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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 MARCH 31, 1996
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.)
1000 CHRYSLER DRIVE, AUBURN HILLS, MICHIGAN 48326-2766
(Address of principal executive offices) (Zip Code)
(810) 576-5741
(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 373,993,520 shares of common stock outstanding as of
March 31, 1996.
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CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PAGE NO.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements..................................................... 1-5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................ 6-9
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, 1996 AND 1995
1996 1995
------- -------
(IN MILLIONS
OF DOLLARS)
Sales of manufactured products............................................ $14,044 $12,829
Finance and insurance revenues............................................ 449 380
Other revenues............................................................ 463 404
------- -------
TOTAL REVENUES....................................................... 14,956 13,613
------- -------
Costs, other than items below............................................. 11,005 10,516
Depreciation and special tools amortization............................... 611 563
Selling and administrative expenses....................................... 1,087 1,008
Employee retirement benefits.............................................. 311 311
Interest expense.......................................................... 272 245
------- -------
TOTAL EXPENSES....................................................... 13,286 12,643
------- -------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE................................................ 1,670 970
Provision for income taxes................................................ 665 378
------- -------
EARNINGS BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE........................................................... 1,005 592
Cumulative effect of a change in accounting principle..................... -- (96)
------- -------
NET EARNINGS......................................................... $ 1,005 $ 496
Preferred stock dividends................................................. 1 14
------- -------
NET EARNINGS ON COMMON STOCK......................................... $ 1,004 $ 482
======= =======
(IN DOLLARS OR
MILLIONS OF SHARES)
PRIMARY EARNINGS PER COMMON SHARE:
Earnings before cumulative effect of a change in accounting principle... $ 2.64 $ 1.59
Cumulative effect of a change in accounting principle................... -- (.26)
------- -------
Net earnings per common share........................................... $ 2.64 $ 1.33
======= =======
Average common and dilutive equivalent shares outstanding................. 380.5 362.5
FULLY DILUTED EARNINGS PER COMMON SHARE:
Earnings before cumulative effect of a change in accounting principle... $ 2.61 $ 1.46
Cumulative effect of a change in accounting principle................... -- (.23)
------- -------
Net earnings per common share........................................... $ 2.61 $ 1.23
======= =======
Average common and dilutive equivalent shares outstanding................. 385.1 404.3
DIVIDENDS DECLARED PER COMMON SHARE....................................... $ 0.60 $ 0.40
See notes to consolidated financial statements.
1
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ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
1996 1995
----------- --------------------------
MARCH 31 DECEMBER 31 MARCH 31
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents.................................. $ 6,174 $ 5,543 $ 4,042
Marketable securities...................................... 2,175 2,582 4,292
------- ------- -------
Total cash, cash equivalents and marketable
securities.......................................... 8,349 8,125 8,334
Accounts receivable -- trade and other..................... 2,290 2,003 1,851
Inventories................................................ 5,137 4,448 4,307
Prepaid pension, taxes and other expenses.................. 915 985 1,191
Finance receivables and retained interests in sold
receivables.............................................. 14,585 13,623 13,141
Property and equipment..................................... 12,918 12,595 11,302
Special tools.............................................. 3,481 3,566 3,629
Intangible assets.......................................... 2,134 2,082 2,141
Deferred tax assets........................................ 313 490 477
Other assets............................................... 6,299 5,839 5,094
------- ------- -------
TOTAL ASSETS.......................................... $56,421 $53,756 $51,467
======= ======= =======
LIABILITIES:
Accounts payable........................................... $ 9,034 $ 8,290 $ 7,996
Short-term debt............................................ 2,393 2,674 4,437
Payments due within one year on long-term debt............. 2,510 1,661 760
Accrued liabilities and expenses........................... 7,888 7,032 6,508
Long-term debt............................................. 9,763 9,858 8,642
Accrued noncurrent employee benefits....................... 9,361 9,217 8,800
Other noncurrent liabilities............................... 4,065 4,065 3,597
------- ------- -------
