1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from_____________ to ______________________
Commission file number 1-9161
CHRYSLER CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-2673623
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12000 Chrysler Drive, Highland Park, Michigan 48288-0001
- - ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(313) 956-5741
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
The registrant had 354,163,755 shares of common stock outstanding as of June
30, 1994.
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CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 1-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-10
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11-12
Item 5. Other Information 13-15
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
Exhibit Index 18
3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
For the Three and Six Months Ended June 30, 1994 and 1993
(In millions of dollars)
Three Months Ended Six Months Ended
----------------------- ------------------------
1994 1993 1994 1993
-------- --------- -------- ----------
Sales of manufactured products $ 12,369 $ 10,307 $ 24,920 $ 20,545
Finance and insurance income 330 360 673 735
Other income 383 364 712 655
----------- --------- ----------- -----------
TOTAL SALES AND REVENUES 13,082 11,031 26,305 21,935
----------- --------- ----------- -----------
Costs, other than items below 9,375 8,098 18,981 16,179
Depreciation of property and equipment (Note 5) 230 252 506 503
Amortization of special tools (Note 5) 276 177 506 392
Selling and administrative expenses 997 886 1,952 1,657
Pension expense 158 173 335 386
Nonpension postretirement benefit expense 204 201 407 395
Interest expense 249 293 482 592
Gain on sales of automotive assets
and investments (Note 4) -- (171) -- (171)
----------- --------- ----------- -----------
TOTAL COSTS AND EXPENSES 11,489 9,909 23,169 19,933
----------- --------- ----------- -----------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 1,593 1,122 3,136 2,002
Provision for income taxes 637 437 1,242 787
----------- --------- ----------- -----------
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 956 685 1,894 1,215
Cumulative effect of changes in accounting
principles (Note 3) -- -- -- (4,966)
----------- --------- ----------- -----------
NET EARNINGS (LOSS) $ 956 $ 685 $ 1,894 $ (3,751)
Preferred stock dividends 20 20 40 40
----------- --------- ----------- -----------
NET EARNINGS (LOSS) ON COMMON STOCK $ 936 $ 665 $ 1,854 $ (3,791)
=========== ========= =========== ===========
(In dollars or millions of shares)
Primary earnings (loss) per common share:
Earnings before cumulative effect of
changes in accounting principles $ 2.61 $ 1.86 $ 5.16 $ 3.48
Cumulative effect of changes in
accounting principles -- -- -- (14.70)
----------- --------- ----------- -----------
Net earnings (loss) per common share $ 2.61 $ 1.86 $ 5.16 $ (11.22)
=========== ========= =========== ===========
Average common and dilutive equivalent
shares outstanding 359.1 357.6 359.6 338.0
Fully diluted earnings per common share:
Earnings before cumulative effect of
changes in accounting principles $ 2.35 $ 1.69 $ 4.64 $ --
Cumulative effect of changes in
accounting principles -- -- -- --
----------- --------- ----------- -----------
Net earnings per common share $ 2.35 $ 1.69 $ 4.64 $ --
=========== ========= =========== ===========
Average common and dilutive equivalent
shares outstanding 407.5 406.0 407.9 --
Dividends declared per common share $ 0.25 $ 0.15 $ 0.45 $ 0.30
_________________________
See notes to consolidated financial statements.
1
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Item 1. FINANCIAL STATEMENTS - Continued
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In millions of dollars)
1994 1993
----------- -----------------------------
June 30 Dec. 31 June 30
----------- ------------ -------------
ASSETS:
Cash and cash equivalents $ 5,654 $ 4,040 $ 4,120
Marketable securities 1,212 1,055 1,438
Accounts receivable - trade and other 2,585 1,799 1,904
Inventories (Note 2) 3,430 3,629 3,458
Prepaid taxes, pension and other expenses 693 833 590
Finance receivables and retained interests in sold
receivables and other related amounts 11,036 10,208 10,906
Property and equipment 9,766 9,319 8,744
Special tools 3,378 3,455 2,928
Intangible assets 4,276 4,328 4,551
Deferred tax assets 1,559 2,210 2,506
Other assets 2,763 2,954 1,681
---------- ----------- ----------
TOTAL ASSETS $ 46,352 $ 43,830 $ 42,826
========== =========== ==========
LIABILITIES:
Accounts payable $ 7,440 $ 6,863 $ 6,187
Short-term debt 3,781 3,297 2,078
Payments due within one year on long-term debt 1,110 1,283 880
Accrued liabilities and expenses 4,891 4,650 4,200
Long-term debt 7,361 6,871 9,884
Accrued noncurrent employee benefits 9,659 10,613 10,566
Other noncurrent liabilities 3,606 3,417 3,395
---------- ----------- ----------
TOTAL LIABILITIES 37,848 36,994 37,190
---------- ----------- ----------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized
20.0 shares; Series A Convertible Preferred Stock;
issued: 1994 and 1993 - 1.7 shares (aggregate
liquidation preference $863 million) 2 2 2
Common stock - $1 per share par value; authorized
1,000.0 shares; issued: 1994 and 1993 - 364.1 shares 364 364 364
Additional paid-in capital 5,532 5,533 5,538
Retained earnings 2,834 1,170 13
Treasury stock - at cost: 1994 - 9.9 shares;
1993 - 10.4 and 13.2 shares, respectively (228) (233) (281)
---------- ----------- ----------
TOTAL SHAREHOLDERS' EQUITY 8,504 6,836 5,636
---------- ----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,352 $ 43,830 $ 42,826
========== =========== ==========
_________________________
See notes to consolidated financial statements.
