FORM 6-K
Table of Contents

No.1-7628

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF FEBRUARY 2019

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  ☒    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):  ☐

 

 

 


Table of Contents

Contents

Exhibit 1:

On February 1, 2019, Honda Motor Co., Ltd. announced its consolidated financial results for the fiscal third quarter and the fiscal nine-month period ended December 31, 2018.


Table of Contents

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/ Eiji Fujimura

Eiji Fujimura

General Manager

Finance Division

Honda Motor Co., Ltd.

Date: February 7, 2019


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February 1, 2019

HONDA MOTOR CO., LTD. REPORTS

CONSOLIDATED FINANCIAL RESULTS

FOR THE FISCAL THIRD QUARTER AND

THE FISCAL NINE-MONTH PERIOD ENDED DECEMBER 31, 2018

Tokyo, February 1, 2019 — Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal third quarter and the fiscal nine-month period ended December 31, 2018.

Third Quarter Results

Honda’s consolidated sales revenue for the fiscal third quarter ended December 31, 2018 totaled JPY 3,973.6 billion, approximately the same level compared to the same period last year, due mainly to increased sales revenue at motorcycle and financial services business operations, which was partially offset by the negative foreign currency translation effects. Operating profit for the quarter decreased by 40.2%, to JPY 170.1 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales revenue and model mix as well as the increased selling, general and administrative expenses and the negative foreign currency effects, which was partially offset by continuing cost reduction. Profit before income taxes decreased by 34.6%, to JPY 226.9 billion from the same period last year. Profit for the period attributable to owners of the parent for the quarter decreased by 70.5%, to JPY 168.2 billion from the same period last year due mainly to the impacts of the enactment of the U.S. Tax Cuts and Jobs Act in the same period last year.

Earnings per share attributable to owners of the parent for the quarter amounted to JPY 95.61, a decrease of JPY 222.89 from the corresponding period last year. One Honda American Depository Share represents one common share.

Nine Months Results

Consolidated sales revenue for the nine months ended December 31, 2018 increased by 3.4%, to JPY 11,839.5 billion from the same period last year, due mainly to increased sales revenue in all business operations. Operating profit decreased by 3.2%, to JPY 684.0 billion from the same period last year, due mainly to increased in selling, general and administrative expenses as well as negative foreign currency effects, which was partially offset by continuing cost reduction and the loss related to the settlement of multidistrict class action litigation in the same period last year. Profit before income taxes decreased by 6.1%, to JPY 868.2 billion from the same period last year. Profit for the period attributable to owners of the parent decreased by 34.5%, to JPY 623.3 billion from the same period last year, due mainly to the impacts of the enactment of the U.S. Tax Cuts and Jobs Act in the same period last year.

Earnings per share attributable to owners of the parent for the period amounted to JPY 353.10, a decrease of JPY 176.29 from the same period last year.

 

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Consolidated Statements of Financial Position for the Nine Months Ended December 31, 2018

Total assets increased by JPY 502.0 billion, to JPY 19,851.2 billion from March 31, 2018, mainly due to increased Receivables from financial services as well as foreign currency translation effects. Total liabilities increased by JPY 165.3 billion, to JPY 11,280.4 billion from March 31, 2018, mainly due to increased Financial liabilities and foreign currency translation effects despite a decrease in Trade payables. Total equity increased by JPY 336.6 billion, to JPY 8,570.7 billion from March 31, 2018 due mainly to an increase in Retained earnings attributable to Profit for the period, despite a decrease attributable to acquisition of the Company’s own shares.

Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2018

Consolidated cash and cash equivalents on December 31, 2018 decreased by JPY 62.4 billion from March 31, 2018, to JPY 2,194.0 billion. The reasons for the increases or decreases for each cash flow activity, when compared with the same period last year, are as follows:

Net cash provided by operating activities amounted to JPY 498.6 billion of cash inflows. Cash inflows from operating activities decreased by JPY 123.9 billion from the same period last year, due mainly to increased payments for parts and raw materials, which was partially offset by increased cash received from customers.

Net cash used in investing activities amounted to JPY 496.1 billion of cash outflows. Cash outflows from investing activities increased by JPY 64.8 billion from the same period last year, due mainly to increased payments for acquisitions of other financial assets.

Net cash used in financing activities amounted to JPY 54.2 billion of cash outflows. Cash outflows from financing activities decreased by JPY 76.1 billion from the same period last year, due mainly to an increase in proceeds from financing liabilities, which was partially offset by an increase in repayments of financing liabilities and purchases of treasury stock.

 

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Forecasts for the Fiscal Year Ending March 31, 2019

In regard to the forecasts of the financial results for the fiscal year ending March 31, 2019, Honda projects consolidated results to be as shown below:

Fiscal year ending March 31, 2019

 

     Yen (billions)      Changes from FY 2018  

Sales revenue

     15,850.0        +3.2

Operating profit

     790.0        -5.2

Profit before income taxes

     1,010.0        -9.4

Profit for the year

     765.0        -32.2

Profit for the year attributable to owners of the parent

     695.0        -34.4
     Yen         

Earnings per share attributable to owners of the parent

     

Basic and diluted

     393.99     

Note: The forecasts are based on the assumption that the average exchange rates for the Japanese yen to the U.S. dollar will be JPY 111 for the full year ending March 31, 2019.

