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 March 31, 1995 ------------------------------ 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 369,075,109 shares of common stock outstanding as of March 31, 1995. 2 CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX PAGE NO. -------- Part I. FINANCIAL INFORMATION Item 1. Financial Statements 1-4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-9 Part II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 5. Other Information 10-12 Item 6. Exhibits and Reports on Form 8-K 13 Signature Page 14 Exhibit Index 15 3 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (unaudited) For the Three Months Ended March 31, 1995 and 1994 (In millions of dollars) 1995 1994 ------------ ------------ Sales of manufactured products $ 12,829 $ 12,551 Finance and insurance income 380 344 Other income 404 329 ----------- ----------- TOTAL REVENUES 13,613 13,224 ----------- ----------- Costs, other than items below 10,516 9,606 Depreciation of property and equipment 271 277 Amortization of special tools 292 230 Selling and administrative expenses 1,008 955 Pension expense 105 177 Nonpension postretirement benefit expense 206 203 Interest expense 245 233 ----------- ----------- TOTAL EXPENSES 12,643 11,681 ----------- ----------- EARNINGS BEFORE INCOME TAXES 970 1,543 Provision for income taxes 378 605 ----------- ----------- NET EARNINGS $ 592 $ 938 Preferred stock dividends 14 20 ----------- ----------- NET EARNINGS ON COMMON STOCK $ 578 $ 918 =========== =========== (In dollars or millions of shares) PRIMARY EARNINGS PER COMMON SHARE $ 1.59 $ 2.55 =========== =========== Average common and dilutive equivalent shares outstanding 362.5 360.1 FULLY DILUTED EARNINGS PER COMMON SHARE $ 1.46 $ 2.30 =========== =========== Average common and dilutive equivalent shares outstanding 404.3 408.3 DIVIDENDS DECLARED PER COMMON SHARE $ 0.40 $ 0.20 See notes to consolidated financial statements. 1 4 Item 1. FINANCIAL STATEMENTS - CONTINUED CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In millions of dollars) 1995 1994 ------------- ------------------------------ March 31 Dec. 31 March 31 ------------- ------------- ------------- (unaudited) (unaudited) ASSETS: Cash and cash equivalents $ 4,042 $ 5,145 $ 5,385 Marketable securities 4,292 3,226 1,105 Accounts receivable, net - trade and other 1,851 1,695 1,730 Inventories (Note 2) 3,649 3,356 3,462 Prepaid taxes, pension and other expenses 1,191 1,330 773 Finance receivables, retained interests in sold receivables and other related amounts 13,141 12,433 11,359 Property and equipment 11,302 11,073 9,570 Special tools 3,629 3,643 3,371 Intangible assets 2,141 2,162 4,304 Deferred tax assets 418 395 1,879 Other assets 5,094 5,081 2,720 ----------- ----------- ----------- TOTAL ASSETS $ 50,750 $ 49,539 $ 45,658 =========== =========== =========== LIABILITIES: Accounts payable $ 7,996 $ 7,826 $ 7,094 Short-term debt 4,437 4,645 3,687 Payments due within one year on long-term debt 760 811 1,196 Accrued liabilities and expenses 5,695 5,582 5,061 Long-term debt 8,642 7,650 7,343 Accrued noncurrent employee benefits 8,800 8,595 10,065 Other noncurrent liabilities 3,597 3,736 3,547 ----------- ----------- ----------- TOTAL LIABILITIES 39,927 38,845 37,993 ----------- ----------- ----------- SHAREHOLDERS' EQUITY: (shares in millions) (Notes 5, 6 and 7) Preferred stock - $1 per share par value; authorized 20.0 shares; Series A Convertible Preferred Stock; issued and outstanding: 1995 and 1994 - 0.9 and 1.7 shares, respectively (aggregate liquidation preference $478 million and $863 million, respectively) 1 2 2 Common stock - $1 per share par value; authorized 1,000.0 shares; issued: 1995 and 1994 - 385.4 and 364.1 shares, respectively 385 364 364 Additional paid-in capital 5,540 5,536 5,532 Retained earnings 5,462 5,006 1,996 Treasury stock - at cost: 1995 - 16.4 shares; 1994 - 9.0 and 10.0 shares, respectively (565) (214) (229) ----------- ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 10,823 10,694 7,665 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,750 $ 49,539 $ 45,658 =========== =========== =========== See notes to consolidated financial statements. 