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Item 1. FINANCIAL STATEMENTS - Continued
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1994 and 1993
(In millions of dollars)
1994 1993
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 1,894 $ (3,751)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 1,012 895
Provision for credit losses 90 120
Deferred income tax provision 659 404
Gain on sales of automotive assets and investments -- (171)
Cumulative effect of changes in accounting principles -- 4,966
Change in accounts receivable (787) (56)
Change in inventories 160 (386)
Change in prepaid expenses and other assets 81 45
Change in accounts payable and accrued and other liabilities 81 (1,001)
Other 44 (15)
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,234 1,050
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (1,857) (2,890)
Sales and maturities of marketable securities 1,680 2,744
Proceeds from sales of automotive assets and investments 62 309
Finance receivables acquired (9,636) (8,945)
Finance receivables collected 1,420 3,680
Proceeds from sales of finance receivables 7,518 5,275
Proceeds from sales of nonautomotive assets -- 2,267
Expenditures for property and equipment (1,045) (653)
Expenditures for special tools (438) (429)
Other 60 187
----------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,236) 1,545
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities) 484 1,299
Proceeds under revolving lines of credit and long-term borrowings 703 5,303
Payments on revolving lines of credit and long-term borrowings (393) (9,307)
Proceeds from issuance of common stock, net of expenses -- 1,952
Dividends paid (182) (136)
Other 4 57
----------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 616 (832)
----------- ------------
Change in cash and cash equivalents 1,614 1,763
Cash and cash equivalents at beginning of period 4,040 2,357
----------- ------------
Cash and cash equivalents at end of period $ 5,654 $ 4,120
=========== ============
_________________________
See notes to consolidated financial statements.
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Item 1. FINANCIAL STATEMENTS - Continued
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Consolidation and Financial Statement Presentation
The consolidated financial statements of Chrysler Corporation and its
consolidated subsidiaries ("Chrysler") include the accounts of all significant
majority-owned subsidiaries and entities. Intercompany accounts and
transactions have been eliminated in consolidation. The unaudited consolidated
financial statements of Chrysler for the three and six months ended June 30,
1994 and 1993 reflect all adjustments, consisting of only normal and recurring
items (with the exception of the items discussed in Note 3), which are, in the
opinion of management, necessary to present a fair statement of the results for
the interim periods. The operating results for the three and six months ended
June 30, 1994 are not necessarily indicative of the results of operations for
the entire year. Reference should be made to the consolidated financial
statements included in the Annual Report on Form 10-K for the year ended
December 31, 1993. Amounts for 1993 have been reclassified to conform with
current period classifications.
Note 2. Inventories
Inventories, summarized by major classification, were as follows:
1994 1993
------------ -----------------------------
June 30 Dec. 31 June 30
------------ ----------- ------------
(In millions of dollars)
Finished products, including service parts $ 993 $ 1,016 $ 1,013
Raw materials, finished production parts and supplies 1,143 1,177 1,007
Vehicles held for short-term lease 1,294 1,436 1,438
------------ ----------- ------------
TOTAL $ 3,430 $ 3,629 $ 3,458
============ =========== ============
Note 3. Changes in Accounting Principles
Certain Investments in Debt and Equity Securities
Effective January 1, 1994, Chrysler adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." This new accounting standard specifies the accounting and
reporting requirements for changes in the fair values of investments in debt
and equity securities which have readily determinable fair values. Adoption of
this accounting standard did not have a material effect on Chrysler's
consolidated financial statements at January 1, 1994.
Nonpension Postretirement Benefits
Effective January 1, 1993, Chrysler adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires the
accrual of such benefits during the years the employees provide services. The
adoption of this accounting standard resulted in an after-tax charge of $4.68
billion, or $13.86 per common share. This one-time charge represented the
immediate recognition of the SFAS No. 106 transition obligation of $7.44
billion, partially offset by $2.76 billion of estimated tax benefits.
Implementation of SFAS No. 106 did not increase Chrysler's cash expenditures for
nonpension postretirement benefits.
