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 NOVEMBER 2013

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:

BEIJING, China, November 5, 2013 - Honda Motor (China) Investment Co., Ltd., a wholly-owned Honda subsidiary in China, announced the establishment of a new wholly-owned subsidiary, Honda Motor China Technology Co., Ltd., with the goal of further strengthening Honda’s automobile R&D, parts procurement and production functions in China.

Exhibit 2:

On November 12, 2013, Honda Motor Co., Ltd. filed its consolidated financial statements for the fiscal second quarter and the first half ended September 30, 2013 with Financial Services Agency in Japan.

Exhibit 3:

SÃO PAULO, Brazil, November 26, 2013 - Honda Automoveis do Brasil Ltda., the Honda automobile production and sales subsidiary in Brazil, held a ceremony to mark the start of construction of its new automobile production plant in the city of Itirapina in the state of Sao Paulo (approximately 200km northwest of the city of Sao Paulo). The ceremony was attended by approximately 300 guests, including the Governor of Sao Paulo State, government and community officials, suppliers to Honda, as well as Takanobu Ito, President & CEO of Honda Motor Co., Ltd.


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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/ Kohei Takeuchi

Kohei Takeuchi
Operating Officer and Director
Chief Financial Officer
Honda Motor Co., Ltd.

Date: December 6, 2013


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Honda Strengthens Automobile R&D, Procurement and Production Functions in China - Establishment of New Subsidiary, Honda Motor China Technology Co., Ltd. -

BEIJING, China, November 5, 2013 - Honda Motor (China) Investment Co., Ltd. (HMCI), a wholly-owned Honda subsidiary in China, announced the establishment of a new wholly-owned subsidiary, Honda Motor China Technology Co., Ltd., with the goal of further strengthening Honda’s automobile R&D, parts procurement and production functions in China. The existing functions of the Guangzhou Branch of HMCI will be transferred to the new company and further localized to expand Honda’s automobile business in China. The new company is scheduled to become operational in January 2014 and already has a plan to build a new company facility in the city of Guangzhou and move into the new building in January 2016.

For details, please refer to the website of Honda Motor Co., Ltd

http://world.honda.com/news/2013/c131105Honda-Motor-China-Technology/index.html


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

September 30, 2013


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2013 and September 30, 2013

 

     Yen (millions)  
Assets    March 31,
2013
     September 30,
2013
 
     unaudited      unaudited  

Current assets:

     

Cash and cash equivalents

   ¥ 1,206,128       ¥ 1,132,283   

Trade accounts and notes receivable, net of allowance for doubtful accounts of ¥7,885 million at March 31, 2013 and ¥6,957 million at September 30, 2013 (note 3)

     1,005,981         941,229   

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

     1,243,002         1,393,245   

Inventories (note 4)

     1,215,421         1,216,975   

Deferred income taxes

     234,075         230,522   

Other current assets (notes 3, 5 and 9)

     418,446         409,929   
  

 

 

    

 

 

 

Total current assets

     5,323,053        5,324,183   
  

 

 

    

 

 

 

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

     2,788,135         3,147,146   

Investments and advances:

     

Investments in and advances to affiliates (note 3)

     459,110         568,181   

Other, including marketable equity securities (notes 3 and 5)

     209,680         262,669   
  

 

 

    

 

 

 

Total investments and advances

     668,790         830,850   
  

 

 

    

 

 

 

Property on operating leases:

     

Vehicles

     2,243,424         2,461,216   

Less accumulated depreciation

     400,292         425,431   
  

 

 

    

 

 

 

Net property on operating leases

     1,843,132         2,035,785   
  

 

 

    

 

 

 

Property, plant and equipment, at cost:

     

Land

     515,661         508,733   

Buildings

     1,686,638         1,767,957   

Machinery and equipment

     3,832,090         4,110,591   

Construction in progress

     288,073         302,516   
  

 

 

    

 

 

 
     6,322,462         6,689,797   

Less accumulated depreciation and amortization

     3,922,932         4,129,063   
  

 

 

    

 

 

 

Net property, plant and equipment

     2,399,530         2,560,734   
  

 

 

    

 

 

 

Other assets, net of allowance for doubtful accounts of ¥22,754 million at March 31, 2013 and ¥22,327 million at September 30, 2013 (notes 3 and 9)

     612,717         609,496   
  

 

 

    

 

 

 

Total assets

   ¥ 13,635,357       ¥ 14,508,194   
  

 

 

    

 

 

 


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2013 and September 30, 2013

 

     Yen (millions)  
Liabilities and Equity    March 31,
2013
    September 30,
2013
 
     unaudited     unaudited  

Current liabilities:

    

Short-term debt

   ¥ 1,238,297      ¥ 1,456,324   

Current portion of long-term debt

     945,046       915,504   

Trade payables:

    

Notes

     31,354       24,790   

Accounts

     956,660        934,347   

Accrued expenses (note 10)

     593,570       556,681   

Income taxes payable

     48,454        36,778   

Other current liabilities (note 9)

     275,623       291,470   
  

 

 

   

 

 

 

Total current liabilities

     4,089,004        4,215,894   
  

 

 

   

 

 

 

Long-term debt, excluding current portion

     2,710,845       3,020,453   

Other liabilities (notes 6 and 10)

     1,630,085        1,618,611   
  

 

 

   

 

 

 

Total liabilities

     8,429,934       8,854,958   
  

 

 

   

 

 

 

Equity:

    

Honda Motor Co., Ltd. shareholders’ equity:

    

Common stock, authorized 7,086,000,000 shares at March 31, 2013 and at September 30, 2013; issued 1,811,428,430 shares at March 31, 2013 and at September 30, 2013

     86,067       86,067   

Capital surplus

     171,117       171,117   

Legal reserves

     47,583       48,998   

Retained earnings (notes 1(c) and 11(a))

     6,001,649       6,172,811   

Accumulated other comprehensive income (loss), net (notes 5, 6, 7 and 9)

     (1,236,792 )     (976,052

Treasury stock, at cost 9,131,140 shares at March 31, 2013 and 9,133,532 shares at September 30, 2013

     (26,124 )     (26,134
  

 

 

   

 

 

 

Total Honda Motor Co., Ltd. shareholders’ equity

     5,043,500       5,476,807   
  

 

 

   

 

 

 

Noncontrolling interests (note 1(c))

     161,923       176,429   
  

 

 

   

 

 

 

Total equity

     5,205,423       5,653,236   
  

 

 

   

 

 

 

Commitments and contingent liabilities (note 10)

    

Total liabilities and equity

   ¥ 13,635,357     ¥ 14,508,194   
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Income

For the six months ended September 30, 2012 and 2013

 

     Yen (millions)  
     September 30,
2012
    September 30,
2013
 
     unaudited     unaudited  

Net sales and other operating revenue

   ¥ 4,707,195      ¥ 5,724,316  

Operating costs and expenses:

    

Cost of sales

     3,494,049        4,275,221  

Selling, general and administrative

     670,155        799,924   

Research and development

     266,111        292,757  
  

 

 

   

 

 

 
     4,430,315        5,367,902   
  

 

 

   

 

 

 

Operating income

     276,880        356,414  

Other income (expenses):

    

Interest income

     14,360        11,920  

Interest expense

     (6,131     (5,812

Other, net (notes 5 and 9)

     15,931        (24,900 )
  

 

 

   

 

 

 
     24,160        (18,792
  

 

 

   

 

 

 

Income before income taxes and equity in income of affiliates

     301,040        337,622  

Income tax expense (note 1(e)):

    

Current

     73,786        103,008  

Deferred

     48,860        37,261   
  

 

 

   

 

 

 
     122,646        140,269  
  

 

 

   

 

 

 

Income before equity in income of affiliates

     178,394        197,353   

Equity in income of affiliates (note 1(f))

     48,229        63,453  
  

 

 

   

 

 

 

Net income

     226,623        260,806   

Less: Net income attributable to noncontrolling interests

     12,667        17,939  
  

 

 

   

 

 

 

Net income attributable to Honda Motor Co., Ltd.

