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 September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 1-9161
CHRYSLER CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-2673623
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12000 Chrysler Drive, Highland Park, Michigan 48288-0001
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(Address of principal executive offices) (Zip Code)
(313) 956-5741
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(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 354,472,454 shares of common stock outstanding as of
September 30, 1994.
2
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
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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 1. Legal Proceedings 10
Item 5. Other Information 11-13
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
Exhibit Index 16
3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
For the Three and Nine Months Ended September 30, 1994 and 1993
Three Months Ended Nine Months Ended
1994 1993 1994 1993
---------------------- ----------------------
(In millions of dollars)
Sales of manufactured products $ 10,938 $ 8,995 $ 35,858 $ 29,540
Finance and insurance income 323 352 996 1,087
Other income 398 366 1,110 1,021
-------- --------- --------- --------
TOTAL SALES AND REVENUES 11,659 9,713 37,964 31,648
-------- --------- --------- --------
Costs, other than items below 8,672 7,392 27,653 23,571
Depreciation of property and equipment (Note 5) 235 235 741 738
Amortization of special tools (Note 5) 203 116 709 508
Selling and administrative expenses 900 812 2,852 2,469
Pension expense 174 169 509 555
Nonpension postretirement benefit expense 197 200 604 595
Interest expense 215 271 697 863
Gain on sales of automotive assets
and investments (Note 4) -- (94) -- (265)
-------- --------- --------- --------
TOTAL COSTS AND EXPENSES 10,596 9,101 33,765 29,034
-------- --------- --------- --------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 1,063 612 4,199 2,614
Provision for income taxes (Note 6) 412 189 1,654 976
-------- --------- --------- --------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 651 423 2,545 1,638
Cumulative effect of changes in accounting
principles (Note 3) -- -- -- (4,966)
-------- --------- --------- --------
NET EARNINGS (LOSS) $ 651 $ 423 $ 2,545 $ (3,328)
Preferred stock dividends 20 20 60 60
-------- --------- --------- --------
NET EARNINGS (LOSS) ON COMMON STOCK $ 631 $ 403 $ 2,485 $ (3,388)
======== ========= ========= ========
(In dollars or millions of shares)
Primary earnings (loss) per common share:
Earnings before cumulative effect of
changes in accounting principles $ 1.76 $ 1.13 $ 6.92 $ 4.61
Cumulative effect of changes in
accounting principles -- -- -- (14.50)
-------- --------- --------- --------
Net earnings (loss) per common share $ 1.76 $ 1.13 $ 6.92 $ (9.89)
======== ========= ========= ========
Average common and dilutive equivalent
shares outstanding 358.8 357.9 359.3 342.5
Fully diluted earnings per common share:
Earnings before cumulative effect of
changes in accounting principles $ 1.60 $ 1.04 $ 6.24 $ --
Cumulative effect of changes in
accounting principles -- -- -- --
-------- --------- --------- --------
Net earnings per common share $ 1.60 $ 1.04 $ 6.24 $ --
======== ========= ========= ========
Average common and dilutive equivalent
shares outstanding 407.4 406.2 407.8 --
Dividends declared per common share $ 0.25 $ 0.15 $ 0.70 $ 0.45
- -------------------------
See notes to consolidated financial statements.