Postemployment Benefits
Effective January 1, 1993, Chrysler adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This accounting standard requires the
accrual of benefits provided to former or inactive employees after employment
but prior to retirement. Adoption of this accounting standard resulted in the
recognition of an after-tax charge of $283 million, or $0.84 per common share.
Adoption of SFAS No. 112 did not increase Chrysler's cash expenditures for
postemployment benefits. Previously reported results for the six months ended
June 30, 1993 have been restated to reflect the adoption of SFAS No. 112
effective January 1, 1993.
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Item 1. FINANCIAL STATEMENTS - Continued
Note 3. Changes in Accounting Principles - Continued
Impaired Loans
In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," effective for fiscal
years beginning after December 15, 1994. This new accounting standard requires
creditors to evaluate the collectibility of both contractual interest and
principal of receivables when evaluating the need for a loss accrual. Chrysler
has not determined the impact that the adoption of this accounting standard will
have on its consolidated operating results or financial position. Chrysler
plans to adopt this standard on or before January 1, 1995, as required.
Note 4. Sales of Automotive Assets and Investments
During the second quarter of 1994, Chrysler sold certain of the soft trim
operations of its Acustar division, and entered into a five-year supply
agreement with the purchaser. Aggregate net proceeds from the sale and the
supply agreement were approximately $100 million. The related pretax gain of
approximately $60 million has been deferred and will be recognized over the term
of the supply agreement.
During the first quarter of 1994, Chrysler sold the wiring harness operations
of its Acustar division, and entered into a five-year supply agreement with the
purchaser. Aggregate net proceeds from the sale and the supply agreement were
approximately $225 million. The related pretax gain of approximately $196
million has been deferred and will be recognized over the term of the supply
agreement.
During the second quarter of 1993, Chrysler sold the plastics operations of its
Acustar division for net proceeds of $132 million, resulting in a pretax gain
of $60 million ($39 million after applicable income taxes). Also during the
second quarter of 1993, Chrysler sold an aggregate of 27 million shares of
Mitsubishi Motors Corporation for proceeds of $177 million, resulting in a
pretax gain of $111 million ($70 million after applicable income taxes).
Note 5. Changes in Estimated Service Lives of Fixed Assets
During the second quarter of 1994, Chrysler revised the estimated service
lives of certain special tools and property and equipment. These revisions
were based on updated assessments of the service lives of the related assets
and resulted in the recognition of additional amortization of special tools of
$89 million and decreased depreciation of property and equipment of $15
million for the second quarter of 1994.
5
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL REVIEW
Chrysler Corporation and its consolidated subsidiaries ("Chrysler")
reported earnings before income taxes of $1.6 billion for the second quarter of
1994, compared with $1.1 billion for the second quarter of 1993. For the first
six months of 1994, Chrysler reported earnings before income taxes and the
cumulative effect of changes in accounting principles of $3.1 billion, compared
with $2.0 billion for the comparable period of 1993. Pretax earnings for the
second quarter and first six months of 1993 included gains on sales of
automotive assets and investments of $171 million.
The improvement in operating results in the second quarter and first six
months of 1994 over the corresponding periods of 1993 resulted from an increase
in sales volume and pricing actions, including lower per unit sales incentives,
partially offset by increased employee costs. Chrysler's worldwide factory car
and truck sales for the three and six months ended June 30, 1994 were 702,802
units, a 7 percent increase from the second quarter of 1993, and 1,443,400
units, an 11 percent increase over the first six months of 1993. Combined U.S.
and Canadian dealers' days supply of vehicle inventory decreased to 45 days at
June 30, 1994 from 63 days at December 31, 1993 and 50 days at June 30, 1993.
Net earnings for the second quarter of 1994 were $956 million, or $2.61
per common share, compared with $685 million, or $1.86 per common share, in the
second quarter of 1993. Net earnings for the six months ended June 30, 1994
were $1.9 billion, compared to a net loss of $3.8 billion for the comparable
period of 1993. The net loss for the first six months of 1993 resulted from a
charge of $4.7 billion, or $13.86 per common share, for the cumulative effect of
a change in accounting principle related to the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Results for the first six months
of 1993 also included a charge of $283 million, or $0.84 per common share, for
the cumulative effect of a change in accounting principle relating to the
adoption of SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
In the second quarter of 1994, North American vehicle industry retail
sales, on a Seasonally Adjusted Annual Rate basis, were 16.4 million cars and
trucks, compared to 15.6 million units for the second quarter of 1993, an
increase of 5 percent. Chrysler's U.S. and Canada combined retail car and truck
market share for the three and six months ended June 30, 1994 remained
consistent with the corresponding 1993 periods, as increases in truck market
share were offset by decreases in car market share, as shown in the following
table:
Second Quarter Six Months
---------------------------------- ----------------------------
Inc./ Inc./
1994 1993 (Dec.) 1994 1993 (Dec.)
