrealized
losses
 

Available-for-sale

        

Less than 12 months

   ¥ 9,054       ¥ 1,516       ¥ 7,600       ¥ 2,939   

12 months or longer

     7,759         1,151         7,032         949   
  

 

 

    

 

 

    

 

 

    

 

 

 
   ¥ 16,813       ¥ 2,667       ¥ 14,632       ¥ 3,888   
  

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity

           

Less than 12 months

   ¥ 31,042       ¥ 167       ¥ 605       ¥ 1   

12 months or longer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   ¥ 31,042       ¥ 167       ¥ 605       ¥ 1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Honda does not believe the decline in fair value of any of its investment securities to be other than temporary, which is based on factors such as financial and operating conditions of the issuer, the industry in which the issuer operates, degree and period of the decline in fair value and other relevant factors.


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11

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(7) Pledged Assets

Pledged assets at March 31, 2011 and December 31, 2011 are as follows:

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Trade accounts and notes receivable

   ¥ 13,808       ¥ 7,508   

Inventories

     11,691         3,660   

Other current assets

     5,337         —     

Property, plant and equipment

     24,548         21,013   

Finance subsidiaries-receivables

     504,587         493,545   

(8) Income taxes

On November 30, 2011, the National Diet of Japan approved the laws for amendments to previous income tax laws.

Upon the change in the laws, the statutory income tax rate in Japan will be changed to approximately 38% for fiscal years beginning on or after April 1, 2012, and to approximately 35% for fiscal years beginning on or after April 1, 2015. Thus, the Company and its Japanese subsidiaries measured deferred tax assets and liabilities based on the tax rates to be applied in the fiscal years in which temporary differences are expected to be recovered or settled.

As a result, net of deferred tax assets decreased ¥16,072 million as of December 31, 2011, and income tax expenses increased ¥16,072 million for the nine months and the three months ended December 31, 2011.

Due primarily to the impact of this tax rate change, the effective tax rates of Honda for the nine months and the three months ended December 31, 2011 differ from Japanese (or the Company’s) statutory income tax rate, which is 40% for the fiscal year ending March 31, 2012.


Table of Contents

 

12

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(9) Equity

The changes in equity for the nine months and three months ended December 31, 2010 and 2011 are as follows:

For the nine months ended December 31, 2010

 

     Yen (millions)  
     Honda Motor Co., Ltd.
shareholders’ equity
    Noncontrolling
interests
    Total
equity
 

Balance at March 31, 2010

   ¥ 4,328,640      ¥ 127,790      ¥ 4,456,430   

Cumulative effect of adjustments resulting from the adoption of new accounting standards on variable interest entities, net of tax

     1,432        —          1,432   
  

 

 

   

 

 

   

 

 

 

Adjusted balance at March 31, 2010

   ¥ 4,330,072      ¥ 127,790      ¥ 4,457,862   
  

 

 

   

 

 

   

 

 

 

Dividends paid to Honda Motor Co., Ltd. shareholders

     (65,136     —          (65,136

Dividends paid to noncontrolling interests

     —          (15,641     (15,641

Capital transactions and others

     —          164        164   

Comprehensive income (loss):

      

Net income

     489,534        21,465        510,999   

Other comprehensive income (loss), net of tax

      

Adjustments from foreign currency translation

     (339,624     (7,727     (347,351

Unrealized gains (losses) on available-for-sale securities, net

     1,655        (13     1,642   

Unrealized gains (losses) on derivative instruments, net

     621        —          621   

Pension and other postretirement benefits adjustments

     6,158        112        6,270   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     158,344        13,837        172,181   
  

 

 

   

 

 

   

 

 

 

Purchase of treasury stock

     (34,796     —          (34,796

Reissuance of treasury stock

     2        —          2   
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2010

   ¥ 4,388,486      ¥ 126,150      ¥ 4,514,636   
  

 

 

   

 

 

   

 

 

 

During the six months ended September 30, 2010, the Company retired 23,400 thousand shares of its treasury stock at a cost of ¥80,417 million by offsetting with unappropriated retained earnings of ¥ 80,417 million based on the resolution of the board of directors. It had no effect on the total Honda Motor Co., Ltd. shareholders’ equity.


Table of Contents

 

13

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the nine months ended December 31, 2011

 

     Yen (millions)  
     Honda Motor Co., Ltd.
shareholders’ equity
    Noncontrolling
interests
    Total
equity
 

Balance at March 31, 2011

   ¥ 4,449,975      ¥ 132,937      ¥ 4,582,912   
  

 

 

   

 

 

   

 

 

 

Dividends paid to Honda Motor Co., Ltd. shareholders

     (81,103     —          (81,103

Dividends paid to noncontrolling interests

     —          (15,060     (15,060

Capital transactions and others

     —          (2,653     (2,653

Comprehensive income (loss):

      

Net income

     139,888        4,772        144,660   

Other comprehensive income (loss), net of tax

      

Adjustments from foreign currency translation

     (262,426     (6,251     (268,677

Unrealized gains (losses) on available-for-sale securities, net

     (6,218     (56     (6,274

Unrealized gains (losses) on derivative instruments, net

     201        —          201   

Pension and other postretirement benefits adjustments

     5,071        96        5,167   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     (123,484     (1,439     (124,923
  

 

 

   

 

 

   

 

 

 

Purchase of treasury stock

     (5     —          (5

Reissuance of treasury stock

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

   ¥ 4,245,383      ¥ 113,785      ¥ 4,359,168   
  

 

 

   

 

 

   

 

 

 


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14

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the three months ended December 31, 2010

 

