Form 6-K for December 2003
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 December 2003

 


 

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 officers)

 

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):         

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

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):             

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes              No             

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-            

 


 


Table of Contents

Contents

 

Exhibit 1:

On December 16, 2003, Honda Motor Co., Ltd. announced the development of its compact, lightweight, fuel-efficient, low emission HF118 Turbofan Engine for the HondaJet—Honda’s experimental business jet. (Ref. #C03-088)

 

Exhibit 2:

On December 16, 2003, Honda Motor Co., Ltd. announced that the HondaJet, its new experimental compact business jet equipped with Honda-developed HF118 jet engines, successfully completed initial flight tests at Piedmont Triad Airport in North Carolina, U.S. (Ref. #C03-089)

 

Exhibit 3:

On December 17, 2003, Honda Motor Co., Ltd. announced its 2003 forecast and 2004 plan in both sales and production. (Ref. #03095)

 

Exhibit 4:

On December 17, 2003, Honda Motor Co., Ltd. announced that it would establish a new wholly-owned subsidiary in China – Honda Motor (China) Investment Co., Ltd. – with the objective of strengthening the function of its regional operation center there. (Ref. #C03-093)

 

Exhibit 5:

On December 25, 2003, Honda Motor Co., Ltd. announced that overseas production grew 5.5% in November, mostly because of increased output in Asia. (Ref. #C03-096)

 

Exhibit 6:

On December 25, 2003, Honda Motor Co., Ltd. announced that the 1.3L version of the Fit has been certified as achieving emission levels which are 75% lower than the 2005 emission regulation standards established by the Japanese Ministry of Land, Infrastructure and Transport. (Ref. #A03-067)

 

Exhibit 7:

Interim Business Report for the First-Half term (six months ended September 30, 2003) of the 80th fiscal period.

 

Exhibit 8:

Semi Annual report for the First-Half term (six months ended September 30, 2003) of the 80th fiscal period.


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/    Satoshi Aoki


Satoshi Aoki

Senior Managing and

Representative Director

 

Date: January 20, 2004

 

 


Table of Contents

LOGO

 

ref. #C03-088

 

Honda Announces Development of

HF118 Turbofan Aircraft Engine

 

December 16, 2003—Honda Motor Co., Ltd. announced today the development of its compact, lightweight, fuel-efficient, low-emission HF118 Turbofan Engine for the HondaJet—Honda’s experimental business jet.

 

Honda used its proprietary computational fluid dynamics software to optimize airflow within the compact engine, maximizing performance. The engine’s simple, high-performance combustion chamber keeps emission levels low enough to meet the requirements of anticipated standards for compact jets.

 

On the basis of electronic control technology originally developed for automotive applications, Honda has created the first ultra-compact Full Authority Digital Electronic Control (FADEC) system for this class of engine, which provides superior engine operation and reliability without variable mechanisms.

 

Development of this engine began in 1999, and it has been submitted to comprehensive testing, including required tests such as the 150-hour endurance test . The engine has now logged more than 110 hours of flight-testing on other manufacturers’ aircraft, confirming its reliability.

 

Key Specifications

 

Engine Type   

2-Spool Turbofan

One-Stage Fan, Two-Stage Compressor, Two-Stage Turbine

Take-off thrust    757 kgf (1,670 lbf)    Take-off fuel consumption    0.49 kg/hr/kgf (0.49 lb/hr/lbf)
Cruise thrust    191 kgf (420 lbf)    Cruising fuel consumption    0.75 kg/hr/kgf (0.75 lb/hr/lbf)
Dry weight    178 kg (392 lb)    Bypass ratio    2.9
Fan diameter    441 mm (17.4 inches)    Total length    1,384 mm (54.5 inches)

 

LOGO   LOGO
HF118 Turbofan Engine   HF118 mounted on the HondaJet

 

Publicity information relating to the HondaJet and HF118 Turbofan Engine is available from the following URL:

http://www.honda.co.jp/PR/

(This site is intended exclusively for the use of journalists.)

 


Table of Contents

LOGO

 

ref. #C03-089

 

Flight Tests of Honda Experimental Business Jet Begin

 

December 16, 2003—Honda Motor Co., Ltd. announced today that the HondaJet, its new experimental compact business jet equipped with Honda-developed HF118 jet engines, successfully completed initial flight tests this month at Piedmont Triad Airport in North Carolina, US.

 

Compared with conventional jets, this experimental aircraft offers superior fuel efficiency and remarkable cabin space. The engines are optimally positioned on the upper surface of the main wing in a unique configuration that reduces drag at high speeds and increases cruising efficiency. This layout also eliminates the need for structural engine mounts in the fuselage, creating over 30% more cabin space than in a conventional aircraft.

 

The fuselage is a compact and lightweight co-cured carbon composite structure, yet realizes the largest cabin in its class. The main wing, which features aluminum skin panels formed from single sheets of aluminum that provide a smoother surface than conventional wing configurations, along with Honda’s proprietary turbulence-reducing laminar airfoil, work together to significantly improve aerodynamic performance. Additional drag-reducing technologies include the fuselage nose, which is designed to generate laminar flow. These features, in combination with Honda’s fuel-efficient HF118 Turbofan Engine, achieve fuel efficiency over 40% higher than conventional aircraft.

 

LOGO   LOGO
The HondaJet taking off   The HondaJet on the ground

 

This experimental aircraft is also outfitted with a state-of-the-art glass cockpit with an integrated avionics system, as well as an autopilot function, anti-icing equipment, and other systems. The jet is scheduled to undergo approximately 200 hours of flight-testing to demonstrate and verify the operability and performance characteristics of its various systems.

 

Honda began research into compact business jets in 1986, using engines provided by other manufacturers. The HF118 Turbofan Engine-equipped HondaJet experimental compact jet is the first Honda developed aircraft to be outfitted with a Honda engine, a milestone of significance for the company and the industry.

 

–1–


Table of Contents

Main Specifications

 

Provisional name

 

HondaJet

Seating

 

6 (2 crew + 4 passengers or 1 + 5)

Engine

 

Honda HF118 Turbofan Engine

Maximum take-off thrust (kgf (lbf))

 

757 (1,670) x 2

Maximum take-off weight (kgf (lbf))

 

4,173 (9,200)

Length x width x height (m (ft))

 

12.5 x 12.2 x 4.1 (41.1 x 39.9 x 13.2)

Maximum speed (km/hr (knots))

 

778 (420)

Service ceiling (m(ft))

 

12,497 (41,000)

Range (km (nm))

 

2,037 (1,100)

Fuel consumption (km/kg (nm/lb))

 

3.3 (0.8)

Take-off distance (m (ft))

 

807 (2,647)

Landing distance(m (ft))

 

694 (2,277)

 

LOGO

Diagrams

 

Publicity information relating to the HondaJet and HF118 Turbofan Engine is available from the following

URL: http://www.honda.co.jp/PR/

(This site is intended exclusively for the use of journalists.)

 

–2–


Table of Contents

=Supplement=

<New Technologies Employed in the HondaJet>

  

LOGO

Wing shape test on T-33 aircraft

  

LOGO

IR analysis of air flow

       
Honda SMH-1 Natural Laminar Flow Wing Section      

 

Honda’s proprietary SMH-1 achieves low drag and excellent performance at high speeds despite its relative thickness.

     
Laminar Flow Nose Section    Visualization of flow around the nose section during a wind tunnel test    LOGO

 

The optimal design of the fuselage nose generates a laminar flow that reduces drag on the fuselage.

     
Over-the-Wing Engine - Mount    Computer - calculated pressure distribution around the over-the-wing mounted engine    LOGO

 

Optimal placement of the engine nacelles over the main wing improves aerodynamic performance at high speeds.

     
Co-cured Composite Fuselage          
The co-cured composite and honeycomb sandwich structure combine to create a new composite structure that enables Honda to develop a lightweight fuselage with more interior space.    Strength testing of the co - cured composite material    LOGO
Aluminum Main Wing          
The use of an integrally stiffened skin produces a smooth wing surface that promotes laminar flow.    Structural configuration of the aluminum main wing    LOGO
Glass Cockpit          
The aircraft is equipped with a state-of-the-art Garmin G1000 glass cockpit system. Information is efficiently presented on flat-panel flight displays.    The cockpit    LOGO

 

–3–


Table of Contents

December 17, 2003

Ref.# 03095

 

2003/2004 SALES & PRODUCTION

 

     2003

    2004

 
     Forecast

   % Change

    Plan

   % Change

 

<Global Sales (unit: 10 thousand)> *= New record

                      

Motorcycles & ATVs

   *approx. 909    112 %   *approx. 1,040    114 %

Automobiles

   *291    103 %   *320    110 %

Power Products

   *498    111 %   *540    108 %

Total

   *1,698    110 %   *1,900    112 %
     2003

    2004

 
     Forecast

   % Change

    Plan

   % Change

 
     (Units)          (Units)       

<Motorcycles & ATVs> *= New record

                      

Japan sales

   410,000    97.8 %   410,000    100.0 %

Export sales

   430,000    94.4 %   370,000    86.0 %

Motorcycle Total

   840,000    96.0 %   780,000    92.9 %

ATVs

   310,000    94.3 %   *340,000    109.7 %

Motorcycle & ATV Total

   1,150,000    95.5 %   1,120,000    97.4 %

KD sets

   *7,400,000    108.9 %   *8,620,000    116.5 %

·    Electric power assist bicycle “Racoon” is not included in the above figures.

      

Japan production (·)

   664,000    76.5 %   610,000    91.9 %

Overseas production (··)

   *8,456,000    119.1 %   *9,760,000    115.4 %

Global production (···)

   *9,120,000    114.5 %   *10,370,000    113.7 %

(·) – completely built unit (CBU) + complete knock-down (CKD)

      

(· ·) – CBU production at local plants (excluding overseas CKD)

      

(· · ·) – Domestic production plus overseas production

      
     2003

    2004

 
     Forecast

   % Change

    Plan

   % Change

 
     (Units)          (Units)       

<Automobiles> *= New record

                      

· Passenger cars & light trucks

   485,000    79.0 %   506,000    104.3 %

Mini vehicles

   255,000    88.3 %   294,000    115.3 %

Japan sales

   740,000    82.0 %   800,000    108.1 %

Export sales

   465,000    97.7 %   460,000    98.9 %

Total

   1,205,000    87.4 %   1,260,000    104.6 %

KD sets

   1,580,000    111.1 %   *1,710,000    108.2 %

·    Import car sales are included in passenger cars & light trucks

      

Japan production (·)

   1,160,000    83.7 %   1,220,000    105.2 %

Overseas production (··)

   *1,790,000    118.2 %   *1,950,000    108.9 %

Global production (···)

   *2,950,000    101.7 %   *3,170,000    107.5 %

(·) – completely built unit (CBU) + complete knock-down (CKD)

      

(· ·) – CBU production at local plants (excluding overseas CKD)

      

(· · ·) – Domestic production plus overseas production

      
     2003

    2004

 
     Forecast

   % Change

    Plan

   % Change

 
     (Units)          (Units)       

<Power Products> *= New record

                      

Japan sales

   445,000    90.3 %   400,000    89.9 %

Export sales

   4,536,200    113.8 %   5,000,000    110.2 %

Total

   *4,981,200    111.2 %   *5,400,000    108.4 %

 

· OEM engines for export have been included in Japan sales since 2001.