-------- -------- -------- -------- ------- --------
U.S. Retail Market Share (1):
Car 9.5% 10.0% (0.5) % 9.6% 10.2% (0.6) %
Truck 22.9% 22.6% 0.3 % 23.1% 22.5% 0.6 %
Combined U.S. Car and Truck 15.0% 15.0% -- 15.1% 15.1% --
U.S. and Canada Combined Retail
Market Share (1) 15.4% 15.4% -- 15.6% 15.5% 0.1 %
_______________________________
(1) All market share data include fleet sales.
The decline in Chrysler's U.S. car market share for the three and six month
periods was the result of declines in sales of models which are scheduled to be
replaced in the fall of 1994, partially offset by increases in sales of
subcompact cars due to the introduction of the Dodge and Plymouth Neon. The
increases in U.S. truck market share for the three and six month periods reflect
increased sales in the full-size pickup truck and sport-utility market
segments, resulting from the introduction of Chrysler's all-new Dodge Ram pickup
truck in 1993 and the continued success of Jeep(R) vehicles.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
FINANCIAL REVIEW - Continued
Pretax earnings of Chrysler Financial Corporation ("CFC") for the second
quarter of 1994 and 1993 were $69 million and $62 million, respectively. For
the six months ended June 30, 1994, CFC's earnings before income taxes and the
cumulative effect of changes in accounting principles were $144 million,
compared to $112 million for the comparable period of 1993. The improved
results in the second quarter and first six months of 1994 compared to the
corresponding periods of 1993 were primarily the result of higher levels of
automotive financing and lower provisions for credit losses, partially offset by
reduced retail automotive margins. CFC reported net earnings of $44 million in
each of the second quarters of 1994 and 1993. CFC's net earnings for the first
six months of 1994 and 1993 were $91 million and $51 million, respectively.
CFC's net earnings for the first six months of 1993 included charges totaling
$30 million for the adoptions of SFAS No. 106 and SFAS No. 112.
Chrysler's revenues and results of operations are principally derived
from the North American automotive marketplace. During the first six months of
1994, North American automobile industry sales increased from the 1993 levels,
as the economic recovery continued. Chrysler experienced sales growth
consistent with the North American automobile industry. In response to this
continued economic recovery, during the first quarter of 1994 Chrysler revised
its productive asset acquisition plans to increase its worldwide production
capacity by approximately 500,000 units per year by 1996. These planned
capacity expansions increased Chrysler's projected spending for new product
development and the acquisition of productive assets, and could result in the
hiring of up to 6,000 additional employees by the end of 1996.
COMPARISON OF SELECTED ELEMENTS OF REVENUE AND COSTS
Chrysler's total sales and revenues for the second quarter and first six
months of 1994 and 1993 were as follows:
Second Quarter Six Months
---------------------------------- ----------------------------
Inc./ Inc./
1994 1993 (Dec.) 1994 1993 (Dec.)
-------- -------- -------- -------- ------- --------
(In millions of dollars) (In millions of dollars)
Sales of manufactured products $ 12,369 $ 10,307 20 % $ 24,920 $ 20,545 21 %
Finance and insurance income 330 360 (8)% 673 735 (8)%
Other income 383 364 5 % 712 655 9 %
--------- --------- --------- --------
Total sales and revenues $ 13,082 $ 11,031 19 % $ 26,305 $ 21,935 20 %
========= ========= ========= ========
The increase in sales of manufactured products in the second quarter of
1994 primarily reflects the 7 percent increase in factory unit sales as compared
to the second quarter of 1993, and an increase in the average revenue per unit,
net of sales incentives, to $17,676 in the second quarter of 1994. The increase
in sales of manufactured products in the first six months of 1994 primarily
reflects the 11 percent increase in factory unit sales as compared to the first
six months of 1993, and an increase in the average revenue per unit, net of
sales incentives, to $17,236 for the six months ended June 30, 1994. The
increase in average revenue per unit in both 1994 periods was largely due to
sales of a larger proportion of trucks and pricing actions, including lower per
unit sales incentives.
The decrease in finance and insurance income in the three and six months
ended June 30, 1994 as compared to the corresponding 1993 periods was primarily
the result of reduced nonautomotive financing revenue, reflecting sales and
downsizing of nonautomotive financing operations. Total automotive financing
volume in the second quarter and first six months of 1994 was $17.9 billion and
$35.0 billion, respectively, compared to $15.6 billion and $29.7 billion for the
corresponding 1993 periods. Financing support provided in the U.S. by CFC for
new Chrysler vehicle retail deliveries (including fleet) and wholesale vehicle
sales to dealers and the number of vehicles financed during the three and six
months ended June 30, 1994 and 1993 were as follows:
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
COMPARISON OF SELECTED ELEMENTS OF REVENUE AND COSTS - Continued
Second Quarter Six Months
---------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- --------
U.S. Penetration:
Retail 24 % 23 % 24 % 23 %
Wholesale 75 % 75 % 73 % 73 %
Number of New Chrysler Vehicles Financed
in the U.S. (in thousands):
Retail 149 137 286 248
Wholesale 421 396 844 773
Total costs and expenses for the second quarter and first six months of
1994 and 1993 were as follows:
Second Quarter Six Months
---------------------------------- ----------------------------------
Inc./ Inc./
1994 1993 (Dec.) 1994 1993 (Dec.)