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Item 1. FINANCIAL STATEMENTS - Continued
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
1994 1993
------------ -----------------------------
Sept. 30 Dec. 31 Sept. 30
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(In millions of dollars)
ASSETS:
Cash and cash equivalents $ 5,241 $ 4,040 $ 4,092
Marketable securities 1,896 1,055 797
Accounts receivable - trade and other 2,317 1,799 1,559
Inventories (Note 2) 3,528 3,629 3,658
Prepaid taxes, pension and other expenses 623 833 884
Finance receivables and retained interests in sold
receivables and other related amounts 11,073 10,208 9,950
Property and equipment 10,081 9,319 8,930
Special tools 3,433 3,455 3,214
Intangible assets 4,213 4,328 4,529
Deferred tax assets (Note 6) 1,349 2,210 2,407
Other assets 2,752 2,954 1,652
------------ ------------ ------------
TOTAL ASSETS $ 46,506 $ 43,830 $ 41,672
============ ============ ============
LIABILITIES:
Accounts payable $ 7,438 $ 6,863 $ 6,462
Short-term debt 3,814 3,297 2,945
Payments due within one year on long-term debt 949 1,283 1,681
Accrued liabilities and expenses 5,101 4,650 4,351
Long-term debt 7,156 6,871 6,768
Accrued noncurrent employee benefits 9,288 10,613 10,033
Other noncurrent liabilities 3,716 3,417 3,425
------------ ------------ ------------
TOTAL LIABILITIES 37,462 36,994 35,665
------------ ------------ ------------
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 5,533 5,533 5,532
Retained earnings 3,371 1,170 374
Treasury stock - at cost: 1994 - 9.6 shares;
1993 - 10.4 and 12.0 shares, respectively (226) (233) (265)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 9,044 6,836 6,007
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,506 $ 43,830 $ 41,672
============ ============ ============
- -------------------------
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 Nine Months Ended September 30, 1994 and 1993
1994 1993
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(In millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 2,545 $ (3,328)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 1,450 1,246
Provision for credit losses 174 184
Deferred income tax provision 839 533
Gain on sales of automotive assets and investments -- (265)
Cumulative effect of changes in accounting principles -- 4,966
Change in accounts receivable (527) 310
Change in inventories (43) (586)
Change in prepaid expenses and other assets 171 (189)
Change in accounts payable and accrued and other liabilities 283 (1,146)
Other 101 18
------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,993 1,743
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (3,393) (3,532)
Sales and maturities of marketable securities 2,530 4,027
Proceeds from sales of automotive assets and investments 62 461
Finance receivables acquired (14,148) (12,854)
Finance receivables collected 2,406 5,689
Proceeds from sales of finance receivables 10,984 8,052
Proceeds from sales of nonautomotive assets -- 2,267
Expenditures for property and equipment (1,627) (1,102)
Expenditures for special tools (706) (826)
Other (87) 165
------------ -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,979) 2,347
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities) 517 2,166
Proceeds under revolving lines of credit and long-term borrowings 561 5,846
Payments on revolving lines of credit and long-term borrowings (608) (12,178)
Proceeds from issuance of common stock, net of expenses -- 1,952
Dividends paid (290) (209)
Other 7 68
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 187 (2,355)
------------ -------------
Change in cash and cash equivalents 1,201 1,735
Cash and cash equivalents at beginning of period 4,040 2,357
------------ -------------
Cash and cash equivalents at end of period $ 5,241 $ 4,092
============= =============
- -------------------------
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 nine months ended September
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 nine
months ended September 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
----------- ----------------------------
Sept. 30 Dec. 31 Sept. 30
----------- ----------- -----------
(In millions of dollars)
Finished products, including service parts $ 1,052 $ 1,016 $ 984
Raw materials, finished production parts and supplies 1,325 1,177 1,196
Vehicles held for short-term lease 1,151 1,436 1,478
----------- ----------- -----------
TOTAL $ 3,528 $ 3,629 $ 3,658
============ ============ ============
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 $13.68 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 $0.82 per common share.
Adoption of SFAS No. 112 did not increase Chrysler's cash expenditures for
postemployment benefits. Previously reported results for the nine months ended
September 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. Based on
its initial assessment, Chrysler believes that the implementation of this new
accounting standard will not have a material impact 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 first and second quarters of 1994, Chrysler sold certain operations
of its Acustar division, and entered into five-year supply agreements with the
purchasers. Aggregate net proceeds from the sales and the supply agreements
were approximately $325 million. The related pretax gains of approximately
$256 million have been deferred and will be recognized over the term of the
supply agreements.
