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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 382,560,840 shares of common stock outstanding as of
September 30, 1995.
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2
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 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 (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
(IN MILLIONS OF DOLLARS)
Sales of manufactured products.......................... $11,184 $10,938 $35,666 $35,858
Finance and insurance income............................ 358 326 1,146 1,002
Other income............................................ 467 398 1,326 1,110
------- ------- ------- -------
TOTAL REVENUES..................................... 12,009 11,662 38,138 37,970
------- ------- ------- -------
Costs, other than items below........................... 9,445 8,672 29,778 27,653
Depreciation of property and equipment.................. 263 238 802 747
Amortization of special tools........................... 247 203 861 709
Selling and administrative expenses..................... 921 900 3,005 2,852
Pension expense......................................... 98 174 298 509
Nonpension postretirement benefit expense............... 204 197 608 604
Interest expense........................................ 218 215 733 697
Special plant provision................................. 31 -- 263 --
------- ------- ------- -------
TOTAL EXPENSES..................................... 11,427 10,599 36,348 33,771
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES....................... 582 1,063 1,790 4,199
Provision for income taxes.............................. 228 412 709 1,654
------- ------- ------- -------
NET EARNINGS....................................... $ 354 $ 651 $ 1,081 $ 2,545
Preferred stock dividends............................... 2 20 19 60
------- ------- ------- -------
NET EARNINGS ON COMMON STOCK....................... $ 352 $ 631 $ 1,062 $ 2,485
======= ======= ======= =======
(IN DOLLARS OR MILLIONS OF SHARES)
PRIMARY EARNINGS PER COMMON SHARE....................... $ 0.91 $ 1.76 $ 2.82 $ 6.92
======= ======= ======= =======
Average common and dilutive equivalent shares
outstanding........................................... 387.3 358.8 376.2 359.3
FULLY DILUTED EARNINGS PER COMMON SHARE................. $ 0.90 $ 1.60 $ 2.71 $ 6.24
======= ======= ======= =======
Average common and dilutive equivalent shares
outstanding........................................... 393.7 407.4 398.4 407.8
DIVIDENDS DECLARED PER COMMON SHARE..................... $ 0.50 $ 0.25 $ 1.40 $ 0.70
See notes to consolidated financial statements.
1
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ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
1995 1994
------------ ---------------------------
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents................................ $ 4,117 $ 5,145 $ 5,241
Marketable securities.................................... 3,494 3,226 1,896
Accounts receivable -- trade and other................... 2,234 1,695 1,527
Inventories.............................................. 3,663 3,356 3,528
Prepaid taxes, pension and other expenses................ 915 1,330 623
Finance receivables, retained interests in sold
receivables and other related amounts.................. 12,551 12,433 11,769
Property and equipment................................... 12,115 11,073 10,296
Special tools............................................ 3,487 3,643 3,433
Intangible assets........................................ 2,107 2,162 4,213
Deferred tax assets...................................... 380 395 1,349
Other assets............................................. 5,726 5,081 2,631
-------- -------- --------
TOTAL ASSETS........................................ $ 50,789 $ 49,539 $ 46,506
======== ======== ========
LIABILITIES:
Accounts payable......................................... $ 8,393 $ 7,826 $ 7,438
Short-term debt.......................................... 2,911 4,645 3,814
Payments due within one year on long-term debt........... 1,090 811 949
Accrued liabilities and expenses......................... 5,759 5,582 5,101
Long-term debt........................................... 9,105 7,650 7,156
Accrued noncurrent employee benefits..................... 9,060 8,595 9,288
Other noncurrent liabilities............................. 3,945 3,736 3,716
-------- -------- --------
TOTAL LIABILITIES................................... 40,263 38,845 37,462
-------- -------- --------
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 -- 0.2 and 1.7
shares, respectively (aggregate liquidation preference
$84 million and $863 million, respectively)............ * 2 2
Common stock -- $1 per share par value; authorized
1,000.0 shares; issued: 1995 and 1994 -- 407.4 shares
and 364.1 shares, respectively......................... 407 364 364
Additional paid-in capital............................... 5,504 5,536 5,533
Retained earnings........................................ 5,577 5,006 3,371
Treasury stock -- at cost: 1995 -- 24.8 shares; 1994 --
9.0 and 9.6 shares, respectively....................... (962) (214) (226)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY.......................... 10,526 10,694 9,044
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......... $ 50,789 $ 49,539 $ 46,506
======== ======== ========