The reasons for the increases or decreases in the forecasts of the operating profit, and profit before income taxes for the fiscal year ending March 31, 2019 from the previous year are as follows.

 

     Yen (billions)  

Revenue, model mix, etc.

     + 34.5  

Cost reduction, the effect of raw material cost fluctuations, etc.

     + 109.0  

SG&A expenses

     - 24.0  

R&D expenses

     - 42.0  

Currency effect

     - 160.0  

Settlement of multidistrict class action litigation*

     + 53.7  

Restitution income*

     -14.7  
  

 

 

 

Operating profit compared with fiscal year ended March 31, 2018

     - 43.5  
  

 

 

 

Share of profit of investments accounted for using the equity method

     - 32.6  

Finance income and finance costs

     - 28.7  
  

 

 

 

Profit before income taxes compared with fiscal year ended March 31, 2018

     - 104.9  
  

 

 

 

 

*

Litigation settlement and restitution income related to airbag inflator included in SG&A expenses in fiscal year 2018

Dividend per Share of Common Stock

Fiscal third quarter dividend is JPY 28 per share of common stock. The total expected annual dividend per share of common stock for the fiscal year ending March 31, 2019, is JPY 111 per share.

This announcement contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on management’s assumptions and beliefs taking into account information currently available to it. Therefore, please be advised that the actual results of the Company could differ materially from those described in these forward-looking statements as a result of numerous factors, including general economic conditions in the principal markets of the Company, its consolidated subsidiaries and its affiliates accounted for by the equity-method, and fluctuation of foreign exchange rates, as well as other factors detailed from time to time. The various factors for increases and decreases in profit have been classified in accordance with a method that Honda considers reasonable.

 

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[1] Condensed Consolidated Statements of Financial Position

 

     Yen (millions)  
     Mar. 31, 2018     Dec. 31, 2018  
Assets     

Current assets:

    

Cash and cash equivalents

     2,256,488       2,194,073  

Trade receivables

     800,463       688,213  

Receivables from financial services

     1,840,699       1,873,742  

Other financial assets

     213,177       229,189  

Inventories

     1,523,455       1,618,680  

Other current assets

     291,006       375,030  
  

 

 

   

 

 

 

Total current assets

     6,925,288       6,978,927  
  

 

 

   

 

 

 

Non-current assets:

    

Investments accounted for using the equity method

     679,517       666,587  

Receivables from financial services

     3,117,364       3,379,984  

Other financial assets

     436,555       477,449  

Equipment on operating leases

     4,088,133       4,330,434  

Property, plant and equipment

     3,062,433       2,972,261  

Intangible assets

     741,514       744,446  

Deferred tax assets

     129,338       134,763  

Other non-current assets

     169,022       166,350  
  

 

 

   

 

 

 

Total non-current assets

     12,423,876       12,872,274  
  

 

 

   

 

 

 

Total assets

     19,349,164       19,851,201  
  

 

 

   

 

 

 
Liabilities and Equity     

Current liabilities:

    

Trade payables

     1,224,627       1,056,584  

Financing liabilities

     2,917,261       3,138,789  

Accrued expenses

     404,719       427,688  

Other financial liabilities

     115,405       133,109  

Income taxes payable

     53,595       50,062  

Provisions

     305,994       285,194  

Other current liabilities

     602,498       569,987  
  

 

 

   

 

 

 

Total current liabilities

     5,624,099       5,661,413  
  

 

 

   

 

 

 

Non-current liabilities:

    

Financing liabilities

     3,881,749       3,998,741  

Other financial liabilities

     60,005       61,342  

Retirement benefit liabilities

     404,401       399,540  

Provisions

     220,625       204,607  

Deferred tax liabilities

     629,722       645,765  

Other non-current liabilities

     294,468       309,030  
  

 

 

   

 

 

 

Total non-current liabilities

     5,490,970       5,619,025  
  

 

 

   

 

 

 

Total liabilities

     11,115,069       11,280,438  
  

 

 

   

 

 

 

Equity:

    

Common stock

     86,067       86,067  

Capital surplus

     171,118       171,343  

Treasury stock

     (113,271     (177,826

Retained earnings

     7,611,332       8,028,707  

Other components of equity

     178,292       178,249  
  

 

 

   

 

 

 

Equity attributable to owners of the parent

     7,933,538       8,286,540  

Non-controlling interests

     300,557       284,223  
  

 

 

   

 

 

 

Total equity

     8,234,095       8,570,763  
  

 

 

   

 

 

 

Total liabilities and equity

     19,349,164       19,851,201  
  

 

 

   

 

 

 

 

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[2] Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Income

For the three months ended December 31, 2017 and 2018

 

     Yen (millions)  
     Three months
ended
Dec. 31, 2017
    Three months
ended
Dec. 31, 2018
 