 


Table of Contents

 

LOGO

 

C03-093

 

Honda Strengthens Function of Regional Operation Center in China

 

Tokyo, December 17, 2003 — Honda Motor Co., Ltd. today announced that it will establish a new wholly-owned subsidiary in China – Honda Motor (China) Investment Co., Ltd. – with the objective of strengthening the function of its regional operation center there. The new company will be responsible for developing Honda’s overall business strategy in China and representing Honda group companies in various areas including corporate communications, and intellectual property management. The company is expected to begin operations in February 2004.

 

Honda currently has 11 joint ventures and subsidiaries in China for its motorcycle, automobile and power equipment businesses. In April 2003, Honda established its sixth regional operation worldwide in order to manage Honda’s growing operations in China more comprehensively. The new company will consolidate the regional headquarters functions and ensure that management decision-making is deeply-rooted in local market conditions and the needs of the customer. This strategy enables Honda to optimize its businesses to respond quickly to changes in the business environment of this rapidly growing market.

 

The new company will serve as a holding company with various stakes in each Honda company in China. In this way, the company can make timely decisions on the allocation of business resources within the region. The specific investment of Honda Motor (China) Investment Co. in each business subsidiary is to be determined.

 

Since 1994, Honda managed its global operations through a “matrix” system including both regional operations and its major business line operations. Under this system, Honda’s six regional operations – Japan, North America, South America, Europe, Asia/Oceania, and China – are empowered to make strategic decisions in various business areas including product line-up, manufacturing, sales and investments. At the same time, headquarters functions for each business line – automobile, motorcycle, power equipment, and parts – make cross-regional decisions and strategic adjustments to optimize the efficiency of Honda operations globally.

 

About the new company

 

Name of company:

  

Honda Motor (China) Investment Co., Ltd.

Establishment:

  

January, 2004 (tentative)

Start of operations:

  

February, 2004 (tentative)

Capital:

  

US$30million

Shareholder:

  

100% owned by Honda Motor Co., Ltd.

Representative (CEO):

  

Atsuyoshi Hyogo

Location:

  

Beijing, China

Number of associates:

  

approximately 35

 


Table of Contents

 

LOGO

 

Ref.#C03-096

 

Honda Overseas Production Up 5.5% In November

 

December 25, 2003 — Honda Motor Co., Ltd., announced today that overseas production grew 5.5% in November, mostly because of increased output in Asia. It was the 35th consecutive month of overseas production increases at Honda. For the first 11 months of 2003, overseas production is up 17.8%, predominantly due to a surge of 59.2% in Asia-based production.

 

November’s domestic sales fell 22.1% overall, but sales of mini-vehicles were up 18.5%, the second consecutive monthly increase. Honda’s Life mini-vehicle (17,692 units) was the best seller, followed by Fit (11,116), the new Odyssey (6,643 units).

 

Exports in November were down 19.9%, the fifth straight month of decline, because of decreased shipments to North America.

 

 

 

PRODUCTION, SALES, EXPORTS (November 2003)

 

PRODUCTION

 

     November

    Annual Total - 2003

 
     Units

   Vs.11/02

    Units

   Vs.2002

 

Domestic (CBU+CKD)

   102,480    -15.6 %   1,069,350    -15.9 %

Overseas (CBU only)

   144,635    +5.5 %   1,659,160    +17.8 %

Worldwide Total *

   247,115    -4.4 %   2,728,510    +1.8 %

 

* excludes overseas CKD

 

REGIONAL PRODUCTION

 

     November

    Annual Total - 2003

 
     Units

   Vs.11/02

    Units

   Vs.2002

 

North America

   94,560    -2.1 %   1,151,162    +10.9 %

(USA only)

   61,607    -3.8 %   787,126    +12.3 %

Europe

   16,712    -2.3 %   170,660    +3.9 %

Asia

   26,536    +43.2 %   276,284    +59.2 %

Others

   6,827    +40.6 %   61,054    +87.0 %

Regional Total

   144,635    +5.5 %   1,659,160    +17.8 %

 

-1-


Table of Contents

SALES

 

     November

    Annual Total - 2003

 

Vehicle type


   Units

    Vs.11/02

    Units

    Vs.2002

 

Passenger Cars & Light Trucks

   32,928     -39.1 %   440,389     -21.2 %

(Imports)

   (906 )   +97.4 %   (18,886 )   +133.7 %

Mini Vehicles

   26,821     +18.5 %   233,214     -12.8 %

Honda Brand TTL

   59,749     -22.1 %   673,603     -18.5 %

 

EXPORTS

 

     November

    Annual Total - 2003

 
     Units

   Vs.11/02

    Units

   Vs.2002

 

North America

   16,907    -38.8 %   224,689    -17.4 %

(USA only)

   15,803    -34.5 %   199,710    -17.4 %

Europe

   8,313    +58.2 %   102,588    +58.6 %

Asia

   2,391    -1.5 %   18,636    -38.5 %

Others

   9,146    -13.7 %   76,777    +17.8 %

Total

   36,757    -19.9 %   422,690    -2.2 %

 

For further information, please contact:

 

Masaya Nagai

Shigeki Endo

Tatsuya David Iida

Honda Motor Co., Ltd. Corporate Communications Division

Telephone: 03-5412-1512

Facsimile: 03-5412-1545

 

-2-


Table of Contents

 

LOGO

 

ref. #A03-067

 

Honda Fit Meets 2005 Emission Regulations

 

December 25, 2003 – Honda Motor Co., Ltd. has announced that the 1.3L version of the Fit, a car widely acclaimed for its advanced packaging, excellent fuel economy, innovative styling, and popularity amongst a broad age range of customers, has been certified as achieving emission levels which are 75% lower («««« low emission vehicle), than the 2005 emission regulation standards established by the Japanese Ministry of Land, Infrastructure and Transport. This Fit model will be on sale at Honda automobile dealerships nationwide from January 13, 2004.

 

The Fit 1.5L version has been certified as achieving emission level 50% lower (««« low emission vehicle), than the 2005 standards realizing extremely high environmental friendly emission levels for the Fit lineup.

 

In addition to the Fit, the Honda Inspire and OdysseyT1 models are certified as («««« low emission vehicle) and the Life and StreamT2 models are certified as (««« low emission vehicle). By the end of the first half of 2004, Honda plans to bring its entire automobile lineup in compliance with the 2005 emission regulations realizing an even broader lineup of environmentally friendly vehicles.

 

T 1 S, M, and L types

T 2 FF model

 

Publicity information for the Fit is available for downloading from the following URL: http://www.honda.co.jp/PR/

(This site is intended solely for the use of journalists)

 


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LOGO

 

INTERIM BUSINESS REPORT FOR THE FIRST-HALF TERM

(SIX MONTHS ENDED SEPTEMBER 30, 2003)

OF THE 80TH FISCAL PERIOD

 


 

(This is a translation of summary information of the interim business report in the Japanese language which is contained in the November 2003 issue of “Honda Kabunushi Tsushin” (News for Stockholders), mailed on November 21, 2003, to holders of Honda Common Stock in Japan.)

 


 

HONDA MOTOR CO., LTD.

(HONDA GIKEN KOGYO KABUSHIKI KAISHA)

TOKYO, JAPAN

 


Table of Contents

CONTENTS

 

Consolidated Financial Summary

   1

Unit Sales Breakdown

   1

Net Sales Breakdown

   2

Business Segment Information

   3

Geographical Segment Information

   3

Five-Year Financial Results

   4

Consolidated Statements of Income

   5

Consolidated Balance Sheets

   6

Consolidated Statements of Cash Flows

   8

Explanatory Notes

   9

Consolidated Statements of Cash Flows Divided into Non-financial Services Businesses and Finance Subsidiaries (Unaudited)

   10

Unconsolidated Financial Section

   11

Unconsolidated Balance Sheets

   12

Unconsolidated Statements of Income

   14

Common Stock Information

   15

Breakdown of Stockholders

   15

Principal Stockholders

   15

Five-Year Financial Results (Unconsolidated)

   16

Board of Directors

   17

 


Table of Contents

CONSOLIDATED FINANCIAL SUMMARY

 

For the six months ended September 30, 2003 and 2002

and forecasts for the fiscal year ending March 31, 2004

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


   U.S. dollar
(millions)


   Yen
(millions)


                        FORECASTS*

Financial Highlights


   Six months ended
September 30,
2003


   %
change


    Six months ended
September 30,
2002


   Six months ended
September 30,
2003


   Fiscal year ending
March 31,
2004


Net sales and other operating revenue

   ¥ 4,025,431    4.5 %   ¥ 3,853,611    $ 36,184    ¥ 8,220,000

Operating income

     301,871    (6.8 )     323,869      2,713      623,000

Income before income taxes

     331,881    21.3       273,701      2,983      648,000

Net income

     239,178    22.8       194,779      2,150      470,000
    

  

 

  

  

 

     Yen

   U.S. dollar

   Yen

                    FORECAST*

     Six months
ended
September 30,
2003


   Six months
ended
September 30,
2002


   Six months
ended
September 30,
2003


   Fiscal year
ending
March 31,
2004


Basic net income per common share

   ¥ 249.34    ¥ 199.98    $ 2.24       

Basic net income per American share

     124.67      99.99      1.12       

Cash dividend per common share

     19      16           ¥ 38
    

  

         

 

UNIT SALES BREAKDOWN

 

For the six months ended September 30, 2003 and 2002

and forecasts for the fiscal year ending March 31, 2004

Honda Motor Co., Ltd. and Subsidiaries

  

Units

(thousands)


 
                 FORECASTS*

 
     Six months
ended
September 30,
2003


    Six months
ended
September 30,
2002


    Fiscal year
ending
March 31,
2004


 

Motorcycles:

                  

Japan

   214     215     425  

(motorcycles included above)

   (214 )   (215 )   (425 )

North America

   239     291     670  

(motorcycles included above)

   (122 )   (138 )   (367 )

Europe

   158     155     280  

(motorcycles included above)

   (153 )   (150 )   (274 )

Asia

   3,189     2,817     6,880  

(motorcycles included above)

   (3,189 )   (2,817 )   (6,880 )

Others

   419     389     825  

(motorcycles included above)

   (414 )   (384 )   (820 )
    

 

 

Total

   4,219     3,867     9,080  

(motorcycles included above)

   (4,092 )   (3,704 )   (8,766 )
    

 

 

Automobiles:

                  

Japan

   329     426     765  

North America

   782     732     1,565  

Europe

   113     104     220  

Asia

   163     95     355  

Others

   56     49     130  
    

 

 

Total

   1,443     1,406     3,035  
    

 

 

Power Products:

                  

Japan

   245     252     475  

North America

   1,053     900     2,245  

Europe

   421     424     1,260  

Asia

   317     312     865  

Others

   159     118     235  
    

 

 

Total

   2,195     2,006     5,080  
    

 

 

 

Explanatory notes:   1.   The geographical breakdown of unit sales is based on the location of affiliated and unaffiliated customers.
    2.   Net sales of power products & other businesses include revenue from sales of power products and related parts, leisure businesses, trading and finance subsidiaries.