   ¥ 213,956      ¥ 242,867   
  

 

 

   

 

 

 
     Yen  
     September 30,
2012
    September 30,
2013
 

Basic net income attributable to Honda Motor Co., Ltd. per common share (note 13):

   ¥ 118.71      ¥ 134.75  
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the six months ended September 30, 2012 and 2013

 

     Yen (millions)  
     September 30,
2012
    September 30,
2013
 
     unaudited     unaudited  

Net income

   ¥ 226,623      ¥ 260,806  

Other comprehensive income (loss), net of tax:

    

Adjustments from foreign currency translation

     (152,299     165,750  

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

     (12,228     18,450   

Unrealized gains (losses) on derivative instruments, net

     349        346  

Pension and other postretirement benefits adjustments (note 6)

     4,266        81,394   
  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax (note 7)

     (159,912     265,940  
  

 

 

   

 

 

 

Comprehensive income (loss)

     66,711        526,746   

Less: Comprehensive income attributable to noncontrolling interests

     10,824        23,139  
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to Honda Motor Co., Ltd.

   ¥ 55,887      ¥ 503,607   
  

 

 

   

 

 

 

 

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 September 30, 2012 and 2013

 

     Yen (millions)  
     September 30,
2012
    September 30,
2013
 
     unaudited     unaudited  

Net sales and other operating revenue

   ¥ 2,271,286      ¥ 2,890,221  

Operating costs and expenses:

    

Cost of sales

     1,702,835        2,150,812  

Selling, general and administrative

     327,472        416,863   

Research and development

     140,112        151,095  
  

 

 

   

 

 

 
     2,170,419        2,718,770   
  

 

 

   

 

 

 

Operating income

     100,867        171,451  

Other income (expenses):

    

Interest income

     6,661        5,928  

Interest expense

     (3,115     (2,838

Other, net (notes 5 and 9)

     1,847        (8,954 )
  

 

 

   

 

 

 
     5,393        (5,864
  

 

 

   

 

 

 

Income before income taxes and equity in income of affiliates

     106,260        165,587  

Income tax expense (note 1(e)):

    

Current

     37,915        59,142  

Deferred

     6,898        10,288   
  

 

 

   

 

 

 
     44,813        69,430  
  

 

 

   

 

 

 

Income before equity in income of affiliates

     61,447        96,157   

Equity in income of affiliates (note 1(f))

     27,497        31,686  
  

 

 

   

 

 

 

Net income

     88,944        127,843   

Less: Net income attributable to noncontrolling interests

     6,711        7,475  
  

 

 

   

 

 

 

Net income attributable to Honda Motor Co., Ltd.

   ¥ 82,233      ¥ 120,368   
  

 

 

   

 

 

 
     Yen  
     September 30,
2012
    September 30,
2013
 

Basic net income attributable to Honda Motor Co., Ltd. per common share (note 13):

   ¥ 45.63      ¥ 66.79  
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months ended September 30, 2012 and 2013

 

     Yen (millions)  
     September 30,
2012
    September 30,
2013
 
     unaudited     unaudited  

Net income

   ¥ 88,944      ¥ 127,843  

Other comprehensive income (loss), net of tax:

    

Adjustments from foreign currency translation

     (101,851     (23,796 )

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

     (2,420     9,756   

Unrealized gains (losses) on derivative instruments, net

     210        (241 )

Pension and other postretirement benefits adjustments (note 6)

     1,903        78,709   
  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax (note 7)

     (102,158     64,428  
  

 

 

   

 

 

 

Comprehensive income (loss)

     (13,214     192,271   

Less: Comprehensive income attributable to noncontrolling interests

     4,911        4,164  
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to Honda Motor Co., Ltd.

   ¥ (18,125   ¥ 188,107   
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the six months ended September 30, 2012 and 2013

 

     Yen (millions)  
     September 30,
2012
    September 30,
2013
 
     unaudited     unaudited  

Cash flows from operating activities:

    

Net income

   ¥ 226,623      ¥ 260,806   

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

    

Depreciation excluding property on operating leases (note 1(g))

     155,614        216,736   

Depreciation of property on operating leases

     118,213        164,334  

Deferred income taxes

     48,860        37,261   

Equity in income of affiliates

     (48,229     (63,453 )

Dividends from affiliates

     31,365        8,060   

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

     2,664        10,341  

Impairment loss on property on operating leases

     2,208        1,322   

Loss (gain) on derivative instruments, net

     (24,656     (39,142 )

Decrease (increase) in assets:

    

Trade accounts and notes receivable

     (8,278     99,663  

Inventories

     (91,728     39,676   

Other current assets

     53,338        22,522  

Other assets

     (18,574     (7,883

Increase (decrease) in liabilities:

    

Trade accounts and notes payable

     (120,313     (1,393

Accrued expenses

     24,494        (16,923 )

Income taxes payable

     5,407        (15,829

Other current liabilities

     (387     27,696  

Other liabilities

     1,290        (6,138

Other, net

     (34,640     (66,154 )
  

 

 

   

 

 

 

Net cash provided by operating activities

     323,271        671,502   

Cash flows from investing activities:

    

Increase in investments and advances

     (10,928     (23,411

Decrease in investments and advances

     9,572        25,214  

Payments for purchases of available-for-sale securities

     —          (27,590

Proceeds from sales of available-for-sale securities

     —          4,085  

Payments for purchases of held-to-maturity securities

     (1,118     (58

Proceeds from redemptions of held-to-maturity securities

     6,435        1,753  

Capital expenditures

     (282,332     (355,990

Proceeds from sales of property, plant and equipment

     19,932        14,588  

Proceeds from insurance recoveries for damaged property, plant and equipment

     2,917        6,800   

Acquisitions of finance subsidiaries-receivables

     (992,380     (1,582,865 )

Collections of finance subsidiaries-receivables

     908,938        1,219,326   

Purchases of operating lease assets

     (416,447     (582,206 )

Proceeds from sales of operating lease assets

     204,356        310,900   
  

 

 

   

 

 

 

Net cash used in investing activities

     (551,055     (989,454 )

Cash flows from financing activities:

    

Proceeds from short-term debt

     3,374,385        4,307,274  

Repayments of short-term debt

     (3,355,219     (4,133,849

Proceeds from long-term debt

     592,080        821,199  

Repayments of long-term debt

     (520,564     (688,583

Dividends paid (note 11(a))

     (61,278     (70,289 )

Dividends paid to noncontrolling interests

     (5,060     (8,467

Sales (purchases) of treasury stock, net

     (2     (10 )

Other, net (note 1(g))

     (15,078     (17,581
  

 

 

   

 

 

 

Net cash provided by financing activities

     9,264        209,694  

Effect of exchange rate changes on cash and cash equivalents

     (47,284     34,413   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (265,804     (73,845 )

Cash and cash equivalents at beginning of period

     1,247,113        1,206,128   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   ¥ 981,309      ¥ 1,132,283  
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.


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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, 2013 consolidated financial statements and notes thereto included in Honda Motor Co., Ltd. and Subsidiaries Annual Report for the year ended March 31, 2013.

 

(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) Changing in Fiscal Year-end of a Subsidiary

Effective April 1, 2013, a subsidiary of the Company changed its fiscal year-end from December 31 to March 31. As a result, the Company eliminated the previously existing three month differences between the reporting periods of the Company and the subsidiary in the consolidated financial statements. The elimination of the lag period represents a change in accounting principle and has been reported by retrospective application. The impacts on the retained earnings and noncontrolling interests as of April 1, 2012 are ¥6,023 million and ¥1,658 million, respectively. Honda believes the effect of the retrospective application is not material to the Company’s consolidated financial statements as of and for the six months and the three months ended September 30, 2012, and therefore the Company’s consolidated financial statements have not been retrospectively adjusted, except for the adjustment to retained earnings and noncontrolling interests as of April 1, 2012.