Sales revenue

        3,957,123          3,973,655  

Operating costs and expenses:

    

Cost of sales

     (3,063,005     (3,158,104

Selling, general and administrative

     (422,923     (444,556

Research and development

     (186,619     (200,848
  

 

 

   

 

 

 

Total operating costs and expenses

     (3,672,547     (3,803,508
  

 

 

   

 

 

 

Operating profit

     284,576       170,147  
  

 

 

   

 

 

 

Share of profit of investments accounted for using the equity method

     54,512       51,403  

Finance income and finance costs:

    

Interest income

     11,381       12,848  

Interest expense

     (3,142     (4,108

Other, net

     (430     (3,363
  

 

 

   

 

 

 

Total finance income and finance costs

     7,809       5,377  
  

 

 

   

 

 

 

Profit before income taxes

     346,897       226,927  

Income tax expense

     242,871       (42,059
  

 

 

   

 

 

 

Profit for the period

     589,768       184,868  
  

 

 

   

 

 

 

Profit for the period attributable to:

    

Owners of the parent

     570,251       168,238  

Non-controlling interests

     19,517       16,630  
     Yen  

Earnings per share attributable to owners of the parent

    

Basic and diluted

     318.50       95.61  

 

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Condensed Consolidated Statements of Comprehensive Income

For the three months ended December 31, 2017 and 2018

 

     Yen (millions)  
     Three months
ended
Dec. 31, 2017
    Three months
ended
Dec. 31, 2018
 

Profit for the period

           589,768             184,868  

Other comprehensive income, net of tax:

    

Items that will not be reclassified to profit or loss

    

Remeasurements of defined benefit plans

     (24,210     —    

Net changes in revaluation of financial assets measured at fair value through other comprehensive income

     16,360       (26,131

Share of other comprehensive income of investments accounted for using the equity method

     2,450       (2,278

Items that may be reclassified subsequently to profit or loss

    

Net changes in revaluation of financial assets measured at fair value through other comprehensive income

     —         161  

Exchange differences on translating foreign operations

     18,673       (169,559

Share of other comprehensive income of investments accounted for using the equity method

     7,752       (6,168
  

 

 

   

 

 

 

Total other comprehensive income, net of tax

     21,025       (203,975
  

 

 

   

 

 

 

Comprehensive income for the period

     610,793       (19,107
  

 

 

   

 

 

 

Comprehensive income for the period attributable to:

    

Owners of the parent

     587,954       (28,313

Non-controlling interests

     22,839       9,206  

 

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Condensed Consolidated Statements of Income

For the nine months ended December 31, 2017 and 2018

 

     Yen (millions)  
     Nine months
ended
Dec. 31, 2017
    Nine months
ended
Dec. 31, 2018
 

Sales revenue

     11,446,418       11,839,500  

Operating costs and expenses:

    

Cost of sales

     (8,926,648     (9,325,508

Selling, general and administrative

     (1,280,195     (1,254,501

Research and development

     (532,843     (575,486
  

 

 

   

 

 

 

Total operating costs and expenses

     (10,739,686     (11,155,495
  

 

 

   

 

 

 

Operating profit

     706,732       684,005  
  

 

 

   

 

 

 

Share of profit of investments accounted for using the equity method

     189,723       169,631  

Finance income and finance costs:

    

Interest income

     30,194       36,172  

Interest expense

     (9,293     (10,065

Other, net

     7,169       (11,492
  

 

 

   

 

 

 

Total finance income and finance costs

     28,070       14,615  
  

 

 

   

 

 

 

Profit before income taxes

     924,525       868,251  

Income tax expense

     82,396       (187,436
  

 

 

   

 

 

 

Profit for the period

     1,006,921       680,815  
  

 

 

   

 

 

 

Profit for the period attributable to:

    

Owners of the parent

     951,592       623,339  

Non-controlling interests

     55,329       57,476  
     Yen  

Earnings per share attributable to owners of the parent

    

Basic and diluted

     529.39       353.10  

 

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Table of Contents

Condensed Consolidated Statements of Comprehensive Income

For the nine months ended December 31, 2017 and 2018

 

     Yen (millions)  
     Nine months
ended
Dec. 31, 2017
    Nine months
ended
Dec. 31, 2018
 

Profit for the period

        1,006,921             680,815  

Other comprehensive income, net of tax:

    

Items that will not be reclassified to profit or loss

    

Remeasurements of defined benefit plans

     (24,210     —    

Net changes in revaluation of financial assets measured at fair value through other comprehensive income

     28,417       (25,697

Share of other comprehensive income of investments accounted for using the equity method

     2,352       (3,023

Items that may be reclassified subsequently to profit or loss

    

Net changes in revaluation of financial assets measured at fair value through other comprehensive income

     —         120  

Exchange differences on translating foreign operations

     104,807       29,817  

Share of other comprehensive income of investments accounted for using the equity method

     19,033       (23,918
  

 

 

   

 

 

 

Total other comprehensive income, net of tax

     130,399       (22,701
  

 

 

   

 

 

 

