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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, 1997
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 687,927,015 shares of common stock outstanding as of
March 31, 1997.
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CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PAGE NO.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.............................. 1-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 6-10
Part II. OTHER INFORMATION
Item 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 MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
---- ----
(IN MILLIONS OF DOLLARS)
Sales of manufactured products.............................. $15,156 $14,044
Finance and insurance revenues.............................. 410 449
Other revenues.............................................. 550 463
------- -------
TOTAL REVENUES......................................... 16,116 14,956
------- -------
Costs, other than items below............................... 11,968 11,005
Depreciation and special tools amortization................. 678 611
Selling and administrative expenses......................... 1,207 1,087
Employee retirement benefits................................ 325 311
Interest expense............................................ 234 272
------- -------
TOTAL EXPENSES......................................... 14,412 13,286
------- -------
EARNINGS BEFORE INCOME TAXES........................... 1,704 1,670
Provision for income taxes.................................. 675 665
------- -------
NET EARNINGS........................................... $ 1,029 $ 1,005
Preferred stock dividends................................... -- 1
------- -------
NET EARNINGS ON COMMON STOCK........................... $ 1,029 $ 1,004
======= =======
(IN DOLLARS OR MILLIONS
OF SHARES)
PRIMARY EARNINGS PER COMMON SHARE........................... $ 1.46 $ 1.32
======= =======
Average common and dilutive equivalent shares
outstanding............................................ 705.9 760.9
FULLY DILUTED EARNINGS PER COMMON SHARE..................... $ 1.45 $ 1.30
======= =======
Average common and dilutive equivalent shares
outstanding............................................ 708.4 770.2
DIVIDENDS DECLARED PER COMMON SHARE......................... $ 0.40 $ 0.30
See notes to consolidated financial statements.
1
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ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
1997 1996
----------- --------------------------
MARCH 31 DECEMBER 31 MARCH 31
-------- ----------- --------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents.................................. $ 6,202 $ 5,158 $ 6,174
Marketable securities...................................... 2,461 2,594 2,175
------- ------- -------
Total cash, cash equivalents and marketable
securities.......................................... 8,663 7,752 8,349
Accounts receivable -- trade and other..................... 1,763 2,126 2,290
Inventories................................................ 5,562 5,195 5,137
Prepaid employee benefits, taxes and other expenses........ 1,723 1,929 915
Finance receivables and retained interests in sold
receivables.............................................. 13,983 12,339 14,585
Property and equipment..................................... 15,291 14,905 12,918
Special tools.............................................. 3,924 3,924 3,481
Intangible assets.......................................... 1,973 1,995 2,134
Other assets............................................... 6,714 6,019 6,612
------- ------- -------
TOTAL ASSETS.......................................... $59,596 $56,184 $56,421
======= ======= =======
LIABILITIES:
Accounts payable........................................... $ 9,402 $ 8,981 $ 9,034
Accrued liabilities and expenses........................... 8,981 8,864 7,888
Short-term debt............................................ 3,804 3,214 2,393
Payments due within one year on long-term debt............. 2,847 2,998 2,510
Long-term debt............................................. 9,296 7,184 9,763
Accrued noncurrent employee benefits....................... 9,599 9,431 9,361
Other noncurrent liabilities............................... 3,900 3,941 4,065
------- ------- -------
TOTAL LIABILITIES..................................... 47,829 44,613 45,014
------- ------- -------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock -- $1 per share par value; authorized 20.0
shares; Series A Convertible Preferred Stock; issued and
outstanding: 1997 -- 0.03; 1996 -- 0.04 and 0.12 shares,
respectively (aggregate liquidation preference 1997 --
$15 million; 1996 -- $21 million and $58 million,
respectively)............................................ * * *
Common stock -- $1 per share par value; authorized 1,000.0
shares; issued: 1997 -- 822.3; 1996 -- 821.6 and 408.8
shares, respectively..................................... 822 822 409
Additional paid-in capital................................. 5,163 5,129 5,514
Retained earnings.......................................... 9,560 8,829 7,034
Treasury stock -- at cost: 1997 -- 134.4 shares; 1996 --
119.1 and 34.8 shares, respectively...................... (3,778) (3,209) (1,550)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY............................ 11,767 11,571 11,407
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $59,596 $56,184 $56,421
======= ======= =======
- -------------------------
* Less than $1 million
See notes to consolidated financial statements.