 

* These forecasts are based on the assumption that the exchange rates for the yen to the U.S. dollar and the euro for the current fiscal year will average ¥115 and ¥127, respectively. This announcement contains forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934. Honda’s actual results could materially differ from those contained in these forward-looking statements as a result of numerous factors outside of Honda’s control. Such factors include general economic conditions in Honda’s principal markets, and foreign exchange rates between the Japanese yen and other major currencies, as well as other factors detailed from time to time in Honda’s reports filed with the U.S. Securities and Exchange Commission.

 

1


Table of Contents

NET SALES BREAKDOWN

 

For the six months ended September 30, 2003 and 2002

Honda Motor Co., Ltd. and Subsidiaries

   Yen (millions)

 
     Six months ended
September 30, 2003


    Six months ended
September 30, 2002


 

Motorcycle business:

                          

Japan

   ¥ 50,903    10.7 %   ¥ 51,975    10.4 %

North America

     130,534    27.5       164,254    33.0  

Europe

     97,799    20.6       87,221    17.5  

Asia

     119,881    25.2       107,256    21.6  

Others

     75,954    16.0       87,128    17.5  
    

  

 

  

Total

   ¥ 475,071    100.0 %   ¥ 497,834    100.0 %
    

  

 

  

Automobile business:

                          

Japan

   ¥ 631,247    19.3 %   ¥ 758,141    24.5 %

North America

     2,015,790    61.7       1,862,010    60.2  

Europe

     252,169    7.7       204,265    6.6  

Asia

     263,093    8.1       177,870    5.8  

Others

     104,959    3.2       89,227    2.9  
    

  

 

  

Total

   ¥ 3,267,258    100.0 %   ¥ 3,091,513    100.0 %
    

  

 

  

Financial Services:

                          

Japan

   ¥ 10,303    8.2 %   ¥ 11,273    9.6 %

North America

     111,193    88.1       103,240    88.2  

Europe

     3,561    2.8       2,589    2.2  

Asia

     358    0.3       14    0.0  

Others

     821    0.6       —      —    
    

  

 

  

Total

   ¥ 126,236    100.0 %   ¥ 117,116    100.0 %
    

  

 

  

Power products & other businesses:

                          

Japan

   ¥ 57,579    36.7 %   ¥ 55,657    37.8 %

North America

     52,008    33.2       51,035    34.7  

Europe

     25,724    16.4       23,691    16.1  

Asia

     14,272    9.1       10,897    7.4  

Others

     7,283    4.6       5,868    4.0  
    

  

 

  

Total

   ¥ 156,866    100.0 %   ¥ 147,148    100.0 %
    

  

 

  

Total:

                          

Japan

   ¥ 750,032    18.6 %   ¥ 877,046    22.8 %

North America

     2,309,525    57.4       2,180,539    56.6  

Europe

     379,253    9.4       317,766    8.2  

Asia

     397,604    9.9       296,037    7.7  

Others

     189,017    4.7       182,223    12.4  
    

  

 

  

Total

   ¥ 4,025,431    100.0 %   ¥ 3,853,611    100.0 %
    

  

 

  

 

Explanatory notes:

 

1.       The geographical breakdown of net sales is based on the location of affiliated and unaffiliated customers.

   

2.       Net sales of power products & other businesses include revenue from sales of power products and related parts, leisure businesses, trading and finance subsidiaries.

 

2


Table of Contents

BUSINESS SEGMENT INFORMATION

 

For the six months ended September 30, 2003 and 2002 and the year ended March 31, 2003

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


 

Net Sales and Other Operating Revenue


   Six months
ended
September 30,
2003


    %
change


    Six months
ended
September 30,
2002


   

Fiscal year
ended

March 31,
2003


 

Motorcycle business:

                              

Sales to unaffiliated customers

   ¥ 475,071     (4.6 )%   ¥ 497,834     ¥ 978,095  

Automobile business:

                              

Sales to unaffiliated customers

     3,267,258     5.7       3,091,513       6,440,094  

Financial services:

                              

Sales to unaffiliated customers

     126,236     7.8       117,116       237,958  

Intersegment sales

     1,311     (24.5 )     1,737       3,037  
    


       


 


Total

     127,547     7.3       118,853       240,995  
    


       


 


Other businesses:

                              

Sales to unaffiliated customers

     156,866     6.6       147,148       315,352  

Intersegment sales

     5,707     3.9       5,495       10,971  
    


       


 


Total

     162,573     6.5       152,643       326,323  
    


       


 


Eliminations

     (7,018 )   —         (7,232 )     (14,008 )
    


       


 


Consolidated

   ¥ 4,025,431     4.5 %   ¥ 3,853,611     ¥ 7,971,499  
    


 

 


 


For the six months ended September 30, 2003 and 2002 and the year ended March 31, 2003

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


 

Operating Income


   Six months
ended
September 30,
2003


    %
change


    Six months
ended
September 30,
2002


   

Fiscal year
ended

March 31,
2003


 

Motorcycle business

   ¥ 8,203     (78.0 )%   ¥ 37,326     ¥ 58,766  

Automobile business

     248,832     1.0       246,446       560,103  

Financial services

     40,756     21.6       33,520       61,989  

Other businesses

     4,080     (38.0 )     6,577       8,591  
    


       


 


Consolidated

   ¥ 301,871     (6.8 )%   ¥ 323,869     ¥ 689,449  
    


 

 


 


GEOGRAPHICAL SEGMENT INFORMATION

                              

For the six months ended September 30, 2003 and 2002 and the year ended March 31, 2003

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


 

Operating Income


   Six months
ended
September 30,
2003


    %
change


    Six months
ended
September 30,
2002


   

Fiscal year
ended

March 31,
2003


 

Japan

   ¥ 77,403     (15.1 )%   ¥ 91,149     ¥ 202,329  

North America

     169,368     (10.7 )     189,610       398,708  

Europe

     17,349     940.1       1,668       14,185  

Asia

     24,138     24.9       19,320       37,809  

Others

     11,299     (18.0 )     13,779       23,211  

Eliminations

     2,314             8,343       13,207  
    


       


 


Consolidated

   ¥ 301,871     (6.8 )%   ¥ 323,869     ¥ 689,449  
    


 

 


 


 

* The geographical segmentation is based on the location where sales originated.

 

* In addition to the four conventional regions, Japan, North America, Europe and Others, Asia is newly segmented from the first half.

 

3


Table of Contents

FIVE-YEAR FINANCIAL RESULTS

 

For the years ended March 31, 2000, 2001, 2002 and 2003

and the six months ended September 30, 2003

Honda Motor Co., Ltd. and Subsidiaries


   Year ended
March 31,
2000


   Year ended
March 31,
2001


   Year ended
March 31,
2002


   Year ended
March 31,
2003


   Six months
ended
September 30,
2003


Net sales and other operating revenue (¥ millions)

   ¥ 6,098,840    ¥ 6,463,830    ¥ 7,362,438    ¥ 7,971,499    ¥ 4,025,431

Operating income (¥ millions)

     426,230      406,960      639,296      689,449      301,871

Income before income taxes (¥ millions)

     416,063      384,976      551,342      609,755      331,881

Net income (¥ millions)

     262,415      232,241      362,707      426,662      239,178

Net income per common share, basic (¥)

     269.31      238.34      372.23      439.43      249.34

Net income per common share, diluted (¥)

     269.31      238.34      372.23      439.43      249.34

Total assets (¥ millions)

     4,898,428      5,667,409      6,940,795      7,681,291      7,991,787

Total stockholders’ equity (¥ millions)

     1,930,373      2,230,291      2,573,941      2,629,720      2,743,981

Stockholders’ equity per common share (¥)

     1,981.07      2,288.87      2,641.55      2,734.69      2,871.68

Research and development (¥ millions)

     334,036      352,829      395,176      436,863      218,872

Capital expenditures (¥ millions)

     222,891      285,687      303,424      316,991      128,033

Depreciation (¥ millions)

     172,139      170,342      194,944      220,874      103,592
    

  

  

  

  

 

 

4


Table of Contents

CONSOLIDATED STATEMENTS OF INCOME

 

For the six months ended September 30, 2003 and 2002

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


 
     Six months
ended
September 30,
2003


    Six months
ended
September 30,
2002


 

Net sales and other operating revenue

   ¥ 4,025,431     ¥ 3,853,611  

Operating costs and expenses:

                

Cost of sales

     2,784,909       2,614,864  

Selling, general and administrative

     719,779       701,855  

Research and development

     218,872       213,023  
    


 


       3,723,560       3,529,742  
    


 


Operating income

     301,871       323,869  

Other income:

                

Interest

     5,297       4,093  

Other

     39,412       5,541  
    


 


       44,709       9,634  
    


 


Other expenses:

                

Interest

     5,527       6,377  

Other

     9,172       53,425  
    


 


       14,699       59,802  
    


 


Income before income taxes

     331,881       273,701  

Income taxes

     128,702       107,184  
    


 


Income before equity in income of affiliates

     203,179       166,517  

Equity in income of affiliates

     35,999       28,262  
    


 


Net income

     239,178       194,779  

Retained earnings:

                

Balance at beginning of period

     3,161,664       2,765,600  

Cash dividends paid

     (15,386 )     (14,616 )

Transfer to legal reserves

     (2,944 )     (43 )
    


 


Balance at end of period

   ¥ 3,382,512     ¥ 2,945,720  
    


 


     Yen

 
     Six months
ended
September 30,
2002


    Six months
ended
September 30,
2001


 