- -------------------------
* Less than $1 million
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 NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
-------- --------
(IN MILLIONS OF
DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................................ $ 1,081 $ 2,545
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization......................................... 1,663 1,456
Special plant provision............................................... 263 --
Provision for credit losses........................................... 254 174
Deferred income taxes................................................. 141 839
Change in receivables................................................. 1,460 (741)
Change in inventories................................................. (308) (43)
Change in prepaid expenses and other assets........................... (507) 171
Change in accounts payable and accrued and other liabilities.......... 1,385 283
Other................................................................. 181 101
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................ 5,613 4,785
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities.................................... (4,157) (3,393)
Sales and maturities of marketable securities......................... 3,937 2,530
Finance receivables acquired.......................................... (18,347) (14,049)
Finance receivables collected......................................... 4,359 4,038
Proceeds from sales of finance receivables............................ 11,307 9,678
Expenditures for property and equipment............................... (2,229) (1,757)
Expenditures for special tools........................................ (699) (706)
Other................................................................. 452 (112)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES............................ (5,377) (3,771)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities)............... (1,734) 517
Proceeds from long-term borrowings.................................... 3,104 561
Payments on long-term borrowings...................................... (1,377) (608)
Repurchase of common stock............................................ (769) --
Dividends paid........................................................ (516) (290)
Other................................................................. 28 7
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES.................................................... (1,264) 187
-------- --------
Change in cash and cash equivalents..................................... (1,028) 1,201
Cash and cash equivalents at beginning of period........................ 5,145 4,040
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............................. $ 4,117 $ 5,241
======== ========
See notes to consolidated financial statements.
3
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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, 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 and
nine months ended September 30, 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
------------ ---------------------------
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
------------ ----------- ------------
(IN MILLIONS OF DOLLARS)
Finished products, including service parts............... $1,132 $1,145 $1,052
Raw materials, finished production parts and supplies.... 1,403 1,223 1,325
Vehicles held for short-term lease....................... 1,128 988 1,151
------ ------ ------
TOTAL............................................... $3,663 $3,356 $3,528
====== ====== ======
NOTE 3. SALES OF AUTOMOTIVE ASSETS AND INVESTMENTS
Chrysler sold its wiring harness operations and certain of its soft trim
operations in the first and second quarters of 1994, respectively, and entered
into long-term supply agreements with each of the purchasers. Aggregate net
proceeds from the sales and the supply agreements were $315 million. The related
pretax gains of $254 million were deferred and are being recognized over the
periods of the respective supply agreements.
NOTE 4. PREFERRED STOCK CONVERSION AND SUPPLEMENTARY EARNINGS PER SHARE DATA
During the third quarter and the first nine months of 1995, holders of the
Series A Convertible Preferred Stock converted 88,416 and 1,557,588 shares,
respectively, of preferred stock into 2.5 and 43.3 million shares of common
stock, respectively. Primary earnings per common share for the third quarter and
the first nine months of 1995 were calculated based upon a weighted average of
common shares outstanding which included the additional shares from the
preferred stock conversions. If all of the preferred stock conversions had
occurred on January 1, 1995, primary earnings per common share for the first
nine months of 1995 would have been $2.73.
NOTE 5. COMMON STOCK REPURCHASE PROGRAM
During the third quarter of 1995, Chrysler's Board of Directors approved an
increase in Chrysler's common stock repurchase program from $1 billion to $2
billion to be completed by the end of 1996, depending on market conditions.
During the third quarter and the first nine months of 1995, Chrysler repurchased
3.3 and 17.4 million shares, respectively, of its common stock under this
program at a cost of $174 and $782 million (including $13 million in unsettled
purchases), respectively.