Comprehensive income for the period

     1,137,320       658,114  
  

 

 

   

 

 

 

Comprehensive income for the period attributable to:

    

Owners of the parent

     1,072,640       606,702  

Non-controlling interests

     64,680       51,412  

 

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[3] Condensed Consolidated Statements of Changes in Equity

As of and for the nine months ended December 31, 2017

 

    Yen (millions)  
    Equity attributable to owners of the parent     Non-controlling
interests
    Total
equity
 
    Common
stock
    Capital
surplus
    Treasury
stock
    Retained
earnings
    Other
components
of equity
    Total  

Balance as of April 1, 2017

    86,067       171,118       (26,189     6,712,894       351,406       7,295,296       274,330       7,569,626  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income for the period

               

Profit for the period

          951,592         951,592       55,329       1,006,921  

Other comprehensive income, net of tax

            121,048       121,048       9,351       130,399  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

          951,592       121,048       1,072,640       64,680       1,137,320  

Reclassification to retained earnings

          (23,096     23,096       —           —    

Transactions with owners and other

               

Dividends paid

          (129,764       (129,764     (40,002     (169,766

Purchases of treasury stock

        (87,080         (87,080       (87,080
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners and other

        (87,080     (129,764       (216,844     (40,002     (256,846
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2017

    86,067       171,118       (113,269     7,511,626       495,550       8,151,092       299,008       8,450,100  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

As of and for the nine months ended December 31, 2018

 

 

    Yen (millions)  
    Equity attributable to owners of the parent     Non-controlling
interests
    Total
equity
 
    Common
stock
    Capital
surplus
    Treasury
stock
    Retained
earnings
    Other
components
of equity
    Total  

Balance as of April 1, 2018

    86,067       171,118       (113,271     7,611,332       178,292       7,933,538       300,557       8,234,095  

Effect of changes in accounting policy

          (46,833     (208     (47,041     6       (47,035

Effect of hyperinflation

          (9,454     14,896       5,442         5,442  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted balance as of April 1, 2018

    86,067       171,118       (113,271     7,555,045       192,980       7,891,939       300,563       8,192,502  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income for the period

               

Profit for the period

          623,339         623,339       57,476       680,815  

Other comprehensive income, net of tax

            (16,637     (16,637     (6,064     (22,701
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

          623,339       (16,637     606,702       51,412       658,114  

Reclassification to retained earnings

          (1,906     1,906       —           —    

Transactions with owners and other

               

Dividends paid

          (144,983       (144,983     (65,039     (210,022

Purchases of treasury stock

        (64,556         (64,556       (64,556

Disposal of treasury stock

        1           1         1  

Share-based payment transactions

      225             225         225  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners and other

      225       (64,555     (144,983       (209,313     (65,039     (274,352
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other changes

          (2,788       (2,788     (2,713     (5,501
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2018

    86,067       171,343       (177,826     8,028,707       178,249       8,286,540       284,223       8,570,763  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

[4] Consolidated Statements of Cash Flows

 

     Yen (millions)  
     Nine months
ended
Dec. 31, 2017
    Nine months
ended
Dec. 31, 2018
 

Cash flows from operating activities:

    

Profit before income taxes

     924,525       868,251  

Depreciation, amortization and impairment losses excluding equipment on operating leases

     531,230       518,386  

Share of profit of investments accounted for using the equity method

     (189,723     (169,631

Finance income and finance costs, net

     11,628       (68,087

Interest income and interest costs from financial services, net

     (96,331     (92,655

Changes in assets and liabilities

    

Trade receivables

     57,230       105,991  

Inventories

     (104,753     (105,008

Trade payables

     (72,579     (85,229

Accrued expenses

     (39,806     (34,658

Provisions and retirement benefit liabilities

     (79,965     (22,445

Receivables from financial services

     (121,704     (165,210

Equipment on operating leases

     (136,548     (141,291

Other assets and liabilities

     (64,373     (101,717

Other, net

     4,483       108  

Dividends received

     79,542       98,624  

Interest received

     184,581       201,325  

Interest paid

     (79,611     (105,418

Income taxes paid, net of refunds

     (185,174     (202,677
  

 

 

   

 

 

 

Net cash provided by operating activities

     622,652       498,659  

Cash flows from investing activities:

    

Payments for additions to property, plant and equipment

     (318,457     (316,581

Payments for additions to and internally developed intangible assets

     (112,706     (136,115

Proceeds from sales of property, plant and equipment and intangible assets

     15,089       16,381  

Payments for acquisitions of investments accounted for using the equity method

     (2,450     (2,401

Payments for acquisitions of other financial assets

     (188,995     (449,654

Proceeds from sales and redemptions of other financial assets

     175,488       389,553  

Other, net

     719       2,649  
  

 

 

   

 

 

 

Net cash used in investing activities

     (431,312     (496,168

Cash flows from financing activities:

    