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ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
---- ----
(IN MILLIONS OF DOLLARS)
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 967 $ 1,883
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities........................ (968) (678)
Sales and maturities of marketable securities............. 1,075 1,298
Finance receivables acquired.............................. (5,803) (5,890)
Finance receivables collected............................. 1,711 1,860
Proceeds from sales of finance receivables................ 3,463 3,241
Expenditures for property and equipment................... (559) (624)
Expenditures for special tools............................ (273) (207)
Purchases of vehicle operating leases..................... (299) (130)
Other..................................................... (8) 72
------- -------
NET CASH USED IN INVESTING ACTIVITIES................ (1,661) (1,058)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt................................. 590 (411)
Proceeds from long-term borrowings........................ 3,134 965
Payments on long-term borrowings.......................... (1,168) (213)
Repurchases of common stock............................... (561) (329)
Dividends paid............................................ (283) (229)
Other..................................................... 26 23
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES.......................................... 1,738 (194)
------- -------
Change in cash and cash equivalents......................... 1,044 631
Cash and cash equivalents at beginning of period............ 5,158 5,543
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 6,202 $ 6,174
======= =======
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. Affiliates that are 20
percent to 50 percent owned and subsidiaries where control is expected to be
temporary, primarily investments in certain dealerships, are generally accounted
for on an equity basis. Intercompany accounts and transactions have been
eliminated in consolidation. The consolidated financial statements of Chrysler
for the three months ended March 31, 1997 and 1996 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, 1997 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, 1996. Certain
amounts for 1996 have been reclassified to conform with current period
classifications.
NOTE 2. INVENTORIES
Inventories, summarized by major classification, were as follows:
1997 1996
-------- ----------------------
MARCH 31 DECEMBER 31 MARCH 31
-------- ----------- --------
(IN MILLIONS OF DOLLARS)
Finished products, including service parts.................. $1,674 $1,569 $1,524
Raw materials, finished production parts and supplies....... 1,462 1,540 1,457
Vehicles held for short-term lease.......................... 2,426 2,086 2,156
------ ------ ------
TOTAL.................................................. $5,562 $5,195 $5,137
====== ====== ======
NOTE 3. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1997, Chrysler adopted Statement of Financial
Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." The adoption of this
accounting standard did not have a material impact on Chrysler's consolidated
financial statements.
Effective January 1, 1996, Chrysler adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." The initial adoption of this accounting standard did not have a material
impact on Chrysler's consolidated financial statements.
NOTE 4. COMMON STOCK REPURCHASES
During 1996, Chrysler's Board of Directors approved an increase in
Chrysler's planned 1997 common stock repurchases from $1 billion to $2 billion.
These common stock repurchases are subject to market and general economic
conditions. During the first quarter of 1997, Chrysler repurchased 17.9 million
shares of its common stock at a cost of $587 million (including $41 million in
unsettled repurchases).
NOTE 5. LONG-TERM DEBT
On February 5, 1997, Chrysler sold, in a private offering, $500 million of
7.45% Debentures due 2097 for net proceeds of $485 million. Concurrent with the
sale of these debentures, Chrysler terminated, and settled for cash, forward
contracts (notional amount $520 million) which were entered into to mitigate
interest rate risk associated with the anticipated sale of this debt. These
debentures were exchanged for $500 million of publicly traded 7.45% Debentures,
Series B, on April 2, 1997.