2 5 Item 1. FINANCIAL STATEMENTS - CONTINUED CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) For the Three Months Ended March 31, 1995 and 1994 (In millions of dollars) 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 592 $ 938 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 563 507 Provision for credit losses 88 48 Deferred income taxes 119 287 Change in receivables 334 (889) Change in inventories (294) 144 Change in prepaid expenses and other assets 44 18 Change in accounts payable and accrued and other liabilities 324 439 Other 74 7 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,844 1,499 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (2,114) (1,097) Sales and maturities of marketable securities 1,072 1,038 Finance receivables acquired (5,925) (4,383) Finance receivables collected 1,138 762 Proceeds from sales of finance receivables 3,587 3,326 Expenditures for property and equipment (617) (464) Expenditures for special tools (245) (148) Other (73) 126 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (3,177) (840) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt (less than 90-day maturities) (208) 390 Proceeds from long-term borrowings 1,470 610 Payments on long-term borrowings (538) (226) Repurchase of common stock (Note 6) (338) -- Dividends paid (162) (91) Other 6 3 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 230 686 ----------- ----------- Change in cash and cash equivalents (1,103) 1,345 Cash and cash equivalents at beginning of period 5,145 4,040 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,042 $ 5,385 =========== =========== See notes to consolidated financial statements. 3 6 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 months ended March 31, 1995 and 1994 reflect all adjustments, consisting of only normal and recurring items, 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 months ended March 31, 1995 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, 1994. Amounts for 1994 have been reclassified to conform with current period classifications. NOTE 2. INVENTORIES Inventories, summarized by major classification, were as follows: 1995 1994 ------------- ------------------------------ March 31 Dec. 31 March 31 ------------- ------------- ------------- (In millions of dollars) Finished products, including service parts $ 1,235 $ 1,145 $ 1,013 Raw materials, finished production parts and supplies 1,344 1,223 1,138 Vehicles held for short-term lease 1,070 988 1,311 ----------- ----------- ----------- TOTAL $ 3,649 $ 3,356 $ 3,462 =========== =========== =========== NOTE 3. CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1995, Chrysler adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." These new accounting standards require creditors to evaluate the collectibility of both contractual interest and principal of receivables when evaluating the need for a loss accrual. The implementation of these new accounting standards did not have a material impact on Chrysler's consolidated operating results or financial position. NOTE 4. SALES OF AUTOMOTIVE ASSETS AND INVESTMENTS During the first quarter of 1994, Chrysler sold its wiring harness operations and entered into a long-term supply agreement with the purchaser. Aggregate net proceeds from the sale and the supply agreement were $222 million. The related pretax gain of $196 million was deferred and is being recognized over the five-year term of the supply agreement. NOTE 5. PREFERRED STOCK CONVERSION During the first quarter of 1995, holders of the Series A Convertible Preferred Stock converted 769,597 shares of Preferred Stock into 21.4 million shares of common stock. NOTE 6. COMMON STOCK REPURCHASE In December 1994, Chrysler's Board of Directors approved a $1 billion common stock repurchase program, subject to market and business conditions. During the first quarter of 1995, Chrysler repurchased 8.6 million shares of its common stock under this program at a cost of $369 million (including $31 million in unsettled repurchases). NOTE 7. SUBSEQUENT EVENT On April 12, 1995, Tracinda Corporation ("Tracinda"), which owns approximately 10 percent of the outstanding common stock of Chrysler, sent the Company a letter proposing to acquire the remaining 90 percent of Chrysler's common stock at $55 per share. Chrysler's Board of Directors stated that the Company is not for sale and that the letter received from Tracinda would be reviewed by the Company's Board of Directors and with the Company's financial and legal advisors. 4 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL REVIEW Chrysler reported earnings before income taxes of $970 million for the first quarter of 1995, compared with $1,543 million for the first quarter of 1994. Net earnings for the first quarter of 1995 were $592 million, or $1.59 per common share, compared with $938 million, or $2.55 per common share, in the first quarter of 1994. The lower operating results in the first quarter of 1995 compared to the first quarter of 1994 resulted primarily from lost production and costs associated with the model changeover and launch of Chrysler's all-new minivans, costs associated with the voluntary minivan owner service action, higher material costs, a lower mix of higher-margin vehicles, and lower factory unit sales in Mexico. Production losses and costs associated with the model changeover and launch of the all-new minivans will continue through the second quarter of 1995. Chrysler's worldwide factory car and truck sales for the three months ended March 31, 1995 were 714,765 units, a 3 percent decrease from the first quarter of 1994. Combined U.S. and Canadian dealers' days