During the third quarter of 1993, Chrysler sold its remaining 23.3 million
shares of Mitsubishi Motors Corporation ("MMC") stock for proceeds of $152
million, resulting in a pretax gain of $94 million ($58 million after
applicable income taxes). 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 MMC 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
Effective April 1, 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 $74 million
and $163 million, respectively, in the three and nine months ended September
30, 1994, and decreased depreciation of property and equipment of $15 million
and $30 million, respectively, for the three and nine months ended September
30, 1994.
Note 6. Income Taxes
During the third quarter of 1993, the Omnibus Budget Reconciliation Act of 1993
was enacted in the United States. This legislation increased the federal
maximum statutory corporate income tax rate to thirty-five percent, retroactive
to January 1, 1993. The adjustment of deferred tax assets and liabilities to
the higher tax rate, partially offset by the increased tax provision on 1993
earnings, resulted in the recognition, in the third quarter of 1993, of a $51
million net decrease in the provision for income taxes.
------------------------------
* * * * *
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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 $1,063 million for the third quarter of 1994,
compared with $612 million for the third quarter of 1993. For the first nine
months of 1994, Chrysler reported earnings before income taxes and the
cumulative effect of changes in accounting principles of $4.2 billion, compared
with $2.6 billion for the comparable period of 1993. Pretax earnings for the
third quarter and first nine months of 1993 included gains on sales of
automotive assets and investments of $94 million and $265 million,
respectively.
The improvement in operating results in the third quarter and first nine
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 profit-based employee costs. Chrysler's
worldwide factory car and truck sales for the three and nine months ended
September 30, 1994 increased 15 percent and 12 percent, respectively, over the
comparable 1993 periods. Combined U.S. and Canadian dealers' days supply of
vehicle inventory was 54 days at September 30, 1994, as compared to 63 days at
December 31, 1993 and 54 days at September 30, 1993.
Net earnings for the third quarter of 1994 were $651 million, or $1.76 per
common share, compared with $423 million, or $1.13 per common share, in the
third quarter of 1993. Net earnings for the three months ended September 30,
1993 included a $51 million favorable adjustment to the income tax provision to
reflect the increase in the U.S. federal tax rate to 35 percent. Net earnings
for the nine months ended September 30, 1994 were $2.5 billion, compared to a
net loss of $3.3 billion for the comparable period of 1993. The net loss for
the first nine months of 1993 resulted from a charge of $4.7 billion 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 nine months of 1993 also included a charge of $283 million 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 third quarter of 1994, North American vehicle industry retail sales,
on a Seasonally Adjusted Annual Rate basis, were 16.2 million cars and trucks,
compared to 15.1 million units for the third quarter of 1993, an increase of 7
percent. Chrysler's U.S. and Canada combined retail car and truck market share
for the third quarter of 1994 decreased slightly from the third quarter of
1993. Chrysler's U.S. and Canada combined retail car and truck market share
for the nine months ended September 30, 1994 remained consistent with the
corresponding 1993 period. Increases in truck market share were offset by
decreases in car market share in both the third quarter and nine month periods,
as shown in the following table:
Third Quarter Nine Months
------------------------------- -------------------------------
Inc./ Inc./
1994 1993 (Dec.) 1994 1993 (Dec.)
-------- ------- -------- -------- -------- --------
U.S. Retail Market Share (1):
Car 8.0% 9.1% (1.1) % 9.1% 9.9% (0.8) %
Truck 20.5% 19.9% 0.6 % 22.2% 21.6% 0.6 %
Combined U.S. Car and Truck 13.1% 13.4% (0.3) % 14.5% 14.5% ---
U.S. and Canada Combined Retail
Market Share (1) 13.5% 13.6% (0.1) % 14.9% 14.9% ---
- ------------------------------
(1) All market share data include fleet sales.