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ITEM 1. FINANCIAL STATEMENTS -- CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 5. LONG-TERM DEBT -- CONTINUED
On February 26, 1997, Chrysler sold $600 million of 7.45% Debentures due
2027 for net proceeds of $592 million. Concurrent with the sale of these
debentures, Chrysler terminated, and settled for cash, forward contracts
(notional amount $575 million) which were entered into to mitigate interest rate
risk associated with the anticipated sale of this debt.
The gains on termination of the forward contracts were immaterial and will
be amortized over the terms of the respective debt.
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 of $1,704 million for the
first quarter of 1997, compared with $1,670 million for the first quarter of
1996. Net earnings for the first quarter of 1997 were $1,029 million, or $1.46
per common share, compared with $1,005 million, or $1.32 per common share, in
the first quarter of 1996.
The improvement in operating results in the first quarter of 1997 compared
with the first quarter of 1996 resulted primarily from an increase in vehicle
shipments and net pricing actions (including the effect of increased average
sales incentives per vehicle), substantially offset by increases in selling and
administrative expenses, and depreciation and special tools amortization.
Chrysler's worldwide vehicle shipments in the first quarter of 1997 were
781,239, an increase of 28,063 units or 4 percent, compared with the first
quarter of 1996. Chrysler's vehicle shipments outside of the U.S., Canada and
Mexico in the first quarter of 1997 were 52,852, an increase of 5,507 units or
12 percent, compared with the first quarter of 1996.
Chrysler's revenues and results of operations are principally derived from
the U.S. and Canada automotive marketplaces. In the first quarter of 1997,
retail industry sales (including fleet) of new cars and trucks in the U.S. and
Canada, on a Seasonally Adjusted Annual Rate basis, were 17.0 million units,
compared with 16.8 million units for the first quarter of 1996.
Chrysler's U.S. and combined U.S. and Canada retail sales and market share
data for the first quarter of 1997 and 1996 were as follows:
FIRST QUARTER
------------------------------------
INCREASE/
1997 1996 (DECREASE)
---- ---- ----------
U.S. Retail Market(1):
Car sales................................................. 202,977 215,147 (12,170)
Car market share.......................................... 10.0% 10.5% (0.5)%
Truck sales (including minivans).......................... 369,678 376,159 (6,481)
Truck market share........................................ 21.8% 22.9% (1.1)%
Combined car and truck sales.............................. 572,655 591,306 (18,651)
Combined car and truck market share....................... 15.4% 16.0% (0.6)%
U.S. and Canada Retail Market(1):
Combined car and truck sales.............................. 626,844 644,678 (17,834)
Combined car and truck market share....................... 15.6% 16.3% (0.7)%
- -------------------------
(1) All retail sale and market share data include fleet sales.
Chrysler's U.S. car market share for the first quarter of 1997 decreased
compared with the first quarter of 1996 primarily as a result of decreased sales
of its Neon subcompact vehicles. Chrysler's U.S. truck market share for the
first quarter of 1997 decreased compared with the first quarter of 1996
primarily as a result of decreased sales of its Dodge Ram pickup trucks and
Jeep(R) Cherokee vehicles, partially offset by increased sales of Jeep Wrangler
vehicles. These decreases reflect an increasingly competitive environment
resulting from new product offerings from competitors and increased sales by
Japanese manufacturers.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
FINANCIAL REVIEW -- CONTINUED
Chrysler Financial Corporation ("CFC") reported earnings before income
taxes of $141 million for the first quarter of 1997 compared with $154 million
for the first quarter of 1996. CFC's net earnings were $93 million for the first
quarter of 1997 compared with $98 million for the first quarter of 1996. The
decrease in net earnings for the first quarter of 1997 compared with the first
quarter of 1996 primarily reflects higher provisions for credit losses partially
offset by higher gains from sales of receivables.