 

(d) Adoption of New Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. This amendment requires reporting entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component, and to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income.

Honda adopted ASU 2013-02, effective April 1, 2013, and discloses in accompanying note 7 to consolidated financial statements. This adoption has no impact on the Honda’s financial position or results of operations.


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2

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(e) 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 six months ended September 30, 2013. If a reliable estimate cannot be made, Honda utilizes the actual year-to-date effective tax rate.

 

(f) Impairment Loss on Investments in Affiliates

For the six months ended September 30, 2012, Honda recognized impairment loss of ¥6,525 million, net of tax, on certain investments in affiliates which have quoted market values because of other-than-temporary decline in fair value below their carrying values. The fair values of the investments were based on quoted market price. The impairment loss is included in equity in income of affiliates in the accompanying consolidated statement of income. For the three months ended September 30, 2012 and for the six months and the three months ended September 30, 2013, Honda did not recognize any significant impairment losses.

 

(g) Immaterial Corrections of the Prior Year’s Consolidated Statements of Cash Flows

Adjustments have been made to correct previous immaterial understatements in both depreciation excluding property on operating leases, which is included in cash flows from operating activities, and payments of other debt, which is included in other, net in cash flows from financing activities, in the consolidated statements of cash flows for the six months ended September 30, 2012. These adjustments increased previously reported net cash provided by operating activities and decreased previously reported net cash provided by financing activities by ¥13,464 million for the six months ended September 30, 2012.

(2) Allowances for Finance Subsidiaries-receivables

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Finance subsidiaries-receivables

     

Allowance for credit losses

   ¥ 17,828       ¥ 19,975   

Allowance for losses on lease residual values

     3,354         2,803   


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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 (consumer finance 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.

Finance subsidiaries-receivables, net, consisted of the following at March 31, 2013 and September 30, 2013:

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Retail

   ¥ 3,865,430       ¥ 4,361,000   

Direct financing lease

     448,672         468,450   

Wholesale flooring

     389,562         336,169   

Commercial loans

     42,433         49,747   
  

 

 

    

 

 

 

Total finance receivables

     4,746,097         5,215,366   

Less:

     

Allowance for credit losses

     19,716         21,924   

Allowance for losses on lease residual values

     3,354         2,803   

Unearned interest income and fees

     18,697         19,668   
  

 

 

    

 

 

 
     4,704,330         5,170,971   

Less:

     

Finance receivables included in trade accounts and notes receivables, net

     461,450         409,418   

Finance receivables included in other assets, net

     211,743         221,162   
  

 

 

    

 

 

 

Finance subsidiaries-receivables, net

     4,031,137         4,540,391   

Less current portion

     1,243,002         1,393,245   
  

 

 

    

 

 

 

Noncurrent finance subsidiaries-receivables, net

   ¥ 2,788,135       ¥ 3,147,146   
  

 

 

    

 

 

 

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. The allowance for credit losses is management’s estimate of probable losses incurred on finance receivables.

Consumer finance receivables consist of a large number of smaller-balance homogenous loans and leases and are collectively evaluated for impairment. The finance subsidiaries of the Company utilize various methodologies when estimating the allowance for credit losses including models that incorporate vintage loss and delinquency migration analysis. The models take into consideration attributes of the portfolio including loan-to-value ratios, internal and external credit scores, and collateral types. Economic factors such as used vehicle prices, unemployment rates, and consumer debt service burdens are also incorporated when estimating losses.

Wholesale receivables are considered to be impaired when it is probable that the finance subsidiaries of the Company will be unable to collect all amounts due according to the original terms of the contract. 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.


Table of Contents

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 tables present the changes in the allowance for credit losses on finance receivables for the six months ended September 30, 2012 and 2013.

For the six months ended September 30, 2012

 

     Yen (millions)  
     Retail     Direct
financing
lease
    Wholesale     Total  

Balance at beginning of period

   ¥ 20,497      ¥ 1,151      ¥ 1,401      ¥ 23,049   

Provision

     1,656        259        186        2,101   

Charge-offs

     (9,570     (285     (315     (10,170

Recoveries

     3,911        48        14        3,973   

Adjustments from foreign currency translation

     (1,114     (26     (64     (1,204
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 15,380      ¥ 1,147      ¥ 1,222      ¥ 17,749   
  

 

 

   

 

 

   

 

 

   

 

 

 
For the six months ended September 30, 2013         
     Yen (millions)  
     Retail     Direct
financing
lease
    Wholesale     Total  

Balance at beginning of period

   ¥ 17,643      ¥ 789      ¥ 1,284      ¥ 19,716   

Provision

     9,048        232        202        9,482   

Charge-offs

     (12,231     (302     (78     (12,611

Recoveries

     4,470        51        10        4,531   

Adjustments from foreign currency translation

     678        18        110        806   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ 19,608      ¥ 788      ¥ 1,528      ¥ 21,924   
  

 

 

   

 

 

   

 

 

   

 

 

 

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.


Table of Contents

5

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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.

The following tables present the age analyses of past due finance receivables at March 31, 2013 and September 30, 2013.

As of March 31, 2013

 

     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

   ¥ 12,947       ¥ 1,805       ¥ 2,607       ¥ 17,359       ¥ 3,247,241       ¥ 3,264,600   

Used & certified auto

     5,064         643         276         5,983         434,183         440,166   

Others

     1,213         419         1,353         2,985         157,679         160,664   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total retail

     19,224         2,867         4,236         26,327         3,839,103         3,865,430   

Direct financing lease

     966         161         1,644         2,771         445,901         448,672   

Wholesale

                 

Wholesale flooring

     205         67         311         583         388,979         389,562   

Commercial loans

     —           —           —           —           42,433         42,433   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total wholesale

     205         67         311         583         431,412         431,995   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total finance receivables

   ¥ 20,395       ¥ 3,095       ¥ 6,191       ¥ 29,681       ¥ 4,716,416       ¥ 4,746,097   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of September 30, 2013

 

     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

   ¥ 17,911       ¥ 3,046       ¥ 2,915       ¥ 23,872       ¥ 3,730,417       ¥ 3,754,289   

Used & certified auto

     7,053         1,291         450         8,794         421,609         430,403   

Others

     1,518         690         1,644         3,852         172,456         176,308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total retail

     26,482         5,027         5,009         36,518         4,324,482         4,361,000   

Direct financing lease

     800         188         402         1,390         467,060         468,450   

Wholesale

                 

Wholesale flooring

     101         24         408         533         335,636         336,169   

Commercial loans

     —           2         11         13         49,734         49,747   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total wholesale

     101         26         419         546         385,370         385,916   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total finance receivables

   ¥ 27,383       ¥ 5,241       ¥ 5,830       ¥ 38,454       ¥ 5,176,912       ¥ 5,215,366   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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


Table of Contents

6

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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.

The following tables present the balances of consumer finance receivables by this credit quality indicator at March 31, 2013 and September 30, 2013.

As of March 31, 2013

 

     Yen (millions)  
     Performing      Nonperforming      Total consumer
finance receivables
 

Retail

        

New auto

   ¥ 3,260,188       ¥ 4,412       ¥ 3,264,600   

Used & certified auto

     439,247         919         440,166   

Others

     158,892         1,772         160,664   
  

 

 

    

 

 

    

 

 

 

Total retail

     3,858,327         7,103         3,865,430   

Direct financing lease

     446,867         1,805         448,672   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 4,305,194       ¥ 8,908       ¥ 4,314,102   
  

 

 

    

 

 

    

 

 

 
As of September 30, 2013         
     Yen (millions)  
     Performing      Nonperforming      Total consumer
finance receivables
 

Retail

        

New auto

   ¥ 3,748,328       ¥ 5,961       ¥ 3,754,289   

Used & certified auto

     428,662         1,741         430,403   

Others

     173,974         2,334         176,308   
  

 

 

    

 

 

    

 

 

 

Total retail

     4,350,964         10,036         4,361,000   

Direct financing lease

     467,860         590         468,450   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 4,818,824       ¥ 10,626       ¥ 4,829,450   
  

 

 

    

 

 

    

 

 

 

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 balances of wholesale receivables by this credit quality indicator at March 31, 2013 and September 30, 2013.