4
7
ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. SPECIAL PLANT PROVISION
During the second quarter of 1995, Chrysler recorded a $232 million
provision for costs associated with production changes at Chrysler's Newark
assembly plant. The plant ended production of Chrysler's LeBaron convertibles in
July 1995. In addition, Newark production of the Chrysler Concorde and Dodge
Intrepid was reduced to one shift in August 1995 and will end prior to
production of a new vehicle in the fall of 1997. The provision includes the
recognition of supplemental unemployment benefits, job security benefits and
other related employee costs, and the write-down of certain equipment and
tooling. During the third quarter, this provision was increased by $31 million
to $263 million, primarily reflecting changes in the estimate for job security
benefit costs.
5
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto.
FINANCIAL REVIEW
Chrysler reported earnings before income taxes of $582 million for the
third quarter of 1995, compared with $1,063 million for the third quarter of
1994. For the first nine months of 1995, Chrysler reported earnings before
income taxes of $1,790 million, compared with $4,199 million for the first nine
months of 1994. Net earnings for the third quarter of 1995 were $354 million, or
$0.91 per common share, compared with $651 million, or $1.76 per common share
for the third quarter of 1994. Net earnings for the nine months ended September
30, 1995 were $1,081 million or $2.82 per common share, compared with $2,545
million or $6.92 per common share for the comparable 1994 period.
The lower operating results in the third quarter of 1995 compared with the
corresponding period in 1994 resulted primarily from lower minivan production
volume, costs associated with the launch of Chrysler's all-new minivans and the
launch of Chrysler's full-size Dodge Ram pickup truck at an additional facility,
a lower mix of higher-margin vehicles, higher incentives and lower factory unit
sales in Mexico.
The lower operating results in the first nine months of 1995 compared with
the corresponding period in 1994 resulted primarily from lower minivan
production volume and costs associated with the model changeover and launch of
Chrysler's all-new minivans, higher incentives and material costs, a provision
for costs associated with production changes at Chrysler's Newark assembly
plant, a lower mix of higher-margin vehicles, and lower factory unit sales in
Mexico.
Chrysler's worldwide factory car and truck sales for the three and nine
months ended September 30, 1995 were 581,853 and 1,931,769 units, respectively,
a decrease of 11,904 and 105,388 units from the third quarter and first nine
months of 1994, respectively. Minivan factory sales for the third quarter and
first nine months of 1995 were 125,299 and 388,209 units, respectively, a
decrease of 29,011 and 121,428 units from the comparable 1994 periods. The
decline in minivan factory unit sales was primarily attributable to the model
changeover and launch of Chrysler's all-new minivans. Worldwide minivan factory
unit sales in the fourth quarter of 1995 are expected to be comparable to fourth
quarter 1994 minivan factory unit sales.
Chrysler's revenues and results of operations are derived principally from
the U.S. and Canada automotive marketplace. In the third quarter of 1995, retail
sales of new cars and trucks in the U.S. and Canada, on a Seasonally Adjusted
Annual Rate basis, were 16.2 million units, the same as for the third quarter of
1994. Combined U.S. and Canadian dealers' days supply of vehicle inventory was
62 days at September 30, 1995, as compared with 54 days at September 30, 1994.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
FINANCIAL REVIEW -- CONTINUED
Chrysler's U.S. and Canada combined retail car and truck market share for
the three and nine months ended September 30, 1995 were as follows:
THIRD QUARTER NINE MONTHS
---------------------------------- --------------------------------------
INCREASE/ INCREASE/
1995 1994 (DECREASE) 1995 1994 (DECREASE)
------- ------- ---------- --------- --------- ----------
U.S. Retail Market(1):
Car sales........................ 177,038 179,100 (2,062) 619,257 627,381 (8,124)
Car market share................. 7.9% 8.0% (0.1)% 9.3% 9.1% 0.2%
Truck sales...................... 328,739 320,716 8,023 1,023,387 1,068,387 (45,000)
Truck market share............... 20.7% 20.5% 0.2% 21.0% 22.2% (1.2)%
Combined car and truck sales..... 505,777 499,816 5,961 1,642,644 1,695,768 (53,124)
Combined car and truck
market share................... 13.2% 13.1% 0.1% 14.3% 14.5% (0.2)%
U.S. and Canada Retail Market(1):
Combined car and truck sales..... 560,841 552,625 8,216 1,814,478 1,887,078 (72,600)
Combined car and truck
market share................... 13.6% 13.5% 0.1% 14.6% 14.9% (0.3)%
- -------------------------
(1) All retail sale and market share data include fleet sales.