TOTAL LIABILITIES..................................... 45,014 42,797 40,740
------- ------- -------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock -- $1 per share par value; authorized 20.0
shares; Series A Convertible Preferred Stock; issued and
outstanding: 1996 -- 0.1; 1995 -- 0.1 and 0.9 shares,
respectively (aggregate liquidation preference 1996 --
$58 million; 1995 -- $68 million and $478 million,
respectively)............................................ * * 1
Common stock -- $1 per share par value; authorized 1,000.0
shares; issued: 1996 -- 408.8; 1995 -- 408.2 and 385.4
shares, respectively..................................... 409 408 385
Additional paid-in capital................................. 5,514 5,506 5,540
Retained earnings.......................................... 7,034 6,280 5,366
Treasury stock -- at cost: 1996 -- 34.8 shares; 1995 --
29.9 and 16.4 shares, respectively....................... (1,550) (1,235) (565)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY............................ 11,407 10,959 10,727
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.............................................. $56,421 $53,756 $51,467
======= ======= =======
- -------------------------
* Less than $1 million
See notes to consolidated financial statements.
2
5
ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
------- -------
(IN MILLIONS OF
DOLLARS)
NET CASH PROVIDED BY OPERATING ACTIVITIES.............................. $ 1,883 $ 1,844
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities................................... (928) (2,114)
Sales and maturities of marketable securities........................ 1,298 1,072
Finance receivables acquired......................................... (5,890) (5,925)
Finance receivables collected........................................ 2,082 1,093
Proceeds from sales of finance receivables........................... 3,241 3,587
Expenditures for property and equipment.............................. (754) (617)
Expenditures for special tools....................................... (207) (245)
Other................................................................ 100 (28)
------- -------
NET CASH USED IN INVESTING ACTIVITIES........................... (1,058) (3,177)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities).............. (411) (208)
Proceeds from long-term borrowings................................... 965 1,470
Payments on long-term borrowings..................................... (213) (538)
Repurchases of common stock.......................................... (329) (338)
Dividends paid....................................................... (229) (162)
Other................................................................ 23 6
------- -------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES................................................... (194) 230
------- -------
Change in cash and cash equivalents.................................... 631 (1,103)
Cash and cash equivalents at beginning of period....................... 5,543 5,145
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 6,174 $ 4,042
======= =======
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 unaudited 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 consolidated financial
statements of Chrysler for the three months ended March 31, 1996 and 1995
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, 1996 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, 1995. Certain amounts for 1995 have been reclassified to conform
with current period classifications.
NOTE 2. INVENTORIES
Inventories, summarized by major classification, were as follows:
1996 1995
-------- -----------------------
MARCH 31 DECEMBER 31 MARCH 31
-------- ----------- --------
(IN MILLIONS OF DOLLARS)
Finished products, including service parts.................... $1,524 $1,232 $1,235
Raw materials, finished production parts and supplies......... 1,457 1,456 1,344
Vehicles held for short-term lease............................ 2,156 1,760 1,728
------ ------ ------
TOTAL.................................................... $5,137 $4,448 $4,307
====== ====== ======
NOTE 3. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1996, Chrysler adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
implementation of this new accounting standard did not have a material impact on
Chrysler's consolidated operating results or financial position.
Effective January 1, 1995, Chrysler changed its accounting treatment for
vehicle sales for which Chrysler conditionally guarantees the minimum resale
value of the vehicles in accordance with the consensus reached on Emerging
Issues Task Force Issue 95-1, "Revenue Recognition on Sales with a Guaranteed
Minimum Resale Value." In accordance with the consensus, these vehicle sales are
accounted for as operating leases with the related revenues and costs deferred
at the time of shipment. A portion of the deferred revenues and costs is
recognized over the corresponding guarantee period, with the remainder
recognized at the end of the guarantee period. The average guarantee period for
these vehicles is approximately nine months. Implementation of this accounting
change resulted in the recognition of an after-tax charge of $96 million, or
$0.26 per common share, for the cumulative effect of this change in accounting
principle. Chrysler's first-quarter 1995 consolidated financial statements have
been restated to reflect this accounting change.