As of March 31, 2013

 

     Yen (millions)  
     Group A      Group B      Total  

Wholesale

        

Wholesale flooring

   ¥ 236,203       ¥ 153,359       ¥ 389,562   

Commercial loans

     24,198         18,235         42,433   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 260,401       ¥ 171,594       ¥ 431,995   
  

 

 

    

 

 

    

 

 

 

As of September 30, 2013

 

     Yen (millions)  
     Group A      Group B      Total  

Wholesale

        

Wholesale flooring

   ¥ 198,557       ¥ 137,612       ¥ 336,169   

Commercial loans

     28,833         20,914         49,747   
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 227,390       ¥ 158,526       ¥ 385,916   
  

 

 

    

 

 

    

 

 

 

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 of ¥37,274 million and ¥40,787 million are included in other current assets, investments and advances and other assets in the consolidated balance sheets at March 31, 2013 and September 30, 2013, 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 ¥19,562 million and ¥20,184 million at March 31, 2013 and September 30, 2013, respectively, for which the allowance for credit losses were ¥19,541 million and ¥20,167 million at March 31, 2013 and September 30, 2013, respectively.

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


Table of Contents

8

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(4) Inventories

Inventories at March 31, 2013 and September 30, 2013 are summarized as follows:

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Finished goods

   ¥ 726,034       ¥ 711,920   

Work in process

     53,035         69,907   

Raw materials

     436,352         435,148   
  

 

 

    

 

 

 

Total

   ¥ 1,215,421       ¥ 1,216,975   
  

 

 

    

 

 

 

(5) Investments and Advances-Other

Investments and advances at March 31, 2013 and September 30, 2013 consist of the following:

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Current

     

Corporate debt securities

   ¥        1,553       ¥ —     

Government bonds

     —           2,000   

Advances

     926         1,237   

Certificates of deposit

     1,550         1,550   

Other

     10,846         11,287   
  

 

 

    

 

 

 

Total

   ¥ 14,875       ¥    16,074   
  

 

 

    

 

 

 

Investments and advances due within one year are included in other current assets in the consolidated balance sheets.

 

                     
     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Noncurrent

     

Auction rate securities

   ¥ 6,928       ¥ 6,549   

Marketable equity securities

     117,110         146,414   

Government bonds

     2,000         —     

U.S. government agency debt securities

     1,068         3,715   

Non-marketable equity securities accounted for under the cost method

     

Non-marketable preferred stocks

     969         969   

Other

     10,780         12,392   

Guaranty deposits

     20,210         19,429   

Advances

     2,132         2,144   

Other

     48,483         71,057   
  

 

 

    

 

 

 

Total

   ¥    209,680       ¥    262,669   
  

 

 

    

 

 

 


Table of Contents

9

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Certain information with respect to available-for-sale securities and held-to-maturity securities at March 31, 2013 and September 30, 2013 are summarized below:

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Available-for-sale

     

Cost

   ¥ 49,990       ¥ 73,110   

Fair value

        128,848         181,800   

Gross unrealized gains

     80,453         109,805   

Gross unrealized losses

     1,595         1,115   

Held-to-maturity

     

Amortized cost

   ¥ 16,511       ¥ 15,496   

Fair value

     16,556         15,525   

Gross unrealized gains

     45         29   

Gross unrealized losses

     —           —     

Maturities of debt securities classified as available-for-sale at September 30, 2013 are as follows:

 

     Yen (millions)  

Due within one year

   ¥ 1,075   

Due after one year through five years

     10,166   

Due after five years through ten years

     7,038   

Due after ten years

     13,196   
  

 

 

 

Total

   ¥ 31,475   
  

 

 

 

Maturities of debt securities classified as held-to-maturity at September 30, 2013 are as follows:

 

     Yen (millions)  

Due within one year

   ¥ 3,692   

Due after one year through five years

     23   

Due after five years through ten years

     9,775   

Due after ten years

     2,006   
  

 

 

 

Total

   ¥ 15,496   
  

 

 

 

There were no significant realized gains and losses from available-for-sale securities included in other income (expenses) – other, net for the six months and the three months ended September 30, 2012 and 2013.


Table of Contents

10

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Gross unrealized losses on available-for-sale 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, 2013 and September 30, 2013 are as follows:

 

     Yen (millions)  
     March 31, 2013      September 30, 2013  
     Fair value      Unrealized
losses
     Fair value      Unrealized
losses
 

Less than 12 months

   ¥ 8,778       ¥ 192       ¥ 15,750       ¥ 493   

12 months or longer

     8,753         1,403         6,910         622   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   ¥ 17,531       ¥ 1,595       ¥ 22,660       ¥ 1,115   
  

 

 

    

 

 

    

 

 

    

 

 

 

Honda does not believe the decline in fair value of any of its investment securities to be other than temporary, 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.

There were no held-to-maturity securities in a loss position at March 31, 2013 and September 30, 2013.

(6) Pension and Other Postretirement Benefits

In September 2013, certain consolidated subsidiaries in North America amended their existing defined benefit pension plans, effective January 1, 2014, to reduce the benefits in future periods for their employees on or after January 1, 2014.

This plan amendment resulted in a reduction of the projected benefit obligation and recognition of the prior service benefit at the date of the plan amendment which is amortized over the average remaining service period from the date of the plan amendment. The consolidated subsidiaries also remeasured their projected benefit obligation and the fair value of related plan assets at the date of the plan amendment. The effects of the plan amendment and the remeasurement are recorded in other comprehensive income (loss), net of tax during the three months ending September 30, 2013. This plan amendment had no material impact on the pension costs and contributions to the pension plan for the six months and the three months ended September 30, 2013.

Following this plan amendment, employees of these consolidated subsidiaries may elect to move from the existing defined benefit pension plans to a defined contribution pension plan, and will be required to make this election during the three month period ending December 31, 2013. Depending on the result of their election, a curtailment in the existing defined benefit pension plans may occur during the three months ending December 31, 2013.


Table of Contents

11

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(7) Other Comprehensive Income (Loss)

The following tables present the changes in accumulated other comprehensive income (loss) by component for the six months and the three months ended September 30, 2013.

For the six months ended September 30, 2013

 

     Yen (millions)  
     Adjustments
from foreign
currency
translation
    Unrealized gains
(losses) on
available-for-sale
securities, net
     Unrealized
gains (losses)
on derivative
instruments,
net
    Pension and
other
postretirement
benefits
adjustments
    Total  

Balance at beginning of period

   ¥ (969,583   ¥ 44,131       ¥ (237   ¥ (311,103   ¥ (1,236,792

Other comprehensive income (loss) before reclassifications *1

     165,750        18,225         459        76,301        260,735   

Amounts reclassified from accumulated other comprehensive income (loss)

     —          225         (113     5,093        5,205   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     165,750        18,450         346        81,394        265,940   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Less: Other comprehensive income attributable to noncontrolling interests

     5,097        16         —          87        5,200   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ (808,930   ¥ 62,565       ¥ 109      ¥ (229,796   ¥ (976,052
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

*1 

The tax effects for other comprehensive income (loss) before reclassifications of Pension and other postretirement benefits adjustments include ¥44,862 million loss for the six months ended September 30, 2013.