     Yen (millions)  
     Honda Motor Co., Ltd.
shareholders’ equity
    Noncontrolling
interests
    Total
equity
 

Balance at September 30, 2010

   ¥ 4,378,376      ¥ 124,333      ¥ 4,502,709   
  

 

 

   

 

 

   

 

 

 

Dividends paid to Honda Motor Co., Ltd. shareholders

     (21,628     —          (21,628

Dividends paid to noncontrolling interests

     —          (2,377     (2,377

Capital transactions and others

     —          —          —     

Comprehensive income (loss):

      

Net income

     81,118        6,869        87,987   

Other comprehensive income (loss), net of tax

      

Adjustments from foreign currency translation

     (59,055     (2,722     (61,777

Unrealized gains (losses) on available-for-sale securities, net

     7,471        10        7,481   

Unrealized gains (losses) on derivative instruments, net

     242        —          242   

Pension and other postretirement benefits adjustments

     1,970        37        2,007   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     31,746        4,194        35,940   
  

 

 

   

 

 

   

 

 

 

Purchase of treasury stock

     (9     —          (9

Reissuance of treasury stock

     1        —          1   
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2010

   ¥ 4,388,486      ¥ 126,150      ¥ 4,514,636   
  

 

 

   

 

 

   

 

 

 


Table of Contents

 

15

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the three months ended December 31, 2011

 

     Yen (millions)  
     Honda Motor Co., Ltd.
shareholders’ equity
    Noncontrolling
interests
    Total
equity
 

Balance at September 30, 2011

   ¥ 4,297,278      ¥ 117,570      ¥ 4,414,848   
  

 

 

   

 

 

   

 

 

 

Dividends paid to Honda Motor Co., Ltd. shareholders

     (27,034     —          (27,034

Dividends paid to noncontrolling interests

     —          (625     (625

Capital transactions and others

     —          (2,653     (2,653

Comprehensive income (loss):

      

Net income

     47,662        494        48,156   

Other comprehensive income (loss), net of tax

      

Adjustments from foreign currency translation

     (73,248     (1,032     (74,280

Unrealized gains (losses) on available-for-sale securities, net

     (962     (1     (963

Unrealized gains (losses) on derivative instruments, net

     (1     —          (1

Pension and other postretirement benefits adjustments

     1,689        32        1,721   
  

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     (24,860     (507     (25,367
  

 

 

   

 

 

   

 

 

 

Purchase of treasury stock

     (1     —          (1

Reissuance of treasury stock

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

   ¥ 4,245,383      ¥ 113,785      ¥ 4,359,168   
  

 

 

   

 

 

   

 

 

 


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16

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(10) Fair Value Measurement

In accordance with FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures”, Honda uses a three-level hierarchy when measuring fair value. The following is a description of the three hierarchy levels:

 

Level 1    Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date
Level 2    Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly
Level 3    Unobservable inputs for the assets or liabilities

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest input that is significant to the fair value measurement in its entirety.

The following tables present the assets and liabilities measured at fair value on a recurring basis as of March 31, 2011 and December 31, 2011.

 

As of March 31, 2011    Yen (millions)  
     Level 1      Level 2     Level 3     Gross
fair value
    Netting
adjustment
    Net
amount
 

Assets:

             

Derivative instruments

             

Foreign exchange instruments (note 11)

   ¥ —         ¥ 57,880      ¥ —        ¥ 57,880      ¥ —        ¥ —     

Interest rate instruments (note 11)

     —           29,759        154        29,913        —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           87,639        154        87,793        (26,641     61,152   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

             

Marketable equity securities

     92,421         —          —          92,421        —          92,421   

Auction rate securities

     —           —          6,948        6,948        —          6,948   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

     92,421         —          6,948        99,369        —          99,369   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   ¥ 92,421       ¥ 87,639      ¥ 7,102      ¥ 187,162      ¥ (26,641   ¥ 160,521   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

             

Derivative instruments

             

Foreign exchange instruments (note 11)

   ¥ —         ¥ (15,712   ¥ —        ¥ (15,712   ¥ —        ¥ —     

Interest rate instruments (note 11)

     —           (32,435     (155     (32,590     —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           (48,147     (155     (48,302     26,641        (21,661
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   ¥ —         ¥ (48,147   ¥ (155   ¥ (48,302   ¥ 26,641      ¥ (21,661
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


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17

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

As of December 31, 2011    Yen (millions)  
     Level 1      Level 2     Level 3     Gross
fair value
    Netting
adjustment
    Net
amount
 

Assets:

             

Derivative instruments

             

Foreign exchange instruments (note 11)

   ¥ —         ¥ 56,655      ¥ —        ¥ 56,655      ¥ —        ¥ —     

Interest rate instruments (note 11)

     —           33,478        13        33,491        —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           90,133        13        90,146        (25,735     64,411   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

             

Marketable equity securities

     80,915         —          —          80,915        —          80,915   

Auction rate securities

     —           —          6,418        6,418        —          6,418   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

     80,915         —          6,418        87,333        —          87,333   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   ¥ 80,915       ¥ 90,133      ¥ 6,431      ¥ 177,479      ¥ (25,735   ¥ 151,744   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

             

Derivative instruments

             

Foreign exchange instruments (note 11)

   ¥ —         ¥ (21,675   ¥ —        ¥ (21,675   ¥ —        ¥ —     

Interest rate instruments (note 11)

     —           (20,616     (13     (20,629     —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           (42,291     (13     (42,304     25,735        (16,569
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   ¥ —         ¥ (42,291   ¥ (13   ¥ (42,304   ¥ 25,735      ¥ (16,569
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative asset and liability positions are presented net by counterparty on the consolidated balance sheets when valid master netting agreement exists and the other conditions set out in the FASB Accounting Standards Codification (ASC) 210-20 “Balance Sheet-Offsetting” are met.