NOTE 4. COMMON STOCK REPURCHASES
During the first quarter of 1996, Chrysler's Board of Directors approved an
increase in Chrysler's planned 1996 common stock repurchases from $1 billion to
$2 billion and approved an additional $1 billion of common stock repurchases for
1997. These common stock repurchases are subject to market and general economic
conditions. During the first quarter of 1996, Chrysler repurchased 5.8 million
shares of its common stock at a cost of $332 million (including $27 million in
unsettled repurchases).
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ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 5. SUBSEQUENT EVENT
On April 4, 1996, Chrysler entered into an agreement to sell substantially
all of the operations of Chrysler Technologies Corporation ("CTC"). Under the
sale agreement, Chrysler will receive a sale price of $455 million and a
dividend of $20 million, for a total of $475 million. CTC, a wholly owned
subsidiary of Chrysler, engages principally in aircraft modification and the
manufacture of electronics products and systems. The sale, which is subject to
federal regulatory approval, is expected to be completed in the second quarter
of 1996. In addition, the sale is expected to result in a pretax gain of
approximately $100 million.
5
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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 and the cumulative effect of
a change in accounting principle of $1,670 million for the first quarter of
1996, compared with $970 million for the first quarter of 1995. Net earnings for
the first quarter of 1996 were $1,005 million, or $2.64 per common share,
compared with $496 million, or $1.33 per common share, in the first quarter of
1995. Fully diluted earnings per share were $2.61 in the first quarter of 1996
as compared with $1.23 in the first quarter of 1995. Net earnings for the first
quarter of 1995 included a charge of $96 million, or $0.26 per common share, for
the cumulative effect of a change in accounting principle related to the
consensus reached on Emerging Issues Task Force Issue 95-1, "Revenue Recognition
on Sales with a Guaranteed Minimum Resale Value."
The improvement in operating results in the first quarter of 1996 as
compared with the first quarter of 1995 resulted primarily from a 5 percent
increase in shipments and an increased proportion of higher-margin truck
(including minivan) shipments. In addition, operating results for the first
quarter of 1995 included the unfavorable effects of costs associated with the
model changeover and launch of Chrysler's all-new minivans and a $115 million
pretax charge for costs associated with a voluntary minivan owner service
action.
Chrysler's worldwide shipments in the first quarter of 1996 were 225,261
cars and 527,915 trucks (including minivans), compared with 280,969 cars and
433,796 trucks (including minivans) in the first quarter of 1995.
Chrysler's revenues and results of operations are principally derived from
the U.S. and Canada automotive marketplaces. In the first quarter of 1996,
retail sales of new cars and trucks in the U.S. and Canada, on a Seasonally
Adjusted Annual Rate basis, were 16.8 million units, compared with 16.5 million
units for the first quarter of 1995.
Chrysler's U.S. and combined U.S. and Canada retail sales and market share
data for the first quarter of 1996 and 1995 were as follows:
FIRST QUARTER
----------------------------------
INCREASE/
1996 1995 (DECREASE)
------- ------- ----------
U.S. Retail Market(1):
Car sales.................................................... 215,147 214,036 1,111
Car market share............................................. 10.5% 10.5% --
Truck sales (including minivans)............................. 376,159 310,544 65,615
Truck market share........................................... 22.9% 20.2% 2.7%
Combined car and truck sales................................. 591,306 524,580 66,726
Combined car and truck market share.......................... 16.0% 14.7% 1.3%
U.S. and Canada Retail Market(1):
Combined car and truck sales................................. 644,678 573,132 71,546
Combined car and truck market share.......................... 16.3% 15.0% 1.3%
- -------------------------
(1) All retail sale and market share data include fleet sales.