For the three months ended September 30, 2013

 

     Yen (millions)  
     Adjustments
from foreign
currency
translation
    Unrealized gains
(losses) on
available-for-sale
securities, net
    Unrealized
gains (losses)
on derivative
instruments,
net
    Pension and
other
postretirement
benefits
adjustments
    Total  

Balance at beginning of period

   ¥ (788,480   ¥ 52,800      ¥ 350      ¥ (308,461   ¥ (1,043,791

Other comprehensive income (loss) before reclassifications *2

     (23,796     9,749        109        76,503        62,565   

Amounts reclassified from accumulated other comprehensive income (loss)

     —          7        (350     2,206        1,863   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (23,796     9,756        (241     78,709        64,428   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Other comprehensive income attributable to noncontrolling interests

     (3,346     (9     —          44        (3,311
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   ¥ (808,930   ¥ 62,565      ¥ 109      ¥ (229,796   ¥ (976,052
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*2 

The tax effects for other comprehensive income (loss) before reclassifications of Pension and other postretirement benefits adjustments include ¥44,930 million loss for the three months ended September 30, 2013.


Table of Contents

12

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following tables present the reclassifications out of accumulated other comprehensive income (loss) by component for the six months and the three months ended September 30, 2013.

For the six months ended September 30, 2013

 

     Yen (millions)

Details about accumulated other comprehensive income (loss) components

   Amounts
reclassified from
accumulated other
comprehensive
income (loss)
   

Affected line items in the statement
where net income is presented

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

    
   ¥ (347   Other income (expenses) - Other, net
     122      Income tax expense
  

 

 

   
   ¥ (225   Net income
  

 

 

   

Unrealized gains (losses) on derivative instruments, net

    
   ¥ 183      Other income (expenses) - Other, net
     (70   Income tax expense
  

 

 

   
   ¥ 113      Net income
  

 

 

   

Pension and other postretirement benefits adjustments

    
   ¥ (7,902   *
     2,809      Income tax expense
  

 

 

   
   ¥ (5,093   Net income
  

 

 

   

Total reclassifications for the period

   ¥ (5,205  
  

 

 

   

For the three months ended September 30, 2013

 

     Yen (millions)

Details about accumulated other comprehensive income (loss) components

   Amounts
reclassified from
accumulated other
comprehensive
income (loss)
   

Affected line items in the statement
where net income is presented

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

    
   ¥ (11   Other income (expenses) - Other, net
     4      Income tax expense
  

 

 

   
   ¥ (7   Net income
  

 

 

   

Unrealized gains (losses) on derivative instruments, net

    
   ¥ 564      Other income (expenses) - Other, net
     (214   Income tax expense
  

 

 

   
   ¥ 350      Net income
  

 

 

   

Pension and other postretirement benefits adjustments

    
   ¥ (3,420   *
     1,214      Income tax expense
  

 

 

   
   ¥ (2,206   Net income
  

 

 

   

Total reclassifications for the period

   ¥ (1,863  
  

 

 

   

 

* This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost.


Table of Contents

13

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(8) Fair Value Measurements

In accordance with the 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, 2013 and September 30, 2013.

As of March 31, 2013

 

     Yen (millions)  
     Level 1      Level 2     Level 3      Gross
fair value
    Netting
adjustment
    Net
amount
 

Assets:

              

Derivative instruments

              

Foreign exchange instruments (note 9)

   ¥ —         ¥ 6,538      ¥ —         ¥ 6,538      ¥ —        ¥ —     

Interest rate instruments (note 9)

     —           32,152        —           32,152        —          —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           38,690        —           38,690        (18,071     20,619   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Available-for-sale securities

              

Marketable equity securities

     117,110         —          —           117,110        —          117,110   

Auction rate securities

     —           —          6,928         6,928        —          6,928   

Others

     584         4,226        —           4,810        —          4,810   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

     117,694         4,226        6,928         128,848        —          128,848   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   ¥ 117,694       ¥ 42,916      ¥ 6,928       ¥ 167,538      ¥ (18,071   ¥ 149,467   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities:

              

Derivative instruments

              

Foreign exchange instruments (note 9)

   ¥ —         ¥ (78,934   ¥ —         ¥ (78,934   ¥ —        ¥ —     

Interest rate instruments (note 9)

     —           (14,639     —           (14,639     —          —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           (93,573     —           (93,573     18,071        (75,502
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   ¥ —         ¥ (93,573   ¥ —         ¥ (93,573   ¥ 18,071      ¥ (75,502
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 


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14

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

As of September 30, 2013

 

     Yen (millions)  
      Level 1      Level 2     Level 3      Gross
fair value
    Netting
adjustment
    Net
amount
 

Assets:

              

Derivative instruments

              

Foreign exchange instruments (note 9)

   ¥ —         ¥ 7,323      ¥ —         ¥ 7,323      ¥ —        ¥ —     

Interest rate instruments (note 9)

     —           22,188        —           22,188        —          —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           29,511        —           29,511        (9,775     19,736   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Available-for-sale securities

              

Marketable equity securities

     146,414         —          —           146,414        —          146,414   

Auction rate securities

     —           —          6,549         6,549        —          6,549   

Others

     2,151         26,686        —           28,837        —          28,837   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

     148,565         26,686        6,549         181,800        —          181,800   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   ¥ 148,565       ¥ 56,197      ¥ 6,549       ¥ 211,311      ¥ (9,775   ¥ 201,536   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities:

              

Derivative instruments

              

Foreign exchange instruments (note 9)

   ¥ —         ¥ (14,424   ¥ —         ¥ (14,424   ¥ —        ¥ —     

Interest rate instruments (note 9)

     —           (14,121     —           (14,121     —          —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total derivative instruments

     —           (28,545     —           (28,545     9,775        (18,770
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   ¥ —         ¥ (28,545   ¥ —         ¥ (28,545   ¥ 9,775      ¥ (18,770
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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 ASC 210-20 “Balance Sheet-Offsetting” are met.


Table of Contents

15

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following tables present the reconciliation during the six months ended September 30, 2012 and 2013 for all Level 3 assets and liabilities measured at fair value on a recurring basis.

For the six months ended September 30, 2012

 

     Yen (millions)  
     Auction rate securities  

Balance at beginning of period

   ¥ 6,651   

Total realized/unrealized gains or losses

  

Included in earnings

     —     

Included in other comprehensive income (loss)

     —     

Purchases, issuances, settlements and sales

  

Purchases

     —     

Issuances

     —     

Settlements

     —     

Sales

     (8

Foreign currency translation

     (371
  

 

 

 

Balance at end of period

   ¥ 6,272   
  

 

 

 

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)

     —     
For the six months ended September 30, 2013   
     Yen (millions)  
     Auction rate securities  

Balance at beginning of period

   ¥ 6,928   

Total realized/unrealized gains or losses

  

Included in earnings

     —     

Included in other comprehensive income (loss)

     99   

Purchases, issuances, settlements and sales

  

Purchases

     —     

Issuances

     —     

Settlements

     —     

Sales

     (790

Foreign currency translation

     312   
  

 

 

 

Balance at end of period

   ¥ 6,549   
  

 

 

 

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)

     —     


Table of Contents

16

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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

Foreign exchange and interest rate instruments (note 9)

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

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

Marketable equity securities

The fair value of marketable equity securities is estimated by 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 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. To estimate fair value of auction rate securities, Honda uses 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 measured certain investments in affiliates which have quoted market values at fair value on a nonrecurring basis due to the recognition of impairment loss for the year ended March 31, 2013. The fair value of the investments was ¥68,778 million and estimated by using quoted market price. Fair value measurement for the investments is classified as Level 1.

For the six months ended September 30, 2013, Honda does not have significant assets and liabilities measured at fair value on a nonrecurring basis.

Honda has not elected the fair value option for the year ended March 31, 2013 and the six months ended September 30, 2013.