Proceeds from short-term financing liabilities

     5,723,203       6,085,890  

Repayments of short-term financing liabilities

     (5,537,683     (5,865,684

Proceeds from long-term financing liabilities

     1,203,256       1,290,354  

Repayments of long-term financing liabilities

     (1,228,275     (1,256,400

Dividends paid to owners of the parent

     (129,764     (144,983

Dividends paid to non-controlling interests

     (39,392     (61,786

Purchases and sales of treasury stock, net

     (87,080     (64,555

Other, net

     (34,630     (37,061
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (130,365     (54,225

Effect of exchange rate changes on cash and cash equivalents

     43,534       (10,681
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     104,509       (62,415

Cash and cash equivalents at beginning of year

     2,105,976       2,256,488  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

     2,210,485       2,194,073  
  

 

 

   

 

 

 

 

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Table of Contents

[5] Assumptions for Going Concern

None

[6] Notes to Consolidated Financial Statements

[A] Changes in accounting policies

(a) IFRS 9 “Financial Instruments”

Honda was an early adopter of IFRS 9 “Financial Instruments” issued in November 2009, amended in October 2010 and November 2013 (“IFRS 9 (2013)”) prior to the year ended March 31, 2018 and has adopted IFRS 9 issued in July 2014 (“IFRS 9 (2014)”) with a date of initial application of April 1, 2018. The adoption of IFRS 9 (2014) resulted in changes in accounting policies primarily for classification and impairment of financial assets. IFRS 9 (2014) has an exemption allowing comparative information for prior periods not to be restated with respect to classification and measurement (including impairment) changes. Therefore, the comparative information has not been restated and continues to be reported under IFRS 9 (2013). Instead, the cumulative effect of adopting IFRS 9 (2014) was recognized in the opening balance of equity as of the date of initial application on April 1, 2018. The following are primary changes and corresponding impacts of adopting IFRS 9 (2014).

Classification of financial assets

Debt securities other than those classified into financial assets measured at amortized cost were classified into financial assets measured at fair value through profit or loss under IFRS 9 (2013). IFRS 9 (2014) newly established a classification in which financial assets are measured at fair value through other comprehensive income. Under IFRS 9 (2014), a financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met: 1) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and 2) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Honda has evaluated the business models within which financial assets are held and contractual terms of financial assets. As a result, Honda has reclassified debt securities such as government bonds and municipal bonds held by certain subsidiaries from the financial assets measured at fair value through profit or loss to financial assets measured at fair value through other comprehensive income as of April 1, 2018.

The impact of this reclassification is as follows:

 

     Yen (millions)  
     Carrying amounts
as of March 31,
2018 under IFRS 9
(2013)
     Reclassification     Carrying amounts
as of April 1,

2018 under IFRS 9
(2014)
 

Other financial assets:

       

Financial assets measured at fair value through profit or loss:

       

Debt securities

     69,829        (14,376     55,453  

Financial assets measured at fair value through other comprehensive income:

       

Debt securities

     —          14,376       14,376  

 

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Table of Contents

Impairment of financial assets

IFRS 9 (2014) replaced the incurred loss model under IAS 39 with the expected credit loss (ECL) model. The ECL model requires the allowance for credit losses to be measured at amounts equal to either lifetime ECL for those financial assets which have experienced a significant increase in credit risk (SICR) since initial recognition or 12-month ECL for financial assets which have not experienced a SICR. Lifetime ECL represents ECL that results from all possible default events over the expected life of a financial asset. 12-month ECL is the portion of lifetime ECL that results from default events that are possible within 12 months after the reporting date. ECL is a probability-weighted estimate of the difference between the contractual cash flows and the cash flows that the entity expects to receive, discounted at the original effective interest rates.

When determining whether credit risk has increased significantly, Honda assesses financial assets either individually based primarily on delinquencies or collectively for groups of financial assets with shared risk characteristics such as the period of initial recognition, collateral type, original term and credit score considering relative changes in expected default rates since initial recognition.

The application of the ECL model resulted in an increase in the allowance for credit losses of JPY 4,599 million as of April 1, 2018, which is on receivables from financial services.

(b) IFRS 15 “Revenue from Contracts with Customers”

Honda has adopted IFRS 15 ”Revenue from Contracts with Customers” with a date of initial application of April 1, 2018 by recognizing the cumulative effect of initially applying this standard as an adjustment to the opening balance of equity at the date of initial application. Therefore, the comparative information has not been restated and continues to be reported under the previous accounting policy.

Honda’s contracts with customers include promises to transfer goods or services without charges such as free inspections. Such promised goods or services are generally considered performance obligations and related sales revenue is deferred under IFRS 15, if it is deemed material, while such sales was recognized at contract inception under the previous accounting policy.

Further, under IFRS 15, dealer incentives are considered variable consideration when determining the transaction price and sales revenue is recognized only to the extent that it is highly probable that a significant reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved, which results in higher deductions from sales revenue recognized when products are sold to dealers.