Basis net income per common share

   ¥ 249.34     ¥ 199.98  

Basis net income per American share

     124.67       99.99  
    


 


 

5


Table of Contents

CONSOLIDATED BALANCE SHEETS

 

March 31, 2003 and September 30, 2003 and 2002

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


Assets


   September 30,
2003


   March 31,
2003


   September 30,
2002


     (Unaudited)    (Audited)    (Unaudited)

Current assets:

                    

Cash and cash equivalents

   ¥ 624,842    ¥ 547,404    ¥ 518,408

Trade accounts and notes receivable

     320,461      444,498      332,185

Finance subsidiaries–receivables, net

     1,081,896      1,097,541      980,852

Inventories

     784,796      751,980      670,268

Deferred income taxes

     200,134      202,376      205,290

Other current assets

     311,660      248,561      227,826
    

  

  

Total current assets

     3,323,789      3,292,360      2,934,829
    

  

  

Finance subsidiaries–receivables, net

     2,416,333      2,230,020      2,024,071

Investments and advances

     482,839      412,971      395,138

Property, plant and equipment, at cost:

                    

Land

     347,596      342,991      336,708

Buildings

     932,332      942,747      912,139

Machinery and equipment

     1,986,273      2,023,724      2,018,426

Construction in progress

     93,159      72,112      96,542
    

  

  

       3,359,360      3,381,574      3,363,815

Less accumulated depreciation

     1,970,848      1,987,231      1,987,880
    

  

  

Net property, plant and equipment

     1,388,512      1,394,343      1,375,935
    

  

  

Other assets

     380,314      351,597      241,612
    

  

  

Total assets

   ¥ 7,991,787    ¥ 7,681,291    ¥ 6,971,585
    

  

  

 

6


Table of Contents
    

Yen

(millions)


 

Liabilities and Stockholders’ Equity


   September 30,
2003


    March 31,
2003


    September 30,
2002


 
     (Unaudited)     (Audited)     (Unaudited)  

Current liabilities:

                        

Short-term debt

   ¥ 803,532     ¥ 877,954     ¥ 937,819  

Current portion of long-term debt

     405,533       304,342       142,231  

Trade payables

     766,238       830,671       775,584  

Accrued expenses

     789,475       777,492       719,596  

Income taxes payable

     65,439       64,179       66,269  

Other current liabilities

     324,475       267,752       232,643  
    


 


 


Total current liabilities

     3,154,692       3,122,390       2,874,142  
    


 


 


Long-term debt

     1,283,072       1,140,182       953,833  

Other liabilities

     810,042       788,999       550,260  
    


 


 


Total liabilities

     5,247,806       5,051,571       4,378,235  
    


 


 


Stockholders’ equity:

                        

Common stock

     86,067       86,067       86,067  

Capital surplus

     172,719       172,529       172,529  

Legal reserves

     32,335       29,391       29,012  

Retained earnings

     3,382,512       3,161,664       2,945,720  

Adjustments from foreign currency translation

     (567,690 )     (469,472 )     (455,149 )

Net unrealized gains on marketable equity securities

     31,544       14,820       12,611  

Minimum pension liabilities adjustments

     (308,384 )     (308,513 )     (187,824 )

Accumulated other comprehensive income (loss)

     (844,530 )     (763,165 )     (630,362 )

Treasury stock

     (85,122 )     (56,766 )     (9,616 )
    


 


 


Total stockholders’ equity

     2,743,981       2,629,720       2,593,350  
    


 


 


Total liabilities and stockholders’ equity

   ¥ 7,991,787     ¥ 7,681,291     ¥ 6,971,585  
    


 


 


 

7


Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the six months ended September 30, 2003 and 2002

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


 
     Six months
ended
September 30,
2003


    Six months
ended
September 30,
2002


 

Cash flows from operating activities:

                

Net income

   ¥ 239,178     ¥ 194,779  

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

                

Depreciation

     103,592       102,105  

Deferred income taxes

     66,145       (8,713 )

Equity in income of affiliates

     (35,999 )     (28,262 )

Loss on fair value adjustment of derivative instrument (profit)

     (44,410 )     43,462  

Decrease (increase) in assets:

                

Trade accounts and notes receivable

     117,169       97,858  

Inventories

     (50,251 )     (62,948 )

Increase (decrease) in trade payables

     (36,811 )     (26,445 )

Other, net

     (56,008 )     60,393  
    


 


Net cash provided by operating activities

     302,605       372,229  

Cash flows from investing activities:

                

Decrease (increase) in investments and advances

     21,109       11,785  

Capital expenditures

     (128,033 )     (133,290 )

Proceeds from sales of property, plant and equipment

     7,609       5,517  

Decrease (increase) in finance subsidiaries–receivables

     (425,584 )     (417,561 )
    


 


Net cash used in investing activities

     (524,899 )     (533,549 )

Cash flows from financing activities:

                

Increase (decrease) in short-term debt

     19,679       (4,164 )

Proceeds from long-term debt

     412,544       349,893  

Repayment of long-term debt

     (76,343 )     (229,568 )

Acquisition of treasury stock

     (28,769 )     (9,567 )

Cash dividends paid

     (15,386 )     (14,616 )

Increase (decrease) in commercial paper classified as long-term debt

     354       2,069  
    


 


Net cash provided by (used in) financing activities

     312,079       94,047  

Effect of exchange rate changes on cash and cash equivalents

     (12,347 )     (23,760 )
    


 


Net change in cash and cash equivalents

     77,438       (91,033 )

Cash and cash equivalents at beginning of year

     547,404       609,441  
    


 


Cash and cash equivalents at end of year

   ¥ 624,842     ¥ 518,408  
    


 


 

8


Table of Contents

EXPLANATORY NOTES

 

Honda Motor Co., Ltd. and Subsidiaries

 

1. The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States because the Company has issued American Depositary Receipts listed on the New York Stock Exchange and files reports with the U.S. Securities and Exchange Commission. All segment information, however, is prepared in accordance with a Ministerial Ordinance under the Securities and Exchange Law of Japan.

 

2. The average exchange rates for the fiscal second quarter ended September 30, 2003 were ¥117.60=U.S.$1 and ¥132.26=euro1. The average exchange rates for the corresponding period last year were ¥119.24=U.S.$1 and ¥117.32=euro1.

 

3. United States dollar amounts have been translated from yen solely for the convenience of the reader at the rate of ¥111.25=U.S.$1, the mean of the telegraphic transfer selling exchange rate and the telegraphic transfer buying exchange rate prevailing on the Tokyo foreign exchange market on September 30, 2003.

 

4. The Company’s Common Stock-to-ADR exchange rate was changed from two shares of Common Stock to one ADR to one share of Common Stock to two ADRs, effective January 10, 2002.

 

5. The Company has adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income.” The following table represents components of the Company’s comprehensive income. Other comprehensive income (loss) consists of changes in adjustments from foreign currency translation, net unrealized gains on marketable equity securities and minimum pension liabilities adjustment.

 

    

Yen

(millions)


 
    

Six months

ended
September 30, 2003


   

Six months

ended
September 30, 2002


 

Net income

   ¥ 239,178     ¥ 194,779  

Other comprehensive income (loss)

     (81,365 )     (151,187 )
    


 


Comprehensive income (loss)

   ¥ 157,813     ¥ 43,592  
    


 


 

6. Certain reclassifications have been made to the prior year’s consolidated financial statements to conform those financial statements to the presentation used for the fiscal second quarter ended September 30, 2003.

 

7. The number of treasury stocks has been excluded from the calculation for basic net income per common share.

 

9


Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Divided into Non-financial Services Businesses and Finance Subsidiaries (Unaudited)

 

For the six months ended September 30, 2003

Honda Motor Co., Ltd. and Subsidiaries

  

Yen

(millions)


 
    

Six months ended

September 30, 2003


 
     Non-financial
services businesses


    Finance
subsidiaries


 

Cash flows from operating activities:

                

Net income

   ¥ 215,830     ¥ 23,373  

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

                

Depreciation

     103,397       195  

Deferred income taxes

     23,620       42,525  

Equity in income of affiliates

     (35,947 )     —    

Loss on fair value adjustment of derivative instrument (profit)

     (42,848 )     (1,562 )

Decrease (increase) in trade accounts and notes receivable

     112,349       —    

Decrease (increase) in inventories

     (50,251 )     —    

Increase (decrease) in trade payables

     (37,392 )     —    

Other, net

     (35,087 )     (16,345 )
    


 


Net cash provided by operating activities

     253,671       48,186  

Cash flows from investing activities:

                

Decrease (increase) in investments and advances*

     33,460       19  

Capital expenditures

     (127,870 )     (163 )

Proceeds from sales of property, plant and equipment

     5,014       2,595  

Decrease (increase) in finance subsidiaries—receivables

     —         (430,018 )
    


 


Net cash used in investing activities

     (89,396 )     (427,567 )
    


 


Free cash flow (cash flows from operating and investing activities)

     164,275       (379,381 )

Free cash flow of non-financial services businesses excluding the increase in loans (amounting to ¥81,986 million) to finance subsidiaries (Note)

     149,966       —    

Cash flows from financing activities:

                

Increase (decrease) in short-term debt*

     (22,570 )     26,099  

Proceeds from long-term debt*

     5,126       414,720  

Repayment of long-term debt*

     (5,684 )     (70,834 )

Proceeds from issuance of common stock

     —         1,860  

Acquisition of treasury stock

     (28,769 )     —    

Cash dividends paid

     (15,411 )     —    

Increase (decrease) in commercial paper classified as long-term debt

     —         354  
    


 


Net cash provided by financing activities

     (67,308 )     372,199  
    


 


Effect of exchange rate changes on cash and cash equivalents

     (11,582 )     (765 )
    


 


Net change in cash and cash equivalents

     85,385       (7,947 )

Cash and cash equivalents at beginning of year

     530,343       17,061  
    


 


Cash and cash equivalents at end of year

   ¥ 615,728     ¥ 9,114  
    


 


 

Notes:   Non-financial services businesses loans to finance subsidiaries. These cash flows were included in the items of “Other, net” of non-financial services businesses, and “Increase (decrease) in short-term debt”, and “Repayment of long-term debt” of finance subsidiaries (marked by *).

 

       Free cash flow of non-financial services businesses excluding the increase in lending to finance subsidiaries are stated for readers’ information.

 

10


Table of Contents

 

UNCONSOLIDATED FINANCIAL SECTION

 


 

11


Table of Contents

UNCONSOLIDATED BALANCE SHEETS

 

March 31, 2003 and September 30, 2003 and 2002

Honda Motor Co., Ltd.