-------- -------- -------- -------- ------- --------
(In millions of dollars) (In millions of dollars)
Costs, other than items below $ 9,375 $ 8,098 16 % $ 18,981 $ 16,179 17 %
Depreciation of property and
equipment 230 252 (9)% 506 503 1 %
Amortization of special tools 276 177 56 % 506 392 29 %
Selling and administrative expenses 997 886 13 % 1,952 1,657 18 %
Pension expense 158 173 (9)% 335 386 (13)%
Nonpension postretirement
benefit expense 204 201 1 % 407 395 3 %
Interest expense 249 293 (15)% 482 592 (19)%
Gain on sales of automotive
assets and investments -- (171) -- -- (171) --
--------- -------- -------- --------
Total costs and expenses $ 11,489 $ 9,909 16 % $ 23,169 $ 19,933 16 %
========= ========= ======== ========
Costs, other than items below increased in the second quarter and first
six months of 1994 primarily as a result of increased factory unit sales and
sales of an increased proportion of higher-priced vehicles. Costs, other than
items below were 76 percent of sales of manufactured products for each of the
three and six months ended June 30, 1994, compared to 79 percent for each of the
three and six month periods ended June 30, 1993. These decreases were primarily
attributable to greater capacity utilization and an increased mix of
higher-margin vehicles.
Depreciation of property and equipment for the second quarter of 1994
declined as compared to the second quarter of 1993 as a result of revisions,
effective April 1, 1994, to the estimated service lives of several classes of
property and equipment.
Special tooling amortization increased significantly in the second quarter
and first six months of 1994 compared with the respective 1993 periods
primarily as a result of the shortening of the remaining service lives of
certain special tools, effective April 1, 1994.
The increase in selling and administrative expenses for the 1994 periods,
as compared to the 1993 periods, primarily resulted from increased advertising
expenses related largely to the introduction of the Dodge and Plymouth Neon,
and increased profit-based employee costs.
8
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
COMPARISON OF SELECTED ELEMENTS OF REVENUE AND COSTS - Continued
Pension expense decreased for the three and six months ended June 30,
1994 as compared to the corresponding periods in 1993 due to the improved
funding of the plans (including the $3.5 billion in contributions made in
1993). These decreases were partially offset by the reduction in the discount
rate used to measure the projected benefit obligation and scheduled increases
in benefits included in the 1993 national contracts with Chrysler's principal
collective bargaining units.
Nonpension postretirement benefit expense increased slightly in the 1994
periods, as compared to the 1993 periods, due to the decrease in the discount
rate used to measure the accumulated nonpension postretirement benefit
obligation.
The decrease in interest expense for the second quarter and first six
months of 1994 was primarily due to lower average borrowings. The reduced
average borrowings resulted from CFC's first quarter 1993 sales of its
nonautomotive financing operations and Chrysler's early redemption of $769
million of its outstanding debt in the fourth quarter of 1993. CFC's average
effective cost of borrowings was 8.4 percent in both the second quarter and
first six months of 1994, compared to 8.4 percent and 8.6 percent in the
corresponding periods of 1993. The decrease in the six month period primarily
reflects lower term debt costs, partially offset by higher short-term interest
rates.
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's combined cash, cash equivalents and marketable securities
totaled $6.9 billion at June 30, 1994 (including $519 million held by CFC), an
increase of $1.8 billion from December 31, 1993. The increase in the first six
months of 1994 was the result of cash generated by operating activities,
partially offset by pension contributions and capital expenditures.
During the first quarter of 1994, Chrysler revised its near-term new
product development and productive asset acquisition plans to include various
actions intended to increase the capacity at several of its facilities.
Chrysler currently expects to spend approximately $21 billion in the 1994 to
1998 period for new product development and the acquisition of productive
assets.
Chrysler's projected pension benefit obligation in excess of plan assets
was $2.2 billion at December 31, 1993. Chrysler contributed $1.3 billion to the
pension fund in the first six months of 1994. During the second quarter of
1994, Chrysler announced an objective, subject to a continuation of present
general economic, industry and capital market trends, to fully fund the
remaining pension obligation by the end of 1994. In order to achieve this
objective, Chrysler currently expects that the level of contributions during the
remainder of 1994 will be similar to the amount of contributions made during the
first six months of 1994.