The decline in Chrysler's U.S. car market share for the three and nine
month periods was principally the result of declines in sales of models which
are being replaced in the fall of 1994 with all-new 1995 models, partially
offset by increased sales in the basic middle and basic large segments. The
increases in U.S. truck market share for the three and nine month periods
reflect increased sales of full-size pickup trucks, resulting from the
introduction of Chrysler's all-new Dodge Ram pickup truck in late 1993. Despite
increased retail unit sales in 1994, market shares in the minivan and small
sport-utility segments decreased slightly from the 1993 periods, principally as
a result of market demand in excess of Chrysler's current production
capabilities for minivans and 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 third
quarter of 1994 and 1993 were $82 million and $64 million, respectively. For
the nine months ended September 30, 1994 and 1993, CFC's earnings before income
taxes and the cumulative effect of changes in accounting principles were $226
million and $176 million, respectively. The improved results in the third
quarter and first nine months of 1994 compared to the corresponding periods of
1993 were primarily the result of higher levels of automotive financing and
lower costs of bank facilities, partially offset by reduced retail automotive
margins. CFC reported net earnings of $50 million in the third quarter of
1994, compared to $22 million in the third quarter of 1993. CFC's net earnings
for the third quarter of 1993 were reduced by a $16 million adjustment to
reflect a retroactive increase in the U.S. federal income tax rate to 35
percent. CFC's net earnings for the first nine months of 1994 and 1993 were
$141 million and $73 million, respectively. CFC's net earnings for the first
nine 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 nine months
of 1994, North American automobile industry sales increased from the 1993
levels, as the U.S. economic recovery continued. Overall, Chrysler experienced
sales growth consistent with the North American automobile industry. In
response to the 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 addition of up to 6,000 employees by the end of 1996.
COMPARISON OF SELECTED ELEMENTS OF REVENUE AND COSTS
Chrysler's total sales and revenues for the third quarter and first nine
months of 1994 and 1993 were as follows:
Third Quarter Nine Months
------------------------------------ -----------------------------------
Inc./ Inc./
1994 1993 (Dec.) 1994 1993 (Dec.)
---------- ---------- -------- ---------- ---------- --------
(In millions of dollars) (In millions of dollars)
Sales of manufactured products $ 10,938 $ 8,995 22 % $ 35,858 $ 29,540 21 %
Finance and insurance income 323 352 (8)% 996 1,087 (8)%
Other income 398 366 9 % 1,110 1,021 9 %
---------- ---------- ---------- ----------
Total sales and revenues $ 11,659 $ 9,713 20 % $ 37,964 $ 31,648 20 %
========== ========== ========== ==========
The increase in sales of manufactured products in the third quarter of
1994 primarily reflects the 15 percent increase in factory unit sales as
compared to the third quarter of 1993, and an increase in the average revenue
per unit, net of sales incentives, to $18,252 in the third quarter of 1994. The
increase in sales of manufactured products in the first nine months of 1994
primarily reflects the 12 percent increase in factory unit sales as compared to
the first nine months of 1993, and an increase in the average revenue per unit,
net of sales incentives, to $17,533 for the nine months ended September 30,
1994. The increase in average revenue per unit in both 1994 periods was due to
pricing actions, including lower per unit sales incentives, and sales of a
larger proportion of trucks.
The decrease in finance and insurance income in the three and nine
months ended September 30, 1994 as compared to the corresponding 1993 periods
was primarily the result of reduced nonautomotive financing revenue, reflecting
liquidations of CFC's nonautomotive portfolios. Total automotive financing
volume in the third quarter and first nine months of 1994 was $16.3 billion and
$51.4 billion, respectively, compared to $13.7 billion and $43.4 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 nine months ended September 30, 1994 and 1993 were as follows:
7
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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
Third Quarter Nine Months
-------------------- -------------------
1994 1993 1994 1993
------- ------- ------- -------
U.S. Penetration:
Retail 23 % 24 % 24 % 24 %
Wholesale 76 % 77 % 74 % 74 %
Number of New Chrysler Vehicles Financed
in the U.S. (in thousands):
Retail 113 117 399 365
Wholesale 371 332 1,216 1,105
The increase in other income resulted principally from increased interest
income for the three and nine months ended September 30, 1994, reflecting
Chrysler's increased cash, cash equivalents and marketable securities balances
in 1994 as compared to 1993.
