-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+ou63O/OY2u4sI4Sz9rHVjPoXO/LZOUoVwVvLWPKu56lNyy+nYzLEcrUKAsTGSb SNbC+7vpLrlSknCUhAbgJA== 0000950124-98-005550.txt : 19981014 0000950124-98-005550.hdr.sgml : 19981014 ACCESSION NUMBER: 0000950124-98-005550 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981013 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHRYSLER CORP /DE CENTRAL INDEX KEY: 0000791269 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 382673623 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09161 FILM NUMBER: 98723960 BUSINESS ADDRESS: STREET 1: 1000 CHRYSLER DR STREET 2: CIMS 485 11 51 CITY: AUBURN HILLS STATE: MI ZIP: 48326-2766 BUSINESS PHONE: 8105765741 MAIL ADDRESS: STREET 1: 1000 CHRYSLER DRIVE STREET 2: CIMS 485 11 51 CITY: AUBURN HILLS STATE: MI ZIP: 48326-2766 FORMER COMPANY: FORMER CONFORMED NAME: CHRYSLER HOLDING CORP DATE OF NAME CHANGE: 19860610 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 -------------------------- 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) (248) 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 647,423,781 shares of common stock outstanding as of September 30, 1998. 2 CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX -----
PAGE NO. -------- Part I. FINANCIAL INFORMATION Item 1. Financial Statements 1-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-12 Part II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 15-17 Item 6. Exhibits and Reports on Form 8-K 18 Signature Page 19 Exhibit Index 20
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, 1998 and 1997 (In millions of dollars)
Three Months Ended Nine Months Ended -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Sales of manufactured products $ 13,910 $ 12,101 $ 45,805 $ 40,650 Finance and insurance revenues 572 394 1,517 1,204 Other revenues 475 681 1,436 1,826 ------------ ------------ ------------ ----------- TOTAL REVENUES 14,957 13,176 48,758 43,680 ------------ ------------ ------------ ----------- Costs, other than items below 11,283 10,145 36,642 33,205 Depreciation and special tools amortization 817 590 2,539 1,974 Selling and administrative expenses 1,106 1,139 3,330 3,560 Employee retirement benefits 326 325 952 961 Interest expense 346 251 942 739 ------------ ------------ ------------ ----------- TOTAL EXPENSES 13,878 12,450 44,405 40,439 ------------ ------------ ------------ ----------- EARNINGS BEFORE INCOME TAXES 1,079 726 4,353 3,241 Provision for income taxes 397 285 1,616 1,288 ------------ ------------ ------------ ----------- NET EARNINGS $ 682 $ 441 $ 2,737 $ 1,953 ============ ============ ============ =========== (In dollars or millions of shares) BASIC EARNINGS PER COMMON SHARE $ 1.05 $ 0.66 $ 4.23 $ 2.86 =========== =========== =========== =========== Average common shares outstanding 647.3 671.0 646.5 682.5 DILUTED EARNINGS PER COMMON SHARE $ 1.02 $ 0.65 $ 4.14 $ 2.82 =========== =========== =========== =========== Average common and dilutive equivalent shares outstanding 665.5 681.0 661.5 692.7 DIVIDENDS DECLARED PER COMMON SHARE $ 0.40 $ 0.40 $ 1.20 $ 1.20
See notes to consolidated financial statements. 1 4 Item 1. FINANCIAL STATEMENTS - CONTINUED CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In millions of dollars)
1998 1997 ------------- ------------------------------ Sept. 30 Dec. 31 Sept. 30 ------------- ------------- ------------ (unaudited) (unaudited) ASSETS: Cash and cash equivalents $ 6,963 $ 4,898 $ 5,347 Marketable securities 3,665 2,950 2,252 -------------- -------------- ------------- Total cash, cash equivalents and marketable securities 10,628 7,848 7,599 Accounts receivable - trade and other 1,548 1,646 1,837 Inventories 5,979 4,738 6,419 Prepaid employee benefits, taxes and other expenses 1,010 2,193 1,670 Finance receivables and retained interests in sold receivables 16,292 13,518 13,161 Property and equipment 19,820 17,968 16,924 Special tools 4,540 4,572 4,358 Intangible assets 1,511 1,573 1,950 Other noncurrent assets 6,408 6,362 6,201 -------------- -------------- ------------- TOTAL ASSETS $ 67,736 $ 60,418 $ 60,119 ============== ============== ============= LIABILITIES: Accounts payable $ 10,697 $ 9,512 $ 9,614 Accrued liabilities and expenses 11,114 9,717 9,456 Short-term debt 3,708 3,841 3,145 Payments due within one year on long-term debt 3,081 2,638 2,692 Long-term debt 11,344 9,006 10,097 Accrued noncurrent employee benefits 10,126 9,841 9,865 Other noncurrent liabilities 4,464 4,501 3,983 -------------- -------------- ------------- TOTAL LIABILITIES 54,534 49,056 48,852 -------------- -------------- ------------- 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 - 0.02 and 0.02 shares, respectively (aggregate liquidation preference 1997 - $8 million and $8 million, respectively) -- * * Common stock - $1 per share par value; authorized 1,000.0 shares; issued: 1998 - 824.0 shares; 1997 - 823.1 and 823.1 shares, respectively 824 823 823 Additional paid-in capital 5,219 5,231 5,232 Retained earnings 12,557 10,605 9,996 Treasury stock - at cost: 1998 - 176.6 shares; 1997 - 174.7 and 160.6 shares, respectively (5,398) (5,297) (4,784) -------------- -------------- -------------- TOTAL SHAREHOLDERS' EQUITY 13,202 11,362 11,267 -------------- -------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 67,736 $ 60,418 $ 60,119 ============== ============== =============
*Less than $50 thousand 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 Nine Months Ended September 30, 1998 and 1997 (In millions of dollars)
1998 1997 -------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,720 $ 5,884 -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (2,719) (1,983) Sales and maturities of marketable securities 2,869 2,343 Finance receivables acquired (22,731) (21,165) Finance receivables collected 7,515 6,659 Proceeds from sales of finance receivables 13,351 14,082 Expenditures for property and equipment (2,092) (2,359) Expenditures for special tools (941) (1,208) Purchases of vehicle operating leases (2,255) (1,427) Proceeds from sales of vehicles under purchased operating leases 273 129 Change in cash and investments held by securitization trusts 151 (1,164) Other 215 156 -------------- ------------- NET CASH USED IN INVESTING ACTIVITIES (6,364) (5,937) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt (133) (69) Proceeds from long-term borrowings 4,983 5,550 Payments on long-term borrowings (2,252) (2,938) Repurchases of common stock (197) (1,593) Dividends paid (777) (830) Other 85 122 -------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,709 242 -------------- ------------- Change in cash and cash equivalents 2,065 189 Cash and cash equivalents at beginning of period 4,898 5,158 -------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,963 $ 5,347 ============== =============
See notes to consolidated financial statements. 3 6 Item 1. FINANCIAL STATEMENTS - CONTINUED CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ NOTE 1. CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION The unaudited consolidated financial statements of Chrysler Corporation and its consolidated subsidiaries ("Chrysler") include the accounts of all significant majority-owned subsidiaries that are controlled by Chrysler. Affiliates that are 20 percent to 50 percent owned and subsidiaries where control is expected to be temporary or does not reside with Chrysler 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 and nine months ended September 30, 1998 and 1997 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, 1998 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, 1997. Certain amounts for 1997 have been reclassified to conform with current period classifications. NOTE 2. INVENTORIES Inventories, summarized by major classification, were as follows:
1998 1997 ------------- ------------------------------ Sept. 30 Dec. 31 Sept. 30 ------------ ------------ ------------ (In millions of dollars) Finished products, including service parts $ 1,904 $ 1,883 $ 1,865 Raw materials, finished production parts and supplies 1,598 1,445 1,495 Vehicles held for short-term lease 2,477 1,410 3,059 ------------- ------------- ------------ TOTAL $ 5,979 $ 4,738 $ 6,419 ============= ============= ============
NOTE 3. CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1998, Chrysler adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement requires that all items recognized under accounting standards as components of comprehensive earnings be reported in an annual financial statement that is displayed with the same prominence as other annual financial statements. This Statement also requires that an entity classify items of other comprehensive earnings by their nature in an annual financial statement. For example, other comprehensive earnings may include foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on marketable securities classified as available-for-sale. Annual financial statements for prior periods will be reclassified, as required. Chrysler's total comprehensive earnings were as follows:
Three Months Ended Sept. 30 Nine Months Ended Sept. 30 -------------------------------- ------------------------------ 1998 1997 1998 1997 -------------- -------------- -------------- ------------- (In millions of dollars) Net earnings $ 682 $ 441 $ 2,737 $ 1,953 Other comprehensive earnings (loss) (11) 9 (28) 1 -------------- -------------- -------------- ------------- Total comprehensive earnings $ 671 $ 450 $ 2,709 $ 1,954 ============== ============== ============== =============