  

Yen

(millions)


 

Assets


   September 30,
2003


    March 31,
2003


    September 30,
2002


 

Current assets

   ¥ 843,731     ¥ 829,444     ¥ 783,642  

Cash and bank deposits

     313,546       236,336       165,257  

Notes/accounts receivable

     233,424       281,278       235,441  

Inventories

     130,360       129,999       119,092  

Other

     169,548       185,533       266,744  

Allowance for doubtful accounts

     (3,149 )     (3,704 )     (2,895 )

Fixed assets

     1,274,329       1,231,887       1,217,210  

Tangible fixed assets

     598,854       593,607       583,016  

Buildings

     183,176       174,581       168,358  

Machinery and equipment

     83,428       87,484       93,153  

Land

     252,944       249,258       242,710  

Other

     79,304       82,283       78,794  

Intangible fixed assets

     6,155       5,688       3,467  

Investments and others

     669,319       632,592       630,727  

Investment securities

     501,218       466,527       471,267  

Other investments

     187,773       185,876       178,911  

Allowance for doubtful accounts

     (19,673 )     (19,812 )     (19,451 )
    


 


 


Total assets

   ¥ 2,118,061     ¥ 2,061,331     ¥ 2,000,853  
    


 


 


 

Explanatory note: The amounts described above disregard figures of less than one million yen.

 

12


Table of Contents
    

Yen

(millions)


 

Liabilities and Stockholders’ Equity


   September 30,
2003


    March 31,
2003


    September 30,
2002


 

Current liabilities

   ¥ 481,579     ¥ 525,315     ¥ 500,231  

Notes/accounts payable

     274,306       280,392       293,055  

Short-term bank loans

     2,554       3,352       626  

Accrued expenses

     21,736       36,478       31,655  

Accrued product warranty

     47,666       47,978       43,078  

Accrued employees’ bonuses

     36,046       41,132       31,440  

Other

     99,269       115,982       100,376  

Fixed liabilities

     131,066       114,761       91,079  

Long-term bank loans

     798       883       949  

Reserve for product warranties

     37,172       38,313       30,444  

Accrued employees’ retirement benefits

     83,257       65,176       49,474  

Other

     9,838       10,388       10,211  
    


 


 


Total liabilities

     612,646       640,077       591,311  
    


 


 


Common stock

     86,067       86,067       86,067  

Capital surplus

     170,504       168,912       168,912  

Retained earnings (including legal reserves)

     1,295,782       1,201,333       1,138,572  

Unrealized gains on securities available for sale

     38,183       21,707       25,606  

Treasury stock

     (85,122 )     (56,766 )     (9,616 )
    


 


 


Total stockholders’ equity

     1,505,415       1,421,254       1,409,541  
    


 


 


Total liabilities and stockholders’ equity

   ¥ 2,118,061     ¥ 2,061,331     ¥ 2,000,853  
    


 


 


 

Note:   Reclassifications on stockholders’ equity have been made to the prior periods-end to conform to the Amended Regulations Concerning the Terms, Forms and Methods of Preparation of Semi-annual Financial Statements, Etc.

 

13


Table of Contents

UNCONSOLIDATED STATEMENTS OF INCOME

 

For the six months ended September 30, 2003 and 2002

and forecasts for fiscal year ending March 31, 2004

Honda Motor Co., Ltd.

  

Yen

(millions)


                 FORECASTS*

   Six months
ended
September 30,
2003


    Six months
ended
September 30,
2002


   

Fiscal year
ending

March 31,
2004


Ordinary profit and loss:

                      

Operating profit and loss:

                      

Operating revenue:

                      

Net sales

   ¥ 1,580,708     ¥ 1,625,558     ¥ 3,310,000

Operating expenses:

                      

Cost of sales

     1,036,615       1,108,036        

Selling, general and administrative expenses

     453,792       451,359        
    


 


     

Operating profit

     90,299       66,162        
    


 


     

Non-operating profit

     70,586       62,837        

Non-operating expenses

     8,753       8,238        
    


 


     

Ordinary profit

     152,131       120,762       278,000
    


 


     

Extraordinary profit

     1,987       1,474        

Extraordinary loss

     4,310       4,108        
    


 


     

Income before income taxes

     149,809       118,128        
    


 


     

Income taxes:

                      

Current

     46,148       51,883        

Deferred

     (6,654 )     (25,469 )      
    


 


     

Net income

     110,315       91,714       202,000
    


 


     

Unappropriated retained earnings at beginning of period

     33,918       32,366        
    


 


     

Unappropriated retained earnings at end of period

   ¥ 144,233     ¥ 124,081        
    


 


     

 

Explanatory note: The amounts described above disregard figures of less than one million yen.

 

* These forecasts are based on the assumption that the exchange rates for the yen to the U.S. dollar and the euro for the current fiscal year will average ¥115 and ¥127, respectively. This announcement contains forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934. Honda’s actual results could materially differ from those contained in these forward-looking statements as a result of numerous factors outside of Honda’s control. Such factors include general economic conditions in Honda’s principal markets, and foreign exchange rates between the Japanese yen and other major currencies, as well as other factors detailed from time to time in Honda’s reports filed with the U.S. Securities and Exchange Commission.

 

14


Table of Contents

COMMON STOCK INFORMATION

 

As of September 30, 2003

Honda Motor Co., Ltd.


         

Number of shares authorized to be issued

   3,600,000,000 shares

Number of shares issued and outstanding

   974,414,215 shares

Number of stockholders

   56,386     

Share prices (closing prices on the Tokyo Stock Exchange)

   High    ¥5,510 (September 2003)
     Low    ¥3,570 (April 2003)
     Close    ¥4,470 (September 30, 2003)

 

BREAKDOWN OF STOCKHOLDERS

 

As of September 30, 2003

Honda Motor Co., Ltd.


   Number of
stockholders


   Number of
shares held
(thousands)


Individuals and others

   54,419    64,029

Government and municipal corporations

   1    4

Financial institutions

   266    475,834

Securities companies

   41    3,500

Domestic companies and others

   715    98,324

Foreign institutions and individuals

   943    313,836

Treasury stock

   1    18,884
    
  

Total

   56,386    974,414
    
  

 

Explanatory notes:   1.   The number of shares described above disregard figures of less than one thousand shares.
    2.   Domestic companies and others include shares of the Japan Securities Depository Center.

 

PRINCIPAL STOCKHOLDERS

 

As of September 30, 2003

Honda Motor Co., Ltd.


   Number of
shares held
(thousands)


   %

Japan Trustee Services Bank, Ltd.

   48,958    5.0

State Street Bank and Trust Company, N.A.

   41,768    4.3

The Master Trust Bank of Japan, Ltd.

   41,360    4.2

The Bank of Tokyo-Mitsubishi, Ltd.

   40,555    4.2

The Tokio Marine & Fire Insurance Co., Ltd.

   37,459    3.8

The Chase Manhattan Bank, N.A., London

   30,442    3.1

Meiji Life Insurance Company

   28,444    2.9

UFJ Bank, Limited

   25,929    2.7

Sompo Japan Insurance Inc.

   23,830    2.4

The Mitsubishi Trust & Banking Corp.

   21,769    2.2
    
  

 

Explanatory notes:   1.   The number of shares described above disregard figures of less than one thousand shares.
    2.   Number of shares of the Company’s common stock held by Japan Trustee Services Bank, Ltd., The Master Trust Bank of Japan, Ltd., are owned exclusively in connection with their trust businesses.
    3.   State Street Bank and Trust Company, N.A. and The Chase Manhattan Bank, N.A., London conduct custody services of the Company’s common stock mainly owned by institutional investors in Europe and the United States and are also nominees of shares of the Company’s common stock held by such institutional investors.

 

15


Table of Contents

FIVE-YEAR FINANCIAL RESULTS (UNCONSOLIDATED)

 

For the years ended March 31, 2000, 2001, 2002 and 2003

and the six months ended September 30, 2003

Honda Motor Co., Ltd.


   Year ended
March 31,
2000


    Year ended
March 31,
2001


    Year ended
March 31,
2002


    Year ended
March 31,
2003


    Six months
ended
September 30,
2003


 

Net sales (¥ millions)

   ¥ 2,919,840     ¥ 3,042,022     ¥ 3,211,186     ¥ 3,322,719     ¥ 1,580,708  

Ordinary profit (¥ millions)

     201,440       137,374       218,987       242,680       152,131  

Net income (¥ millions)

     135,322       11,326       134,925       170,035       110,315  

Net income per common share (¥)

     138.88       11.62       138.47       174.63       115.00  

Total assets (¥ millions)

     1,758,588       1,765,814       1,937,805       2,061,331       2,118,061  

Stockholders’ equity (¥ millions)

     1,212,899       1,236,686       1,342,648       1,421,254       1,505,415  

Stockholders’ equity per common share (¥)

     1,244.75       1,269.16       1,377.92       1,477.49       1,575.48  

Common stock (¥ millions)

     86,067       86,067       86,067       86,067       86,067  

Stockholders’ equity ratio (%)

     69.0 %     70.0 %     69.3 %     68.9 %     71.1 %
    


 


 


 


 


 

Explanatory note: The amounts over one million yen described above disregard figures of less than one million yen.

 

16


Table of Contents

BOARD OF DIRECTORS

 

As of September 30, 2003

   
Chairman and Representative Director   Directors

Yoshihide Munekuni

 

Satoru Kishi

   

Mikio Yoshimi

President and Representative Director  

Masaaki Kato

Takeo Fukui

 

Shigeru Takagi

   

Masahiro Yoshimura

Executive Vice President and Representative Director  

Hiroshi Kuroda

Koichi Amemiya

 

Akio Hamada

   

Teruo Kowashi

Senior Managing and Representative Directors  

Seiichi Moriguchi

Michiyoshi Hagino

 

Tetsuo Iwamura

Minoru Harada

 

Takashi Yamamoto

Motoatsu Shiraishi

 

Masaru Takabayashi

Satoshi Aoki

 

Tatsuhiro Oyama

Hiroshi Okubo

 

Suguru Kanazawa

   

Manabu Nishimae

Managing Directors  

Fumihiko Ike

Atsuyoshi Hyogo

 

Masaya Yamashita

Satoshi Dobashi

 

Hiroshi Kobayashi

Satoshi Toshida

   

Koki Hirashima

 

Director and Advisor

Koichi Kondo

 

Hiroyuki Yoshino

Yasuo Ikenoya

   

Toru Onda

 

Corporate Auditors

Akira Takano

 

Kunihiro Chujo*

Takanobu Ito

 

Koji Miyajima*

   

Koukei Higuchi

   

Kuniyasu Yamada

   

* Full-time service auditor

 

17


Table of Contents

LOGO

 


Printed in Japan

 


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Consolidated Financial Statements

 