Total costs and expenses for the third quarter and first nine months of 1994
and 1993 were as follows:
Third Quarter Nine Months
------------------------------------ ------------------------------------
Inc./ Inc./
1994 1993 (Dec.) 1994 1993 (Dec.)
----------- ----------- -------- ---------- ---------- -------
(In millions of dollars) (In millions of dollars)
Costs, other than items below $ 8,672 $ 7,392 17 % $ 27,653 $ 23,571 17 %
Depreciation of property and
equipment 235 235 -- 741 738 --
Amortization of special tools 203 116 75 % 709 508 40 %
Selling and administrative expenses 900 812 11 % 2,852 2,469 16 %
Pension expense 174 169 3 % 509 555 (8)%
Nonpension postretirement
benefit expense 197 200 (2)% 604 595 2 %
Interest expense 215 271 (21)% 697 863 (19)%
Gain on sales of automotive
assets and investments -- (94) -- -- (265) --
----------- ----------- ---------- ----------
Total costs and expenses $ 10,596 $ 9,101 16 % $ 33,765 $ 29,034 16 %
=========== =========== ========== ==========
Costs, other than items below increased in the third quarter and first
nine 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 79 percent and 77 percent of sales of manufactured products for
the respective three and nine month periods ended September 30, 1994, compared
to 82 percent and 80 percent for the respective three and nine month periods
ended September 30, 1993. These decreases were primarily attributable to greater
capacity utilization.
Depreciation of property and equipment for the third quarter and first
nine months of 1994 remained consistent with the comparable 1993 periods as
increases resulting from Chrysler's facility modernization program were
substantially offset by lower depreciation at CFC reflecting the reductions in
CFC's nonautomotive operations.
Special tooling amortization increased significantly in the third
quarter and first nine months of 1994 compared with the comparable 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 third
quarter of 1994, as compared to the third quarter of 1993 was principally due to
increased advertising. For the nine-month periods, the increase in 1994
primarily resulted from increased advertising expenses and 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 for the third quarter of 1994 remained comparable with the
third quarter of 1993, while decreasing for the first nine months of 1994 as
compared to the first nine months of 1993. Plan funding improvements,
including the $5.4 billion in contributions made in 1993 and 1994, resulted in
reductions to pension expense. These reductions were partially offset by
increases resulting from the reduction in the discount rate used to measure
pension expense and scheduled increases in benefits included in the 1993
national contracts with Chrysler's principal collective bargaining units.
Nonpension postretirement benefit expense for the three and nine month
periods ended September 30, 1994 remained comparable with the 1993 periods, as
increases resulting from the decrease in the discount rate used to measure
nonpension postretirement benefit expense were offset by cost savings
associated with the implementation of new managed care initiatives.
The decrease in interest expense for the third quarter of 1994 was
primarily due to lower average automotive borrowings, resulting from Chrysler's
repayment of $1.2 billion of debt since September 30, 1993. Interest expense
decreased for the first nine months of 1994 primarily due to lower average
borrowings resulting from the repayment of automotive borrowings and CFC's 1993
sales of nonautomotive operations. CFC's average effective cost of borrowings
was 7.7 percent and 8.2 percent in the third quarter and first nine months of
1994, respectively, compared to 8.9 percent and 8.7 percent in the
corresponding periods of 1993. The decrease in the 1994 periods primarily
reflects lower term debt and bank facility costs, partially offset by higher
short-term interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's combined cash, cash equivalents and marketable securities
totaled $7.1 billion at September 30, 1994 (including $507 million held by
CFC), an increase of $2.0 billion from December 31, 1993. The increase in the
first nine 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 $1.9 billion to
the pension fund in the first nine 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 estimates that contributions during the fourth quarter of
1994 will not exceed $650 million.