Effective January 1, 1998, Chrysler adopted Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP provides guidance on accounting for the costs of computer software developed or obtained for internal use. This SOP requires that entities capitalize certain internal-use software costs once certain criteria are met. Historically, Chrysler generally expensed the costs of developing or obtaining internal-use software as incurred. Adoption of the standard did not have a material effect on Chrysler's consolidated financial statements. 4 7 Item 1. FINANCIAL STATEMENTS - CONTINUED CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED ------------------------------------------------------ NOTE 4. PROPOSED BUSINESS COMBINATION Chrysler, Daimler-Benz Aktiengesellschaft ("Daimler-Benz") and DaimlerChrysler AG ("DaimlerChrysler") have entered into a Business Combination Agreement dated as of May 7, 1998 (as amended and restated) providing for (i) the merger of a newly created Delaware corporation with and into Chrysler ("the Chrysler Merger"); (ii) an offer by DaimlerChrysler to exchange one DaimlerChrysler ordinary share for each Daimler-Benz ordinary share (or 1.005 DaimlerChrysler shares for each Daimler-Benz ordinary share if greater than 90 percent of shares are exchanged); and (iii) the merger of Daimler-Benz with and into DaimlerChrysler. In the Chrysler merger, each share of outstanding Chrysler common stock will be converted into the right to receive 0.6235 DaimlerChrysler shares. As a result of these transactions, DaimlerChrysler will be owned by the former shareholders of Chrysler and Daimler-Benz, and Chrysler will be a wholly owned subsidiary of DaimlerChrysler. On May 7, 1998, Chrysler entered into a Stockholder Agreement with Kirk Kerkorian and Tracinda Corporation (together, "Tracinda"), the owner of approximately 11 percent of the common stock of Chrysler, pursuant to which Tracinda agreed to vote its shares in favor of the transactions contemplated by the Business Combination Agreement. Also on May 7, 1998, Chrysler amended its Rights Agreement, dated as of February 5, 1998, with First Chicago Trust Company of New York. The amendment renders the Rights Agreement inapplicable to the transactions contemplated by the Business Combination Agreement. The transaction is expected to close in November 1998, subject to the satisfaction or waiver of various conditions as more fully described in the Business Combination Agreement. These conditions include completion of the exchange of at least 75 percent of the outstanding shares of Daimler-Benz for DaimlerChrysler shares and the receipt of opinions from the respective tax counsel of Chrysler and Daimler-Benz regarding certain United States federal income and German tax consequences of the transactions. Additionally, the transaction is conditioned upon the receipt by Chrysler of a private letter ruling from the United States Internal Revenue Service (the "IRS"), which was received from the IRS on September 4, 1998. Chrysler's and Daimler-Benz' shareholders approved the proposed business combination at separate Special Shareholders' Meetings held on September 18, 1998. The initial period for the exchange of Daimler-Benz shares for DaimlerChrysler shares extends from September 24, 1998 through October 23, 1998. In September 1998, Chrysler filed a preliminary Form S-3 with the Securities and Exchange Commission to register the offering of up to 30 million shares of Chrysler common stock. This offering of Chrysler common stock is conditioned on the exchange of at least 90 percent of the outstanding shares of Daimler-Benz for DaimlerChrysler shares. NOTE 5. PREFERRED STOCK REDEMPTION On July 24, 1998, Chrysler redeemed all of the outstanding Depositary Shares representing its Series A Convertible Preferred Stock. 5 8 Item 1. FINANCIAL STATEMENTS - CONTINUED CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED ------------------------------------------------------ NOTE 6. EARNINGS PER COMMON SHARE Earnings per common share ("EPS") data were computed as follows:
Three Months Ended Sept. 30 Nine Months Ended Sept. 30 ------------------------------- ------------------------------ 1998 1997 1998 1997 ------------- ------------- ------------- ------------ (In millions of dollars and shares, except per-common-share amounts) Net earnings $ 682 $ 441 $ 2,737 $ 1,953 ============= ============= ============= ============= Basic EPS: Weighted-average common shares outstanding 647.3 671.0 646.5 682.5 ============= ============= ============= ============= Basic EPS $ 1.05 $ 0.66 $ 4.23 $ 2.86 ============= ============= ============= ============= Diluted EPS: Weighted-average common shares outstanding 647.3 671.0 646.5 682.5 Shares issued on exercise of dilutive options 36.1 31.1 33.5 27.8 Shares purchased with proceeds of options (20.5) (23.8) (21.4) (20.8) Shares applicable to convertible preferred stock 0.1 0.9 0.5 1.5 Shares contingently issuable 2.5 1.8 2.4 1.7 ------------- ------------- ------------- ------------- Shares applicable to diluted earnings 665.5 681.0 661.5 692.7 ============= ============= ============= ============= Diluted EPS $ 1.02 $ 0.65 $ 4.14 $ 2.82 ============= ============= ============= =============
6 9 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 $1.079 billion for the third quarter of 1998 compared with $726 million for the third quarter of 1997. For the first nine months of 1998, Chrysler reported earnings before income taxes of $4.353 billion, compared with $3.241 billion for the first nine months of 1997. Net earnings for the third quarter of 1998 were $682 million, or $1.05 per common share ($1.02 per diluted common share), compared with $441 million, or $0.66 per common share ($0.65 per diluted common share), for the third quarter of 1997. Net earnings for the first nine months of 1998 were $2.737 billion, or $4.23 per common share ($4.14 per diluted common share), compared with $1.953 billion, or $2.86 per common share ($2.82 per diluted common share), for the first nine months of 1997. The increase in earnings for the third quarter of 1998 compared with the third quarter of 1997 primarily reflects an increase in vehicle shipments, partially offset by an increase in depreciation and special tools amortization. The increase in earnings for the first nine months of 1998 compared with the first nine months of 1997 primarily reflects an increase in vehicle shipments and decreased warranty costs, partially offset by an increase in average sales incentives and depreciation and special tools amortization. Vehicle shipments for the first nine months of 1997 were negatively impacted by the 29-day strike at an engine plant in Detroit, Michigan. The decrease in warranty costs was primarily related to several voluntary customer service actions and recalls which occurred in 1997. The increase in average sales incentives was attributable to an increasingly competitive automotive market environment. Earnings for the third quarter and first nine months of 1997 also included a $41 million charge ($25 million after taxes) for costs related to discontinuing Chrysler's Eagle brand at the end of the 1998 model year. Chrysler's worldwide vehicle shipments in the third quarter and first nine months of 1998 were 673,163 units and 2,348,252 units, respectively, compared with 605,356 units and 2,125,048 units, respectively, in the third quarter and first nine months of 1997. The increase in worldwide shipments for the third quarter of 1998, as compared to the third quarter of 1997, primarily reflects increased shipments of Chrysler's Dodge Durango and full-size sedans, partially offset by decreased shipments of Jeep(R) Grand Cherokees. The increase in worldwide shipments for the first nine months of 1998, as compared to the first nine months of 1997, primarily reflects increased shipments of Chrysler's Dodge Durango and Dodge Ram pickup trucks as well as a general increase in passenger cars, partially offset by decreased shipments of Jeep Grand Cherokees. Decreased shipments of Jeep Grand Cherokees resulted from the changeover to the all-new Jeep Grand Cherokee which began in the second quarter of 1998 and was substantially completed in the third quarter of 1998. Shipments for the first nine months of 1997 also reflect the unfavorable impact of a 29-day strike during the second quarter of 1997. Chrysler's vehicle shipments outside of the U.S., Canada and Mexico in the third quarter and first nine months of 1998 were 38,228 units and 145,919 units, respectively, compared with 54,138 units and 179,298 units, respectively, in the third quarter and first nine months of 1997. The decrease in shipments outside of the U.S., Canada and Mexico is primarily caused by economic difficulties in Asian markets. Chrysler's revenues and results of operations are principally derived from the U.S. and Canada automotive marketplaces. In the third quarter of 1998, retail industry sales (including fleet) of new cars and trucks in the U.S. and Canada, on a Seasonally Adjusted Annual Rate basis, were 16.7 million units compared with 17.2 million units for the third quarter of 1997. In the first nine months of 1998, retail industry sales (including fleet) of new cars and trucks in the U.S. and Canada, on a Seasonally Adjusted Annual Rate basis, were 17.1 million units compared with 16.9 million units for the first nine months of 1997. 7 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED FINANCIAL REVIEW - CONTINUED Chrysler's U.S. and combined U.S. and Canada retail sales and market share data for the third quarter and first nine months of 1998 and 1997 were as follows:
Third Quarter Nine Months ------------------------------------- ---------------------------------------- Increase/ 1998 1997 Increase 1998 1997 (Decrease) --------- --------- ----------- ---------- ---------- ----------- U.S. Retail Market (1): Car sales 179,189 165,010 14,179 569,948 583,325 (13,377) Car market share 9.0% 7.7% 1.3% 9.2% 9.1% 0.1% Truck sales (including minivans) 407,688 379,177 28,511 1,318,547 1,162,007 156,540 Truck market share 22.1% 20.9% 1.2% 22.7% 21.5% 1.2% Combined car and truck sales 586,877 544,187 42,690 1,888,495 1,745,332 143,163 Combined car and truck market share 15.3% 13.7% 1.6% 15.7% 14.8% 0.9% U.S. and Canada Retail Market (1): Combined car and truck sales 651,192 607,789 43,403 2,095,853 1,936,843 159,010 Combined car and truck market share 15.5% 14.1% 1.4% 16.0% 15.1% 0.9%
(1) All retail sales and market share data include fleet sales. Chrysler's U.S. car market share for the third quarter of 1998 increased compared with the third quarter of 1997 primarily as a result of increased sales of its full-size sedans. Chrysler's U.S. truck market share for the third quarter of 1998 increased compared with the third quarter of 1997 primarily as a result of increased sales of its Dodge Ram pickup trucks and Dodge Durango, partially offset by decreased sales of minivans. Chrysler's U.S. truck market share for the first nine months of 1998 increased compared with the first nine months of 1997 primarily as a result of increased sales of its Dodge Durango. U.S. truck market share in the third quarter and first nine months of 1998, as compared to the corresponding periods in 1997, was also negatively impacted by the changeover to the all-new Jeep Grand Cherokee which began in the second quarter of 1998 and was substantially completed in the third quarter of 1998. Chrysler Financial Corporation ("CFC") reported earnings before income taxes of $180 million for the third quarter of 1998 compared with $168 million for the third quarter of 1997. For the first nine months of 1998, CFC reported earnings before income taxes of $518 million compared with $465 million for the first nine months of 1997. CFC's net earnings for the third quarter and first nine months of 1998 were $116 million and $344 million, respectively, compared with $111 million and $307 million for the third quarter and first nine months of 1997, respectively. The increase in net earnings for the third quarter of 1998 compared with the third quarter of 1997 primarily reflects higher gains and servicing fees from the sales of finance receivables and a decrease in the provision for credit losses. COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES Chrysler's total revenues for the third quarter and first nine months of 1998 and 1997 were as follows:
Third Quarter Nine Months ---------------------------------------- ----------------------------------------- Increase/ Increase/ (In millions of dollars) 1998 1997 (Decrease) 1998 1997 (Decrease) ----------- ----------- ---------- ----------- ----------- ---------- Sales of manufactured products $ 13,910 $ 12,101 15 % $ 45,805 $ 40,650 13 % Finance and insurance revenues 572 394 45 % 1,517 1,204 26 % Other revenues 475 681 (30)% 1,436 1,826 (21)% ----------- ----------- ----------- ----------- Total revenues $ 14,957 $ 13,176 14 % $ 48,758 $ 43,680 12 % =========== =========== =========== ===========
8 11 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 Sales of manufactured products in the third quarter 1998, compared with the corresponding period in 1997, primarily reflects an 11 percent increase in vehicle shipments and the recognition of deferred revenue related to sales to rental car companies under guaranteed depreciation programs. The increase in Sales of manufactured products in the first nine months of 1998, compared with the corresponding period in 1997, primarily reflects an 11 percent increase in vehicle shipments and the recognition of deferred revenue related to sales to rental car companies under guaranteed depreciation programs, partially offset by higher average sales incentives. The increase in Finance and insurance revenues in the third quarter and first nine months of 1998 compared with the corresponding 1997 periods is primarily attributable to higher levels of vehicles under purchased operating leases and automotive finance receivables managed. The decrease in Other revenues for the third quarter and first nine months of 1998 compared with the corresponding 1997 periods is primarily attributable to the divestiture of Chrysler's Car Rental Operations in December 1997. Chrysler's total expenses for the third quarter and first nine months of 1998 and 1997 were as follows:
Third Quarter Nine Months -------------------------------------- --------------------------------------- Increase/ Increase/ 1998 1997 (Decrease) 1998 1997 (Decrease) ----------- ----------- ---------- ----------- ----------- ---------- (In millions of dollars) Costs, other than items below $ 11,283 $ 10,145 11 % $ 36,642 $ 33,205 10 % Depreciation and special tools amortization 817 590 38 % 2,539 1,974 29 % Selling and administrative expenses 1,106 1,139 (3)% 3,330 3,560 (6)% Employee retirement benefits 326 325 -- 952 961 (1)% Interest expense 346 251 38 % 942 739 27 % ------------ ------------ ----------- ----------- Total expenses $ 13,878 $ 12,450 11 % $ 44,405 $ 40,439 10 % ============ ============ =========== ===========
Costs, other than items below increased in the third quarter and first nine months of 1998 compared with the corresponding 1997 periods, primarily as a result of an 11 percent increase in vehicle shipments. Costs, other than items below were 81 percent and 80 percent of Sales of manufactured products for the third quarter and first nine months of 1998, respectively, compared with 84 percent and 82 percent for the third quarter and first nine months of 1997, respectively. Depreciation and special tools amortization for the third quarter and first nine months of 1998 increased compared with the corresponding 1997 periods 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 third quarter and first nine months of 1998 decreased compared with the corresponding 1997 periods primarily as a result of the divestiture of Chrysler's Car Rental Operations, partially offset by increased selling and advertising costs. Interest expense for the third quarter and first nine months of 1998 increased compared with the corresponding 1997 periods primarily as a result of higher average debt levels at CFC and increased vehicles intransit and intransit times, partially offset by lower average effective borrowing costs at CFC. Chrysler's effective income tax rates were 36.8 percent and 37.1 percent in the third quarter and first nine months of 1998, respectively, compared with 39.3 percent and 39.7 percent in the third quarter and first nine months of 1997, respectively. These decreases reflect ongoing income tax reduction initiatives by Chrysler. 9 12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED LIQUIDITY AND CAPITAL RESOURCES Chrysler's consolidated combined cash, cash equivalents and marketable securities totaled $10.628 billion at September 30, 1998 (including $1.114 billion held by CFC), compared with $7.848 billion at December 31, 1997 (including $788 million held by CFC). The increase in Chrysler's combined cash, cash equivalents and marketable securities in the first nine months of 1998 was primarily the result of cash generated by operating activities and cash provided by a net increase in total debt at CFC, partially offset by capital expenditures, net finance receivables acquired and dividend payments. At September 30, 1998, Chrysler (excluding CFC) had debt maturities totaling $129 million through 2000. At September 30, 1998, Chrysler had a $2.6 billion revolving credit agreement that expires in April 2002. There were no amounts outstanding under the revolving credit agreement during the third quarter of 1998. Chrysler believes that cash from operations and its cash position will be sufficient to meet its capital expenditure, debt maturity and other funding requirements. Receivable sales continued to be a significant source of funding for CFC, which realized $7.8 billion of net proceeds from the sale of automotive retail receivables in the first nine months of 1998 compared with $6.1 billion of net proceeds in the first nine months of 1997. In addition, securitization of revolving wholesale account balances provided funding for CFC which aggregated $4.8 billion and $7.0 billion at September 30, 1998 and 1997, respectively. At September 30, 1998, CFC had contractual debt maturities of $4.1 billion for the remainder of 1998 (including $2.8 billion of short-term notes), $3.4 billion in 1999 and $3.6 billion in 2000. CFC's U.S. and Canadian revolving credit facilities, which total $8 billion, consist of a $2 billion facility expiring in April 1999 and a $6 billion facility expiring in April 2002. At September 30, 1998, no amounts were outstanding under these facilities. 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 debt maturity and other funding requirements. 