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES
Chrysler's total revenues for the three months ended March 31, 1997 and
1996 were as follows:
FIRST QUARTER
-----------------------------------------
INCREASE/
1997 1996 (DECREASE)
---- ---- ----------
(IN MILLIONS OF DOLLARS)
Sales of manufactured products.............................. $15,156 $14,044 8 %
Finance and insurance revenues.............................. 410 449 (9)%
Other revenues.............................................. 550 463 19 %
------- -------
Total revenues......................................... $16,116 $14,956 8 %
======= =======
The increase in sales of manufactured products in the first quarter of 1997
compared with the first quarter of 1996 primarily reflects a 4 percent increase
in vehicle shipments and an increase in average revenue per unit, net of sales
incentives, from $18,559 in the first quarter of 1996 to $19,427 in the first
quarter of 1997. The increase in average revenue per unit was principally due to
pricing actions partially offset by higher average sales incentives per vehicle.
The decrease in finance and insurance revenues in the first quarter of 1997
compared with the first quarter of 1996 was primarily attributable to lower
average automotive and nonautomotive receivables outstanding, partially offset
by an increase in vehicles under purchased operating leases.
The increase in other revenues in the first quarter of 1997 compared with
the first quarter of 1996 was primarily attributable to higher gains from sales
of receivables at CFC and higher interest income.
Chrysler's total expenses for the three months ended March 31, 1997 and
1996 were as follows:
FIRST QUARTER
-----------------------------------------
INCREASE/
1997 1996 (DECREASE)
---- ---- ----------
(IN MILLIONS OF DOLLARS)
Costs, other than items below............................... $11,968 $11,005 9 %
Depreciation and special tools amortization................. 678 611 11 %
Selling and administrative expenses......................... 1,207 1,087 11 %
Employee retirement benefits................................ 325 311 5 %
Interest expense............................................ 234 272 (14)%
------- -------
Total expenses......................................... $14,412 $13,286 8 %
======= =======
Costs, other than items below increased in the first quarter of 1997
compared with the first quarter of 1996 primarily as a result of a 4 percent
increase in vehicle shipments and increased vehicle content. Costs, other than
items below as a percent of sales of manufactured products were 79 percent and
78 percent for the three months ended March 31, 1997 and 1996, respectively.
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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
Depreciation and special tools amortization for the first quarter of 1997
increased compared with the first quarter of 1996 primarily as a result of
higher levels of property and equipment in use, including increased depreciation
related to vehicles under purchased operating leases.
Selling and administrative expenses for the first quarter of 1997 increased
compared with the first quarter of 1996 primarily as a result of increased
advertising expenses and increased expenses associated with Chrysler's expanding
international operations.
Interest expense for the first quarter of 1997 decreased compared with the
first quarter of 1996 primarily as a result of lower average effective cost of
borrowings at CFC. The decline in CFC's average effective cost of borrowings
primarily reflects lower market interest rates in the U.S. and Canada.
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $8,663 million at March 31, 1997 (including $1,037 million
held by CFC and Car Rental Operations), compared with $7,752 million at December
31, 1996 (including $797 million held by CFC and Car Rental Operations). The
increase in Chrysler's combined cash, cash equivalents and marketable securities
in the first quarter of 1997 was primarily the result of cash provided by a net
increase in total debt and cash generated by operating activities, partially
offset by capital expenditures, net finance receivables acquired, common stock
repurchases and dividend payments.
During 1996, Chrysler's Board of Directors approved an increase in
Chrysler's planned 1997 common stock repurchases from $1 billion to $2 billion.
These common stock repurchases are subject to market and general economic
conditions. During the first quarter of 1997, Chrysler repurchased 17.9 million
shares of its common stock at a cost of $587 million (including $41 million in
unsettled repurchases).
In February 1997, Chrysler sold $500 million of 7.45% Debentures due 2097
and $600 million of 7.45% Debentures due 2027 for net proceeds of $485 million
and $592 million, respectively.