September 30, 2003


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Consolidated Balance Sheets

 

September 30, 2002 and 2003 and March 31, 2003

 

     Yen (millions)

 
     September
30, 2002


    September
30, 2003


   

March

31, 2003


 
     unaudited     unaudited     audited  
Assets                         

Current assets:

                        

Cash and cash equivalents

   ¥ 518,408     ¥ 624,842     ¥ 547,404  

Trade accounts and notes receivable, net of allowance for doubtful accounts of ¥7,310 million at September 30, 2002, ¥7,785 million at September 30, 2003 and ¥8,343 million at March 31, 2003

     332,185       320,461       444,498  

Finance subsidiaries-receivables, net (note 2)

     980,852       1,081,896       1,097,541  

Inventories (note 3)

     670,268       784,796       751,980  

Deferred income taxes

     205,290       200,134       202,376  

Other current assets

     227,826       311,660       248,561  
    


 


 


Total current assets

     2,934,829       3,323,789       3,292,360  
    


 


 


Finance subsidiaries-receivables, net (note 2)

     2,024,071       2,416,333       2,230,020  

Investments and advances:

                        

Investments in and advances to affiliates

     249,877       293,001       272,753  

Other, including marketable equity securities (note 4)

     145,261       189,838       140,218  
    


 


 


Total investments and advances

     395,138       482,839       412,971  
    


 


 


Property, plant and equipment, at cost (note 5):

                        

Land

     336,708       347,596       342,991  

Buildings

     912,139       932,332       942,747  

Machinery and equipment

     2,018,426       1,986,273       2,023,724  

Construction in progress

     96,542       93,159       72,112  
    


 


 


       3,363,815       3,359,360       3,381,574  

Less accumulated depreciation

     1,987,880       1,970,848       1,987,231  
    


 


 


Net property, plant and equipment

     1,375,935       1,388,512       1,394,343  
    


 


 


Other assets

     241,612       380,314       351,597  
    


 


 


Total assets

   ¥ 6,971,585     ¥ 7,991,787     ¥ 7,681,291  
    


 


 


Liabilities and Stockholders’ Equity                         

Current liabilities:

                        

Short-term debt (note 5)

   ¥ 937,819     ¥ 803,532     ¥ 877,954  

Current portion of long-term debt (note 5)

     142,231       405,533       304,342  

Trade payables:

                        

Notes

     24,736       26,570       26,076  

Accounts

     750,848       739,668       804,595  

Accrued expenses

     719,596       789,475       777,492  

Income taxes payable

     66,269       65,439       64,179  

Other current liabilities

     232,643       324,475       267,752  
    


 


 


Total current liabilities

     2,874,142       3,154,692       3,122,390  
    


 


 


Long-term debt (note 5)

     953,833       1,283,072       1,140,182  

Other liabilities (note 6)

     550,260       810,042       788,999  
    


 


 


Total liabilities

     4,378,235       5,247,806       5,051,571  
    


 


 


Stockholders’ equity:

                        

Common stock, authorized 3,600,000,000 shares ; issued 974,414,215 shares at September 30, 2002 and 2003 and March 31, 2003

     86,067       86,067       86,067  

Capital surplus

     172,529       172,719       172,529  

Legal reserves

     29,012       32,335       29,391  

Retained earnings

     2,945,720       3,382,512       3,161,664  

Accumulated other comprehensive income (loss) (notes 4 and 8)

     (630,362 )     (844,530 )     (763,165 )

Treasury stock, at cost 1,932,337 shares at September 30, 2002, 18,884,208 shares at September 30, 2003 and 12,797,465 shares at March 31, 2003

     (9,616 )     (85,122 )     (56,766 )
    


 


 


Total stockholders’ equity

     2,593,350       2,743,981       2,629,720  

Commitments and contingent liabilities (notes 11 and 12)

                        
    


 


 


Total liabilities and stockholders’ equity

   ¥ 6,971,585     ¥ 7,991,787     ¥ 7,681,291  
    


 


 


 

See accompanying notes to consolidated financial statements.

 


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Consolidated Statements of Income

 

For the six months ended September 30, 2002 and 2003 and the year ended March 31, 2003

 

     Yen (millions)

    

September

30, 2002


   

September

30, 2003


  

March

31, 2003


     unaudited     unaudited    audited

Net sales and other operating revenue

   ¥ 3,853,611     ¥ 4,025,431    ¥ 7,971,499

Operating costs and expenses:

                     

Cost of sales

     2,614,864       2,784,909      5,410,192

Selling, general and administrative

     701,855       719,779      1,434,995

Research and development

     213,023       218,872      436,863
    


 

  

       3,529,742       3,723,560      7,282,050
    


 

  

Operating income

     323,869       301,871      689,449

Other income (note 1 (q)):

                     

Interest

     4,093       5,297      7,445

Other

     5,541       39,412      5,741
    


 

  

       9,634       44,709      13,186
    


 

  

Other expenses (note 1(q)):

                     

Interest

     6,377       5,527      12,207

Other

     53,425       9,172      80,673
    


 

  

       59,802       14,699      92,880
    


 

  

Income before income taxes and equity in income of affiliates

     273,701       331,881      609,755

Income taxes :

                     

Current

     115,897       62,557      176,632

Deferred

     (8,713 )     66,145      68,433
    


 

  

       107,184       128,702      245,065
    


 

  

Income before equity in income of affiliates

     166,517       203,179      364,690

Equity in income of affiliates

     28,262       35,999      61,972
    


 

  

Net income

   ¥ 194,779     ¥ 239,178    ¥ 426,662
    


 

  

     Yen

     September
30, 2002


    September
30, 2003


  

March

31, 2003


Basic net income per common share (note 1(o)):

                     
     ¥ 199.98     ¥ 249.34    ¥ 439.43
    


 

  

 

See accompanying notes to consolidated financial statements.

 


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Consolidated Statements of Stockholders’ Equity

 

For the six months ended September 30, 2002 and 2003 and the year ended March 31, 2003

 

     Yen (millions)

 
    

September

30, 2002


   

September

30, 2003


   

March

31, 2003


 
     unaudited     unaudited     audited  

Common stock:

                        

Balance at beginning of the period

   ¥ 86,067     ¥ 86,067     ¥ 86,067  
    


 


 


Balance at end of the period

     86,067       86,067       86,067  
    


 


 


Capital surplus:

                        

Balance at beginning of the period

     172,529       172,529       172,529  

Reissuance of treasury stock

     —         190       —    
    


 


 


Balance at end of the period

     172,529       172,719       172,529  
    


 


 


Legal reserves:

                        

Balance at beginning of the period

     28,969       29,391       28,969  

Transfer from retained earnings

     43       2,944       422  
    


 


 


Balance at end of the period

     29,012       32,335       29,391  
    


 


 


Retained earnings:

                        

Balance at beginning of the period

     2,765,600       3,161,664       2,765,600  

Net income for the period

     194,779       239,178       426,662  

Cash dividends

     (14,616 )     (15,386 )     (30,176 )

Transfer to legal reserves

     (43 )     (2,944 )     (422 )
    


 


 


Balance at end of the period

     2,945,720       3,382,512       3,161,664  
    


 


 


Accumulated other comprehensive income (loss):

                        

(notes 4 and 8)

                        

Balance at beginning of the period

     (479,175 )     (763,165 )     (479,175 )

Other comprehensive income (loss) for the period, net of tax

     (151,187 )     (81,365 )     (283,990 )
    


 


 


Balance at end of the period

     (630,362 )     (844,530 )     (763,165 )
    


 


 


Treasury stock:

                        

Balance at beginning of the period

     (49 )     (56,766 )     (49 )

Purchase of treasury stock

     (9,567 )     (28,769 )     (56,717 )

Reissuance of treasury stock

     —         413       —    
    


 


 


Balance at end of the period

     (9,616 )     (85,122 )     (56,766 )

Total stockholders' equity

   ¥ 2,593,350     ¥ 2,743,981     ¥ 2,629,720  
    


 


 


Disclosure of comprehensive income:

                        

Net income for the period

   ¥ 194,779     ¥ 239,178     ¥ 426,662  

Other comprehensive income (loss) for the period, net of tax (notes 4 and 8)

     (151,187 )     (81,365 )     (283,990 )
    


 


 


Total comprehensive income for the period

   ¥ 43,592     ¥ 157,813     ¥ 142,672  
    


 


 


 

See accompanying notes to consolidated financial statements.

 


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Consolidated Statements of Cash Flows

 

For the six months ended September 30, 2002 and 2003 and the year ended March 31, 2003

 

     Yen (millions)

 
    

September

30, 2002


   

September

30, 2003


   

March

31, 2003


 
     unaudited     unaudited     audited  

Cash flows from operating activities (note 7):

                        

Net income

   ¥ 194,779     ¥ 239,178     ¥ 426,662  

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

                        

Depreciation

     102,105       103,592       220,874  

Deferred income taxes

     (8,713 )     66,145       68,433  

Equity in income of affiliates

     (28,262 )     (35,999 )     (61,972 )

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

     14,443       23,112       39,377  

Loss (gain) on derivative instruments and related others

     43,462       (44,410 )     36,983  

Decrease (increase) in assets:

                        

Trade accounts and notes receivable

     97,858       117,169       (16,842 )

Inventories

     (62,948 )     (50,251 )     (146,574 )

Other current assets

     (82,642 )     (122,639 )     (104,583 )

Other assets

     (11,079 )     (16,496 )     (44,820 )

Increase (decrease) in liabilities:

                        

Trade payables

     (26,445 )     (36,811 )     28,675  

Accrued expenses

     82,292       27,603       130,615  

Income taxes payable

     6,315       2,231       3,964  

Other current liabilities

     24,093       23,783       17,708  

Other liabilities

     4,898       14,047       30,412  

Other, net

     22,073       (7,649 )     59,215  
    


 


 


Net cash provided by operating activities

     372,229       302,605       688,127  

Cash flows from investing activities:

                        

Decrease in investments and advances

     11,785       21,109       20,737  

Capital expenditures

     (133,290 )     (128,033 )     (316,991 )

Proceeds from sales of property, plant and equipment

     5,517       7,609       16,438  

Acquisitions of finance subsidiaries-receivables

     (1,735,474 )     (1,869,625 )     (3,265,076 )

Collections of finance subsidiaries-receivables

     927,562       972,602       1,710,833  

Proceeds from sales of finance subsidiaries-receivables

     390,351       471,439       760,500  
    


 


 


Net cash used in investing activities

     (533,549 )     (524,899 )     (1,073,559 )

Cash flows from financing activities :

                        

Increase (decrease) in short-term debt

     (4,164 )     19,679       (47,959 )

Proceeds from long-term debt

     349,893       412,544       775,987  

Repayment of long-term debt

     (229,568 )     (76,343 )     (292,063 )

Cash dividends paid

     (14,616 )     (15,386 )     (30,176 )

Increase (decrease) in commercial paper classified as long-term debt

     2,069       354       (2,131 )

Payment for purchase of treasury stock

     (9,567 )     (28,769 )     (56,717 )
    


 


 


Net cash provided by financing activities

     94,047       312,079       346,941  

Effect of exchange rate changes on cash and cash equivalents

     (23,760 )     (12,347 )     (23,546 )
    


 


 


Net change in cash and cash equivalents

     (91,033 )     77,438       (62,037 )

Cash and cash equivalents at beginning of the period

     609,441       547,404       609,441  
    


 


 


Cash and cash equivalents at end of the period

   ¥ 518,408     ¥ 624,842     ¥ 547,404  
    


 


 


 

See accompanying notes to consolidated financial statements.