At June 30, 1994, Chrysler (excluding CFC), had debt maturities of $417
million remaining in 1994, $282 million in 1995, and $41 million in 1996.
Chrysler believes that cash from operations and its cash position will be
sufficient to enable it to meet its capital expenditure, pension, debt maturity
and other funding requirements.
Chrysler's ability to market its products successfully depends
significantly on the availability of inventory financing for its dealers and, to
a lesser extent, the availability of financing for retail and fleet purchasers
of its products, both of which CFC provides.
Receivable sales continued to be a significant source of funding for CFC,
which realized $3.5 billion of net proceeds from the sale of retail receivables
in the first six months of 1994, compared to $3.7 billion in the first six
months of 1993. In addition, CFC's revolving wholesale receivable sale
arrangements provided funding which aggregated $4.5 billion and $4.4 billion at
June 30, 1994 and 1993, respectively.
9
12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
LIQUIDITY AND CAPITAL RESOURCES - Continued
During the second quarter of 1994, CFC replaced its existing U.S. and
Canadian credit facilities and receivable sale agreements. The new agreements
provide for lower total commitments, less restrictive financial covenants and
reductions in borrowing spreads and commitment fees and the removal of security
interests in CFC's U.S. assets. At June 30, 1994, CFC had U.S. and Canadian
credit facilities totaling $5.2 billion and receivable sale agreements totaling
$1.7 billion. At June 30, 1994, no amounts were outstanding under CFC's U.S.
and Canadian credit facilities or receivable sale agreements.
At June 30, 1994, CFC had debt maturities of $4.1 billion during the
remainder of 1994 (including $3.1 billion of commercial paper), $626 million in
1995, and $1.1 billion in 1996. CFC believes that cash provided by operations,
receivable sales, and the issuance of term debt and commercial paper will be
sufficient to enable CFC to meet its funding requirements.
NEW ACCOUNTING STANDARD
In May 1993, the Financial Accounting Standards Board issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," effective for fiscal
years beginning after December 15, 1994. This new accounting standard requires
creditors to evaluate the collectibility of both contractual interest and
principal of receivables when evaluating the need for a loss accrual. Chrysler
has not determined the impact that the adoption of this accounting standard will
have on its consolidated operating results or financial position. Chrysler
plans to adopt this standard on or before January 1, 1995, as required.
REVIEW BY INDEPENDENT ACCOUNTANTS
Deloitte & Touche, Chrysler's independent public accountants, performed
a review of the financial statements for the three and six months ended June 30,
1994 and 1993 in accordance with the standards for such reviews established by
the American Institute of Certified Public Accountants. The review did not
constitute an audit, and accordingly, Deloitte & Touche did not express an
opinion on the aforementioned data. Refer to the Independent Accountants'
Report included at Exhibit 15A.
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PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Chrysler Corporation was held on
May 19, 1994.
(c) At the meeting, the following matters were submitted to a vote of the
stockholders of Chrysler Corporation:
(1) the election of the following nominees as directors of Chrysler
Corporation. The vote with respect to each nominee was as follows:
NOMINEE FOR WITHHELD
----------------------------------- -------------------- ---------------------
Lilyan H. Affinito 298,782,222 1,329,185
Robert E. Allen 298,649,185 1,462,222
Joseph E. Antonini 296,546,559 3,564,848
Joseph A. Califano, Jr. 297,471,517 2,639,890
Thomas G. Denomme 298,862,085 1,249,322
Robert J. Eaton 298,876,283 1,235,124
Earl G. Graves 298,804,792 1,306,615
Kent Kresa 298,889,545 1,221,862
Robert J. Lanigan 298,867,859 1,243,548
Robert A. Lutz 298,864,089 1,247,318
Peter A. Magowan 298,870,554 1,240,853
Malcolm T. Stamper 298,830,830 1,280,577
Lynton R. Wilson 298,858,140 1,253,267
(2) a recommendation of the Board of Directors that the stockholders
appoint the firm of Deloitte & Touche as independent accountants
to audit the books, records and accounts of Chrysler Corporation
for the year 1994. The vote was as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ -------------------- ----------------- -------------------
298,418,429 632,695 1,060,431 -0-
(3) a proposal by the Board of Directors to amend the certificate of
incorporation to increase the authorized Common Stock from 500
million to 1 billion shares. The vote on this matter was as
follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ -------------------- ----------------- -------------------