The increase in Chrysler's U.S. truck market share for the first quarter of
1996 as compared with the first quarter of 1995 primarily reflects an increase
in minivan and Dodge Ram pickup truck sales.
Pretax earnings of Chrysler Financial Corporation ("CFC") for the first
quarter of 1996 and 1995 were $154 million and $109 million, respectively. CFC's
net earnings were $98 million for the first quarter of 1996, compared with $69
million for the first quarter of 1995. The increase in net earnings for the
first quarter of
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
FINANCIAL REVIEW -- CONTINUED
1996 compared with the first quarter of 1995 primarily reflects improved lending
margins and higher average automotive finance receivables outstanding.
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES
Chrysler's total revenues for the three months ended March 31, 1996 and
1995 were as follows:
FIRST QUARTER
------------------------------------
INCREASE/
1996 1995 (DECREASE)
------- ------- ----------
(IN MILLIONS OF
DOLLARS)
Sales of manufactured products............................. $14,044 $12,829 9%
Finance and insurance revenues............................. 449 380 18%
Other revenues............................................. 463 404 15%
------- -------
Total revenues........................................ $14,956 $13,613 10%
======= =======
The increase in sales of manufactured products in the first quarter of 1996
as compared with the first quarter of 1995 primarily reflects a 5 percent
increase in shipments and an increase in average revenue per unit, net of sales
incentives, from $17,758 in the first quarter of 1995 to $18,559 in the first
quarter of 1996. The increase in average revenue per unit was principally due to
pricing actions and an increased proportion of truck shipments to total vehicle
shipments.
The increase in finance and insurance revenues in the first quarter of 1996
as compared with the first quarter of 1995 was primarily attributable to higher
average automotive finance receivables outstanding and vehicles leased.
Total expenses for the three months ended March 31, 1996 and 1995 were as
follows:
FIRST QUARTER
------------------------------------
INCREASE/
1996 1995 (DECREASE)
------- ------- ----------
(IN MILLIONS OF
DOLLARS)
Costs, other than items below.............................. $11,005 $10,516 5%
Depreciation and special tools amortization................ 611 563 9%
Selling and administrative expenses........................ 1,087 1,008 8%
Employee retirement benefits............................... 311 311 --
Interest expense........................................... 272 245 11%
------- -------
Total expenses........................................ $13,286 $12,643 5%
======= =======
Costs, other than items below increased in the first quarter of 1996 as
compared with the first quarter of 1995 primarily as a result of a 5 percent
increase in shipments. Costs, other than items below as a percent of sales of
manufactured products were 78 percent and 82 percent for the three months ended
March 31, 1996 and 1995, respectively.
Depreciation and special tools amortization for the first quarter of 1996
increased as compared with the first quarter of 1995 primarily as a result of
higher levels of property and equipment in use.
Selling and administrative expenses for the first quarter of 1996 increased
as compared with the first quarter of 1995 primarily as a result of costs
associated with the settlement of a shareholder matter, increased international
activities and increased advertising.
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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
The increase in interest expense for the first quarter of 1996 as compared
with the first quarter of 1995 was primarily due to higher average borrowings,
offset in part, by lower average borrowing rates at CFC. CFC's average effective
cost of borrowings was 7.1 percent and 7.9 percent in the first quarter of 1996
and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's combined cash, cash equivalents and marketable securities
totaled $8.3 billion at March 31, 1996 (including $1.2 billion held by CFC and
Car Rental Operations), compared with $8.1 billion at December 31, 1995
(including $1.2 billion held by CFC and Car Rental Operations). The increase in
Chrysler's combined cash, cash equivalents and marketable securities in the
first quarter of 1996 was primarily the result of cash generated by operating
activities and cash provided by a net increase in total debt, partially offset
by capital expenditures, net finance receivables acquired, common stock
repurchases and dividend payments.