 


Table of Contents

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

For the six months ended September 30, 2002 and 2003 and the year ended March 31, 2003

 

(1) General and Summary of Significant Accounting Policies

 

  (a) Financial Statements

 

The accompanying semiannual consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (such as Accounting Principles Board Opinions and Statements of Financial Accounting Standards), which is permitted by “Regulations Concerning Terminology, Forms and Preparation methods of Semiannual Consolidated Financial Statements” (Ordinance of Ministry of Finance No. 24 of 1999), Article 81. In addition, the segment information is prepared based on the “Regulations Concerning Terminology, Forms and Preparation methods of Semiannual Consolidated Financial Statements” (Ordinance of Ministry of Finance No. 24 of 1999), Article 14. 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, 2003 consolidated financial statements and notes thereto included in Honda Motor Co., Ltd. and Subsidiaries Annual Report for the year ended March 31, 2003. Consolidated financial statements ended March 31, 2003 are derived from the audited consolidated financial statements, while consolidated financial statements ended September 30, 2002 and 2003 are unaudited.

 

  (b) Description of Business

 

Honda Motor Co., Ltd. (the “Company”) and its subsidiaries (collectively “Honda”) develop, manufacture, distribute and provide financing for the sale of its motorcycles, automobiles and power products. Honda’s manufacturing operations are principally conducted in 25 separate factories, 5 of which are located in Japan. Principal overseas manufacturing facilities are located in the United States of America, Canada, the United Kingdom, France, Italy, Spain, India, Pakistan, the Philippines, Thailand, Vietnam, Brazil and Mexico.

 

Net sales and other operating revenue by category of activity for the 6 months ended September 30, 2003 were derived from: motorcycle business 11.8%, automobile business 81.2%, financial services 3.1%, and power product and other businesses 3.9%. Operating income by category of activity for the 6 months ended September 30, 2003 was derived from: motorcycle business 2.7%, automobile business 82.4%, financial services 13.5%, and power product and other businesses 1.4%.

 

Honda sells motorcycles, automobiles and power products in most countries in the world. For the 6 months ended September 30, 2003, 78.4% of net sales and other operating revenue (¥3,154,349 million) was derived from subsidiaries operating outside Japan (2002: ¥2,864,466 million). Net sales and other operating revenue for the 6 months ended September 30, 2003 was geographically broken down based on the location of customers as follows: Japan 18.6%, North America 57.4%, Europe 9.4%, Asia 9.9% and others 4.7%. For the 6 months ended September 30, 2003, 73.6% of operating income (¥222,154 million) was generated from foreign subsidiaries, disregarding the effect of elimination of unrealized profits between domestic operations and foreign operations (2002: ¥224,377 million).

 

  (c) Basis of Presenting Consolidated Financial Statements

 

The Company and its domestic 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 accounting principles generally accepted in the United States of America.

 

(Continued)

 


Table of Contents

2

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

  (d) Consolidation Policy

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in 20% to 50% owned affiliates in which the Company has the ability to exercise significant influence over their operating and financial policies are stated at their underlying equity value.

 

Minority interests in net assets and income are not significant and, accordingly, are not presented separately in the accompanying consolidated balance sheets and statements of income.

 

  (e) Use of Estimates

 

Management of Honda has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Significant items subject to such estimates and assumptions include allowance for credit losses, allowance for losses on lease residual values, valuation allowance for inventories and deferred tax assets, impairment of long-lived assets, product warranty, and assets and obligations related to employee benefits. Actual results could differ from those estimates.

 

  (f) Revenue Recognition

 

Sales of manufactured products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, title and risk of loss have passed to the customers, the sales price is fixed or determinable, and collectibility is probable. Revenues are recognized net of discounts, cash sales incentives and rebates granted.

 

Interest income from finance receivables is recognized using the interest method. Finance receivable origination fees and certain direct origination costs are deferred, and the net fee or cost is recognized using the interest method over the contractual life of the finance receivables.

 

Finance subsidiaries of the Company periodically sell finance receivables. Gain or loss is recognized equal to the difference between the cash proceeds received and the carrying value of the receivables sold and is recorded in the period in which the sale occurs. Honda allocates the recorded investment in finance receivables between the portion(s) of the receivables sold and portion(s) retained based on the relative fair values of those portions on the date the receivables are sold. Honda recognizes gains or losses attributable to the change in the fair value of the retained interests, which are recorded at estimated fair value and accounted for as “trading” securities. Honda determines the value of the retained interest by discounting the future cash flows. Those cash flows are net of estimated credit losses and are discounted at a rate which Honda believes is commensurate with the risks involved. A servicing asset or liability is amortized in proportion to and over the period of estimated net servicing income. Servicing assets and servicing liabilities at September 30, 2002 and 2003 and March 31, 2003 were not significant.

 

(Continued)


Table of Contents

3

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

  (g) Cash Equivalents

 

Honda considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

 

  (h) Inventories

 

Inventories are stated at the lower of cost, determined principally by the first-in, first-out method, or market.

 

  (i) Investments in Securities

 

Honda classifies its debt and equity securities in one of three categories: available-for-sale, trading, or held-to-maturity. Debt securities that are classified as “held-to-maturity” securities are reported at amortized cost. Debt and equity securities classified as “trading” securities are reported at fair value, with unrealized gains and losses included in earnings. Other debt and equity securities are classified as “available-for-sale” securities and are reported at fair value, with unrealized gains or losses, net of deferred taxes included in accumulated other comprehensive income (loss) in the stockholders’ equity section of the consolidated balance sheets. Honda did not hold any “trading” securities at September 30, 2002 or 2003 or March 31, 2003, except for retained interests in the sold pools of finance receivables, which are accounted for as “trading” securities and included in finance receivables. Honda did not hold any “held-to-maturity” securities at September 30, 2002 or 2003 or March 31, 2003.

 

  (j) Goodwill

 

On April 1, 2002, Honda adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Intangible Assets” and ceased amortizing its goodwill at that time. SFAS No. 142 requires that goodwill be not amortized, but instead be tested for impairment at least annually. Honda completed its transitional impairment test of goodwill effective April 1, 2002 and its annual test effective March 31, 2003 as prescribed by SFAS No. 142 and concluded no impairment needed to be recognized. The carrying amount of goodwill at September 30, 2002 and 2003 and March 31, 2003 were ¥15,809 million, ¥17,532 million and ¥15,566 million, respectively.

 

  (k) Depreciation

 

Depreciation of property, plant and equipment is calculated principally by the declining-balance method based on estimated useful lives of the respective assets.

 

The estimated useful lives used in computing depreciation of property, plant and equipment are as follows:

 

Asset


   Life

Buildings

   Up to 50 years

Machinery and equipment

   2 to 20 years

 

(Continued)


Table of Contents

4

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

  (l) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

 

Honda applies the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.

 

Honda’s long-lived assets and certain identifiable intangibles having finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted and without interest charges) expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell.

 

  (m) Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.

 

  (n) Product-Related Expenses

 

Advertising and sales promotion costs are expensed as incurred. Provisions for estimated costs related to product warranty are made at the time of sale. Estimated warranty expenses are provided based on historical warranty claim experience with consideration given to the expected level of future warranty costs as well as current information on repair costs. Included in warranty expenses accruals are costs for general warranties on vehicles Honda sells, product recalls and service actions outside the general warranties.

 

  (o) Basic Net Income per Common Share

 

Basic net income per common share has been computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. The weighted average number of common shares outstanding during the 6 months ended September 30, 2002, 2003 and for the year ended March 31, 2003 was 973,972,176, 959,257,426 and 970,952,677, respectively. There were no potentially dilutive shares outstanding during the 6 months ended September 30, 2002 or 2003 or for the year ended March 31, 2003.

 

(Continued)


Table of Contents

5

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

  (p) Foreign Currency Translation

 

Foreign currency financial statement amounts are translated into Japanese yen on the basis of the period-end rate for all assets and liabilities and the weighted average rate for the period for all income and expense amounts. Translation adjustments resulting therefrom are included in accumulated other comprehensive income (loss) in the stockholders’ equity section of the consolidated balance sheets.

 

  (q) Derivative Financial Instruments

 

The Company and certain of its subsidiaries have entered into foreign exchange agreements and interest rate agreements to manage currency and interest rate exposures. These instruments include foreign currency forward contracts, currency swap agreements, currency option contracts and interest rate swap agreements.

 

Honda applies the provisions of Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133”. Both standards establish accounting and reporting standards for derivative instruments and for hedging activities, and require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income (loss), depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. The ineffective portion of all hedges is immediately recognized in earnings.

 

Because Honda has not elected to apply hedge accounting subsequent to the adoption of SFAS No.133 and SFAS No. 138, changes in the fair value of its derivative instruments are recognized in earnings in the period of the change. The amount recognized in earnings included in other expenses – other during the 6 months ended September 30, 2002 and for the year ended March 31, 2003 were ¥31,929 million and ¥19,910 million, respectively, while included in other income – other during the 6 months ended September 30, 2003 was ¥67,937 million.

 

  (r) Shipping and Handling Costs

 

Shipping and handling costs are included in selling, general and administrative expenses, and are charged to earnings as incurred.

 

(Continued)


Table of Contents

6

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

  (s) New Accounting Pronouncements

 

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,” which clarifies the application of the consolidation rules to certain variable interest entities. FIN 46 established a new multi-step model for the consolidation of variable interest entities when a company has a controlling financial interest based either on voting interests or variable interests. Consolidation based on variable interests is required by the primary beneficiary if the equity investors lack essential characteristics of a controlling financial interest or if the equity investment at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 also provides disclosure requirements related to investments in variable interest entities, whether or not those entities are consolidated.