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 average sales incentives per vehicle increased during 1998 as a result of an increasingly competitive automotive environment, including the continued unfavorable effects of changes in the Japanese yen to U.S. dollar exchange rate. Chrysler expects to continue to face an increasingly competitive automotive environment, within the context of falling goods prices worldwide and industry overcapacity, which is likely to continue to limit vehicle-pricing flexibility in the near term and which could have an effect on profitability. In addition, the weakness of the Japanese yen and other Asian currencies against the U.S. dollar and the continued deterioration in the Asian economies could result in substantial increases in imports from Asia to the U.S. and Canada. The Asian economic difficulties could result in more intense competition in the automotive industry and could have an unfavorable effect on overall economic conditions in the U.S. and Canada, where Chrysler's sales are concentrated. Economic difficulties in the Asian and Latin American markets may also impact the ability of Chrysler to produce and sell vehicles in those markets. Chrysler's worldwide vehicle production in the third quarter of 1998 was 644,875 units, an increase of 72,357 units or 13 percent, as compared with the third quarter of 1997. Chrysler's worldwide vehicle production for the fourth quarter of 1998 is expected to be approximately 724,500 units, a decrease of 8,500 units or 1 percent, as compared with the fourth quarter of 1997. Future expected production levels are heavily dependent on Chrysler's ability to maintain its competitive position, continued favorable economic conditions in the U.S. and Canada, the avoidance of work stoppages by represented employees and the continued successful launch of Chrysler's new products. In the first nine months of 1998, retail (including fleet) industry sales of new cars and trucks in the U.S., on a Seasonally Adjusted Annual Rate basis, were 15.7 million units. Chrysler projects that 1998 retail (including fleet) industry sales for the U.S. will range from 15.2 million to 15.6 million units and that 1999 retail (including fleet) industry sales for the U.S. will range from 14.9 million to 15.4 million units. Actual levels of retail (including fleet) industry sales in the remainder of 1998 and in 1999 will depend on, among other things, economic conditions in the U.S. Continuation of economic difficulties in markets outside of the U.S. and volatility in certain world currencies and capital markets could have an unfavorable effect on consumer confidence and overall economic conditions in the U.S. Accordingly, there can be no assurance that Chrysler's estimates will be accurate. 10 13 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED OUTLOOK - CONTINUED 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: government regulations as they may affect Chrysler's ability to produce and sell the kinds of vehicles that consumers demand, 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, price pressures and sales incentives, and acceptance of new products; excess or shortage of manufacturing capacity; risks and uncertainties associated with Chrysler's expansion into international markets; and changes in foreign currency 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. PROPOSED BUSINESS COMBINATION Chrysler, Daimler-Benz Aktiengesellschaft ("Daimler-Benz") and DaimlerChrysler AG ("DaimlerChrysler") have entered into a Business Combination Agreement dated as of May 7, 1998 (as amended and restated) providing for (i) the merger of a newly created Delaware corporation with and into Chrysler ("the Chrysler Merger"); (ii) an offer by DaimlerChrysler to exchange one DaimlerChrysler ordinary share for each Daimler-Benz ordinary share (or 1.005 DaimlerChrysler shares for each Daimler-Benz ordinary share if greater than 90 percent of shares are exchanged); and (iii) the merger of Daimler-Benz with and into DaimlerChrysler. In the Chrysler merger, each share of outstanding Chrysler common stock will be converted into the right to receive 0.6235 DaimlerChrysler shares. As a result of these transactions, DaimlerChrysler will be owned by the former shareholders of Chrysler and Daimler-Benz, and Chrysler will be a wholly owned subsidiary of DaimlerChrysler. On May 7, 1998, Chrysler entered into a Stockholder Agreement with Kirk Kerkorian and Tracinda Corporation (together, "Tracinda"), the owner of approximately 11 percent of the common stock of Chrysler, pursuant to which Tracinda agreed to vote its shares in favor of the transactions contemplated by the Business Combination Agreement. Also on May 7, 1998, Chrysler amended its Rights Agreement, dated as of February 5, 1998, with First Chicago Trust Company of New York. The amendment renders the Rights Agreement inapplicable to the transactions contemplated by the Business Combination Agreement. The transaction is expected to close in November 1998, subject to the satisfaction or waiver of various conditions as more fully described in the Business Combination Agreement. These conditions include completion of the exchange of at least 75 percent of the outstanding shares of Daimler-Benz for DaimlerChrysler shares and the receipt of opinions from the respective tax counsel of Chrysler and Daimler-Benz regarding certain United States federal income and German tax consequences of the transactions. Additionally, the transaction is conditioned upon the receipt by Chrysler of a private letter ruling from the United States Internal Revenue Service (the "IRS"), which was received from the IRS on September 4, 1998. Chrysler's and Daimler-Benz' shareholders approved the proposed business combination at separate Special Shareholders' Meetings held on September 18, 1998. The initial period for the exchange of Daimler-Benz shares for DaimlerChrysler shares extends from September 24, 1998 through October 23, 1998. In September 1998, Chrysler filed a preliminary Form S-3 with the Securities and Exchange Commission to register the offering of up to 30 million shares of Chrysler common stock. This offering of Chrysler common stock is conditioned on the exchange of at least 90 percent of the outstanding shares of Daimler-Benz for DaimlerChrysler shares. 11 14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED YEAR 2000 Chrysler has conducted an evaluation of the actions necessary in order to ensure that its business critical computer systems will be able to function without disruption with respect to the application of dating systems in the Year 2000. As a result of this evaluation, Chrysler is engaged in the process of upgrading, replacing and testing certain of its information and other computer systems so as to be able to operate without disruption due to Year 2000 issues. Chrysler's remedial actions are scheduled to be completed during the third quarter of 1999 and, based upon information currently available, Chrysler does not anticipate that the costs of its remedial actions will be material to Chrysler's consolidated results of operations and financial position and are being expensed as incurred. However, there can be no assurance that the remedial actions being implemented by Chrysler will be able to be completed by the time necessary to avoid dating systems problems or that the cost of doing so will not be material. If Chrysler is unable to complete its remedial actions in the planned timeframe, contingency plans will be developed to address those business critical systems which may not be Year 2000 compliant. In addition, disruptions with respect to the computer systems of vendors or customers, which systems are outside the control of Chrysler, could impair the ability of Chrysler to obtain necessary materials or products or to sell or to service their customers. Disruptions of Chrysler's computer systems, or the computer systems of Chrysler's vendors or customers, as well as the cost of avoiding such disruption, could have a material adverse effect upon Chrysler's financial condition and results of operations. Chrysler has a process in place to assess the Year 2000 readiness of its business critical vendors and customers. Chrysler believes that the most reasonably likely worst case scenario is that a small number of vendors will be unable to supply components for a short time after January 1, 2000. As part of the assessment process, Chrysler will develop contingency plans for those business critical vendors who are either unable or unwilling to develop remediation plans to become Year 2000 compliant. Although these plans are yet to be developed, Chrysler expects that these plans will include a combination of actions including stockpiling of components and selective resourcing of materials to Year 2000 compliant vendors. Chrysler expects that vendors in this category will represent an insignificant part of its total supply base. It is expected that these plans will be in place by the third quarter of 1999. NEW ACCOUNTING STANDARDS In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This Statement revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. This Statement standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures. Restatement of disclosures for earlier periods is required. This Statement is effective for Chrysler's financial statements for the year ended December 31, 1998. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. This Statement is not expected to have a material impact on Chrysler's consolidated financial statements. This Statement is effective for fiscal years beginning after June 15, 1999, with earlier adoption encouraged. Chrysler will adopt this accounting standard as required by January 1, 2000. 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, 1998 and 1997 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. 