During the first quarter of 1996, Chrysler's Board of Directors approved an
increase in Chrysler's planned 1996 common stock repurchases from $1 billion to
$2 billion and approved an additional $1 billion of common stock repurchases for
1997. These common stock repurchases are subject to market and general economic
conditions. During the first quarter of 1996, Chrysler repurchased 5.8 million
shares of its common stock at a cost of $332 million (including $27 million in
unsettled repurchases).
At March 31, 1996, Chrysler (excluding CFC), had debt maturities totaling
$335 million through 1998. At March 31, 1996, Chrysler had a $1.7 billion
revolving credit agreement which expires in July 1999. There were no amounts
outstanding under this revolving credit agreement at March 31, 1996. During the
first quarter of 1996, Chrysler began the process of negotiating a new revolving
credit agreement to replace its existing revolving credit agreement. Chrysler
believes that cash from operations and its cash position will be sufficient to
meet its capital expenditure, debt maturity, common stock repurchase and other
funding requirements.
Receivable sales continued to be a significant source of funding for CFC,
which realized $1.1 billion of net proceeds from the sale of automotive retail
receivables in the first quarter of 1996 compared with $1.4 billion of net
proceeds in the first quarter of 1995. In addition, securitization of revolving
wholesale account balances provided funding for CFC which aggregated $6.6
billion and $5.8 billion at March 31, 1996 and 1995, respectively.
CFC's U.S. and Canadian revolving credit facilities, which total $8.0
billion, consist of a $2.4 billion facility expiring in May 1996 and a $5.6
billion facility expiring in May 2000. At March 31, 1996, $3 million was
outstanding under CFC's revolving credit facilities. During the first quarter of
1996, CFC began the process of negotiating new revolving credit facilities to
replace its existing revolving credit facilities.
At March 31, 1996, CFC had contractual debt maturities of $3.5 billion for
the remainder of 1996, $2.9 billion in 1997 and $2.5 billion in 1998. CFC
believes that cash provided by operations, receivable sales, access to term debt
markets and the issuance of commercial paper will provide sufficient liquidity
to meet its debt maturity and other funding requirements.
On April 4, 1996, Chrysler entered into an agreement to sell substantially
all of the operations of Chrysler Technologies Corporation ("CTC"). Under the
sale agreement, Chrysler will receive a sale price of $455 million and a
dividend of $20 million, for a total of $475 million. CTC, a wholly owned
subsidiary of Chrysler, engages principally in aircraft modification and the
manufacture of electronics products and systems. The sale, which is subject to
federal regulatory approval, is expected to be completed in the second quarter
of 1996. In addition, the sale is expected to result in a pretax gain of
approximately $100 million.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED
Chrysler's strategy is to focus on its core automotive business. As part of
this strategy, Chrysler has sold certain assets and businesses which are not
related to its core automotive business, and is exploring the sale of other such
assets and businesses in the near term.
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, 1996
and 1995 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
In December 1990 and January 1991, eight class action lawsuits were
commenced by separate plaintiffs against Chrysler and certain of its directors
in the Court of Chancery of the State of Delaware for New Castle County,
Delaware. The Complaints in these suits were very similar and alleged that the
directors breached their fiduciary duties to stockholders by amending Chrysler's
Share Purchase Rights Plan in a manner designed to entrench themselves in office
and to impair the right of stockholders to avail themselves of offers to
purchase their shares by an acquiror not favored by management. On June 6, 1995,
Chrysler entered into a Memorandum of Understanding which contemplated
settlement of the litigation. The Memorandum was subject to several conditions,
including satisfactory completion of discovery as to the fairness of the
proposed settlement. The settlement was subject to Court approval. The
Memorandum also contemplated that the settlement, if approved, would consist of
Chrysler's action in December 1994 further amending its Rights Plan. A
Stipulation and Agreement of Compromise, Settlement and Release was filed with
the Court on December 7, 1995. A notice of pendency of the lawsuit, the proposed
settlement, and of a settlement hearing and right to appear was sent to
stockholders in accordance with the order of the Court. The settlement hearing
was held on February 23, 1996, and the Court approved the settlement and
dismissed the lawsuit.