Table of Contents

 

18

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following tables present a reconciliation during the nine months ended December 31, 2010 and 2011 for all Level 3 assets and liabilities measured at fair value on a recurring basis.

For the nine months ended December 31, 2010

 

     Yen (millions)  
     Retained
interests in
securitizations
    Interest rate
instruments
(note 11)
    Auction
rate
securities
    Total  

Balance at beginning of the year

   ¥ 27,555      ¥ 1,025      ¥ 10,041      ¥ 38,621   

Adjustment resulting from the adoption of new accounting standards on variable interest entities

     (27,555     (1,027     —          (28,582

Total realized/unrealized gains or losses

        

Included in earnings

     —          2        (96     (94

Included in other comprehensive income (loss)

     —          —          282        282   

Purchases, issuances, settlements and sales, net

     —          —          (1,909     (1,909

Foreign currency translation

     —          (1     (1,159     (1,160
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of the period

   ¥ —        ¥ (1   ¥ 7,159      ¥ 7,158   
  

 

 

   

 

 

   

 

 

   

 

 

 

The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date

        

Included in earnings

   ¥ —        ¥ —        ¥ —        ¥ —     

Included in other comprehensive income (loss)

     —          —          —          —     


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19

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the nine months ended December 31, 2011

 

     Yen (millions)  
     Retained
interests in
securitizations
     Interest rate
instruments
(note 11)
    Auction
rate
securities
    Total  

Balance at beginning of the year

   ¥ —         ¥ (1   ¥ 6,948      ¥ 6,947   

Total realized/unrealized gains or losses

         

Included in earnings

     —           —          —          —     

Included in other comprehensive income (loss)

     —           —          —          —     

Purchases, issuances, settlements and sales

         

Purchases

     —           —          —          —     

Issuances

     —           —          —          —     

Settlements

     —           —          (46     (46

Sales

     —           —          (33     (33

Foreign currency translation

     —           1        (451     (450
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at end of the period

   ¥ —         ¥ —        ¥ 6,418      ¥ 6,418   
  

 

 

    

 

 

   

 

 

   

 

 

 

The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date

         

Included in earnings

   ¥ —         ¥ —        ¥ —        ¥ —     

Included in other comprehensive income (loss)

     —           —          —          —     

Total realized/unrealized gains or losses related to interest rate instruments, including those held at the reporting date, are included in other income (expenses) – other, net, in the consolidated statements of income.

The valuation methodologies the assets and liabilities measured at fair value on a recurring basis are as follows:

Foreign exchange and interest rate instruments (see note 11)

The fair values of foreign currency forward exchange contracts and foreign currency option contracts are estimated using market observable inputs such as spot exchange rates, discount rates and implied volatility. Fair value measurement for foreign currency forward exchange contracts and foreign currency option contracts are classified as Level 2. The fair values of currency swap agreements and interest rate swap agreements are estimated by discounting future cash flows using market observable inputs such as LIBOR rates, swap rates, and foreign exchange rates. Fair value measurement for these currency swap agreements and interest rate swap agreements are classified as Level 2.

The fair values of a limited number of interest rate swap agreements related to certain off –balance sheet securitizations are estimated using significant assumptions including market observable inputs, as well as internally developed prepayment assumptions as an input into the model, in order to forecast future notional amounts on these structured derivative contracts. Accordingly, fair value measurement for these derivative contracts is classified as Level 3.

The credit risk of Honda and its counterparties are considered on the valuation of foreign exchange and interest rate instruments.


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20

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Marketable equity securities

The fair value of marketable equity securities is estimated using quoted market prices. Fair value measurement for marketable equity securities is classified as Level 1.

Auction rate securities

The subsidiary’s auction rate securities (ARS) holdings were AAA rated and are insured by qualified guarantee agencies, and reinsured by the Secretary of Education and United States Government, and are guaranteed about 95% by the United States Government. The ARS market has been illiquid, and no readily observable prices exist, Honda measured the fair value of the ARS based on the discounted future cash flows. In order to assess various kinds of risks, such as liquidity risk, Honda used third-party developed valuation model which obtains a wide array of market observable inputs, as well as unobservable inputs including probability of passing or failing auction at each auction. Fair value measurement for auction rate securities is classified as Level 3.

Honda does not have significant assets and liabilities measured at fair value on a nonrecurring basis for the year ended March 31, 2011 and the nine months ended December 31, 2011.

Honda has not elected the fair value option for the year ended March 31, 2011 and the nine months ended December 31, 2011.

The estimated fair values of significant financial instruments at March 31, 2011 and December 31, 2011 are as follows:

 

     Yen (millions)  
     March 31, 2011     December 31, 2011  
     Carrying
amount
    Estimated
fair value
    Carrying
amount
    Estimated
fair value
 

Finance subsidiaries-receivables *

   ¥ 3,642,235      ¥ 3,701,218      ¥ 3,393,493      ¥ 3,427,353   

Held-to-maturity securities

     40,725        40,649        7,336        7,420   

Debt

     (4,100,435     (4,159,300     (3,835,868     (3,888,352

 

* The carrying amounts of finance subsidiaries-receivables at March 31, 2011 and December 31, 2011 in the table exclude ¥333,979 million and ¥313,133 million, respectively, of direct financing leases, net, classified as finance subsidiaries-receivables in the consolidated balance sheets. The carrying amounts of finance subsidiaries-receivables at March 31, 2011 and December 31, 2011 in the table also include ¥496,233 million and ¥423,949 million of finance receivables classified as trade accounts and notes receivable and other assets in the consolidated balance sheets, respectively.