12 15 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On May 7 and 8, 1998, two purported class actions, respectively entitled "Maryland Linotype Composition Co., et al. v. Robert Anthony Lutz, et al.," C.A. 16363 NC and "Jules Bernstein v. Robert Anthony Lutz, et al.," C.A. 16369 NC, were filed in the Court of Chancery of the State of Delaware, New Castle County, naming Chrysler and its directors as defendants. Plaintiffs, purporting to represent the stockholders of Chrysler, allege that Chrysler and its directors breached their fiduciary duties to stockholders by failing to obtain the best price for the shares of Chrysler Common Stock in the Chrysler Merger. The complaints seek to enjoin preliminarily the Chrysler Merger or, in the alternative, damages in the amount of the difference between the value received for the shares of Chrysler Common Stock and the alleged "best price obtainable." Chrysler intends to defend against such allegations vigorously, if and when it is served with these actions. On September 29, 1998, a jury awarded $64 million in damages against Chrysler in "Kiefer vs Chrysler Corporation," a case filed in the 229th Judicial District Court in Starr County, Texas. The complaint alleged that the fuel system in a 1977 Dodge Club Cab pickup truck was defective and allowed fuel to be spilled after the truck was struck by another vehicle, rolled over several times, and caught fire, resulting in the death of its two occupants. Chrysler intends to file motions challenging the verdict and the damage award, and to pursue such motions vigorously, based in part on the fact that the systems which were allegedly defective had been substantially and dangerously modified by the driver and other previous owners. In connection with the previously reported investigation by the U.S. Attorney's Office in Indianapolis, Indiana and the Criminal Investigation Division of the U.S. Environmental Protection Agency, the Federal District Court for the Southern District of Indiana impaneled a grand jury to investigate wastewater discharges last year at Chrysler's transmission plant in Kokomo, Indiana. Chrysler is unable to estimate the amount of fines and penalties, if any, that may ultimately be imposed in connection with this matter. The Wayne County Air Pollution District in Wayne County, Michigan issued a notice of violation under the Federal Clean Air Act with respect to emission levels at Chrysler's engine plant in Trenton, Michigan. Chrysler is unable to estimate the amount of fines and penalties, if any, that may ultimately be imposed in connection with this matter. Three of the four previously reported class action lawsuits alleging defects in airbags in 1993-1996 model year minivans have been dismissed by U.S. District Courts in Louisiana and Texas. The remaining case is pending in Coosa County Circuit Court in Alabama. Two previously consolidated lawsuits alleging defects in the antilock braking systems (ABS) found in certain model year vehicles were denied class certification by the U.S. District Court in New Jersey. As previously reported, an additional ABS class action is pending in Sumter County Circuit Court in Alabama. 13 16 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) A Special Meeting of Stockholders of Chrysler Corporation ("Chrysler Special Meeting") was held on September 18, 1998. (c) The following matters were submitted to a vote at the meeting: (1) approval and adoption of the Amended and Restated Business Combination Agreement, dated as of May 7, 1998, among Daimler-Benz Aktiengesellschaft ("Daimler-Benz"), Chrysler and DaimlerChrysler AG ("DaimlerChrysler"), and the transactions contemplated thereby, including at any adjournment or postponement of the Chrysler Special Meeting. The vote on this matter was as follows:
BROKER FOR AGAINST ABSTAIN NON-VOTES --------------- -------------- ------------- ------------- 475,771,250 12,021,462 1,407,768 -0-
(2) approval of any postponement or adjournment of the Chrysler Special Meeting, if proposed by the Board of Directors of Chrysler Corporation. The vote on this matter was as follows:
BROKER FOR AGAINST ABSTAIN NON-VOTES --------------- -------------- ------------- ------------- 390,323,756 94,629,907 4,246,817 -0-
14 17 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, 1998 and 1997 (In millions of dollars)
Three Months Ended Nine Months Ended -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Sales of manufactured products $ 13,775 $ 12,385 $ 45,185 $ 41,317 Equity in earnings of unconsolidated subsidiaries and affiliates 184 207 557 516 Interest income and other revenues 270 197 726 604 ------------ ------------ ------------ ----------- TOTAL REVENUES 14,229 12,789 46,468 42,437 ------------ ------------ ------------ ----------- Costs, other than items below 11,036 10,215 35,679 33,278 Depreciation and special tools amortization 699 536 2,250 1,836 Selling and administrative expenses 992 936 2,994 2,951 Employee retirement benefits 321 321 938 947 Interest expense 102 55 254 184 ------------ ------------ ------------ ----------- TOTAL EXPENSES 13,150 12,063 42,115 39,196 ------------ ------------ ------------ ----------- EARNINGS BEFORE INCOME TAXES 1,079 726 4,353 3,241 Provision for income taxes 397 285 1,616 1,288 ------------ ------------ ------------ ----------- NET EARNINGS $ 682 $ 441 $ 2,737 $ 1,953 ============ ============ ============ ===========
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 from Chrysler's manufacturing operations, management believes that this disaggregated financial data enhances an understanding of the consolidated financial statements. In December 1997, Chrysler completed an initial public offering of its common stock interest in the Car Rental Operations. 15 18 Item 5. OTHER INFORMATION - CONTINUED SUPPLEMENTAL INFORMATION CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS) BALANCE SHEET (unaudited) (In millions of dollars)
1998 1997 ------------- ------------------------------ Sept. 30 Dec. 31 Sept. 30 ------------- ------------- ------------- ASSETS: Cash and cash equivalents $ 6,356 $ 4,533 $ 5,041 Marketable securities 3,211 2,542 1,839 ------------- -------------- ------------- Total cash, cash equivalents and marketable securities 9,567 7,075 6,880 Accounts receivable - trade and other 1,627 936 694 Inventories 5,979 4,738 5,224 Prepaid employee benefits, taxes and other expenses 988 2,174 1,631 Property and equipment 16,479 15,923 15,182 Special tools 4,540 4,572 4,358 Investments in and advances to unconsolidated subsidiaries 3,580 3,405 3,659 Intangible assets 1,511 1,573 1,600 Deferred tax assets 1,426 1,977 1,857 Other noncurrent assets 5,393 5,474 5,470 -------------- -------------- ------------- TOTAL ASSETS $ 51,090 $ 47,847 $ 46,555 ============== ============== ============= LIABILITIES: Accounts payable $ 9,215 $ 8,599 $ 8,351 Accrued liabilities and expenses 10,956 9,303 9,148 Short-term debt 351 378 385 Payments due within one year on long-term debt 43 19 20 Amounts due CFC 1,243 1,667 1,137 Long-term debt 2,248 2,258 2,267 Accrued noncurrent employee benefits 10,066 9,783 9,805 Other noncurrent liabilities 3,766 4,478 4,175 -------------- -------------- ------------- TOTAL LIABILITIES 37,888 36,485 35,288 -------------- -------------- ------------- 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 - 0.02 and 0.02 shares, respectively (aggregate liquidation preference 1997 - $8 million and $8 million, respectively) -- * * Common stock - $1 per share par value; authorized 1,000.0 shares; issued: 1998 - 824.0 shares; 1997 - 823.1 and 823.1 shares, respectively 824 823 823 Additional paid-in capital 5,219 5,231 5,232 Retained earnings 12,557 10,605 9,996 Treasury stock - at cost: 1998 - 176.6 shares; 1997 - 176.8 and 160.6 shares, respectively (5,398) (5,297) (4,784) -------------- -------------- -------------- TOTAL SHAREHOLDERS' EQUITY 13,202 11,362 11,267 -------------- -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 51,090 $ 47,847 $ 46,555 ============== ============== ==============
* Less than $50 thousand 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 from Chrysler's manufacturing operations, management believes that this disaggregated financial data enhances an understanding of the consolidated financial statements. In December 1997, Chrysler completed an initial public offering of its common stock interest in the Car Rental Operations. 16 19 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 Nine Months Ended September 30, 1998 and 1997 (In millions of dollars)
1998 1997 -------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,180 $ 4,631 -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (700) (579) Sales and maturities of marketable securities 851 868 Expenditures for property and equipment (2,083) (2,290) Expenditures for special tools (941) (1,208) Purchases of vehicle operating leases (359) (448) Proceeds from sales of vehicles under purchased operating leases 114 52 Other 137 70 -------------- -------------- NET CASH USED IN INVESTING ACTIVITIES (2,981) (3,535) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt (27) 39 Proceeds from long-term borrowings 12 1,588 Payments on long-term borrowings (48) (524) Change in advances from CFC (424) 318 Repurchases of common stock (197) (1,593) Dividends paid (777) (830) Other 85 122 -------------- -------------- NET CASH USED IN FINANCING ACTIVITIES (1,376) (880) -------------- -------------- Change in cash and cash equivalents 1,823 216 Cash and cash equivalents at beginning of period 4,533 4,825 -------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,356 $ 5,041 ============== =============