At March 31, 1997, Chrysler (excluding CFC) had debt maturities totaling
$746 million through 1999. At March 31, 1997, Chrysler had a $2.4 billion
revolving credit agreement which expires in April 2001. There were no amounts
outstanding under this revolving credit agreement at March 31, 1997. Chrysler
believes that cash from operations and its cash position will be sufficient to
meet its 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 $1.4 billion of net proceeds from the sale of automotive retail
receivables in the first quarter of 1997 compared with $1.1 billion of net
proceeds in the first quarter of 1996. In addition, securitization of revolving
wholesale account balances provided funding for CFC which aggregated $6.8
billion and $6.6 billion at March 31, 1997 and 1996, respectively.
At March 31, 1997, CFC had contractual debt maturities of $5.4 billion for
the remainder of 1997 (including $3.2 billion of short-term notes), $2.6 billion
in 1998 and $2.4 billion in 1999. CFC's U.S. and Canadian revolving credit
facilities, which total $8 billion, consist of a $2 billion facility expiring in
April 1997 and a $6 billion facility expiring in April 2001. At March 31, 1997,
no amounts were outstanding under CFC's revolving credit facilities. During the
first quarter of 1997, CFC began the process of negotiating new revolving credit
facilities to replace and extend its existing revolving credit facilities. CFC
believes that cash provided by operations, receivable sales, securitizations,
and the issuance of term debt and commercial paper will provide sufficient
liquidity to meet its debt maturity and other funding requirements.
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.
OUTLOOK
The statements contained in this Outlook section are based on management's
current expectations. With the exception of the historical information contained
herein, the statements presented in this Outlook section are forward-looking
statements that involve numerous risks and uncertainties. Actual results may
differ materially.
Chrysler's worldwide vehicle production in the first quarter of 1997 was
762,160 units, an increase of 19,026 units or 3 percent, compared with the first
quarter of 1996. Worldwide vehicle production for the second quarter of 1997 is
expected to be approximately 818,000 units, an increase of 42,200 units,
compared with the second quarter of 1996. This expected production level is
heavily dependent on Chrysler's ability to maintain its competitive position and
continued favorable economic conditions in the U.S. and Canada, where Chrysler's
sales are concentrated.
Chrysler projects that full-year 1997 retail (including fleet) industry
sales for the U.S. will range from 15.0 million to 15.5 million units and that
full-year 1997 retail (including fleet) industry sales for Canada will range
from 1.2 million to 1.3 million units. Full-year 1996 retail (including fleet)
industry sales were 15.4 million units and 1.2 million units in the U.S. and
Canada, respectively. Actual levels of industry retail (including fleet) sales
will depend on, among other things, economic conditions in the U.S. and Canada.
Accordingly, there can be no assurance that Chrysler's estimates will be
accurate.
In addition, Chrysler wishes to caution readers that several factors, as
well as those factors described elsewhere in this discussion or in other
Securities and Exchange Commission filings, in some cases have affected, and in
the future could affect, Chrysler's actual results, and could cause Chrysler's
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, Chrysler. Those factors include: business
conditions and growth in the automotive industry and general economy; changes in
gasoline and oil prices; changes in consumer debt levels and interest rates;
changes in consumer preferences away from pickup trucks, sport-utility vehicles
and minivans; competitive factors, such as domestic and foreign rival car and
truck offerings, sales incentives, acceptance of new products and price
pressures; excess or shortage of manufacturing capacity; risks and uncertainties
associated with Chrysler's expansion into international markets; and changes in
foreign exchange rates and the resulting impact on pricing strategies of major
foreign competitors. Additionally, several of Chrysler's competitors have larger
worldwide sales volumes and greater financial resources, which may, over time,
place Chrysler at a competitive disadvantage in responding to its competitors'
offerings, substantial changes in consumer preferences, government regulations,
or adverse economic conditions in the U.S. and Canada. Finally, the automotive
industry historically has been highly cyclical and the duration of these cycles
has been difficult to predict.