supply of vehicle inventory was 66 days at March 31, 1995, as compared to 50 days at March 31, 1994. Chrysler's revenues and results of operations are principally derived from the U.S. and Canada automotive marketplace. In the first quarter of 1995, U.S. and Canada vehicle industry retail sales, on a Seasonally Adjusted Annual Rate basis, were 16.5 million cars and trucks, compared to 17.2 million units for the first quarter of 1994, a decrease of 4 percent. This decrease is primarily due to a slowdown in economic growth and higher interest rates, which resulted in Chrysler increasing retail incentives in the first quarter of 1995 and lowering 1995 planned production. The higher incentives will likely continue throughout the 1995 model year. Chrysler's U.S. and Canada combined retail car and truck market share for the first quarter of 1995 was lower than the first quarter of 1994. Increases in car market share were offset by decreases in truck market share in the first quarter of 1995, as shown in the following table: First Quarter ---------------------------------------------- Increase/ 1995 1994 (Decrease) ----------- ----------- ---------- U.S. Retail Market(1): Car sales 214,036 213,982 54 Car market share 10.6% 9.8% 0.8% Truck sales 310,544 351,233 (40,689) Truck market share 20.2% 23.2% (3.0)% Combined car and truck sales 524,580 565,215 (40,635) Combined car and truck market share 14.7% 15.3% (0.6)% U.S. and Canada Retail Market(1): Combined car and truck sales 573,132 625,295 (52,163) Combined car and truck market share 15.0% 15.7% (0.7)% ______________________ (1) All retail sale and market share data include fleet sales. Chrysler's U.S. car market share increased in the first quarter of 1995 as compared to the first quarter of 1994 as a result of increased sales of Chrysler's midsize sedans and coupes. The decrease in Chrysler's U.S. truck market share for the first quarter of 1995 as compared to first quarter of 1994 reflects a decline in minivan and Jeep(R) sales, partially offset by an increase in pickup truck sales. Chrysler's all-new 1996 minivans will be introduced in the second quarter of 1995. 5 8 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 first quarter of 1995 and 1994 were $109 million and $75 million, respectively. The improved results in the first quarter of 1995 compared to the first quarter of 1994 were primarily the result of higher levels of automotive financing and lower bank costs partially offset by continuing interest rate pressure on automotive consumer lending margins. CFC reported net earnings of $69 million and $47 million for the first quarter of 1995 and 1994, respectively. Sales of Chrysler vehicles manufactured in Mexico and exported to the U.S. and Canada in the first quarter of 1995 increased 5 percent from the first quarter of 1994, to 35,400 vehicles. Due to the impact of the devaluation of the peso, vehicles manufactured in Mexico and sold in Mexico decreased to 5,800 units in the first quarter of 1995 from 24,400 units in the first quarter of 1994. The impact of the lower sales in Mexico was partially offset by increased profits on sales of vehicles manufactured in Mexico and exported to the U.S. and Canada. Sales in Mexico of vehicles manufactured in the U.S. and Canada were not significant in the first quarter of 1995 and 1994. Chrysler cannot predict the extent that the devaluation of the peso and the resulting uncertainty surrounding the Mexican economic and political environments will have on its operating results in 1995. The National Highway Traffic Safety Administration ("NHTSA") conducted an engineering analysis of the rear liftgate latches on all Chrysler 1984-1994 model year minivans. Although NHTSA has not concluded that the rear liftgate latches are defective, to alleviate customer concerns, Chrysler announced in the first quarter of 1995, a voluntary owner service action to replace the rear liftgate latches on all of its 1984-1994 minivans. Chrysler believes that this service action will conclude this matter. The estimated pretax cost of the voluntary owner service action of $115 million is included in first quarter results. Chrysler has benefitted from several economic factors over the past few years, including: (1) continuing economic recoveries and relatively strong automobile sales in the U.S. and Canada, where Chrysler's sales are concentrated, (2) a cost advantage in comparison to vehicles manufactured in Japan (or vehicles containing significant material components manufactured in Japan) as a result of favorable exchange rates between the Japanese yen and the U.S. dollar, and (3) a shift in U.S. and Canada consumer preferences toward trucks, as Chrysler manufactures a higher proportion of trucks to total vehicles than its principal competitors in the U.S. and Canada. A significant deterioration of any of these factors could adversely affect Chrysler's operating results. COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES Chrysler's total revenues for the three months ended March 31, 1995 and 1994 were as follows: First Quarter ----------------------------------- Increase/ 1995 1994 (Decrease) -------- -------- ---------- (In millions of dollars) Sales of manufactured products $ 12,829 $ 12,551 2% Finance and insurance income 380 344 10% Other income 404 329 23% -------- -------- Total revenues $ 13,613 $ 13,224 3% ======== ======== The increase in sales of manufactured products in the first quarter of 1995 primarily reflects an increase in average revenue per unit, net of sales incentives, from $16,823 in the first quarter of 1994 to $17,758 in the first quarter of 1995, partially offset by a 3 percent decrease in factory unit sales in the first quarter of 1995. The increase in finance and insurance income in the first quarter of 1995, as compared to the first quarter of 1994, was primarily attributable to higher levels of automotive financing volume. Total automotive financing volume in the first quarter of 1995 and 1994 was $20.5 billion and $17.1 billion, respectively. 6 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES - CONTINUED 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 months ended March 31, 1995 and 1994 were as follows: First Quarter --------------------- 1995 1994 --------- -------- U.S. penetration: Retail 30% 24% Wholesale 72% 71% Number of new Chrysler vehicles financed in the U.S. (in thousands): Retail 159 137 Wholesale 427 423 The increase in other income for the three months ended March 31, 1995 as compared to the first quarter of 1994, was principally due to increased automotive interest income resulting from higher cash, cash equivalents and marketable securities balances and higher interest rates. Total expenses for the first quarter of 1995 and 1994 were as follows: First Quarter -------------------------------------- Increase/ 1995 1994 (Decrease) ----------- ----------- ---------- (In millions of dollars) Costs, other than items below $ 10,516 $ 9,606 9% Depreciation of property and equipment 271 277 (2)% Amortization of special tools 292 230 27% Selling and administrative expenses 1,008 955 6% Pension expense 105 177 (41)% Nonpension postretirement benefit expense 206 203 1% Interest expense 245 233 5% ---------- ---------- Total expenses $ 12,643 $ 11,681 8% ========== ========== Costs, other than items below increased in the first quarter of 1995, as compared with the first quarter of 1994, primarily as a result of increased product costs, costs associated with the changeover and launch of Chrysler's all-new minivans and the voluntary minivan owner service action, partially offset by the effect of a 3 percent decrease in factory unit sales. The increase in product costs resulted from higher material costs and increased product content. Costs, other than items below were 82 percent and 77 percent of sales of manufactured products for the three months ended March 31, 1995 and 1994, respectively. Depreciation of property and equipment for the first quarter of 1995 decreased as compared to the first quarter of 1994. Decreases resulting from the second quarter 1994 revisions to the estimated service lives of certain classes of property and equipment were partially offset by increases resulting from Chrysler's facility modernization program. Special tooling amortization increased in the first quarter of 1995, as compared with the first quarter of 1994, primarily as a result of the shortening of the remaining service lives of certain special tools in the second quarter of 1994. The increase in selling and administrative expenses for the first quarter of 1995, as compared to the first quarter of 1994, was principally due to increased advertising related to the introductions of the all-new sedans, Chrysler Cirrus/Dodge Stratus and midsize coupes, Chrysler Sebring/Dodge Avenger. 7 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES - CONTINUED Pension expense for the first quarter of 1995 decreased as compared to the first quarter of 1994 due to improved funding of the pension plans and an increase in the discount rate used to determine pension expense. The increase in interest expense for the first quarter of 1995 was primarily due to higher average CFC borrowings. CFC's average effective cost of borrowings was 7.9 percent and 8.4 percent in the first quarter of 1995 and 1994, respectively. This improvement in the average effective borrowing costs reflects lower bank facility costs and higher levels of commercial paper. LIQUIDITY AND CAPITAL RESOURCES Chrysler's combined cash, cash equivalents and marketable securities totaled $8.3 billion at March 31, 1995 (including $1.0 billion held by CFC), a slight decrease from December 31, 1994. The decrease in the first quarter of 1995 was the result of profit-based employee payments, capital expenditures, debt repayments and common stock repurchases, largely