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 from Chrysler's manufacturing operations, management believes that this disaggregated financial data enhances an understanding of the consolidated financial statements. In December 1997, Chrysler completed an initial public offering of its common stock interest in the Car Rental Operations. 17 20 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibits filed with this Report are listed in the Exhibit Index that 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, 1998. 18 21 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 13, 1998 By J. D. Donlon, III ----------------------- ---------------------------------- J. D. Donlon, III Vice President and Controller (Principal Accounting Officer) 19 22 EXHIBIT INDEX ------------- For Quarterly Report on Form 10-Q for the Quarterly Period Ended September 30, 1998 EXHIBIT ------- 10C Copy of Chrysler Corporation Incentive Compensation Plan, as amended and in effect on and after July 30, 1998 (Filed with this report.) 15A Letter, dated October 9, 1998, re unaudited interim information. (Filed with this report.) 15B Letter, dated October 9, 1998, re unaudited interim information. (Filed with this report.) 27 Financial Data Schedule for the nine months ended September 30, 1998 (Filed with this report). 20 EX-10.(C) 2 INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10C CHRYSLER CORPORATION INCENTIVE COMPENSATION PLAN Effective January 1, 1970 (As Amended Through July 30, 1998) 1. PURPOSE The purpose of the Chrysler Corporation Incentive Compensation Plan (below called the Plan or this Plan) is to encourage the continued and energetic efforts of officers and key salaried employees (below called collectively Employees) of Chrysler Corporation (below called Chrysler) and its subsidiaries (Chrysler and its subsidiaries collectively below called the Corporation) on behalf of the Corporation by enabling them to share in the profits of the Corporation, in accordance with the resolution adopted by the Stockholders of Chrysler at their Annual Meeting on April 16, 1929, as they amended it at their Annual Meeting on April 17, 1956, and at their Special Meeting on April 16, 1963, and at their Annual Meetings on April 15, 1969, April 18, 1972, June 7, 1984, May 20, 1993 and May 19, 1994, and as it may be further amended from time to time (below called the Stockholders' Resolution). 2. INCENTIVE COMPENSATION COMMITTEE The Board of Directors of Chrysler (below called the Board) shall appoint not less than three Directors of Chrysler, none of whom shall be entitled to receive funds or securities pursuant to any Incentive Plan (as defined in the Stockholders' Resolution) of Chrysler, to be an Incentive Compensation Committee (below called the Committee) to administer this Plan. Each member of the Committee shall be a "Non-Employee Director" (which term as used herein shall have the meaning ascribed to it in Rule 16b-3 under the Securities Exchange Act of 1934, or in any amendment thereof in effect at the relevant time). The Committee may designate a Secretary, one or more Assistant Secretaries and an Administrator, none of whom need be Directors of Chrysler. Subject to the provisions of this Plan, the Committee shall have authority, in its discretion, to prescribe, amend, and rescind rules and regulations relating to this Plan. 3. INCENTIVE COMPENSATION FUND For each fiscal year the Board shall authorize and approve the amount to be provided out of the earnings of the Corporation for such fiscal year for purposes of this Plan and the Chrysler Corporation Long-Term Incentive Plan (below called the Long-Term Plan, this Plan and the Long-Term Plan collectively below called the Plans), not to exceed the amount permitted by the Stockholders' Resolution, and shall authorize and direct the proper officers of the Corporation (a) to set aside such amount and to add to it (b) any amount authorized and approved by the Board for any prior fiscal year but not previously awarded and (c) any amount awarded for any prior fiscal year that has been forfeited. The sum of all such amounts (or such part thereof as the Board may determine should be made available for awards for any fiscal year) shall be the Incentive Compensation Fund for that fiscal year (below called the Fund). Any part of such sum that the Board determines shall not be made available for awards for any fiscal year shall be carried forward and may be awarded in a subsequent fiscal year. 4. ELIGIBILITY The Committee, in its sole and absolute discretion, shall have full power to determine by salary, salary grade, salary band, classification, or otherwise, the Employees (including those who have retired or died or have been granted a leave of absence or were laid off during the year) who shall be eligible for consideration to participate in the Plans in any year, except that the Committee may not determine as eligible for consideration to participate in the Plans any Employee who was eligible at any time in that year to participate in any other Incentive Plan of the Corporation as defined in the Stockholders' Resolution. Employees shall not be ineligible for consideration to participate in the Plans by reason of their eligibility to participate in any Performance 2 Award Plan or in any Savings and Investment Plan, both as defined in the Stockholders' Resolution, or in any Stock Option Plan, or any Performance Award Plan adopted under any Stock Option Plan, of Chrysler or any of its subsidiaries or in any successor plan or programs adopted to replace any such plan or programs. 5. SELECTING PARTICIPANTS AND DETERMINING AWARDS Each year the Committee, in accordance with such rules as it may prescribe, shall: (a) select from the Employees eligible for consideration to participate in the Plans those Employees who are to participate for that year; (b) award under this Plan to certain of the Employees so selected (below called Participant) such share of the Fund as the Committee shall determine (below called an Award); provided, however, that the maximum amount of such share that may be awarded to a Participant for a given fiscal year shall not exceed a dollar amount equal to 0.15% of the Corporation's consolidated net earnings for such year as determined in accordance with the Stockholders' Resolution; and (c) award under the Long-Term Plan to certain of the Employees so selected, in accordance with the terms of the Long-Term Plan, such share of the Fund as the Committee shall determine. An Employee may receive an Award under this Plan and an award under the Long-Term Plan in the same year. The Committee shall have full and final authority in performing these duties, but shall report to the Board the share of the Fund awarded to each Employee under this Plan and under the Long-Term Plan, expressed in dollar amounts and/or percentage of base salary or performance share awards or award units or otherwise, as the Committee shall determine. Notwithstanding anything else contained in this Plan to the contrary, if any Award is intended at the time of grant to be other performance based compensation within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as the same may be amended from time to time (the "Code"), to the extent required to so qualify any Award hereunder, the Committee shall not be entitled to exercise any discretion otherwise authorized under this Plan with respect to such Award if the ability to exercise such discretion (as opposed to the exercise of such discretion) would cause such Award to fail to qualify as other performance based compensation. 6. CORPORATE PERFORMANCE GOALS The Committee may establish one or more corporate performance goals ("Performance Goals") each year relating to: quality, customer satisfaction, profitability, net margin as a percentage of revenue, return on sales, return on capital, breakeven, productivity, and/or debt to capitalization. A Performance Goal may consist of such criteria, terms and conditions as the Committee may designate. The Committee shall have the discretion to add additional goals and to modify any objectives or performance levels designated in relation to previously established goals. If an Award for a given year is intended to be qualified performance-based compensation under Section 162(m) of the Code, then the related Performance Goal and Award levels shall be established, as described below, no later than the 90th day of such year. 7. AWARDS At the time it establishes a Performance Goal, the Committee shall determine that the attainment of specified levels of performance in respect of such Performance Goal shall correspond to specified Award levels, subject to reduction as described below. Awards shall be expressed as a percentage of a Participant's base salary (or the average base salary or midpoint of the salary range of a class of Employees) in effect at the time the Performance Goal is established. In no event, however, may an Award exceed the maximum amount referenced in Section 5(b) above. An Employee who first becomes eligible for an Award, and is selected as a Participant, after the beginning of a given year may receive an Award established on a pro rata basis for the number of months he or she is eligible during such year. 8. CORPORATE PERFORMANCE EVALUATION The Committee shall confirm the performance level attained by the Corporation in respect of the Performance Goal established for a given year and the corresponding Awards to be paid in respect of such performance; provided, however, that the Committee, in its sole discretion, may reduce the amount of any Award otherwise payable in respect of such performance. 