 

On October 9, 2003, the FASB issued FASB Staff Position FIN 46-6 (“FSP FIN 46-6”), “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities.” FSP FIN 46-6 defers the effective date for applying the provisions of FIN 46 for interests held by public entities in variable interest entities or potential variable interest entities created before February 1, 2003, to the first period ending after December 15, 2003. Honda is required to apply FIN 46 immediately for variable interest entities created subsequent to January 31, 2003, however, there were no significant variable interest entities created after this date that were required to be consolidated by Honda. The initial effect of the adoption of FIN 46 for potential variable interest entities created prior to February 1, 2003, if any, will be reflected as the cumulative effect of a change in accounting principle in Honda’s consolidated statement of income for the quarter ending December 31, 2003.

 

Honda is continuing its analysis of potential variable interest entities created prior to February 1, 2003, which may require consolidations. These potential variable interest entities include special purpose entities, interests in investments accounted for under the equity method, including joint ventures, or cost method of accounting, dealerships, vendors and service providers. Honda believes that the implementation of FIN 46 for these potential variable interest entities is not expected to have a significant effect on Honda’s consolidated financial statements.

 

In January 2003, the Emerging Issues Task Force reached a final consensus on Issue No. 03-2 “Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities” (“EITF 03-2”). EITF 03-2 addresses accounting for a transfer to the Japanese government of a substitutional portion of an Employees’ Pension Fund (“EPF”) plan, which is a defined benefit pension plan established under the Welfare Pension Insurance Law. EITF 03-2 requires employers to account for the separation process of the substitutional portion from the entire EPF plan (which includes a corporation portion) upon completion of the transfer to the government of the substitutional portion of the benefit obligation and related plan assets. The separation process is considered the culmination of a series of steps in a single settlement transaction. Under this approach, the difference between the fair value of the obligation and the assets required to be transferred to the government should be accounted for and separately disclosed as a subsidy. The Company has not decided whether it will transfer the substitutional portion to the government. Accordingly, the effect on Honda’s consolidated financial statements, if any, cannot be determined until a decision is made and the substitutional portion of the benefit obligation and plan assets are transferred to the government.

 

(Continued)


Table of Contents

7

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

  (t) Reclassifications

 

Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the presentation used for the 6 months ended September 30, 2003.

 

(2) Finance Subsidiaries - Receivables

 

Finance subsidiaries-receivables represent finance receivables generated by finance subsidiaries. Finance receivables include wholesale financing to dealers and retail financing and direct financing leases to consumers.

 

The allowance for credit losses is maintained at an amount management deems adequate to cover estimated losses on finance receivables. The allowance is based on management’s evaluation of many factors, including current economic trends, industry experience, inherent risks in the portfolio and the borrower’s ability to pay.

 

Finance subsidiaries of the Company purchase insurance to cover a substantial amount of the estimated residual value of vehicles leased to customers. The allowance for losses on lease residual values is maintained at an amount management deems adequate to cover estimated losses on the uninsured portion of the vehicles’ lease residual values. The allowance is also based on management’s evaluation of many factors, including current economic conditions, industry experience and the finance subsidiaries’ historical experience with residual value losses.

 

(Continued)


Table of Contents

8

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

Finance subsidiaries-receivables, net, consisted of the following at September 30, 2002 and 2003 and March 31, 2003:

 

     Yen
(millions)


     September
30, 2002


   September
30, 2003


  

March

31, 2003


Direct financing leases

   ¥ 1,572,938    ¥ 1,754,621    ¥ 1,701,447

Retail

     1,381,584      1,748,113      1,550,787

Wholesale

     179,130      165,921      241,039

Term loans to dealers

     21,146      18,292      28,001
    

  

  

Total finance receivables

     3,154,798      3,686,947      3,521,274

Retained interests in the sold pools of finance receivables

     59,677      70,219      67,024
    

  

  

       3,214,475      3,757,166      3,588,298

Less:

                    

Allowance for credit losses

     14,511      23,290      18,628

Allowance for losses on lease residual values

     17,132      23,640      22,355

Unearned interest income and fees

     177,909      212,007      219,754
    

  

  

Finance subsidiaries-receivables, net

     3,004,923      3,498,229      3,327,561

Less current portion

     980,852      1,081,896      1,097,541
    

  

  

Noncurrent finance subsidiaries-receivables, net

   ¥ 2,024,071    ¥ 2,416,333    ¥ 2,230,020
    

  

  

 

(3) Inventories

 

Inventories at September 30, 2002 and 2003 and March 31, 2003 are summarized as follows:

 

     Yen
(millions)


    

September

30, 2002


  

September

30, 2003


  

March

31, 2003


Finished goods

   ¥ 448,147    ¥ 531,186    ¥ 504,548

Work in process

     24,719      27,968      23,728

Raw materials

     197,402      225,642      223,704
    

  

  

     ¥ 670,268    ¥ 784,796    ¥ 751,980
    

  

  

 

(Continued)


Table of Contents

9

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

(4) Investments and Advances-Other

 

Investments and advances-other at September 30, 2002 and 2003 and March 31, 2003 consisted of the following:

 

     Yen
(millions)


    

September

30, 2002


  

September

30, 2003


  

March

31, 2003


Marketable equity securities

   ¥ 79,187    ¥ 92,891    ¥ 66,841

Nonmarketable preferred stocks

     14,200      16,200      16,200

Guaranty deposits

     33,603      32,112      32,162

Life insurance contracts

     4,487      4,329      4,385

Advances

     1,979      3,648      1,786

Other

     11,805      40,658      18,844
    

  

  

     ¥ 145,261    ¥ 189,838    ¥ 140,218
    

  

  

 

Certain information with respect to available-for-sale securities, all of which are marketable equity securities at September 30, 2002 and 2003 and March 31, 2003 is summarized below:

 

    

Yen

(millions)


    

September

30, 2002


  

September

30, 2003


  

March

31, 2003


Cost

   ¥ 49,689    ¥ 32,631    ¥ 34,063

Fair value

     79,187      92,891      66,841

Gross unrealized gains

     33,398      60,739      34,207

Gross unrealized losses

     3,900      479      1,429

 

(5) Short-Term and Long-Term Debt

 

Short-term debt at September 30, 2002 and 2003 and March 31, 2003 is as follows:

 

     Yen
(millions)


    

September

30, 2002


  

September

30, 2003


  

March

31, 2003


Short-term bank loans

   ¥ 226,073    ¥ 247,168    ¥ 220,499

Medium-term notes

     336,202      116,371      325,737

Commercial paper

     375,544      439,993      331,718
    

  

  

     ¥ 937,819    ¥ 803,532    ¥ 877,954
    

  

  

 

(Continued)


Table of Contents

10

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

Long-term debt at September 30, 2002 and 2003 and March 31, 2003 is as follows:

 

Total long-term debt

   ¥ 1,096,064    ¥ 1,688,605    ¥ 1,444,524

Less current portion

     142,231      405,533      304,342
    

  

  

     ¥ 953,833    ¥ 1,283,072    ¥ 1,140,182
    

  

  

 

Property, plant and equipment with a net book value of approximately ¥13,306 million, ¥14,098 million and ¥12,240 million at September 30, 2002 and 2003 and March 31, 2003, respectively, were subject to specific mortgages securing indebtedness.

 

(6) Other Liabilities

 

Other liabilities at September 30, 2002 and 2003 and March 31, 2003 are summarized as follows:

 

     Yen
(millions)


    

September

30, 2002


  

September

30, 2003


  

March

31, 2003


Allowance for product warranty

   ¥ 106,990    ¥ 136,421    ¥ 130,307

Minority interest

     43,384      57,743      52,546

Additional minimum pension liabilities

     354,772      555,077      555,206

Deferred income taxes

     1,339      21,291      8,740

Other

     43,775      39,510      42,200
    

  

  

     ¥ 550,260    ¥ 810,042    ¥ 788,999
    

  

  

 

(7) Supplemental Disclosures of Cash Flow Information

 

     Yen
(millions)


    

The 6 months
ended

September 30,
2002


  

The 6 months
ended

September 30,
2003


  

The year
ended

March 31,
2003


Cash paid during the period for:

                    

Interest

   ¥ 52,305    ¥ 47,400    ¥ 100,368

Income taxes

     110,872      91,368      173,697

 

During the 6 months ended September 30, 2003, the Company reissued its treasury stocks at fair value of ¥603 million to the minority shareholder of a subsidiary, upon which the Company merged with the subsidiary.

 

(Continued)


Table of Contents

11

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

(8) Comprehensive Income

 

Comprehensive income consists of net income, change in adjustments from foreign currency translation, change in net unrealized gains on marketable equity securities, and change in minimum pension liabilities adjustment, and is included in the consolidated statements of stockholders’ equity.

 

Accumulated other comprehensive income (loss) at September 30, 2002 and 2003 and March 31, 2003 are as follows:

 

     Yen
(millions)


 
    

September

30, 2002


   

September

30, 2003


   

March

31, 2003


 

Adjustments from foreign currency translation

   ¥ (455,149 )   ¥ (567,690 )   ¥ (469,472 )

Net unrealized gains on marketable equity securities

     12,611       31,544       14,820  

Minimum pension liabilities adjustment

     (187,824 )     (308,384 )     (308,513 )
    


 


 


Total accumulated other comprehensive income (loss)

   ¥ (630,362 )   ¥ (844,530 )   ¥ (763,165 )
    


 


 


 

(Continued)


Table of Contents

12

 

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

(9) Fair Value of Financial Instruments

 

The estimated fair values of significant financial instruments at September 30, 2002 and 2003 and March 31, 2003 are as follows:

 

    

Yen

(millions)


 
     September 30, 2002

    September 30, 2003

    March 31, 2003

 
    

Carrying

amount


   

Estimated

fair value


   

Carrying

amount


   

Estimated

fair value


   

Carrying

amount


   

Estimated

fair value


 

Finance subsidiaries-receivables (a)

   ¥ 1,622,281     ¥ 1,640,412     ¥ 1,949,764     ¥ 1,975,023     ¥ 1,835,085     ¥ 1,868,749  

Investments and advances-marketable equity securities

     79,187       79,187       92,891       92,891       66,841       66,841  

Debt

     (2,033,883 )     (2,037,827 )     (2,492,137 )     (2,496,375 )     (2,322,478 )     (2,329,535 )

Foreign exchange instruments (b):

                                                

Asset position

   ¥ 5,043     ¥ 5,043     ¥ 36,669     ¥ 36,669     ¥ 9,598     ¥ 9,598  

Liability position

     (17,253 )     (17,253 )     (4,534 )     (4,534 )     (13,523 )     (13,523 )
    


 


 


 


 


 


Net

   ¥ (12,210 )   ¥ (12,210 )   ¥ 32,135     ¥