During the third quarter of 1994, Chrysler replaced its existing $1.5
billion revolving credit agreement, which was to expire in June 1996, with a
new $1.7 billion agreement, expiring in July 1999. The new agreement provides
for reduced interest rates and commitment fees, less restrictive financial
covenants and the removal of the lenders' ability to obtain security interests
in Chrysler's assets. No borrowings have been outstanding under either
revolving credit agreement during 1994.
At September 30, 1994, Chrysler (excluding CFC), had debt maturities
totaling $243 million through 1996. Chrysler believes that cash from
operations and its cash position will be sufficient to enable it to meet its
capital expenditure, pension contribution, 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 $5.2 billion of net proceeds from the sale of retail receivables
in the first nine months of 1994, compared to $5.7 billion in the first nine
months of 1993. In addition, CFC's revolving wholesale receivable sale
arrangements provided funding which aggregated $3.6 billion and $4.1 billion at
September 30, 1994 and 1993, respectively.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
LIQUIDITY AND CAPITAL RESOURCES - Continued
At September 30, 1994, CFC had U.S. and Canadian credit facilities totaling
$5.2 billion and receivable sale agreements totaling $1.7 billion. At
September 30, 1994, no amounts were outstanding under CFC's U.S. and Canadian
credit facilities or receivable sale agreements.
At September 30, 1994, CFC had debt maturities of $4.1 billion during the
remainder of 1994 (including $3.1 billion of commercial paper), $625 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. Based on
its initial assessment, Chrysler believes that the implementation of this new
accounting standard will not have a material impact 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 LLP, Chrysler's independent public accountants,
performed a review of the financial statements for the three and nine months
ended September 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 LLP
did not express an opinion on the aforementioned data. Refer to the
Independent Accountants' Report included at Exhibit 15A.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On July 8, 1994, Chrysler entered into a Consent Decree with the Ohio
Environmental Protection Agency that resolved previously reported allegations
of improper waste disposal at a Chrysler facility in Dayton, Ohio. Pursuant to
the Consent Decree, Chrysler paid a civil penalty of $164,000.
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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 Nine Months Ended September 30, 1994 and 1993
Three Months Ended Nine Months Ended
----------------------- ------------------------
1994 1993 1994 1993
-------- ------- ---------- --------
(In millions of dollars)
Sales of manufactured products $ 11,017 $ 8,962 $ 36,238 $ 29,990
Equity in earnings of unconsolidated subsidiaries
and affiliates 65 68 169 128
Interest and other income 80 57 212 167
-------- ------- ---------- --------
TOTAL SALES AND REVENUES 11,162 9,087 36,619 30,285
-------- ------- ---------- --------
Costs, other than items below 8,540 7,155 27,471 23,432
Depreciation of property and equipment 217 207 686 644
Amortization of special tools 203 116 709 508
Selling and administrative expenses 714 627 2,278 1,919
Pension expense 172 166 503 548
Nonpension postretirement benefit expense 196 198 601 591
Interest expense 57 100 172 294
Gain on sales of automotive assets
and investments -- (94) -- (265)
-------- ------- ---------- --------
TOTAL COSTS AND EXPENSES 10,099 8,475 32,420 27,671
-------- ------- ---------- --------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 1,063 612 4,199 2,614
Provision for income taxes 412 189 1,654 976
-------- ------- ---------- --------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 651 423 2,545 1,638
Cumulative effect of changes in
accounting principles -- -- -- (4,966)
-------- ------- ---------- --------
NET EARNINGS (LOSS) $ 651 $ 423 $ 2,545 $ (3,328)
Preferred stock dividends 20 20 60 60
-------- ------- ---------- --------
NET EARNINGS (LOSS) ON COMMON STOCK $ 631 $ 403 $ 2,485 $ (3,388)
======== ======= ========== ========
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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SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