2 3 9. PAYING AND EARNING OUT OF AWARDS UNDER THIS PLAN Awards under this Plan shall be paid to Participants in one lump sum, unless the Committee, in its discretion, determines that an Award shall be paid in installments. A Participant will have earned out under this Plan an Award payable in one lump sum, or the first installment of an Award payable in installments, if his or her employment with the Corporation has been continuous (a) up to the date of payment of the Award payable in one lump sum, or of the first installment of the Award payable in installments, as the case may be, or (b) up to the date of the Participant's retirement or death if he or she should retire or die before the date of such payment, or (c) up to the date the Participant was granted a leave of absence if such leave of absence was granted before the date of such payment, or (d) up to the date the Participant was laid off if he was laid off before the date of such payment. A Participant will have earned out a subsequent installment if his or her employment with the Corporation has been continuous up to and including (a) the December 31 immediately preceding the date the installment is payable, or (b) the date of the Participant's death if he or she should die before such December 31, or (c) such date as the Corporation may determine under all other circumstances. A Participant whose employment with the Corporation is terminated other than by death will not thereafter earn out under this Plan any installment of an Award payable in installments unless the Corporation expressly consents in writing to waive the condition of continuous employment with the Corporation, and the Participant thereafter will earn out each installment only if up to and including the December 31 immediately preceding the date the installment is payable the Participant neither (a) takes other employment or renders services to others without the written consent of the Corporation, nor (b) conducts himself or herself in a manner adversely affecting the Corporation, the determination by the Committee that a Participant has so conducted himself or herself to be final and conclusive. Any installment which a Participant fails to earn out under this Plan shall be forfeited and included in the Fund for a subsequent year as provided in paragraph 3. Nothing in this Plan shall prevent the Corporation from discharging or requesting the resignation of any Participant. An Award payable in one lump sum, or the first installment of an Award payable in installments, shall be paid to the Participant on such date as the Committee shall determine, and if the Participant complies with the conditions for earning out a subsequent installment, it shall be paid to him or her on such date in the year in which it is payable as the Committee shall determine. Any lump sum payment or installment earned out under this Plan and payable to a Participant who is deceased shall be paid to his or her legal representative in such manner and at such time as it would have been paid to the Participant were he or she then alive and in the employ of the Corporation. 10. FORM OF PAYMENTS UNDER THIS PLAN The Committee in its sole and absolute discretion shall determine for any year whether under this Plan the lump sum payment or the installment of any Awards payable in that year shall be paid in cash or in shares of Chrysler stock, or partly in cash and partly in shares of Chrysler stock, the shares to be shares held by the Corporation in its treasury or purchased by the Corporation in the market for distributing in place of cash, the shares to be valued for this purpose in accordance with the Stockholders' Resolution, with cash in place of fractional shares. 3 4 11. DEFERRAL OF PAYMENT A Participant may voluntarily elect to defer receipt of payment under this Plan of all or any part of an Award payable in one lump sum or of any installment of an Award payable in installments upon such terms and conditions as the Committee may prescribe. 12. COSTS All costs of administering the Plans shall be borne by the Corporation and shall not be charged against the Fund. 13. PAYMENTS UPON A CHANGE IN CONTROL Notwithstanding any other provisions hereof, if a "Change in Control" (as defined in paragraph 13(D) hereof) of Chrysler shall occur, the following shall be paid, in cash, no later than the tenth day following such Change in Control in the case of a Change in Control as defined in paragraph 13(D)(i), (ii) or (iv) hereof, or no later than the tenth day following consummation of the Change in Control transaction in the case of a Change in Control as defined in paragraph 13(D)(iii) hereof: (a) all unpaid installments of an Award payable in installments pursuant to paragraph 9 of this Plan, (b) all voluntary deferrals made by a Participant pursuant to paragraph 11 of this Plan (other than deferrals made into the Chrysler Corporation Salaried Employees Savings Plan and the Chrysler Corporation Salaried Employees Supplemental Savings Plan, which deferrals will be governed by the terms of such plans), (c) all unpaid Awards made (including any made pursuant to paragraph 13(C) hereof) for any completed fiscal year which preceded the Change in Control, and (d) "Change in Control Awards" (as determined pursuant to paragraph 13(A) hereof). A. CHANGE IN CONTROL AWARDS. Upon a Change in Control of Chrysler, each Employee (below called a "Change in Control Participant") eligible pursuant to paragraph 4 hereof for consideration to participate in the Plans for the fiscal year in which the Change in Control occurs (the "Change in Control Year") shall be paid a cash award, in a lump sum (the "Change in Control Award"). The tentative Change in Control Award of each Change in Control Participant to whom an Award was made for the last fiscal year immediately preceding the Change in Control for which Awards (including Awards, if any, made pursuant to paragraph 13(C) hereof) were made generally (the "Base Year") shall be determined by multiplying the "Change in Control Fund" (calculated in accordance with paragraph 13(B) hereof) by a fraction, the numerator of which shall be the amount of the Award of such Change in Control Participant for the Base Year, and the denominator of which shall be the aggregate amount of Awards made for the Base Year. A tentative Change in Control Award for each Change in Control Participant to whom an Award was not made for the Base Year shall also be determined and shall be comparable to the tentative Change in Control Awards of similarly situated (in terms of the criteria employed by the Committee to determine participation under paragraph 4 hereof, such as salary, salary grade or classification) Change in Control Participants to whom Awards were made for the Base Year. The actual Change in Control Award of each Change in Control Participant shall then be determined by multiplying the Change in Control Fund by a fraction, the numerator of which shall be his tentative Change in Control Award and the denominator of which shall be the aggregate tentative Change in Control Awards. B. CHANGE IN CONTROL FUND. The Change in Control Fund shall be the sum of the amounts described in (i) and (ii) below, adjusted by the amount described in (iii): (i) the sum (measured immediately prior to a Change in Control) of (x) any amount authorized and approved by the Board for any fiscal year completed prior to the Change in Control but not previously awarded from, or charged against, the Incentive Compensation Fund pursuant to this or any other plan of the Corporation and (y) any amount awarded from, or charged against, the Incentive Compensation Fund for any fiscal year completed prior to the Change in Control that has been forfeited; (ii) the aggregate amount calculated for the fiscal year in which the Change in Control occurs, from its inception up to and including the date of the Change in Control, in the case of a Change in Control as defined in paragraph 13(D)(i), (ii) or (iv) hereof, and up to and including the date on which the Change in Control transaction is consummated in the case of a Change in Control as defined in paragraph 13(D)(iii) hereof, in the ordinary course of business and based on the Stockholders' Resolution. The determination (made prior to the Change in Control or, as applicable, the consummation of the Change in Control transaction) of the Corporation's internal accountants in making any such calculation shall be conclusive; 4 5 (iii) the "applicable amount" (the sum of (i) and (ii) above) shall be adjusted as follows: (a) if an additional charge is made against the Incentive Compensation Fund with respect to Performance Shares under the Long-Term Plan upon the occurrence of a Change in Control, the "applicable amount" shall be reduced by such charge; and (b) if any amount previously charged against the Incentive Compensation Fund for Performance Shares is not earned and delivered upon the occurrence of a Change in Control and is returned to the Incentive Compensation Fund, the "applicable amount" shall be increased by such returned amount. C. MAKING AWARDS FOR COMPLETED YEARS. Upon the occurrence of a "Potential Change in Control" (as defined in paragraph 13(E) hereof), if there is any completed fiscal year of the Corporation for which the audited financial statements of the Corporation