offset by cash generated by operating activities. In December 1994, Chrysler's Board of Directors approved a $1 billion common stock repurchase program, subject to market and business conditions. During the first quarter of 1995, Chrysler repurchased 8.6 million shares of its common stock under this program at a cost of $369 million (including $31 million in unsettled repurchases). Additionally, in the first quarter of 1995, holders of the Series A Convertible Preferred Stock converted 769,597 shares of Preferred Stock into 21.4 million shares of common stock. At March 31, 1995, Chrysler (excluding CFC), had debt maturities totaling $95 million through 1997. During the first quarter of 1995, Chrysler redeemed $300 million of its 13% Debentures Due 1997 and repaid $163 million of other debt. At March 31, 1995, Chrysler had a $1.7 billion revolving credit agreement which expires in July 1999. None of the commitment was drawn upon during the first quarter of 1995. Chrysler believes that cash from operations and its cash position will be sufficient to enable it to meet its capital expenditure, debt maturity, common stock repurchase and other funding requirements. Chrysler's ability to market its products successfully depends significantly on the availability of vehicle financing for its dealers and, to a lesser extent, the availability of financing for retail and fleet customers, both of which CFC provides. Receivable sales continued to be a significant source of funding in the first quarter of 1995 as CFC realized $1.1 billion of net proceeds from the sale of automotive retail receivables, compared to $1.7 billion of net proceeds in the first quarter of 1994. In addition, CFC's revolving wholesale receivable sale arrangements provided funding which aggregated $5.8 billion and $4.6 billion at March 31, 1995 and 1994, respectively. At March 31, 1995, CFC had U.S. and Canadian credit facilities totaling $5.2 billion and receivable sale agreements totaling $1.7 billion. At March 31, 1995, no amounts were outstanding under CFC's U.S. and Canadian revolving credit or receivable sale agreements. During the first quarter of 1995, CFC began the process of negotiating the early replacement of its U.S. and Canadian revolving credit facilities and receivable sale agreements. At March 31, 1995, CFC had contractual debt maturities of $4.9 billion during the remainder of 1995 (including $4.1 billion of short-term notes) and $1.6 billion in 1996. CFC believes that cash provided by operations, receivable sales, access to term debt markets, and issuance of commercial paper will provide sufficient liquidity to meet its funding requirements. SUBSEQUENT EVENT On April 12, 1995, Tracinda Corporation ("Tracinda"), which owns approximately 10 percent of the outstanding common stock of Chrysler, sent the Company a letter proposing to acquire the remaining 90 percent of Chrysler's common stock at $55 per share. Chrysler's Board of Directors stated that the Company is not for sale and that the letter received from Tracinda would be reviewed by the Company's Board of Directors and with the Company's financial and legal advisors. 8 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED LIQUIDITY AND CAPITAL RESOURCES - CONTINUED REVIEW BY INDEPENDENT ACCOUNTANTS Deloitte & Touche LLP, Chrysler's independent public accountants, performed a review of the financial statements for the three months ended March 31, 1995 and 1994 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 The State of Wisconsin filed a lawsuit against Chrysler Outboard Corporation, a Chrysler subsidiary now known as Beaver Dam Products Corporation, in February 1995 alleging improper disposal of hazardous waste in 1969. This lawsuit, which seeks unspecified damages, may result in the imposition of civil penalties in excess of $100,000. 9 12 Item 5. OTHER INFORMATION SUPPLEMENTAL INFORMATION CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS) STATEMENT OF EARNINGS (unaudited) For the Three Months Ended March 31, 1995 and 1994 (In millions of dollars) 1995 1994 ------------ ------------ Sales of manufactured products $ 12,945 $ 12,634 Equity in earnings of unconsolidated subsidiaries and affiliates 97 50 Interest and other income 121 55 ----------- ----------- TOTAL REVENUES 13,163 12,739 ----------- ----------- Costs, other than items below 10,429 9,518 Depreciation of property and equipment 254 255 Amortization of special tools 292 230 Selling and administrative expenses 852 764 Pension expense 103 175 Nonpension postretirement benefit expense 204 202 Interest expense 59 52 ----------- ----------- TOTAL EXPENSES 12,193 11,196 ----------- ----------- EARNINGS BEFORE INCOME TAXES 970 1,543 Provision for income taxes 378 605 ----------- ----------- NET EARNINGS $ 592 $ 938 =========== =========== This 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 covenant contained in Chrysler's revolving credit facility is 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. 