The decreases in Chrysler's U.S. truck market share and U.S. and Canada
combined car and truck market share for the nine months ended September 30, 1995
were primarily the result of decreases in retail minivan sales of approximately
50,000 and 55,000 units, respectively.
Chrysler vehicles manufactured and sold in Mexico during the third quarter
and first nine months of 1995 were 5,000 and 15,100 units, respectively, a
decrease of 15,700 and 48,100 units from the corresponding 1994 periods. The
impact of the lower sales in Mexico during the third quarter and first nine
months of 1995 was partially offset by higher profits on vehicles manufactured
in Mexico and exported to other markets. The unfavorable economic conditions in
Mexico are expected to continue to have a negative impact on Chrysler's
operating results and financial position.
Pretax earnings of Chrysler Financial Corporation ("CFC") for the third
quarter of 1995 and 1994 were $138 million and $82 million, respectively. For
the nine months ended September 30, 1995, CFC's pretax earnings were $374
million compared with $226 million for the first nine months of 1994. CFC's net
earnings for the third quarter of 1995 and 1994 were $87 million and $50
million, respectively. CFC's net earnings for the nine months ended September
30, 1995 and 1994 were $242 million and $141 million, respectively. The increase
in earnings for the three months ended September 30, 1995 reflects higher levels
of automotive financing and lower operating expenses. The increase in earnings
for the nine months ended September 30, 1995, reflects higher levels of
automotive financing and lower bank costs and operating expenses.
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
Chrysler's total revenues for the third quarter and first nine months of
1995 and 1994 were as follows (in millions of dollars):
THIRD QUARTER NINE MONTHS
-------------------------------- --------------------------------
INCREASE/ INCREASE/
1995 1994 (DECREASE) 1995 1994 (DECREASE)
------- ------- ---------- ------- ------- ----------
Sales of manufactured products...... $11,184 $10,938 2% $35,666 $35,858 (1)%
Finance and insurance income........ 358 326 10% 1,146 1,002 14 %
Other income........................ 467 398 17% 1,326 1,110 19 %
------- ------- ------- -------
Total revenues................. $12,009 $11,662 3% $38,138 $37,970 --
======= ======= ======= =======
The increase in sales of manufactured products in the third quarter of 1995
as compared with the third quarter of 1994 primarily reflects an increase in
average revenue per unit, net of sales incentives, from $18,252 to $19,110
partially offset by a 2 percent decrease in factory unit sales. The decrease in
sales of manufactured products in the first nine months of 1995 as compared with
the first nine months of 1994 primarily reflects a 5 percent decrease in factory
unit sales partially offset by an increase in average revenue per unit, net of
sales incentives, from $17,533 to $18,309. The increase in average revenue per
unit in the third quarter and first nine months of 1995 as compared to the
corresponding periods of 1994 was primarily due to pricing actions and a
favorable mix of higher-priced vehicles partially offset by higher per unit
sales incentives.
The increase in finance and insurance income for the three and nine months
ended September 30, 1995 as compared with the corresponding 1994 periods was
primarily attributable to higher levels of automotive financing volume. Total
automotive financing volume in the third quarter and first nine months of 1995
was $19.6 billion and $61.5 billion, respectively, compared with $16.3 billion
and $51.3 billion for the corresponding 1994 periods.
The increase in other income for the three and nine months ended September
30, 1995 as compared with the corresponding periods in 1994 was principally due
to increased interest income resulting from higher average cash, cash
equivalents and marketable securities balances and higher interest rates.