 

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Table of Contents

The impacts of adopting IFRS 15 on Honda’s condensed consolidated financial statements as of and for the nine months and the three months ended December 31, 2018 are as follows:

(Condensed Consolidated Statements of Financial Position)

As of December 31, 2018

 

     Yen (millions)  
     Balances without
adoption of IFRS 15
    Adjustments     As reported  
Assets       

Current assets:

      

Cash and cash equivalents

     2,194,073       —         2,194,073  

Trade receivables

     689,495       (1,282     688,213  

Receivables from financial services

     1,873,742       —         1,873,742  

Other financial assets

     229,189       —         229,189  

Inventories

     1,618,680       —         1,618,680  

Other current assets

     374,224       806       375,030  
  

 

 

   

 

 

   

 

 

 

Total current assets

     6,979,403       (476     6,978,927  
  

 

 

   

 

 

   

 

 

 

Non-current assets:

      

Investments accounted for using the equity method

     666,575       12       666,587  

Receivables from financial services

     3,379,984       —         3,379,984  

Other financial assets

     477,449       —         477,449  

Equipment on operating leases

     4,330,434       —         4,330,434  

Property, plant and equipment

     2,972,261       —         2,972,261  

Intangible assets

     744,446       —         744,446  

Deferred tax assets

     134,348       415       134,763  

Other non-current assets

     165,544       806       166,350  
  

 

 

   

 

 

   

 

 

 

Total non-current assets

     12,871,041       1,233       12,872,274  
  

 

 

   

 

 

   

 

 

 

Total assets

     19,850,444       757       19,851,201  
  

 

 

   

 

 

   

 

 

 
     Yen (millions)  
     Balances without
adoption of IFRS 15
    Adjustments     As reported  
Liabilities and Equity       

Current liabilities:

      

Trade payables

     1,056,584       —         1,056,584  

Financing liabilities

     3,138,789       —         3,138,789  

Accrued expenses

     367,652       60,036       427,688  

Other financial liabilities

     133,109       —         133,109  

Income taxes payable

     50,062       —         50,062  

Provisions

     289,013       (3,819     285,194  

Other current liabilities

     554,740       15,247       569,987  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     5,589,949       71,464       5,661,413  
  

 

 

   

 

 

   

 

 

 

Non-current liabilities:

      

Financing liabilities

     3,998,741       —         3,998,741  

Other financial liabilities

     61,342       —         61,342  

Retirement benefit liabilities

     399,540       —         399,540  

Provisions

     205,579       (972     204,607  

Deferred tax liabilities

     662,934       (17,169     645,765  

Other non-current liabilities

     307,814       1,216       309,030  
  

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     5,635,950       (16,925     5,619,025  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     11,225,899       54,539       11,280,438  
  

 

 

   

 

 

   

 

 

 

Equity:

      

Common stock

     86,067       —         86,067  

Capital surplus

     171,343       —         171,343  

Treasury stock

     (177,826     —         (177,826

Retained earnings

     8,081,616       (52,909     8,028,707  

Other components of equity

     178,910       (661     178,249  
  

 

 

   

 

 

   

 

 

 

Equity attributable to owners of the parent

     8,340,110       (53,570     8,286,540  

Non-controlling interests

     284,435       (212     284,223  
  

 

 

   

 

 

   

 

 

 

Total equity

     8,624,545       (53,782     8,570,763  
  

 

 

   

 

 

   

 

 

 

Total liabilities and equity

     19,850,444       757       19,851,201  
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

(Condensed Consolidated Statements of Income)

For the three months ended December 31, 2018

 

     Yen (millions)  
     Balances without
adoption of IFRS 15
    Adjustments     As reported  

Sales revenue

     4,017,243       (43,588     3,973,655  

Operating costs and expenses:

      

Cost of sales

     (3,158,630     526       (3,158,104

Selling, general and administrative

     (444,354     (202     (444,556

Research and development

     (200,848     —         (200,848
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     (3,803,832     324       (3,803,508
  

 

 

   

 

 

   

 

 

 

Operating profit

     213,411       (43,264     170,147  
  

 

 

   

 

 

   

 

 

 

Share of profit of investments accounted for using the equity method

     51,402       1       51,403  

Finance income and finance costs:

      

Interest income

     12,848       —         12,848  

Interest expense

     (4,108     —         (4,108

Other, net

     (3,363     —         (3,363
  

 

 

   

 

 

   

 

 

 

Total finance income and finance costs

     5,377       —         5,377  
  

 

 

   

 

 

   

 

 

 

Profit before income taxes

     270,190       (43,263     226,927  

Income tax expense

     (53,099     11,040       (42,059
  

 

 

   

 

 

   

 

 

 

Profit for the period

     217,091       (32,223     184,868  
  

 

 

   

 

 

   

 

 

 

Profit for the period attributable to:

      

Owners of the parent

     200,315       (32,077     168,238  

Non-controlling interests

     16,776       (146     16,630  

 

For the nine months ended December 31, 2018

 

      
     Yen (millions)  
     Balances without
adoption of IFRS 15
    Adjustments     As reported  

Sales revenue

     11,851,234       (11,734     11,839,500  

Operating costs and expenses:

      