283,512,535 14,286,768 2,312,252 -0-
(4) a proposal by the Board of Directors regarding amendment of the
Chrysler Corporation 1991 Stock Compensation Plan to increase the
number of shares of Common Stock available thereunder by 17
million shares and to make certain other changes in order to
preserve the Corporation's federal income tax deduction with
respect to performance based compensation paid under the Plan in
future years. The vote on this matter was as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ -------------------- ----------------- -------------------
258,658,979 38,306,175 3,146,401 -0-
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Continued
(5) a proposal by the Board of Directors regarding amendment of the
Stockholders' Resolution and related incentive compensation plans
to extend the authority to award incentive compensation for the
ten fiscal years beginning January 1, 1994 and ending December 31,
2003, and to make certain changes to those plans in order to
preserve the Corporation's federal income tax deduction thereunder
in future years. The vote on this matter was as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ -------------- --------------- --------------------
270,149,020 26,583,200 3,379,335 -0-
(6) a proposal by a stockholder requesting that the Board of Directors
take the necessary steps to provide for cumulative voting in the
election of directors. The vote on this matter was as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ -------------- ---------------- --------------------
69,159,697 186,802,372 3,080,170 41,074,316
(7) a proposal by a stockholder requesting that the Board of Directors
institute an Executive Compensation Review and prepare a report
available to shareholders by October 1994 describing the results of
their Review and any recommended changes in practice. The vote on
this matter was as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ -------------- ---------------- --------------------
20,128,398 234,177,150 4,731,691 41,074,316
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Item 5. OTHER INFORMATION
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF EARNINGS
For the Three and Six Months Ended June 30, 1994 and 1993
(In millions of dollars)
Three Months Ended Six Months Ended
------------------------- -------------------------
1994 1993 1994 1993
----------- ---------- ---------- ---------
Sales of manufactured products $ 12,587 $ 10,594 $ 25,221 $ 21,028
Equity in earnings of unconsolidated subsidiaries
and affiliates 54 38 104 60
Other income 81 67 136 114
----------- ---------- --------- ---------
TOTAL SALES AND REVENUES 12,722 10,699 25,461 21,202
----------- ---------- --------- ---------
Costs, other than items below 9,413 8,177 18,931 16,277
Depreciation of property and equipment 214 220 469 437
Amortization of special tools 276 177 506 392
Selling and administrative expenses 800 700 1,564 1,292
Pension expense 156 171 331 382
Nonpension postretirement benefit expense 203 200 405 393
Interest expense 67 103 119 198
Gain on sales of automotive assets
and investments -- (171) -- (171)
----------- ---------- --------- ---------
TOTAL COSTS AND EXPENSES 11,129 9,577 22,325 19,200
----------- ---------- --------- ---------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 1,593 1,122 3,136 2,002
Provision for income taxes 637 437 1,242 787
----------- ---------- --------- ---------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 956 685 1,894 1,215
Cumulative effect of changes in
accounting principles -- -- -- (4,966)
----------- ---------- --------- ---------
NET EARNINGS (LOSS) $ 956 $ 685 $ 1,894 $ (3,751)
Preferred stock dividends 20 20 40 40
----------- ---------- --------- ---------
NET EARNINGS (LOSS) ON COMMON STOCK $ 936 $ 665 $ 1,854 $ (3,791)
=========== ========== ========= =========
This unaudited Supplemental Information, "Chrysler (with CFC and Car Rental
Operations on an Equity Basis)," reflects the results of operations of Chrysler
with its investments in Chrysler Financial Corporation ("CFC") and its
investments in short-term vehicle rental subsidiaries (the "Car Rental
Operations") accounted for on an equity basis rather than as consolidated
subsidiaries. This Supplemental Information does not purport to present results
of operations in accordance with generally accepted accounting principles
because it does not comply with Statement of Financial Accounting Standards
("SFAS") No. 94, "Consolidation of All Majority-Owned Subsidiaries." The
financial covenants contained in certain of Chrysler's credit facilities are
based on this Supplemental Information. In addition, because the operations of
CFC and the Car Rental Operations are different in nature than Chrysler's
manufacturing operations, management believes that this disaggregated financial
data enhances an understanding of the consolidated financial statements.