BALANCE SHEET
1994 1993
------------ -----------------------------
Sept. 30 Dec. 31 Sept. 30
------------ ------------- ------------
(In millions of dollars)
ASSETS:
Cash and cash equivalents $ 5,070 $ 3,777 $ 3,898
Marketable securities 1,559 707 458
Accounts receivable - trade and other 862 805 1,402
Inventories 2,651 2,483 2,458
Prepaid taxes, pension and other expenses 564 713 745
Property and equipment 9,594 8,820 8,432
Special tools 3,433 3,455 3,214
Investments in and advances to unconsolidated subsidiaries
and affiliated companies 3,665 3,685 3,673
Intangible assets 3,827 3,882 4,071
Deferred tax assets 2,887 3,642 3,871
Other assets 2,128 2,051 632
----------- ------------ ------------
TOTAL ASSETS $ 36,240 $ 34,020 $ 32,854
============ ============ ============
LIABILITIES:
Accounts payable $ 6,977 $ 6,074 $ 5,856
Short-term debt 142 100 101
Payments due within one year on long-term debt 181 399 1,170
Accrued liabilities and expenses 4,835 4,422 4,089
Long-term debt 2,104 2,281 2,323
Accrued noncurrent employee benefits 9,242 10,562 9,982
Other noncurrent liabilities 3,715 3,346 3,326
----------- ------------ ------------
TOTAL LIABILITIES 27,196 27,184 26,847
----------- ------------ ------------
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 5,533 5,533 5,532
Retained earnings 3,371 1,170 374
Treasury stock - at cost: 1994 - 9.6 shares;
1993 - 10.4 and 12.0 shares, respectively (226) (233) (265)
----------- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 9,044 6,836 6,007
----------- ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 36,240 $ 34,020 $ 32,854
============ ============ ============
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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SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1994 and 1993
1994 1993
------------ -------------
(In millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 2,545 $ (3,328)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 1,395 1,152
Equity in earnings of unconsolidated subsidiaries and affiliates (169) (128)
Deferred income tax provision 839 533
Gain on sales of automotive assets and investments -- (265)
Cumulative effect of changes in accounting principles -- 4,966
Change in accounts receivable (58) (445)
Change in inventories (207) (146)
Change in prepaid expenses and other assets (12) (316)
Change in accounts payable and accrued and other liabilities 494 (872)
Other 156 158
------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,983 1,309
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (2,095) (2,376)
Sales and maturities of marketable securities 1,234 2,877
Proceeds from sales of automotive assets and investments 62 461
Expenditures for property and equipment (1,600) (1,092)
Expenditures for special tools (706) (826)
Other 50 (74)
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (3,055) (1,030)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities) 42 14
Proceeds under revolving lines of credit and long-term borrowings 7 20
Payments on revolving lines of credit and long-term borrowings (400) (235)
Proceeds from issuance of common stock, net of expenses -- 1,952
Dividends paid (290) (209)
Other 6 68
------------ -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (635) 1,610
------------ -------------
Change in cash and cash equivalents 1,293 1,889
Cash and cash equivalents at beginning of period 3,777 2,009
------------ -------------
Cash and cash equivalents at end of period $ 5,070 $ 3,898
============ =============
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 September 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: October 14, 1994 By /s/ 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 September 30, 1994
Exhibit
4E Conformed copy of $1,675,000,000 Revolving Credit Agreement, dated
as of July 29, 1994, among Chrysler Corporation, the several Banks
party to the Agreement and Chemical Bank, as Agent for the Banks.
(Filed with this report.)
11 Statement regarding computation of earnings per common share.
(Filed with this report.)
15A Letter, dated October 11, 1994, re unaudited interim information.
(Filed with this report.)
15B Letter, dated October 14, 1994, re unaudited interim information.
(Filed with this report.)
27 Financial Data Schedule for nine months ended September 30, 1994.
16