Cost of sales

     (9,327,471     1,963       (9,325,508

Selling, general and administrative

     (1,255,114     613       (1,254,501

Research and development

     (575,486     —         (575,486
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     (11,158,071     2,576       (11,155,495
  

 

 

   

 

 

   

 

 

 

Operating profit

     693,163       (9,158     684,005  
  

 

 

   

 

 

   

 

 

 

Share of profit of investments accounted for using the equity method

     169,629       2       169,631  

Finance income and finance costs:

      

Interest income

     36,172       —         36,172  

Interest expense

     (10,065     —         (10,065

Other, net

     (11,492     —         (11,492
  

 

 

   

 

 

   

 

 

 

Total finance income and finance costs

     14,615       —         14,615  
  

 

 

   

 

 

   

 

 

 

Profit before income taxes

     877,407       (9,156     868,251  

Income tax expense

     (189,703     2,267       (187,436
  

 

 

   

 

 

   

 

 

 

Profit for the period

     687,704       (6,889     680,815  
  

 

 

   

 

 

   

 

 

 

Profit for the period attributable to:

      

Owners of the parent

     629,606       (6,267     623,339  

Non-controlling interests

     58,098       (622     57,476  

 

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Table of Contents

[B] 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 the components of Honda for 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 the Company’s condensed 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), side-by-sides (S×S) and relevant parts   Research and development Manufacturing Sales and related services

Automobile Business

  Automobiles and relevant parts   Research and development Manufacturing Sales and related services

Financial Services Business

  Financial services   Retail loan and lease related to Honda products Others

Power Product and Other Businesses

  Power products and relevant parts, and others   Research and development Manufacturing Sales and related services Others

1. Segment information based on products and services

For the three months ended December 31, 2017

 

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

Sales revenue:

                  

External customers

        499,117        2,849,328        523,558          85,120       3,957,123        —         3,957,123  

Intersegment

     —          52,085        3,572        8,362       64,019        (64,019     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

     499,117        2,901,413        527,130        93,482         4,021,142        (64,019     3,957,123  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment profit (loss)

     64,823        167,497        50,701        1,555       284,576        —         284,576  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

For the three months ended December 31, 2018

 

 

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

Sales revenue:

                  

External customers

        516,514        2,806,148        560,305          90,688       3,973,655        —         3,973,655  

Intersegment

     —          53,408        3,716        8,704       65,828        (65,828     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

     516,514        2,859,556           564,021        99,392         4,039,483        (65,828       3,973,655  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment profit (loss)

     69,537        41,228        60,374        (992     170,147        —         170,147  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

- 15 -


Table of Contents

As of and for the nine months ended December 31, 2017

 

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

Sales revenue:

                  

External customers

     1,517,766        8,087,128        1,595,750        245,774       11,446,418        —         11,446,418  

Intersegment

     —          131,939        10,633        18,625       161,197        (161,197     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

     1,517,766        8,219,067        1,606,383        264,399       11,607,615        (161,197     11,446,418  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment profit (loss)

     212,185        347,064        147,816        (333     706,732        —         706,732  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment assets

     1,489,767        7,875,109        9,867,147        334,638       19,566,661        194,804       19,761,465  

Depreciation and amortization

     55,986        459,241        559,239        11,654       1,086,120        —         1,086,120  

Capital expenditures

     35,228        357,005        1,374,254        7,213       1,773,700        —         1,773,700  

 

As of and for the nine months ended December 31, 2018

 

 

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

Sales revenue:

                  

External customers

     1,610,740        8,228,119        1,746,285        254,356       11,839,500        —         11,839,500  

Intersegment

     —          146,792        11,202        19,840       177,834        (177,834     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

     1,610,740        8,374,911        1,757,487        274,196       12,017,334        (177,834     11,839,500  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment profit (loss)

     246,711        262,734        176,746        (2,186     684,005        —         684,005  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Segment assets

     1,437,358        7,749,612        9,944,099        327,153       19,458,222        392,979       19,851,201  

Depreciation and amortization

     49,304        455,477        583,184        10,871       1,098,836        —         1,098,836  

Capital expenditures

     46,708        363,963        1,468,846        9,540       1,889,057        —         1,889,057  

Explanatory notes:

 

1.

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

 

2.

Unallocated corporate assets, included in reconciling items, amounted to JPY 523,929 million as of December 31, 2017 and JPY 654,744 million as of December 31, 2018 respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

In addition to the disclosure required by IFRS, Honda provides the following supplemental information for the financial statements users:

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

For the three months ended December 31, 2017

 

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

Sales revenue:

                      

External customers

     557,410          2,114,553        148,354        926,136        210,670          3,957,123        —           3,957,123  

Inter-geographic areas

     600,637        123,255        69,242        180,876        1,452        975,462        (975,462     —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     1,158,047        2,237,808        217,596        1,107,012        212,122        4,932,585        (975,462     3,957,123  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating profit (loss)

     63,275        106,063        2,575        111,139        7,751        290,803        (6,227     284,576  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

For the three months ended December 31, 2018

 

 

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

Sales revenue:

                      

External customers

     620,730          2,126,699        143,432           889,906        192,888          3,973,655        —           3,973,655  