10 13 Item 5. OTHER INFORMATION - CONTINUED SUPPLEMENTAL INFORMATION CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS) BALANCE SHEET (unaudited) (In millions of dollars) 1995 1994 ------------- ------------------------------ March 31 Dec. 31 March 31 ------------- ------------- ------------- ASSETS: Cash and cash equivalents $ 3,716 $ 4,972 $ 5,185 Marketable securities 3,569 2,643 751 Accounts receivable, net - trade and other 610 459 959 Inventories 2,842 2,645 2,416 Prepaid taxes, pension and other expenses 1,123 1,272 680 Property and equipment 10,584 10,347 8,921 Special tools 3,629 3,643 3,371 Investments in and advances to unconsolidated subsidiaries and affiliated companies 3,662 3,642 3,688 Intangible assets 1,769 1,781 3,864 Deferred tax assets 1,940 1,951 3,363 Other assets 4,750 4,722 2,089 ------------ ------------ ------------ TOTAL ASSETS $ 38,194 $ 38,077 $ 35,287 ============ ============ ============ LIABILITIES: Accounts payable $ 7,569 $ 7,403 $ 6,592 Short-term debt 141 140 103 Payments due within one year on long-term debt 27 187 547 Accrued liabilities and expenses 5,429 5,333 4,785 Long-term debt 1,803 2,097 2,124 Accrued noncurrent employee benefits 8,745 8,547 10,013 Other noncurrent liabilities 3,657 3,676 3,458 ------------ ------------ ------------ TOTAL LIABILITIES 27,371 27,383 27,622 ------------ ------------ ------------ SHAREHOLDERS' EQUITY: (shares in millions) Preferred stock - $1 per share par value; authorized 20.0 shares; Series A Convertible Preferred Stock; issued and outstanding: 1995 and 1994 - 0.9 and 1.7 shares, respectively (aggregate liquidation preference - $478 million and $863 million, respectively) 1 2 2 Common stock - $1 per share par value; authorized 1,000.0 shares; issued: 1995 and 1994 - 385.4 and 364.1 shares, respectively 385 364 364 Additional paid-in capital 5,540 5,536 5,532 Retained earnings 5,462 5,006 1,996 Treasury stock - at cost: 1995 - 16.4 shares; 1994 - 9.0 and 10.0 shares, respectively (565) (214) (229) ------------ ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 10,823 10,694 7,665 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 38,194 $ 38,077 $ 35,287 ============ ============ ============ This 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 covenant contained in Chrysler's revolving credit facility is 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. 11 14 Item 5. OTHER INFORMATION - CONTINUED SUPPLEMENTAL INFORMATION CHRYSLER (WITH CFC AND CAR RENTAL OPERATION ON AN EQUITY BASIS) STATEMENT OF CASH FLOWS (unaudited) For the Three Months Ended March 31, 1995 and 1994 (In millions of dollars) 1995 1994 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 592 $ 938 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 546 485 Equity in earnings of unconsolidated subsidiaries and affiliates (97) (50) Deferred income taxes 119 287 Change in accounts receivable (147) (155) Change in inventories (198) 44 Change in prepaid expenses and other assets 44 (7) Change in accounts payable and accrued and other liabilities 477 531 Other 131 27 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,467 2,100 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (1,645) (685) Sales and maturities of marketable securities 732 634 Expenditures for property and equipment (565) (426) Expenditures for special tools (245) (148) Other (44) 29 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,767) (596) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt (less than 90-day maturities) 1 3 Proceeds from long-term borrowings -- 1 Payments on long-term borrowings (463) (12) Repurchase of common stock (338) -- Dividends paid (162) (91) Other 6 3 ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (956) (96) ----------- ----------- Change in cash and cash equivalents (1,256) 1,408 Cash and cash equivalents at beginning of period 4,972 3,777 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,716 $ 5,185 =========== =========== This 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 covenant contained in Chrysler's revolving credit facility is 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. 12 15 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 March 31, 1995. 13 16 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: April 13, 1995 By J. D. Donlon, III ------------------------ ----------------------------- J. D. Donlon, III Vice President and Controller (Chief Accounting Officer) 14 17 EXHIBIT INDEX For Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 1995 EXHIBIT ------- 11 Statement regarding computation of earnings per common share. (Filed with this report.) 15A Letter, dated April 13, 1995, re unaudited interim information. (Filed with this report.) 15B Letter, dated April 13, 1995, re unaudited interim information. (Filed with this report.) 27 Financial Data Schedule for three months ended March 31, 1995 15