The estimated fair values have been determined using relevant market information and appropriate valuation methodologies. However, these estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The effect of using different assumptions and/or estimation methodologies may be significant to the estimated fair values.


Table of Contents

 

21

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The methodologies and assumptions used to estimate the fair values of financial instruments are as follows:

Cash and cash equivalents, trade accounts and notes receivable and trade payables

The carrying amounts approximate fair values because of the short maturity of these instruments.

Finance subsidiaries-receivables

The fair values of retail receivables and commercial loans were estimated by discounting future cash flows using the current rates for these instruments of similar remaining maturities. Given the short maturities of wholesale flooring receivables, the carrying amount of those receivables approximates fair value.

Held-to-maturity securities

The fair values of Government bonds and U.S. government and agency debt securities were estimated by using quoted market prices. The carrying amount of certificates of deposit approximates fair value because of the short maturity of the instrument.

Debt

The fair values of bonds and notes were estimated based on the quoted market prices for the same or similar issues. The fair value of long-term loans was estimated by discounting future cash flows using rates currently available for loans of similar terms and remaining maturities. The carrying amounts of short-term bank loans and commercial paper approximate fair values because of the short maturity of these instruments.

(11) Risk Management Activities and Derivative Financial Instruments

Honda uses derivative financial instruments in the normal course of business to reduce their exposure to fluctuations in foreign exchange rates and interest rates (see note 10). Currency swap agreements are used to manage currency risk exposure on foreign currency denominated debt. Foreign currency forward exchange contracts and purchased option contracts are used to hedge currency risk of sale commitments denominated in foreign currencies (principally U.S. dollars). Foreign currency written option contracts are entered into in combination with purchased option contracts to offset premium amounts to be paid for purchased option contracts. Interest rate swap agreements are mainly used to manage interest rate risk exposure and to convert floating rate financing, such as commercial paper, to (normally three-five years) fixed rate financing in order to match financing costs with income from finance receivables. These instruments involve, to varying degrees, elements of credit, exchange rate and interest rate risks in excess of the amount recognized in the consolidated balance sheets.

The aforementioned instruments contain an element of risk in the event the counterparties are unable to meet the terms of the agreements. However, Honda minimizes the risk exposure by limiting the counterparties to major international banks and financial institutions meeting established credit guidelines. Management of Honda does not expect any counterparty to default on its obligations and, therefore, does not expect to incur any losses due to counterparty default. Honda currently does not require or place collateral for these financial instruments with any counterparties.


Table of Contents

 

22

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Contract amounts outstanding for foreign currency forward exchange contracts, foreign currency option contracts and currency swap agreements and the notional principal amounts of interest rate swap agreements at March 31, 2011 and December 31, 2011 are as follows:

Derivatives designated as hedging instruments:

 

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Foreign currency forward exchange contracts

   ¥ 15,050       ¥ 14,926   
  

 

 

    

 

 

 

Foreign exchange instruments

   ¥ 15,050       ¥ 14,926   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

 

  

     Yen (millions)  
     March 31,
2011
     December 31,
2011
 

Foreign currency forward exchange contracts

   ¥ 611,359       ¥ 558,347   

Foreign currency option contracts

     44,237         173,949   

Currency swap agreements

     549,099         480,338   
  

 

 

    

 

 

 

Foreign exchange instruments

   ¥ 1,204,695       ¥ 1,212,634   
  

 

 

    

 

 

 

Interest rate swap agreements

   ¥ 3,566,605       ¥ 3,359,856   
  

 

 

    

 

 

 

Interest rate instruments

   ¥ 3,566,605       ¥ 3,359,856   
  

 

 

    

 

 

 

Cash flow hedge

The Company applies hedge accounting for certain foreign currency forward exchange contracts related to forecasted foreign currency transactions between the Company and its subsidiaries. Changes in the fair value of derivative financial instruments designated as cash flow hedges are recognized in other comprehensive income (loss). The amounts are reclassified into earnings in the same period when forecasted hedged transactions affect earnings. The amounts recognized in accumulated other comprehensive income (loss) at March 31, 2011 and December 31, 2011 were ¥156 million loss and ¥45 million income, respectively. All amounts recorded in accumulated other comprehensive income (loss) as of December 31, 2011 are expected to be recognized in earnings within the next twelve months.

The period that hedges the changes in cash flows related to the risk of foreign currency rate is at most around two months. There are no derivative financial instruments where hedge accounting has been discontinued due to the forecasted transaction no longer being probable. The Company excludes financial instruments’ time value component from the assessment of hedge effectiveness. There is no portion of hedging instruments that has been assessed as hedge ineffectiveness.

Derivative financial instruments not designated as accounting hedges

Changes in the fair value of derivative financial instruments not designated as accounting hedges are recognized in earnings in the period of the change.


Table of Contents

 

23

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The estimated fair values of derivative instruments at March 31, 2011 and December 31, 2011 are as follows.