In April 1995, thirty four class action lawsuits were commenced by separate
plaintiffs against Chrysler, certain of its current and former directors and, in
some cases, Tracinda Corporation, a holding company wholly owned by Kirk
Kerkorian and the beneficial owner of more than 13% of the outstanding common
stock of Chrysler as of December 31, 1995, and its affiliates, in the Court of
Chancery of the State of Delaware for New Castle County, Delaware. The
Complaints in these suits fall into two general categories: (a) those which
allege that the directors breached their fiduciary duties to stockholders by
failing to negotiate with Tracinda regarding its proposal to acquire all of the
outstanding stock of Chrysler not then owned by it; and (b) those which allege
that the directors breached their fiduciary duties to stockholders by
contemplating, planning and/or effecting Tracinda's proposal at a time when the
market price of Chrysler's stock was depressed and did not reflect its true
value. The Complaints in the former category ask for, among other things, (a) an
injunction or an order obligating the Board of Directors to undertake an
evaluation of alternatives, including measures with respect to Chrysler's Rights
Plan, designed to maximize shareholder value, (b) a declaration that the
defendants have breached their fiduciary duties to the plaintiffs, (c)
compensatory damages and interest, and (d) costs and fees. The Complaints in the
latter category ask for, among other things, (a) a declaration that the
transaction proposed by Tracinda is unfair, unjust and inequitable, (b) an
injunction against implementation of the transaction proposed by Tracinda and
any improper device which impedes maximization of shareholder value, (c) damages
and interest, (d) costs and fees, and (e) such other relief as may be just and
proper. Nineteen of these actions have subsequently been dismissed without
prejudice by the plaintiffs.
9
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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 MONTHS ENDED MARCH 31, 1996 AND 1995
(IN MILLIONS OF DOLLARS)
1996 1995
------- -------
Sales of manufactured products......................................... $14,174 $12,945
Equity in earnings of unconsolidated subsidiaries and affiliates....... 160 97
Interest income and other revenues..................................... 172 121
------- -------
TOTAL REVENUES.................................................... 14,506 13,163
------- -------
Costs, other than items below.......................................... 10,971 10,429
Depreciation and special tools amortization............................ 583 546
Selling and administrative expenses.................................... 912 852
Employee retirement benefits........................................... 306 307
Interest expense....................................................... 64 59
------- -------
TOTAL EXPENSES.................................................... 12,836 12,193
------- -------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE............................................. 1,670 970
Provision for income taxes............................................. 665 378
------- -------
EARNINGS BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE........................................................ 1,005 592
Cumulative effect of a change in accounting principle.................. -- (96)
------- -------
NET EARNINGS...................................................... $ 1,005 $ 496
======= =======
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." 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)
1996 1995
------- -------------------
MARCH DECEMBER MARCH
31 31 31
------- -------- -------
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents............................................ $ 5,626 $ 4,980 $ 3,716
Marketable securities................................................ 1,521 1,908 3,569
------- ------- -------
Total cash, cash equivalents and marketable securities............... 7,147 6,888 7,285
Accounts receivable -- trade and other............................... 1,893 816 610
Inventories.......................................................... 4,386 3,762 3,500
Prepaid pension, taxes and other expenses............................ 880 948 1,123
Property and equipment............................................... 11,953 11,717 10,584
Special tools........................................................ 3,481 3,566 3,629
Investments in and advances to unconsolidated subsidiaries and
affiliated companies............................................... 3,751 3,755 3,662
Intangible assets.................................................... 1,761 1,718 1,769
Deferred tax assets.................................................. 1,807 1,978 1,999
Other assets......................................................... 5,681 5,327 4,750