Chrysler's total expenses for the third quarter and first nine months of
1995 and 1994 were as follows (in millions of dollars):
THIRD QUARTER NINE MONTHS
-------------------------------- --------------------------------
INCREASE/ INCREASE/
1995 1994 (DECREASE) 1995 1994 (DECREASE)
------- ------- ---------- ------- ------- ----------
Costs, other than items below.... $ 9,445 $ 8,672 9% $29,778 $27,653 8%
Depreciation of property and
equipment...................... 263 238 11% 802 747 7%
Amortization of special tools.... 247 203 22% 861 709 21%
Selling and administrative
expenses....................... 921 900 2% 3,005 2,852 5%
Pension expense.................. 98 174 (44)% 298 509 (41)%
Nonpension postretirement benefit
expense........................ 204 197 4% 608 604 1%
Interest expense................. 218 215 1% 733 697 5%
Special plant provision.......... 31 -- -- 263 -- --
------- ------- ------- -------
Total expenses.............. $11,427 $10,599 8% $36,348 $33,771 8%
======= ======= ======= =======
Costs, other than items below increased in the third quarter and first nine
months of 1995, as compared with the corresponding 1994 periods, primarily as a
result of increased product costs and costs associated with the changeover and
launch of Chrysler's all-new minivans, partially offset by the effect of a
decrease in factory unit sales of 2 percent and 5 percent, respectively. The
increase in product costs for the third quarter of 1995
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 REVENUES AND EXPENSES -- CONTINUED
resulted primarily from higher material costs, including increased product
content. The increase in product costs for the first nine months of 1995
resulted primarily from higher material costs (including increased product
content) and higher warranty costs. Warranty costs for the first nine months of
1995, include a charge of $115 million related to the voluntary minivan owner
service action. Costs, other than items below were 84 percent and 83 percent of
sales of manufactured products for the respective three and nine month periods
ended September 30, 1995, compared with 79 percent and 77 percent for the three
and nine month periods ended September 30, 1994.
Depreciation of property and equipment for the third quarter and first nine
months of 1995 increased as compared with the corresponding 1994 periods
primarily as a result of higher investments in, and modernization of, property
and equipment.
Special tooling amortization increased in the third quarter and first nine
months of 1995 as compared with the corresponding 1994 periods primarily as a
result of production of Chrysler's all-new minivans and mid-size sedans.
Pension expense decreased in the third quarter and first nine months of
1995 as compared to the corresponding 1994 periods, due to improved funding of
the pension plans and an increase in the discount rate used to determine pension
expense.
During the second quarter of 1995, Chrysler recorded a $232 million
provision for costs associated with production changes at Chrysler's Newark
assembly plant. The plant ended production of Chrysler's LeBaron convertibles in
July 1995. In addition, Newark production of the Chrysler Concorde and Dodge
Intrepid was reduced to one shift in August 1995 and will end prior to
production of a new vehicle in the fall of 1997. The provision includes the
recognition of supplemental unemployment benefits, job security benefits and
other related employee costs, and the write-down of certain equipment and
tooling. During the third quarter, this provision was increased by $31 million
to $263 million primarily reflecting changes in the estimate for job security
benefit costs.
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's combined cash, cash equivalents and marketable securities
totaled $7.6 billion at September 30, 1995 (including $1.2 billion held by CFC),
compared with $8.4 billion at December 31, 1994. The decrease in the first nine
months of 1995 was the result of capital expenditures, profit-based employee
payments, common stock repurchases and dividend payments, largely offset by cash
generated by operating activities.
During the third quarter of 1995, Chrysler's Board of Directors approved an
increase in Chrysler's common stock repurchase program from $1 billion to $2
billion to be completed by the end of 1996, depending on market conditions.
During the third quarter and the first nine months of 1995, Chrysler repurchased
3.3 and 17.4 million shares, respectively, of its common stock under this
program at a cost of $174 and $782 million (including $13 million in unsettled
purchases), respectively. During the third quarter and the first nine months of
1995, holders of the Series A Convertible Preferred Stock converted 88,416 and
1,557,588 shares, respectively, of preferred stock into 2.5 and 43.3 million
shares of common stock, respectively.
In the second quarter of 1995, Chrysler increased its quarterly common
dividend from $0.40 to $0.50 per common share.
At September 30, 1995, Chrysler (excluding CFC), had debt maturities
totaling $229 million through 1997. During the first nine months of 1995,
Chrysler redeemed $300 million of its 13% Debentures Due 1997 and repaid $180
million of other debt. At September 30, 1995, Chrysler had a $1.7 billion
revolving credit agreement which expires in July 1999. At September 30, 1995,
none of the commitment was drawn upon. Chrysler believes that cash from
operations and its cash position will be sufficient to enable it to meet its
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED
capital expenditure, debt maturity, common stock repurchase, dividend payment
and other funding requirements.