Table of Contents

17

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The estimated fair values of significant financial instruments at March 31, 2013 and September 30, 2013 are as follows:

 

     Yen (millions)  
     March 31, 2013     September 30, 2013  
     Carrying
amount
    Estimated
fair value
    Carrying
amount
    Estimated
fair value
 

Finance subsidiaries-receivables *

   ¥ 4,278,460      ¥ 4,326,333      ¥ 4,725,660      ¥ 4,773,436   

Held-to-maturity securities

     16,511        16,556        15,496        15,525   

Debt

     (4,894,188     (4,966,318     (5,392,281     (5,441,695

 

* The carrying amounts of finance subsidiaries-receivables at March 31, 2013 and September 30, 2013 in the table exclude ¥425,870 million and ¥445,311 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, 2013 and September 30, 2013 in the table also include ¥673,193 million and ¥630,580 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.

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

Cash and cash equivalents, trade receivables 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 are 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 these receivables approximates fair value. Fair value measurements for retail receivables and commercial loans are mainly classified as Level 3.

Held-to-maturity securities

The fair value of Government bonds is estimated by using quoted market prices. Fair value measurement of these Government bonds is classified as Level 1. The fair value of U.S. government agency debt securities is estimated based on proprietary pricing models provided by specialists and/or market makers and the models obtain a wide array of market observable inputs such as credit ratings and discount rates. Fair value measurement for these securities is classified as Level 2.

Debt

The fair values of bonds are estimated by using quoted market prices. Fair value measurement of these bonds is mainly classified as Level 1. The fair values of short-term loans and long-term loans are estimated by discounting future cash flows using interest rates currently available for loans of similar terms and remaining maturities. Fair value measurements for these loans are mainly classified as Level 2.


Table of Contents

18

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(9) 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 (note 8). 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.

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, 2013 and September 30, 2013 are as follows:

Derivatives designated as hedging instruments

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Foreign currency forward exchange contracts

   ¥      23,324       ¥      28,167   
  

 

 

    

 

 

 

Total foreign exchange instruments

   ¥ 23,324       ¥ 28,167   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments

 

     Yen (millions)  
     March 31,
2013
     September 30,
2013
 

Foreign currency forward exchange contracts

   ¥ 724,435       ¥ 548,600   

Foreign currency option contracts

     4,145         4,352   

Currency swap agreements

     337,254         327,427   
  

 

 

    

 

 

 

Total foreign exchange instruments

   ¥ 1,065,834       ¥ 880,379   
  

 

 

    

 

 

 

Interest rate swap agreements

   ¥ 4,063,289       ¥ 4,290,123   
  

 

 

    

 

 

 

Total interest rate instruments

   ¥ 4,063,289       ¥ 4,290,123   
  

 

 

    

 

 

 


Table of Contents

19

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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, 2013 and September 30, 2013 were ¥237 million loss and ¥109 million income, respectively. All amounts recorded in accumulated other comprehensive income (loss) as of September 30, 2013 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 ineffective.

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.

The estimated fair values of derivative instruments at March 31, 2013 and September 30, 2013 are as follows:

As of March 31, 2013

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

   ¥ —        ¥ (211)      ¥ —        ¥ —        ¥ (211)   
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

   ¥ 6,538      ¥ (78,723   ¥ (1,534   ¥ (314   ¥ (70,337

Interest rate instruments

     32,152        (14,639     3,907        18,560        (4,954
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   ¥ 38,690      ¥ (93,362   ¥ 2,373      ¥ 18,246      ¥ (75,291
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Netting adjustment

     (18,071     18,071         
  

 

 

   

 

 

       

Net amount

   ¥ 20,619      ¥ (75,291      
  

 

 

   

 

 

       


Table of Contents

20

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

As of September 30, 2013

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

   ¥  24      ¥  —        ¥  24       ¥  —        ¥  —     
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

   ¥ 7,299      ¥ (14,424   ¥ 4,952       ¥ (488   ¥ (11,589

Interest rate instruments

     22,188        (14,121     1,075         14,173        (7,181
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total

   ¥ 29,487      ¥ (28,545   ¥ 6,027       ¥ 13,685      ¥ (18,770
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Netting adjustment

     (9,775     9,775          
  

 

 

   

 

 

        

Net amount

   ¥ 19,712      ¥ (18,770       
  

 

 

   

 

 

        

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

21

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The pre-tax effects of derivative instruments on the Company’s results of operations for the six months and the three months ended September 30, 2012 and 2013 are as follows:

For the six months ended September 30, 2012

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

   ¥ 192       Other income (expenses) - Other, net    ¥ (369   Other income (expenses) - Other, net    ¥ (279

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥ 23,193   

Interest rate instruments

   Other income (expenses) - Other, net      4,252   
     

 

 

 

Total

      ¥ 27,445   
     

 

 

 

For the six months ended September 30, 2013

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

   ¥ 740       Other income (expenses) - Other, net    ¥ 183       Other income (expenses) - Other, net    ¥   (85

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥ (13,151

Interest rate instruments

   Other income (expenses) - Other, net      (8,627
     

 

 

 

Total

      ¥ (21,778
     

 

 

 


Table of Contents

22

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the three months ended September 30, 2012

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

   ¥ 264       Other income
(expenses) -
Other, net
  ¥ (72   Other income
(expenses) -

Other, net

  ¥    13   

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥ 10,248   

Interest rate instruments

   Other income (expenses) - Other, net      (162
     

 

 

 

Total

      ¥ 10,086   
     

 

 

 

For the three months ended September 30, 2013

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

   ¥ 176       Other income
(expenses) -
Other, net
  ¥ 564       Other income
(expenses) -

Other, net

  ¥ (151

Derivatives not designated as hedging instruments

 

    

Yen (millions)

 
    

Gain (Loss) recognized in earnings

 
    

Location

   Amount  

Foreign exchange instruments

   Other income (expenses) - Other, net    ¥ 10,168   

Interest rate instruments

   Other income (expenses) - Other, net      (3,598
     

 

 

 

Total

      ¥ 6,570   
     

 

 

 

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

23

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(10) Contingent Liabilities

Honda has entered into various guarantee and indemnification agreements. At March 31, 2013 and September 30, 2013, Honda has guaranteed ¥26,475 million and ¥25,843 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 at March 31, 2013 and September 30, 2013 are ¥26,475 million and ¥25,843 million, respectively. At September 30, 2013, 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, 2013 and the six months ended September 30, 2013 are as follows:

 

     Yen (millions)  
     March 31,
2013
    September 30,
2013
 

Balance at beginning of period

   ¥ 170,562      ¥ 208,033   

Warranty claims paid during the period

     (64,942     (51,951

Liabilities accrued for warranties issued during the period

     97,108        60,570   

Changes in liabilities for pre-existing warranties during the period

     (8,583     3,581   

Foreign currency translation

     13,888        5,178   
  

 

 

   

 

 

 

Balance at end of period

   ¥ 208,033      ¥ 225,411   
  

 

 

   

 

 

 

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

24

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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

For the six months ended September 30, 2012

 

  (a) Information concerning dividends

 

  1. Dividend payout

 

Resolution   The ordinary general meeting of shareholders on June 21, 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   March 31, 2012
Effective date   June 22, 2012
Resource for dividend   Retained earnings

 

Resolution   The board of directors meeting on July 31, 2012
Type of shares   Common stock
Total amount of dividends (million yen)   34,243
Dividend per share of common stock (yen)   19.00
Record date   June 30, 2012
Effective date   August 24, 2012
Resource for dividend   Retained earnings

 

  2. Dividends payable of which record date was in the six months ended September 30, 2012, effective after the period

 

Resolution   The board of directors meeting on October 29, 2012
Type of shares   Common stock
Total amount of dividends (million yen)   34,243
Dividend per share of common stock (yen)   19.00
Record date   September 30, 2012
Effective date   November 27, 2012
Resource for dividend   Retained earnings