------- ------- -------
TOTAL ASSETS.................................................. $42,740 $40,475 $38,911
======= ======= =======
LIABILITIES:
Accounts payable..................................................... $ 8,189 $ 7,654 $ 7,569
Short-term debt...................................................... 346 140 141
Payments due within one year on long-term debt....................... 44 48 27
Accrued liabilities and expenses..................................... 7,629 6,741 6,242
Long-term debt....................................................... 1,769 1,763 1,803
Accrued noncurrent employee benefits................................. 9,299 9,156 8,745
Other noncurrent liabilities......................................... 4,057 4,014 3,657
------- ------- -------
TOTAL LIABILITIES............................................. 31,333 29,516 28,184
------- ------- -------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock -- $1 per share par value; authorized 20.0 shares;
Series A Convertible Preferred Stock; issued and outstanding: 1996
-- 0.1; 1995 -- 0.1 and 0.9 shares, respectively (aggregate
liquidation preference 1996 -- $58 million; 1995 -- $68 million and
$478 million, respectively)........................................ * * 1
Common stock -- $1 per share par value; authorized 1,000.0 shares;
issued: 1996 -- 408.8; 1995 -- 408.2 and 385.4 shares,
respectively....................................................... 409 408 385
Additional paid-in capital........................................... 5,514 5,506 5,540
Retained earnings.................................................... 7,034 6,280 5,366
Treasury stock -- at cost: 1996 -- 34.8 shares; 1995 -- 29.9 and 16.4
shares, respectively............................................... (1,550) (1,235) (565)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY.................................... 11,407 10,959 10,727
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................... $42,740 $40,475 $38,911
======= ======= =======
- -------------------------
* 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.
11
14
ITEM 5. OTHER INFORMATION -- CONTINUED
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
------ -------
(IN MILLIONS OF
DOLLARS)
NET CASH PROVIDED BY OPERATING ACTIVITIES............................... $1,433 $ 1,467
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities.................................... (433) (1,645)
Sales and maturities of marketable securities......................... 796 732
Expenditures for property and equipment............................... (618) (565)
Expenditures for special tools........................................ (207) (245)
Other................................................................. 134 (44)
------ -------
NET CASH USED IN INVESTING ACTIVITIES............................ (328) (1,767)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (less than 90-day maturities)............... 76 1
Proceeds from long-term borrowings.................................... 14 --
Payments on long-term borrowings...................................... (12) (463)
Repurchases of common stock........................................... (329) (338)
Dividends paid........................................................ (229) (162)
Other................................................................. 21 6
------ -------
NET CASH USED IN FINANCING ACTIVITIES............................ (459) (956)
------ -------
Change in cash and cash equivalents..................................... 646 (1,256)
Cash and cash equivalents at beginning of period........................ 4,980 4,972
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............................. $5,626 $ 3,716
====== =======
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." 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
A report on Form 8-K, dated February 13, 1996, was filed during the three
months ended March 31, 1996, reporting the amendment of the Amended and Restated
Rights Agreement, dated as of December 14, 1990 under Item 5 of such Form 8-K.
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 16, 1996 By J. D. Donlon, III
--------------------------------------
J. D. Donlon, III
Vice President and Controller
(Principal Accounting Officer)
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17
EXHIBIT INDEX
FOR QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 1996
EXHIBIT
- -------
3-B Copy of By-Laws of Chrysler Corporation, as amended as of February 8, 1996. (Filed
with this report.)
11 Statement regarding computation of earnings per common share. (Filed with this
report.)
15A Letter, dated April 16, 1996, re unaudited interim information. (Filed with this
report.)
15B Letter, dated April 16, 1996, re unaudited interim information. (Filed with this
report.)
27 Financial Data Schedule for three months ended March 31, 1996. (Filed with this
report.)
15