Receivable sales continued to be a significant source of funding for CFC,
which realized $4.7 billion of net proceeds from the sale of automotive retail
receivables in the first nine months of 1995, compared with $5.2 billion of net
proceeds in the first nine months of 1994. In addition, securitization of
wholesale receivables provided funding for CFC aggregating $6.6 billion and $3.6
billion at September 30, 1995 and 1994, respectively.
CFC's U.S. and Canadian revolving credit facilities total $8.0 billion. At
September 30, 1995, no amounts were outstanding under CFC's revolving credit
facilities.
At September 30, 1995, CFC had contractual debt maturities of $3.1 billion
for the remainder of 1995 (including $2.7 billion of short-term notes), $1.6
billion in 1996 and $2.3 billion in 1997. 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.
NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," effective for
fiscal years beginning after December 15, 1995. This Statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and long-lived assets and certain identifiable intangibles to be disposed
of. The Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In addition, the Statement requires that certain
long-lived assets and identifiable intangibles to be disposed of be reported at
the lower of carrying amount or fair value less cost to sell. Chrysler has not
determined the impact that the adoption of this accounting standard will have on
its consolidated operating results or financial position. Chrysler will adopt
this accounting standard on or before January 1, 1996, 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, 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
PRODUCT MATTERS
Five purported class action lawsuits seeking unspecified economic damages
in connection with rear liftgate latches on Chrysler's 1984-1994 model year
minivans have been consolidated in Federal District Court in San Francisco.
Chrysler previously announced a voluntary owner service action to replace those
latches. The parties have agreed to a proposed settlement that would require
Chrysler to achieve a 60% response rate to its service action by December 31,
1996, or spend $14 million on consumer notices and incentives aimed at
increasing the response rate. Chrysler would also be required to pay $5.2
million in attorneys fees and costs. Notices were sent to class members in
September 1995 following the Court's preliminary approval of the settlement. The
parties will seek final approval of the settlement at a hearing scheduled for
November 3, 1995.
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ITEM 5. OTHER INFORMATION
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF EARNINGS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(IN MILLIONS OF DOLLARS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Sales of manufactured products.......................... $11,253 $11,017 $35,974 $36,238
Equity in earnings of unconsolidated subsidiaries and
affiliates............................................ 155 65 384 169
Interest and other income............................... 103 80 349 212
------- ------- ------- -------
TOTAL REVENUES..................................... 11,511 11,162 36,707 36,619
------- ------- ------- -------
Costs, other than items below........................... 9,320 8,540 29,485 27,471
Depreciation of property and equipment.................. 238 217 744 686
Amortization of special tools........................... 247 203 861 709
Selling and administrative expenses..................... 764 714 2,528 2,278
Pension expense......................................... 96 172 292 503
Nonpension postretirement benefit expense............... 203 196 603 601
Interest expense........................................ 30 57 141 172
Special plant provision................................. 31 -- 263 --
------- ------- ------- -------
TOTAL EXPENSES..................................... 10,929 10,099 34,917 32,420
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES....................... 582 1,063 1,790 4,199
Provision for income taxes.............................. 228 412 709 1,654
------- ------- ------- -------
NET EARNINGS....................................... $ 354 $ 651 $ 1,081 $ 2,545
======= ======= ======= =======
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." Due to the
fact that 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 (UNAUDITED)
1995 1994
------------ ---------------------------
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
------------ ----------- ------------
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents.................................... $ 3,693 $ 4,972 $ 5,070
Marketable securities........................................ 2,714 2,643 1,559
Accounts receivable -- trade and other....................... 1,248 459 862
Inventories.................................................. 2,842 2,645 2,651
Prepaid taxes, pension and other expenses.................... 849 1,272 564
Property and equipment....................................... 11,235 10,347 9,594
Special tools................................................ 3,487 3,643 3,433
Investments in and advances to unconsolidated subsidiaries
and affiliated companies................................... 3,695 3,642 3,665
Intangible assets............................................ 1,740 1,781 3,827
Deferred tax assets.......................................... 1,839 1,951 2,887
Other assets................................................. 5,339 4,722 2,128