Inter-geographic areas

     675,383        123,560        75,375        175,886        1,816        1,052,020        (1,052,020     —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     1,296,113        2,250,259        218,807        1,065,792        194,704        5,025,675        (1,052,020     3,973,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating profit (loss)

     43,382        49,996        1,311        93,162        2,120        189,971        (19,824     170,147  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

As of and for the nine months ended December 31, 2017

 

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

Sales revenue:

                      

External customers

     1,612,740        6,060,094        473,183        2,686,496        613,905        11,446,418        —         11,446,418  

Inter-geographic areas

     1,628,595        375,822        166,646        496,432        4,720        2,672,215        (2,672,215     —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     3,241,335        6,435,916        639,829        3,182,928        618,625        14,118,633        (2,672,215     11,446,418  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating profit (loss)

     119,135        206,992        11,757        319,285        34,482        691,651        15,081       706,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Assets

     4,332,709        11,128,906        685,811        2,921,112        677,332        19,745,870        15,595       19,761,465  

Non-current assets other than
financial instruments and
deferred tax assets

     2,498,753        4,885,452        106,163        711,057        169,757        8,371,182        —         8,371,182  

 

As of and for the nine months ended December 31, 2018

 

 

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

Sales revenue:

                      

External customers

     1,750,679        6,319,470        462,264        2,738,003        569,084        11,839,500        —         11,839,500  

Inter-geographic areas

     1,891,295        375,358        204,574        537,150        5,418        3,013,795        (3,013,795     —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     3,641,974        6,694,828        666,838        3,275,153        574,502        14,853,295        (3,013,795     11,839,500  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating profit (loss)

     85,496        213,839        8,582        343,271        32,745        683,933        72       684,005  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Assets

     4,510,933        11,104,584        664,122        2,891,842        610,717        19,782,198        69,003       19,851,201  

Non-current assets other than
financial instruments and
deferred tax assets

     2,617,310        4,694,949        90,489        665,401        145,342        8,213,491        —         8,213,491  

Explanatory notes:

 

1.

Major countries or regions in each geographic area:

 

North America

   United States, Canada, Mexico

Europe

   United Kingdom, Germany, Belgium, Turkey, Italy

Asia

   Thailand, Indonesia, China, India, Vietnam

Other Regions

   Brazil, Australia

 

2.

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

 

3.

Unallocated corporate assets, included in reconciling items, amounted to JPY 523,929 million as of December 31, 2017 and JPY 654,744 million as of December 31, 2018 respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

 

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Table of Contents

[C] Other

1. Loss related to airbag inflators

Honda has been conducting market-based measures in relation to airbag inflators. Honda recognizes a provision for specific warranty costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. There is a possibility that Honda will need to recognize additional provisions when new evidence related to the product recalls arise, however, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report.

In the United States and Canada, various class action lawsuits and civil lawsuits related to the above mentioned market-based measures were filed against Honda. The plaintiffs claimed for properly functioning airbag inflators, compensation of economic losses including incurred costs and the decline in the value of vehicles, as well as punitive damages.

Most of the class action lawsuits in the United States were transferred to the United States District Court for the Southern District of Florida and consolidated into a multidistrict class action litigation. For the nine months ended December 31, 2017, Honda has reached a settlement with the plaintiffs of the multidistrict class action litigation in the United States. Honda recognized the settlement of JPY 53,739 million as selling, general and administrative expenses, which includes funds contributed to enhance airbag inflator recall activities. The final approval of the settlement from court was completed as July 31, 2018 (U.S. local time).

For the class action lawsuits and civil lawsuits other that the above, Honda did not recognize a provision for loss contingencies because the conditions for a provision have not been met as of the date of this report. Therefore, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report because there are some uncertainties, such as the period when these lawsuits will be concluded.

2. Reversal of impairment loss on investments accounted for using the equity method

For the nine months ended December 31, 2017, the Company recognized reversal of impairment losses of JPY 15,782 million, which had been previously recognized, on certain investments accounted for using the equity method mainly due to the recovery of quoted market values. The reversal of impairment losses is included in share of profit of investments accounted for using the equity method in the condensed consolidated statement of income.

For the nine months ended December 31, 2018, the Company did not recognize any significant reversal of impairment losses.

3. Impacts of the Enactment of the U.S. Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act was enacted in the U.S. on December 22, 2017. Due to the Act, the federal corporate income tax rate in the U.S. applicable to the Company’s U.S. businesses was reduced from 35 percent to a blended corporate rate of 31.55 percent for the last fiscal year ending March 31, 2018 and to 21 percent from the fiscal year commencing on April 1, 2018.

 

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Table of Contents

Based on the reduction of the federal corporate income tax rate, the Company reevaluated deferred tax assets and liabilities in its U.S. consolidated subsidiaries. As a result, the Company had recognized impacts of the enactment of the Tax Cuts and Jobs Act, including a decrease in income tax expenses of JPY 346,129 million, in the third quarter of the fiscal year ending March 31, 2018.

 

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