As of March 31, 2011

Derivatives designated as hedging instruments:

 

     Yen (millions)  
     Gross fair value     Balance sheet location  
     Asset
derivatives
    Liability
derivatives
    Other current
assets
    Other
assets
     Other current
liabilities
 

Foreign exchange instruments

   ¥  —      ¥ (114   ¥      ¥  —       ¥  (114

Derivatives not designated as hedging instruments:

 

  

     Yen (millions)  
     Gross fair value     Balance sheet location  
     Asset
derivatives
    Liability
derivatives
    Other current
assets
    Other
assets
     Other current
liabilities
 

Foreign exchange instruments

   ¥ 57,880      ¥ (15,598   ¥ 20,174      ¥ 31,702       ¥ (9,594

Interest rate instruments

     29,913        (32,590     (2,082     11,358         (11,953
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

   ¥ 87,793      ¥ (48,188   ¥ 18,092      ¥ 43,060       ¥ (21,547
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Netting adjustment

     (26,641     26,641          
  

 

 

   

 

 

        

Net amount

   ¥ 61,152      ¥ (21,547       
  

 

 

   

 

 

        

As of December 31, 2011

 

Derivatives designated as hedging instruments:

 

  

  

     Yen (millions)  
     Gross fair value     Balance sheet location  
     Asset
derivatives
    Liability
derivatives
    Other current
assets
    Other
assets
     Other current
liabilities
 

Foreign exchange instruments

   ¥  —      ¥  (49   ¥  —      ¥ —         ¥  (49

Derivatives not designated as hedging instruments:

 

     Yen (millions)  
     Gross fair value     Balance sheet location  
     Asset
derivatives
    Liability
derivatives
    Other
current
assets
    Other
assets
     Other
current
liabilities
 

Foreign exchange instruments

   ¥ 56,655      ¥ (21,626   ¥ 39,875      ¥ 5,790       ¥ (10,636

Interest rate instruments

     33,491        (20,629     (831     19,577         (5,884
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

   ¥ 90,146      ¥ (42,255   ¥ 39,044      ¥ 25,367       ¥ (16,520
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Netting adjustment

     (25,735     25,735          
  

 

 

   

 

 

        

Net amount

   ¥ 64,411      ¥ (16,520       
  

 

 

   

 

 

        

Derivative asset and liability positions are presented net by counterparty on the consolidated balance sheets when valid master netting agreement exists and the other conditions set out in the FASB Accounting Standards Codification (ASC) 210-20 “Balance Sheet-Offsetting” are met.

The pre-tax effects of derivative instruments on the Company’s results of operations for the nine months and the three months ended December 31, 2010 and 2011 are as follows:


Table of Contents

 

24

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the nine months ended December 31, 2010

Derivatives designated as hedging instruments

Cash flow hedge:

 

     Yen (millions)  
     Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)
     Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)
     Gain (Loss) recognized in
earnings (financial instruments’
time  value component excluded
from the assessment of hedge
effectiveness)
 
     Amount      Location   Amount      Location   Amount  

Foreign exchange instruments:

   ¥ 1,620       Other income
(expenses) -

Other, net

  ¥ 583       Other income
(expenses) -

Other, net

  ¥ (16

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥ 86,302   

Interest rate instruments

   Other income (expenses) - Other, net      (14,447
     

 

 

 

Total

      ¥ 71,855   
     

 

 

 

For the nine months ended December 31, 2011

Derivatives designated as hedging instruments

Cash flow hedge:

 

     Yen (millions)  
     Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)
     Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)
    Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)
 
     Amount      Location   Amount     Location   Amount  

Foreign exchange instruments:

   ¥ 182       Other income
(expenses) -

Other, net

  ¥ (152   Other income
(expenses) -

Other, net

  ¥ (4

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥     35,146   

Interest rate instruments

   Other income (expenses) - Other, net      1,363   
     

 

 

 

Total

      ¥ 36,509   
     

 

 

 


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25

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the three months ended December 31, 2010

Derivatives designated as hedging instruments

Cash flow hedge:

 

     Yen (millions)  
     Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)
     Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)
     Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)
 
     Amount      Location   Amount      Location   Amount  

Foreign exchange instruments:

   ¥ 496       Other income
(expenses) -

Other, net

  ¥ 93       Other income
(expenses) -

Other, net

  ¥ (278

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥ 7,112   

Interest rate instruments

   Other income (expenses) - Other, net          (6,276
     

 

 

 

Total

      ¥ 836   
     

 

 

 

For the three months ended December 31, 2011

Derivatives designated as hedging instruments

Cash flow hedge:

 

     Yen (millions)  
     Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)
     Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)
     Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)
 
     Amount      Location   Amount      Location   Amount  

Foreign exchange instruments:

   ¥ 75       Other income
(expenses) -

Other, net

  ¥ 77       Other income
(expenses) -

Other, net

  ¥ (124

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥     (8,421

Interest rate instruments

   Other income (expenses) - Other, net      3,908   
     

 

 

 

Total

      ¥ (4,513
     

 

 

 

The gains and losses are included in other income (expenses) – other, net on a net basis with related items, such as foreign currency translation.


Table of Contents

 

26

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(12) Contingent Liabilities

Honda has entered into various guarantee and indemnification agreements. At March 31, 2011 and December 31, 2011, Honda has guaranteed ¥30,393 million and ¥28,406 million of bank loans of employees for their housing costs, respectively. If an employee defaults on his/her loan payments, Honda is required to perform under the guarantee. The undiscounted maximum amount of Honda’s obligation to make future payments in the event of defaults is ¥30,393 million and ¥28,406 million, respectively, at March 31, 2011 and December 31, 2011. At December 31, 2011, no amount has been accrued for any estimated losses under the obligations, as it is probable that the employees will be able to make all scheduled payments.

Honda warrants its products for specific periods of time. Product warranties vary depending upon the nature of the product, the geographic location of its sale and other factors.