NEW ACCOUNTING STANDARD
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." This Statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to all entities with publicly held common stock or potential common
stock. This Statement replaces the presentation of primary EPS and fully diluted
EPS with a presentation of basic EPS and diluted EPS, respectively. Basic EPS
excludes dilution and is computed by dividing earnings
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
NEW ACCOUNTING STANDARD -- CONTINUED
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Similar to fully diluted EPS, diluted EPS reflects
the potential dilution of securities that could share in the earnings. This
Statement is not expected to have a material effect on Chrysler's reported EPS
amounts. This Statement is effective for Chrysler's financial statements for the
year ended December 31, 1997.
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, 1997
and 1996 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.
10
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PART II. OTHER INFORMATION
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, 1997 AND 1996
1997 1996
---- ----
(IN MILLIONS OF DOLLARS)
Sales of manufactured products.............................. $15,261 $14,174
Equity in earnings of unconsolidated subsidiaries and
affiliates................................................ 133 160
Interest income and other revenues.......................... 201 172
------- -------
TOTAL REVENUES......................................... 15,595 14,506
------- -------
Costs, other than items below............................... 11,866 10,971
Depreciation and special tools amortization................. 641 583
Selling and administrative expenses......................... 999 912
Employee retirement benefits................................ 322 306
Interest expense............................................ 63 64
------- -------
TOTAL EXPENSES......................................... 13,891 12,836
------- -------
EARNINGS BEFORE INCOME TAXES........................... 1,704 1,670
Provision for income taxes.................................. 675 665
------- -------
NET EARNINGS........................................... $ 1,029 $ 1,005
======= =======
This Supplemental Information does not present the results of operations of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the results of operations of Chrysler with its
investments in Chrysler Financial Corporation ("CFC") and short-term vehicle
rental subsidiaries (the "Car Rental Operations") accounted for on an equity
basis rather than as consolidated subsidiaries and, therefore, 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.
11
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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)
1997 1996
-------- ----------------------
MARCH 31 DECEMBER 31 MARCH 31
-------- ----------- --------
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents................................... $ 5,560 $ 4,825 $ 5,626
Marketable securities....................................... 2,064 2,122 1,521
------- ------- -------
Total cash, cash equivalents and marketable securities...... 7,624 6,947 7,147
Accounts receivable -- trade and other...................... 928 630 1,893
Inventories................................................. 4,644 4,364 4,386
Prepaid employee benefits, taxes and other expenses......... 1,686 1,893 880
Property and equipment...................................... 14,110 13,877 11,953
Special tools............................................... 3,924 3,924 3,481
Investments in and advances from/to unconsolidated
subsidiaries and affiliated companies..................... 3,101 2,874 3,751
Intangible assets........................................... 1,612 1,627 1,761
Deferred tax assets......................................... 1,668 1,624 1,807
Other assets................................................ 5,976 5,448 5,681
------- ------- -------
TOTAL ASSETS......................................... $45,273 $43,208 $42,740
======= ======= =======
LIABILITIES:
Accounts payable............................................ $ 8,632 $ 8,238 $ 8,189
Accrued liabilities and expenses............................ 8,719 8,525 7,629
Short-term debt............................................. 314 346 346
Payments due within one year on long-term debt.............. 21 22 44
Long-term debt.............................................. 2,288 1,206 1,769
Accrued noncurrent employee benefits........................ 9,537 9,365 9,299
Other noncurrent liabilities................................ 3,995 3,935 4,057
------- ------- -------
TOTAL LIABILITIES.................................... 33,506 31,637 31,333
------- ------- -------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized 20.0
shares; Series A Convertible Preferred Stock; issued and
outstanding: 1997 -- 0.03; 1996 -- 0.04 and 0.12 shares,
respectively (aggregate liquidation preference 1997 -- $15
million; 1996 -- $21 million and $58 million,
respectively)............................................. * * *
Common stock -- $1 per share par value; authorized 1,000.0