 

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

None


Table of Contents

25

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

For the six months ended September 30, 2013

 

  (a) Information concerning dividends

 

  1. Dividend payout

 

Resolution   The ordinary general meeting of shareholders on June 19, 2013
Type of shares   Common stock
Total amount of dividends (million yen)   34,243
Dividend per share of common stock (yen)   19.00
Record date   March 31, 2013
Effective date   June 20, 2013
Resource for dividend   Retained earnings

 

Resolution   The board of directors meeting on July 31, 2013
Type of shares   Common stock
Total amount of dividends (million yen)   36,045
Dividend per share of common stock (yen)   20.00
Record date   June 30, 2013
Effective date   August 26, 2013
Resource for dividend   Retained earnings

 

  2. Dividends payable of which record date was in the six months ended September 30, 2013, effective after the period

 

Resolution   The board of directors meeting on October 30, 2013
Type of shares   Common stock
Total amount of dividends (million yen)   36,045
Dividend per share of common stock (yen)   20.00
Record date   September 30, 2013
Effective date   November 28, 2013
Resource for dividend   Retained earnings

 

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

None


Table of Contents

26

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(12) Segment Information

Honda has four reportable segments: Motorcycle business, Automobile business, Financial services business and 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


Table of Contents

27

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Segment Information

As of and for the six months ended September 30, 2012

 

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

Net sales and other operating revenue:

                  

External customers

   ¥ 656,364       ¥ 3,656,723       ¥ 261,679       ¥ 132,429      ¥ 4,707,195       ¥ —        ¥ 4,707,195   

Intersegment

     —           7,832         5,517         4,818        18,167         (18,167     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   ¥ 656,364       ¥ 3,664,555       ¥ 267,196       ¥ 137,247      ¥ 4,725,362       ¥ (18,167   ¥ 4,707,195   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment income (loss)

   ¥ 62,202       ¥ 137,798       ¥ 79,114       ¥ (2,234   ¥ 276,880       ¥ —        ¥ 276,880   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Assets

   ¥ 904,173       ¥ 4,952,109       ¥ 5,577,763       ¥ 284,572      ¥ 11,718,617       ¥ (264,190   ¥ 11,454,427   

Depreciation and amortization

   ¥ 17,701       ¥ 133,051       ¥ 118,872       ¥ 4,203      ¥ 273,827       ¥ —        ¥ 273,827   

Capital expenditures

   ¥ 26,653       ¥ 230,473       ¥ 417,058       ¥ 6,780      ¥ 680,964       ¥ —        ¥ 680,964   
As of and for the six months ended September 30, 2013        
     Yen (millions)  
     Motorcycle
Business
     Automobile
Business
     Financial
Services
Business
     Power Product
and Other
Businesses
    Segment
Total
     Reconciling
Items
    Consolidated  

Net sales and other operating revenue:

                  

External customers

   ¥ 814,959       ¥ 4,425,595       ¥ 335,412       ¥ 148,350      ¥ 5,724,316       ¥ —        ¥ 5,724,316   

Intersegment

     —           8,590         5,159         5,557        19,306         (19,306     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   ¥ 814,959       ¥ 4,434,185       ¥ 340,571       ¥ 153,907      ¥ 5,743,622       ¥ (19,306   ¥ 5,724,316   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment income (loss)

   ¥ 88,124       ¥ 176,530       ¥ 91,228       ¥ 532      ¥ 356,414       ¥ —        ¥ 356,414   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Assets

   ¥ 1,220,606       ¥ 5,906,273       ¥ 7,404,632       ¥ 334,588      ¥ 14,866,099       ¥ (357,905   ¥ 14,508,194   

Depreciation and amortization

   ¥ 22,110       ¥ 188,703       ¥ 165,122       ¥ 5,135      ¥ 381,070       ¥ —        ¥ 381,070   

Capital expenditures

   ¥ 26,147       ¥ 294,398       ¥ 584,140       ¥ 6,632      ¥ 911,317       ¥ —        ¥ 911,317   
For the three months ended September 30, 2012        
     Yen (millions)  
     Motorcycle
Business
     Automobile
Business
     Financial
Services
Business
     Power Product
and Other
Businesses
    Segment
Total
     Reconciling
Items
    Consolidated  

Net sales and other operating revenue:

                  

External customers

   ¥ 309,714       ¥ 1,766,213       ¥ 130,400       ¥ 64,959      ¥ 2,271,286       ¥ —        ¥ 2,271,286   

Intersegment

     —           3,582         2,770         2,330        8,682         (8,682     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   ¥ 309,714       ¥ 1,769,795       ¥ 133,170       ¥ 67,289      ¥ 2,279,968       ¥ (8,682   ¥ 2,271,286   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment income (loss)

   ¥ 25,400       ¥ 37,137       ¥ 38,277       ¥ 53      ¥ 100,867       ¥ —        ¥ 100,867   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
For the three months ended September 30, 2013        
     Yen (millions)  
     Motorcycle
Business
     Automobile
Business
     Financial
Services
Business
     Power Product
and Other
Businesses
    Segment
Total
     Reconciling
Items
    Consolidated  

Net sales and other operating revenue:

                  

External customers

   ¥ 418,089       ¥ 2,229,004       ¥ 170,016       ¥ 73,112      ¥ 2,890,221       ¥ —        ¥ 2,890,221   

Intersegment

     —           4,186         2,567         2,839        9,592         (9,592     —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   ¥ 418,089       ¥ 2,233,190       ¥ 172,583       ¥ 75,951      ¥ 2,899,813       ¥ (9,592   ¥ 2,890,221   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment income (loss)

   ¥ 45,542       ¥ 80,153       ¥ 46,585       ¥ (829   ¥ 171,451       ¥ —        ¥ 171,451   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 


Table of Contents

28

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

 

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). Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable.

 

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 ¥228,945 million as of September 30, 2012 and ¥300,860 million as of September 30, 2013, 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 Financial services business include ¥118,213 million for the six months ended September 30, 2012 and ¥164,334 million for the six months ended September 30, 2013, respectively, of depreciation of property on operating leases.

 

6. Capital expenditure of Financial services business includes ¥416,447 million for the six months ended September 30, 2012 and ¥582,206 million for the six months ended September 30, 2013, respectively, of purchase of operating lease assets.

 

7. The amounts of Assets and Depreciation and amortization for the six months ended September 30, 2012 have been corrected from the amounts previously disclosed.


Table of Contents

29

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 additional useful information:

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

As of and for the six months ended September 30, 2012

 

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

Net sales and other operating revenue:

                     

External customers

   ¥ 999,565       ¥ 2,147,345       ¥ 247,479      ¥ 873,541       ¥ 439,265       ¥ 4,707,195       ¥ —        ¥ 4,707,195   

Transfers between geographic areas

     932,179         122,128         44,971        178,730         10,749         1,288,757         (1,288,757     —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   ¥ 1,931,744       ¥ 2,269,473       ¥ 292,450      ¥ 1,052,271       ¥ 450,014       ¥ 5,995,952       ¥ (1,288,757   ¥ 4,707,195   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 91,025       ¥ 108,966       ¥ (16,359   ¥ 68,154       ¥ 22,819       ¥ 274,605       ¥ 2,275      ¥ 276,880   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Assets

   ¥ 3,106,694       ¥ 6,136,429       ¥ 481,588      ¥ 1,170,618       ¥ 615,405       ¥ 11,510,734       ¥ (56,307   ¥ 11,454,427   

Long-lived assets

   ¥ 1,085,389       ¥ 2,000,980       ¥ 106,766      ¥ 301,710       ¥ 127,950       ¥ 3,622,795       ¥ —        ¥ 3,622,795   
As of and for the six months ended September 30, 2013           
     Yen (millions)  
     Japan      North
America
     Europe     Asia      Other
Regions
     Total      Reconciling
Items
    Consolidated  