The changes in provisions for those product warranties for the year ended March 31, 2011 and the nine months ended December 31, 2011 are as follows:

 

     Yen (millions)  
     March 31,
2011
    December 31,
2011
 

Balance at beginning of the period

   ¥ 226,038      ¥ 213,943   

Warranty claims paid during the period

     (82,080     (63,575

Liabilities accrued for warranties issued during the period

     84,920        43,111   

Changes in liabilities for pre-existing warranties during the period

     (3,550     (11,973

Foreign currency translation

     (11,385     (9,244
  

 

 

   

 

 

 

Balance at end of the period

   ¥ 213,943      ¥ 172,262   
  

 

 

   

 

 

 

With respect to product liability, personal injury claims or lawsuits, Honda believes that any judgment that may be recovered by any plaintiff for general and special damages and court costs will be adequately covered by Honda’s insurance and accrued liabilities. Punitive damages are claimed in certain of these lawsuits. Honda is also subject to potential liability under other various lawsuits and claims. Honda recognizes an accrued liability for loss contingencies when it is probable that an obligation has been incurred and the amount of loss can be reasonably estimated. Honda reviews these pending lawsuits and claims periodically and adjusts the amounts recorded for these contingent liabilities, if necessary, by considering the nature of lawsuits and claims, the progress of the case and the opinions of legal counsel. After consultation with legal counsel, and taking into account all known factors pertaining to existing lawsuits and claims, Honda believes that the ultimate outcome of such lawsuits and pending claims should not result in liability to Honda that would be likely to have an adverse material effect on its consolidated financial position, results of operations or cash flows.


Table of Contents

 

27

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(13) Information Related to Honda Motor Co., Ltd. Shareholders’ Equity

For the nine months ended December 31, 2010

 

  (a) Information concerning dividends

 

  1. Dividend payout

 

Resolution    The ordinary general meeting of shareholders on June 24, 2010
Type of shares    Common stock
Total amount of dividends (million yen)    21,775
Dividend per share of common stock (yen)    12.00
Record date    March 31, 2010
Effective date    June 25, 2010
Resource for dividend    Retained earnings
Resolution    The board of directors meeting on July 30, 2010
Type of shares    Common stock
Total amount of dividends (million yen)    21,733
Dividend per share of common stock (yen)    12.00
Record date    June 30, 2010
Effective date    August 26, 2010
Resource for dividend    Retained earnings
Resolution    The board of directors meeting on October 29, 2010
Type of shares    Common stock
Total amount of dividends (million yen)    21,627
Dividend per share of common stock (yen)    12.00
Record date    September 30, 2010
Effective date    November 25, 2010
Resource for dividend    Retained earnings

 

  2. Dividends payable of which record date was in the nine months ended December 31, 2010, effective after the period

 

Resolution    The board of directors meeting on January 31, 2011
Type of shares    Common stock
Total amount of dividends (million yen)    27,034
Dividend per share of common stock (yen)    15.00
Record date    December 31, 2010
Effective date    February 25, 2011
Resource for dividend    Retained earnings

 

  (b) Significant changes in Honda Motor Co., Ltd. shareholders’ equity

None


Table of Contents

 

28

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the nine months ended December 31, 2011

 

  (a) Information concerning dividends

 

  1. Dividend payout

 

Resolution    The ordinary general meeting of shareholders on June 23, 2011
Type of shares    Common stock
Total amount of dividends (million yen)    27,034
Dividend per share of common stock (yen)    15.00
Record date    March 31, 2011
Effective date    June 24, 2011
Resource for dividend    Retained earnings
Resolution    The board of directors meeting on August 1, 2011
Type of shares    Common stock
Total amount of dividends (million yen)    27,034
Dividend per share of common stock (yen)    15.00
Record date    June 30, 2011
Effective date    August 24, 2011
Resource for dividend    Retained earnings
Resolution    The board of directors meeting on October 31, 2011
Type of shares    Common stock
Total amount of dividends (million yen)    27,034
Dividend per share of common stock (yen)    15.00
Record date    September 30, 2011
Effective date    November 25, 2011
Resource for dividend    Retained earnings

 

  2. Dividends payable of which record date was in the nine months ended December 31, 2011, effective after the period

 

Resolution    The board of directors meeting on January 31, 2012
Type of shares    Common stock
Total amount of dividends (million yen)    27,034
Dividend per share of common stock (yen)    15.00
Record date    December 31, 2011
Effective date    February 24, 2012
Resource for dividend    Retained earnings

 

  (b) Significant changes in Honda Motor Co., Ltd. shareholders’ equity

None


Table of Contents

 

29

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(14) Segment Information

Honda has four reportable segments: the Motorcycle business, the Automobile business, the Financial services business and the Power product and other businesses, which are based on Honda’s organizational structure and characteristics of products and services. Operating segments are defined as components of Honda’s about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting policies used for these reportable segments are consistent with the accounting policies used in Honda’s consolidated financial statements.

Principal products and services, and functions of each segment are as follows:

 

Segment

 

Principal products and services

 

Functions

Motorcycle business  

Motorcycles, all-terrain vehicles

(ATVs) and relevant parts

 

Research & Development

Manufacturing

Sales and related services

Automobile business   Automobiles and relevant parts  

Research & Development

Manufacturing

Sales and related services

Financial services business   Financial, insurance services  

Retail loan and lease related to

Honda products

Others

Power product and other businesses  

Power products and relevant parts,

and others

 

Research & Development

Manufacturing

Sales and related services

Others

Segment Information

For the three months ended December 31, 2010

 

    Yen (millions)  
    Motorcycle
Business
    Automobile
Business
    Financial
Services
Business
    Power Product
and Other
Businesses
    Segment
Total
    Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

               

External customers

  ¥ 301,996      ¥ 1,613,841      ¥ 136,442      ¥ 68,023      ¥ 2,120,302      ¥ —        ¥ (9,888   ¥ 2,110,414   