shares; issued: 1997 -- 822.3; 1996 -- 821.6 and 408.8
shares, respectively...................................... 822 822 409
Additional paid-in capital.................................. 5,163 5,129 5,514
Retained earnings........................................... 9,560 8,829 7,034
Treasury stock -- at cost: 1997 -- 134.4 shares; 1996 --
119.1 and 34.8 shares, respectively....................... (3,778) (3,209) (1,550)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY........................... 11,767 11,571 11,407
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........... $45,273 $43,208 $42,740
======= ======= =======
- -------------------------
* Less than $1 million
This Supplemental Information does not present the financial position of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information 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 and, therefore, 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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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, 1997 AND 1996
1997 1996
---- ----
(IN MILLIONS OF DOLLARS)
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $1,514 $1,440
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities........................ (181) (433)
Sales and maturities of marketable securities............. 219 796
Expenditures for property and equipment................... (540) (613)
Expenditures for special tools............................ (273) (207)
Purchases of vehicle operating leases..................... (89) (5)
Other..................................................... 1 127
------ ------
NET CASH USED IN INVESTING ACTIVITIES................ (863) (335)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt................................. (32) 76
Proceeds from long-term borrowings........................ 1,088 14
Payments on long-term borrowings.......................... (2) (12)
Change in advances from CFC............................... (152) --
Repurchases of common stock............................... (561) (329)
Dividends paid............................................ (283) (229)
Other..................................................... 26 21
------ ------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES.......................................... 84 (459)
------ ------
Change in cash and cash equivalents....................... 735 646
Cash and cash equivalents at beginning of period.......... 4,825 4,980
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $5,560 $5,626
====== ======
This Supplemental Information does not present the cash flows of Chrysler
in accordance with generally accepted accounting principles. This Supplemental
Information 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 and, therefore, 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.
13
16
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 7, 1997, was filed during the three
months ended March 31, 1997, reporting the completion of a Rule 144A sale to
institutional investors of $500 million in aggregate principal amount of 7.45%
Debentures due 2097. This item was reported under Item 5 of such Form 8-K.
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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: April 10, 1997 By J. D. Donlon, III
------------------------------------
J. D. Donlon, III
Vice President and Controller
(Principal Accounting Officer)
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EXHIBIT INDEX
FOR QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 1997
EXHIBIT
- -------
4-D-7 Appendix E to Indenture, dated as of March 1, 1985, as
amended and supplemented, between Chrysler Corporation and
State Street Bank and Trust Company, as successor Trustee to
Manufacturers Hanover Trust Company. Filed as Exhibit 4-D-7
to Registration No. 333-21849 on Form S-4 of Chrysler
Corporation and incorporated herein by reference (not
included herewith).
4-D-8 Appendix F to Indenture, dated as of March 1, 1985, as
amended and supplemented, between Chrysler Corporation and
State Street Bank and Trust Company, as successor Trustee to
Manufacturers Hanover Trust Company. Filed as Exhibit 4-D-8
to Registration No. 333-21849 on Form S-4 of Chrysler
Corporation and incorporated herein by reference (not
included herewith).
4-D-9 Appendix G to Indenture, dated as of March 1, 1985, as
amended and supplemented, between Chrysler Corporation and
State Street Bank and Trust Company, as successor Trustee to
Manufacturers Hanover Trust Company. (Filed with this
report.)
10-A-10 Copy of Chrysler Corporation 1991 Stock Compensation Plan,
as amended and in effect on and after February 6, 1997.
(Filed with this report.)
10-A-11 Copy of Chrysler Corporation Stock Option Plan, as amended
through February 6, 1997. (Filed with this report.)
11 Statement regarding computation of earnings per common
share. (Filed with this report.)
15A Letter, dated April 10, 1997, re unaudited interim
information. (Filed with this report.)
15B Letter, dated April 10, 1997, re unaudited interim
information. (Filed with this report.)
27 Financial Data Schedule for three months ended March 31,
1997. (Filed with this report.)
16