-------- -------- --------
TOTAL ASSETS.......................................... $ 38,681 $ 38,077 $ 36,240
======== ======== ========
LIABILITIES:
Accounts payable............................................. $ 7,779 $ 7,403 $ 6,977
Short-term debt.............................................. 140 140 142
Payments due within one year on long-term debt............... 42 187 181
Accrued liabilities and expenses............................. 5,504 5,333 4,835
Long-term debt............................................... 1,771 2,097 2,104
Accrued noncurrent employee benefits......................... 9,000 8,547 9,242
Other noncurrent liabilities................................. 3,919 3,676 3,715
-------- -------- --------
TOTAL LIABILITIES..................................... 28,155 27,383 27,196
-------- -------- --------
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 -- 0.2 and 1.7 shares,
respectively (aggregate liquidation preference -- $84
million and $863 million, respectively).................... * 2 2
Common stock -- $1 per share par value; authorized 1,000.0
shares; issued: 1995 and 1994 -- 407.4 shares and 364.1
shares, respectively....................................... 407 364 364
Additional paid-in capital................................... 5,504 5,536 5,533
Retained earnings............................................ 5,577 5,006 3,371
Treasury stock -- at cost: 1995 -- 24.8 shares; 1994 -- 9.0
and 9.6 shares, respectively............................... (962) (214) (226)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY............................ 10,526 10,694 9,044
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $ 38,681 $ 38,077 $ 36,240
======== ======== ========
- -------------------------
* Less than $1 million
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.
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15
ITEM 5. OTHER INFORMATION -- CONTINUED
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
------- -------
(IN MILLIONS OF
DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................................... $ 1,081 $ 2,545
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization........................................ 1,605 1,395
Special plant provision.............................................. 263 --
Equity in earnings of unconsolidated subsidiaries and affiliates..... (384) (169)
Deferred income taxes................................................ 141 839
Change in accounts receivable........................................ (790) (58)
Change in inventories................................................ (198) (207)
Change in prepaid expenses and other assets.......................... (466) (12)
Change in accounts payable and accrued and other liabilities......... 1,441 494
Dividends received from affiliate.................................... 229 16
Other................................................................ 220 140
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................... 3,142 4,983
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities................................... (2,487) (2,095)
Sales and maturities of marketable securities........................ 2,439 1,234
Expenditures for property and equipment.............................. (1,944) (1,600)
Expenditures for special tools....................................... (699) (706)
Other................................................................ 5 112
------- -------
NET CASH USED IN INVESTING ACTIVITIES........................... (2,686) (3,055)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities).............. -- 42
Proceeds from long-term borrowings................................... -- 7
Payments on long-term borrowings..................................... (480) (400)
Repurchase of common stock........................................... (769) --
Dividends paid....................................................... (516) (290)
Other................................................................ 30 6
------- -------
NET CASH USED IN FINANCING ACTIVITIES........................... (1,735) (635)
------- -------
Change in cash and cash equivalents.................................... (1,279) 1,293
Cash and cash equivalents at beginning of period....................... 4,972 3,777
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 3,693 $ 5,070
======= =======
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." Due to the fact that 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, 1995.
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17
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 11, 1995 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 SEPTEMBER 30, 1995
EXHIBIT
- -------
10-C-9 Form of Employment Continuation Agreement, dated as of July 6, 1995, between
Chrysler Corporation and each of Robert J. Eaton, Robert A. Lutz, Thomas G.
Denomme and Gary C. Valade (Filed with this report).
10-C-10 Form of Employment Continuation Agreement, dated as of July 6, 1995, between
Chrysler Corporation and each Executive Officer of Chrysler Corporation other than
Messrs. Eaton, Lutz, Denomme and Valade.
11 Statement regarding computation of earnings per common share (Filed with this
report).
15A Letter, dated October 11, 1995, re unaudited interim information (Filed with this
report).
15B Letter, dated October 11, 1995, re unaudited interim information (Filed with this
report).
27 Financial Data Schedule for the nine months ended September 30, 1995 (Filed with
this report).
16