Intersegment

    —          2,087        2,854        4,164        9,105        (9,105     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 301,996      ¥ 1,615,928      ¥ 139,296      ¥ 72,187      ¥ 2,129,407      ¥ (9,105   ¥ (9,888   ¥ 2,110,414   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment income (loss)

  ¥ 29,132      ¥ 68,400      ¥ 44,603      ¥ (2,079   ¥ 140,056      ¥ —        ¥ (14,403   ¥ 125,653   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the three months ended December 31, 2011

  

   
    Yen (millions)  
    Motorcycle
Business
    Automobile
Business
    Financial
Services
Business
    Power Product
and Other
Businesses
    Segment
Total
    Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

               

External customers

  ¥ 302,590      ¥ 1,451,054      ¥ 124,806      ¥ 64,095      ¥ 1,942,545      ¥ —        ¥ —        ¥ 1,942,545   

Intersegment

    —          4,578        2,760        3,951        11,289        (11,289     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 302,590      ¥ 1,455,632      ¥ 127,566      ¥ 68,046      ¥ 1,953,834      ¥ (11,289   ¥ —        ¥ 1,942,545   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment income (loss)

  ¥ 25,866      ¥ (16,997   ¥ 37,597      ¥ (2,168   ¥ 44,298      ¥ —        ¥ —        ¥ 44,298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Table of Contents

 

30

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

As of and for the nine months ended December 31, 2010

 

     Yen (millions)  
     Motorcycle
Business
     Automobile
Business
     Financial
Services
Business
     Power Product
and Other
Businesses
    Segment
Total
     Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

                    

External customers

   ¥ 935,082       ¥ 5,148,743       ¥ 427,346       ¥ 212,617      ¥ 6,723,788       ¥ —        ¥ —        ¥ 6,723,788   

Intersegment

     —           5,135         8,759         12,086        25,980         (25,980     —          —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   ¥ 935,082       ¥ 5,153,878       ¥ 436,105       ¥ 224,703      ¥ 6,749,768       ¥ (25,980   ¥ —        ¥ 6,723,788   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Segment income (loss)

   ¥ 90,460       ¥ 303,727       ¥ 146,672       ¥ (3,167   ¥ 537,692       ¥ —        ¥ (14,123   ¥ 523,569   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Assets

   ¥ 944,662       ¥ 4,764,066       ¥ 5,427,253       ¥ 283,030      ¥ 11,419,011       ¥ (159,399   ¥ —        ¥ 11,259,612   

Depreciation and amortization

   ¥ 30,542       ¥ 221,922       ¥ 161,287       ¥ 8,536      ¥ 422,287       ¥ —        ¥ —        ¥ 422,287   

Capital expenditures

   ¥ 21,086       ¥ 171,191       ¥ 587,981       ¥ 7,198      ¥ 787,456       ¥ —        ¥ —        ¥ 787,456   

As of and for the nine months ended December 31, 2011

     Yen (millions)  
     Motorcycle
Business
     Automobile
Business
    Financial
Services
Business
     Power Product
and Other
Businesses
    Segment
Total
     Reconciling
Items
    Other
Adjustments
     Consolidated  

Net sales and other operating revenue:

                    

External customers

   ¥ 990,287       ¥ 3,961,018      ¥ 387,127       ¥ 204,601      ¥ 5,543,033       ¥ —        ¥ —         ¥ 5,543,033   

Intersegment

     —           10,587        8,231         9,516        28,334         (28,334     —           —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   ¥ 990,287       ¥ 3,971,605      ¥ 395,358       ¥ 214,117      ¥ 5,571,367       ¥ (28,334   ¥ —         ¥ 5,543,033   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Segment income (loss)

   ¥ 109,733       ¥ (122,366   ¥ 134,043       ¥ (2,022   ¥ 119,388       ¥ —        ¥ —         ¥ 119,388   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Assets

   ¥ 965,325       ¥ 4,448,203      ¥ 5,290,548       ¥ 292,342      ¥ 10,996,418       ¥ (114,122   ¥ —         ¥ 10,882,296   

Depreciation and amortization

   ¥ 29,914       ¥ 190,295      ¥ 155,165       ¥ 7,128      ¥ 382,502       ¥ —        ¥ —         ¥ 382,502   

Capital expenditures

   ¥ 39,447       ¥ 203,771      ¥ 500,553       ¥ 6,012      ¥ 749,783       ¥ —        ¥ —         ¥ 749,783   

Explanatory notes:

 

1. Segment income (loss) of each segment is measured in a consistent manner with consolidated operating income, which is income before income taxes and equity in income of affiliates before other income (expenses), except other adjustments, which is out-of-period adjustments. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. For further information on other adjustments, see note 1(e). The amount of out-of-period adjustments are not reported to or used by the chief operating decision maker in deciding how to allocate resources and in assessing the Company’s operating performance. Therefore, the adjustments are not included in the Power product and other businesses but as other adjustments for the three months and the nine months periods ended December 31, 2010.

 

2. Assets of each segment are defined as total assets, including derivative financial instruments, investments in affiliates, and deferred tax assets. Segment assets are based on those directly associated with each segment and those not directly associated with specific segments are allocated based on the most reasonable measures applicable except for the corporate assets described below.

 

3. Intersegment sales and revenues are generally made at values that approximate arm’s-length prices.

 

4. Unallocated corporate assets, included in reconciling items, amounted to ¥393,266 million as of December 31, 2010 and ¥371,004 million as of December 31, 2011 respectively, which consist primarily of cash and cash equivalents, available-for-sale securities and held-to-maturity securities held by the Company. Reconciling items also include elimination of intersegment transactions.