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Item 5. OTHER INFORMATION - Continued
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
BALANCE SHEET
(In millions of dollars)
1994 1993
------------- --------------------------------
June 30 Dec. 31 June 30
------------- ------------ -------------
ASSETS:
Cash and cash equivalents $ 5,479 $ 3,777 $ 3,708
Marketable securities 873 707 1,109
Accounts receivable - trade and other 1,109 805 1,390
Inventories 2,395 2,483 2,273
Prepaid taxes, pension and other expenses 632 713 432
Property and equipment 9,275 8,820 8,236
Special tools 3,378 3,455 2,928
Investments in and advances to unconsolidated subsidiaries
and affiliated companies 3,705 3,685 3,710
Intangible assets 3,841 3,882 4,086
Deferred tax assets 3,046 3,642 3,949
Other assets 2,090 2,051 587
------------- ------------ ------------
TOTAL ASSETS $ 35,823 $ 34,020 $ 32,408
============= ============ ============
LIABILITIES:
Accounts payable $ 6,695 $ 6,074 $ 5,355
Short-term debt 134 100 119
Payments due within one year on long-term debt 543 399 60
Accrued liabilities and expenses 4,646 4,422 3,959
Long-term debt 2,119 2,281 3,427
Accrued noncurrent employee benefits 9,606 10,562 10,518
Other noncurrent liabilities 3,576 3,346 3,334
------------- ------------ -------------
TOTAL LIABILITIES 27,319 27,184 26,772
------------- ------------ -------------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized
20.0 shares; Series A Convertible Preferred Stock;
issued: 1994 and 1993 - 1.7 shares (aggregate
liquidation preference - $863 million) 2 2 2
Common stock - $1 per share par value; authorized
1,000.0 shares; issued: 1994 and 1993 - 364.1 shares 364 364 364
Additional paid-in capital 5,532 5,533 5,538
Retained earnings 2,834 1,170 13
Treasury stock - at cost: 1994 - 9.9 shares;
1993 - 10.4 and 13.2 shares, respectively (228) (233) (281)
------------- ------------ -------------
TOTAL SHAREHOLDERS' EQUITY 8,504 6,836 5,636
------------- ------------ -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 35,823 $ 34,020 $ 32,408
============= ============ ============
This unaudited Supplemental Information, "Chrysler (with CFC and Car Rental
Operations on an Equity Basis)," reflects the financial position of Chrysler
with its investments in CFC and the Car Rental Operations accounted for on an
equity basis rather than as consolidated subsidiaries. This Supplemental
Information does not purport to present financial position in accordance with
generally accepted accounting principles because it does not comply with SFAS
No. 94, "Consolidation of All Majority-Owned Subsidiaries." The financial
covenants contained in certain of Chrysler's credit facilities are based on this
Supplemental Information. In addition, because the operations of CFC and the
Car Rental Operations are different in nature than Chrysler's manufacturing
operations, management believes that this disaggregated financial data enhances
an understanding of the consolidated financial statements.
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Item 5. OTHER INFORMATION - Continued
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1994 and 1993
(In millions of dollars)
1994 1993
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 1,894 $ (3,751)
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 975 829
Equity in earnings of unconsolidated
subsidiaries and affiliates (104) (60)
Deferred income tax provision 659 404
Gain on sales of automotive assets and investments -- (171)
Cumulative effect of changes in accounting principles -- 4,966
Change in accounts receivable (305) (454)
Change in inventories 49 39
Change in prepaid expenses and other assets 14 43
Change in accounts payable and accrued and other liabilities 181 (907)
Other 72 62
--------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,435 1,000
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (1,071) (2,045)
Sales and maturities of marketable securities 896 1,895
Proceeds from sales of automotive assets and investments 62 309
Expenditures for property and equipment (1,031) (646)
Expenditures for special tools (438) (429)
Other 18 (83)
--------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,564) (999)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities) 34 33
Proceeds under revolving lines of credit and long-term
borrowings 1 20
Payments on revolving lines of credit and long-term borrowings (26) (228)
Proceeds from issuance of common stock, net of expenses -- 1,952
Dividends paid (182) (136)
Other 4 57
--------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (169) 1,698
--------- ----------
Change in cash and cash equivalents 1,702 1,699
Cash and cash equivalents at beginning of period 3,777 2,009
--------- ----------
Cash and cash equivalents at end of period $ 5,479 $ 3,708
========= =========
This unaudited Supplemental Information, "Chrysler (with CFC and
Car Rental Operations on an Equity Basis)," reflects the cash
flows of Chrysler with its investments in CFC and the Car Rental
Operations accounted for on an equity basis rather than as
consolidated subsidiaries. This Supplemental Information does
not purport to present cash flows in accordance with generally
accepted accounting principles because it does not comply with
SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries."
The financial covenants contained in certain of Chrysler's credit
facilities are based on this Supplemental Information. In
addition, because the operations of CFC and the Car Rental
Operations are different in nature than Chrysler's manufacturing
operations, management believes that this disaggregated financial
data enhances an understanding of the consolidated financial
statements.
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed with this Report are listed in the Exhibit Index
which immediately precedes such exhibits.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
June 30, 1994.
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CONFORMED
SIGNATURE
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.
CHRYSLER CORPORATION
------------------------
(Registrant)
Date: July 18, 1994 By J. D. DONLON, III
--------------------
J. D. Donlon, III
Vice President and Controller
(Chief Accounting Officer)
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EXHIBIT INDEX
For Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 1994
Exhibit
- - ---------
11 Statement regarding computation of earnings per common share.
(Filed with this report.)
15A Letter, dated July 14, 1994, re unaudited interim information.
(Filed with this report.)
15B Letter, dated July 18, 1994, re unaudited interim information.
(Filed with this report.)
18