Net sales and other operating revenue:

                     

External customers

   ¥ 938,540       ¥ 2,790,218       ¥ 313,679      ¥ 1,167,258       ¥ 514,621       ¥ 5,724,316       ¥ —        ¥ 5,724,316   

Transfers between geographic areas

     1,051,814         183,003         36,778        233,363         6,547         1,511,505         (1,511,505     —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   ¥ 1,990,354       ¥ 2,973,221       ¥ 350,457      ¥ 1,400,621       ¥ 521,168       ¥ 7,235,821       ¥ (1,511,505   ¥ 5,724,316   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 111,468       ¥ 117,887       ¥ (23,314   ¥ 113,775       ¥ 24,066       ¥ 343,882       ¥ 12,532      ¥ 356,414   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Assets

   ¥ 3,234,347       ¥ 8,239,650       ¥ 619,640      ¥ 1,751,665       ¥ 747,168       ¥ 14,592,470       ¥ (84,276   ¥ 14,508,194   

Long-lived assets

   ¥ 1,210,069       ¥ 2,735,896       ¥ 128,953      ¥ 489,710       ¥ 154,364       ¥ 4,718,992       ¥ —        ¥ 4,718,992   
For the three months ended September 30, 2012           
     Yen (millions)  
     Japan      North
America
     Europe     Asia      Other
Regions
     Total      Reconciling
Items
    Consolidated  

Net sales and other operating revenue:

                     

External customers

   ¥ 487,603       ¥ 991,793       ¥ 125,461      ¥ 442,879       ¥ 223,550       ¥ 2,271,286       ¥ —        ¥ 2,271,286   

Transfers between geographic areas

     437,483         62,969         19,110        96,582         6,122         622,266         (622,266     —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   ¥ 925,086       ¥ 1,054,762       ¥ 144,571      ¥ 539,461       ¥ 229,672       ¥ 2,893,552       ¥ (622,266   ¥ 2,271,286   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 30,047       ¥ 26,749       ¥ (8,725   ¥ 36,404       ¥ 10,542       ¥ 95,017       ¥ 5,850      ¥ 100,867   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
For the three months ended September 30, 2013           
     Yen (millions)  
     Japan      North
America
     Europe     Asia      Other
Regions
     Total      Reconciling
Items
    Consolidated  

Net sales and other operating revenue:

                     

External customers

   ¥ 505,002       ¥ 1,384,716       ¥ 154,810      ¥ 568,889       ¥ 276,804       ¥ 2,890,221       ¥ —        ¥ 2,890,221   

Transfers between geographic areas

     509,468         87,197         19,665        124,989         3,645         744,964         (744,964     —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   ¥ 1,014,470       ¥ 1,471,913       ¥ 174,475      ¥ 693,878       ¥ 280,449       ¥ 3,635,185       ¥ (744,964   ¥ 2,890,221   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating income (loss)

   ¥ 49,281       ¥ 46,029       ¥ (13,574   ¥ 60,020       ¥ 18,651       ¥ 160,407       ¥ 11,044      ¥ 171,451   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 


Table of Contents

30

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

 

Explanatory notes:

 

1. Major countries or regions in each geographic area:

 

North America

     United States, Canada, Mexico

Europe

     United Kingdom, Germany, France, Belgium, Russia

Asia

     Thailand, Indonesia, China, India, Vietnam

Other Regions

     Brazil, Australia

 

2. Operating income (loss) of each geographical region 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).

 

3. Assets of each geographical region are defined as total assets, including derivative financial instruments, investments in affiliates, and deferred tax assets.

 

4. Sales and revenues between geographic areas are generally made at values that approximate arm’s-length prices.

 

5. Unallocated corporate assets, included in reconciling items, amounted to ¥228,945 million as of September 30, 2012 and ¥300,860 million as of September 30, 2013, 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 transactions between geographic areas.

 

6. The amounts of Assets for the six months ended September 30, 2012 have been corrected from the amounts previously disclosed.


Table of Contents

31

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

(13) Per Share Data

Basic net income attributable to Honda Motor Co., Ltd. per common share and the bases of computation are as follows:

For the six months ended September 30, 2012 and 2013

 

     Yen  
     September 30,
2012
     September 30,
2013
 

Basic net income attributable to Honda Motor Co., Ltd. per common share

   ¥ 118.71       ¥ 134.75   

 

     Yen (millions)  
     September 30,
2012
     September 30,
2013
 

The bases of computation

     

Net income attributable to Honda Motor Co., Ltd.

   ¥ 213,956       ¥ 242,867   

Amount not applicable to common stock

     —           —     

Net income attributable to Honda Motor Co., Ltd. applicable to common stock

   ¥ 213,956       ¥ 242,867   

Weighted average number of common shares

     1,802,299,302 shares         1,802,295,981 shares   

* Diluted net income attributable to Honda Motor Co., Ltd. per common share is not provided as there is no potential dilution effect.

For the three months ended September 30, 2012 and 2013

 

     Yen  
     September 30,
2012
     September 30,
2013
 

Basic net income attributable to Honda Motor Co., Ltd. per common share

   ¥ 45.63       ¥ 66.79   

 

     Yen (millions)  
     September 30,
2012
     September 30,
2013
 

The bases of computation

     

Net income attributable to Honda Motor Co., Ltd.

   ¥ 82,233       ¥ 120,368   

Amount not applicable to common stock

     —           —     

Net income attributable to Honda Motor Co., Ltd. applicable to common stock

   ¥ 82,233       ¥ 120,368   

Weighted average number of common shares

     1,802,299,148 shares         1,802,295,360 shares   

* Diluted net income attributable to Honda Motor Co., Ltd. per common share is not provided as there is no potential dilution effect.


Table of Contents

Honda Begins Construction of New Automobile Production Plant in Brazil

- Operation to start with the all-new Fit in two years -

SÃO PAULO, Brazil, November 26, 2013 - Honda Automoveis do Brasil Ltda. (HAB), the Honda automobile production and sales subsidiary in Brazil, held a ceremony to mark the start of construction of its new automobile production plant in the city of Itirapina in the state of Sao Paulo (approximately 200km northwest of the city of Sao Paulo). The ceremony was attended by approximately 300 guests, including the Governor of Sao Paulo State, government and community officials, suppliers to Honda, as well as Takanobu Ito, President & CEO of Honda Motor Co., Ltd.

With an annual production capacity of 120,000 units, the new plant is scheduled to become operational in two years, in 2015. Including the acquisition of the 5.8 million square meter (m2) site, the purchase of equipment and construction of the plant building, the total investment for the new plant is expected to be approximately 1 billion Brazilian Reais (approximately 43 billion yen*). The new plant will employ approximately 2,000 associates. HAB plans to begin production at the new plant with the all-new Fit, and then increase the model line-up for production of Fit-class compact vehicles, for which demand is high on a global basis. As a part of HAB’s efforts to address environmental concerns, the new plant will employ shorter production processes and introduce the latest technologies in the painting process. Moreover, HAB will strive to establish a highly efficient production system at the new plant through various approaches including making the optimal use of automation technologies.

Combining the production capacity of the new plant with the existing plant in Sumare, HAB’s total annual automobile production capacity will double from the current 120,000 units to 240,000 units. Moreover, with the goal to strengthen local development capabilities in Brazil, Honda is establishing a new automobile R&D center within the plant in Sumare, which will start full-scale operations by the end of this year. The strengthened local development capability will enable Honda to deliver an increasing number of attractive products developed to accommodate the needs of local customers in Brazil. With the enhancement of the product lineup and doubling of the production capacity, Honda will further expand its automobile sales in South America.

 

* Calculated based on the exchange rate of 1 Brazilian real = 43 yen

For details, please refer to the website of Honda Motor Co., Ltd

http://world.honda.com/news/2013/c131126New-Automobile-Plant-Brazil/index.html