 

5. Depreciation and amortization of the Financial services business include ¥160,036 million for the nine months ended December 31, 2010 and ¥154,054 million for the nine months ended December 31, 2011, respectively, of depreciation of property on operating leases.

 

6. Capital expenditure of the Financial services business includes ¥586,391 million for the nine months ended December 31, 2010 and ¥498,380 million for the nine months ended December 31, 2011 respectively, of purchase of operating lease assets.

 

7. The amounts of Net sales and other operating revenue Intersegment for the three months and nine months ended December 31, 2010 have been corrected from the amounts previously disclosed.

 

8. For the three months ended December 31, 2011, substantially all of the ¥17,348 million of the costs and expenses and ¥11,838 million of insurance recoveries resulting from Thailand flood are included in Segment income (loss) of the Automobile business.


Table of Contents

 

31

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Supplemental Geographical Information

In addition to the disclosure required by U.S. GAAP, Honda provides the following supplemental information in order to provide financial statements users with useful information:

Supplemental geographical information based on the location of the Company and its subsidiaries

For the three months ended December 31, 2010

 

    Yen (millions)  
    Japan     North
America
    Europe     Asia     Other
Regions
    Total     Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

                 

External customers

  ¥ 404,219      ¥ 964,492      ¥ 132,514      ¥ 387,477      ¥ 231,600      ¥ 2,120,302      ¥ —        ¥ (9,888   ¥ 2,110,414   

Transfers between geographic areas

    463,331        47,319        18,226        58,044        7,291        594,211        (594,211     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 867,550      ¥ 1,011,811      ¥ 150,740      ¥ 445,521      ¥ 238,891      ¥ 2,714,513      ¥ (594,211   ¥ (9,888   ¥ 2,110,414   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥ 14,633      ¥ 89,698      ¥ (9,436   ¥ 35,780      ¥ 15,690      ¥ 146,365      ¥ (6,309   ¥ (14,403   ¥ 125,653   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the three months ended December 31, 2011

  

   
    Yen (millions)  
    Japan     North
America
    Europe     Asia     Other
Regions
    Total     Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

                 

External customers

  ¥ 434,749      ¥ 928,336      ¥ 105,229      ¥ 269,470      ¥ 204,761      ¥ 1,942,545      ¥ —        ¥ —        ¥ 1,942,545   

Transfers between geographic areas

    428,450        57,956        14,233        48,210        1,373        550,222        (550,222     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 863,199      ¥ 986,292      ¥ 119,462      ¥ 317,680      ¥ 206,134      ¥ 2,492,767      ¥ (550,222   ¥ —        ¥ 1,942,545   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥ (41,219   ¥ 74,865      ¥ (3,801   ¥ 13,350      ¥ 12,525      ¥ 55,720      ¥ (11,422   ¥ —        ¥ 44,298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Table of Contents

 

32

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

As of and for the nine months ended December 31, 2010

 

    Yen (millions)  
    Japan     North
America
    Europe     Asia     Other
Regions
    Total     Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

                 

External customers

  ¥ 1,377,539      ¥ 3,017,225      ¥ 447,418      ¥ 1,189,687      ¥ 691,919      ¥ 6,723,788      ¥ —        ¥ —        ¥ 6,723,788   

Transfers between geographic areas

    1,339,789        154,054        54,521        179,068        25,858        1,753,290        (1,753,290     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 2,717,328      ¥ 3,171,279      ¥ 501,939      ¥ 1,368,755      ¥ 717,777      ¥ 8,477,078      ¥ (1,753,290   ¥ —        ¥ 6,723,788   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥ 87,919      ¥ 276,364      ¥ (8,438   ¥ 118,530      ¥ 56,389      ¥ 530,764      ¥ 6,928      ¥ (14,123   ¥ 523,569   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets

  ¥ 2,895,405      ¥ 6,025,463      ¥ 492,882      ¥ 1,046,431      ¥ 663,111      ¥ 11,123,292      ¥ 136,320      ¥ —        ¥ 11,259,612   

Long-lived assets

  ¥ 1,059,010      ¥ 1,744,305      ¥ 97,808      ¥ 219,810      ¥ 146,464      ¥ 3,267,397      ¥ —        ¥ —        ¥ 3,267,397   

 

As of and for the nine months ended December 31, 2011

  

   
    Yen (millions)  
    Japan     North
America
    Europe     Asia     Other
Regions
    Total     Reconciling
Items
    Other
Adjustments
    Consolidated  

Net sales and other operating revenue:

                 

External customers

  ¥ 1,188,657      ¥ 2,366,920      ¥ 370,471      ¥ 945,363      ¥ 671,622      ¥ 5,543,033      ¥ —        ¥ —        ¥ 5,543,033   

Transfers between geographic areas

    1,105,253        147,445        44,461        153,553        8,822        1,459,534        (1,459,534     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  ¥ 2,293,910      ¥ 2,514,365      ¥ 414,932      ¥ 1,098,916      ¥ 680,444      ¥ 7,002,567      ¥ (1,459,534   ¥ —        ¥ 5,543,033   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

  ¥ (122,422   ¥ 141,083      ¥ (13,934   ¥ 60,326      ¥ 51,333      ¥ 116,386      ¥ 3,002      ¥ —        ¥ 119,388   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets

  ¥ 2,956,920      ¥ 5,809,611      ¥ 437,391      ¥ 938,207      ¥ 601,543      ¥ 10,743,672      ¥ 138,624      ¥ —        ¥ 10,882,296   

Long-lived assets

  ¥ 1,035,861      ¥ 1,805,658      ¥ 97,691      ¥ 218,844      ¥