are available and for which the Board has not yet determined the Incentive Compensation Fund and/or for which the Committee has not yet determined the Awards, such determinations and the payments of any Awards so determined shall be made as soon as reasonably possible. D. CHANGE IN CONTROL DEFINITION. "Change in Control" shall mean a change in control of Chrysler, which shall be deemed to have occurred: (i) if any Person (as defined below) is or becomes the Beneficial Owner (as defined below) of securities of Chrysler representing 20% or more of the combined voting power of Chrysler's then outstanding securities (unless the event causing the 20% threshold to be crossed is an acquisition of securities directly from Chrysler); or (ii) if during any period of two consecutive years beginning after June 7, 1990, individuals who at the beginning of such period constitute the Board and any new Director (other than a Director designated by a Person who has entered into an agreement with Chrysler to effect a transaction described in paragraph (i), (iii) or (iv) of this Change in Control definition) whose election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (iii) upon the approval by the stockholders of Chrysler of a merger or consolidation of Chrysler with any other corporation (other than a merger or consolidation which would result in the voting securities of Chrysler outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the entity surviving such merger or consolidation), in combination with voting securities of Chrysler or such surviving entity held by a trustee or other fiduciary pursuant to any employee benefit plan of Chrysler or such surviving entity or any subsidiary of Chrysler or such surviving entity, at least 80% of the combined voting power of the voting securities of Chrysler or such surviving entity outstanding immediately after such merger or consolidation), if, and only if, such merger or consolidation is ultimately consummated; or (iv) if the stockholders of Chrysler approve a plan of complete liquidation or dissolution of Chrysler or an agreement for the sale or disposition by Chrysler of all or substantially all Chrysler's assets. For purposes of the definition of Change in Control in this paragraph 13(D): (a) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as supplemented by Section 13(d)(3) of the Exchange Act, provided, however, that Person shall not include (i) Chrysler, any subsidiary of Chrysler or any other Person controlled by Chrysler, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of Chrysler or any subsidiary of Chrysler, or (iii) a corporation owned, directly or indirectly, by the stockholders of Chrysler in substantially the same proportions as their ownership of securities of Chrysler; and (b) a Person shall be deemed the "Beneficial Owner" of any securities which such Person, directly or indirectly, has the right to vote or dispose of or otherwise has "beneficial ownership" of (within the meaning of Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that (i) a Person shall not be deemed the Beneficial Owner of any security as a result of an agreement, arrangement or understanding to vote such securities (x) arising solely from a revocable proxy or consent given in response to a public proxy or 5 6 consent solicitation made pursuant to, and in accordance with, the Exchange Act and the applicable rules and regulations thereunder or (y) made in connection with, or to otherwise participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the applicable rules and regulations thereunder, in either case described in clause (x) or clause (y) above, whether or not such agreement, arrangement or understanding is also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report), and (ii) a Person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. E. POTENTIAL CHANGE IN CONTROL DEFINITION. A "Potential Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (i) Chrysler enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii) Chrysler or any Person (as defined in paragraph 13(D) hereof) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; (iii) any Person who is or becomes the Beneficial Owner (as defined in paragraph 13(D) hereof), directly or indirectly, of securities of Chrysler representing 10% or more of the combined voting power of Chrysler's then outstanding securities, increases such Person's beneficial ownership of such securities by 5% or more over the percentage so owned by such Person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Plan, a Potential Change in Control has occurred. 14. INTERPRETATION The Board shall have full power and authority to interpret and construe this Plan and its interpreting and construing of this Plan and acts pursuant to this Plan in good faith shall be final and conclusive. The Board may correct any defect or supply any omission or reconcile any inconsistency in such a manner and to such an extent as it shall find expedient to carry this Plan into effect, and it shall be the sole and final judge of the expediency. If any such interpreting or construing shall involve a question of law, the Board may rely and act upon the opinion of counsel (who may be counsel to Chrysler) on the question of law. 15. EFFECTIVE PERIOD The Plan shall become effective, upon approval by the Board, beginning January 1, 1970, and shall remain in effect until terminated as provided in Paragraph 16. 16. AMENDMENT AND TERMINATION At any time the Board may amend, alter or terminate this Plan (consistent with the Stockholders' Resolution) as the Board shall deem advisable; provided, however, that the Board may not: (a) without the approval of the holders of a majority of the shares of Common Stock of Chrysler voting on the matter, increase the total amount that under the Stockholders' Resolution may be provided out of the earnings of the Corporation for incentive compensation and (b) without the approval of the holders of a majority of the shares of Common Stock of Chrysler issued and outstanding, issue shares of Chrysler stock for distributing in place of cash; and provided further, however, that terminating or amending this Plan shall not terminate the right of any Participant to earn out and thereby become entitled to receive, in the same manner as if this Plan had not been terminated or amended, any unpaid installment of an Award made to him under this Plan prior to the terminating or amending of this Plan or any Retirement Benefit he would become eligible to receive under the Supplemental Plan by complying with the terms thereof. Nothing in this Plan shall be interpreted to preclude Chrysler from granting awards under, or paying compensation outside the parameters of, the Plan including, without limitation, base salaries, awards under 6 7 any other plan of Chrysler (whether or not approved by stockholders), incentive compensation (whether or not based on the attainment of pre-established performance objectives) or retention or other special payments, that is not deductible for Federal, State or local income tax purposes by reason of Section 162(m) of the Code or otherwise, should the Board or any committee thereof (including the Committee), whichever is applicable, determine that such action is in the best interests of Chrysler and its stockholders. 7 EX-15.(A) 3 LETTER DATED OCTOBER 9, 1998 1 EXHIBIT 15A INDEPENDENT ACCOUNTANTS' REPORT Shareholders and Board of Directors Chrysler Corporation Auburn Hills, Michigan We have reviewed the accompanying condensed consolidated balance sheet of Chrysler Corporation and consolidated subsidiaries as of September 30, 1998 and 1997 and the related condensed consolidated statements of earnings for the three-month and nine-month periods and of cash flows for the nine-month periods ended September 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Chrysler Corporation and consolidated subsidiaries as of December 31, 1997, and the related consolidated statements of earnings and cash flows for the year then ended (not presented herein); and in our report dated January 22, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP Detroit, Michigan October 9, 1998 EX-15.(B) 4 LETTER DATED OCTOBER 9, 1998 1 EXHIBIT 15B October 9, 1998 Chrysler Corporation 1000 Chrysler Drive Auburn Hills, Michigan We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Chrysler Corporation and consolidated subsidiaries for the three-month and nine-month periods ended September 30, 1998 and 1997, as indicated in our report dated October 9, 1998. Because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is incorporated by reference in the following Registration Statements:
REGISTRATION FORM STATEMENT NO. DESCRIPTION S-8 33-5588 Chrysler Salaried Employees' Savings Plan S-8 33-6117 Chrysler Corporation Stock Option Plan S-3 33-13739 Chrysler Corporation Common Stock deliverable to Selling stockholder named therein S-3 33-15716 Chrysler Corporation Common Stock deliverable to Selling stockholders named therein S-8 33-15544 Chrysler Corporation Common Stock (Post-Effective deliverable pursuant to the 1972 and 1980 Amendment No. 1) American Motors Corporation Stock Option Plans S-3 33-15849 Chrysler Corporation Debt Securities S-3 33-22233 Chrysler Corporation Common Stock deliverable to Selling stockholders named therein S-3 33-39688 Chrysler Corporation Common Stock deliverable to Selling stockholders named therein
2
REGISTRATION FORM STATEMENT NO. DESCRIPTION S-8 33-47986 Chrysler Corporation 1991 Stock Compensation Plan S-3 33-59294 Chrysler Corporation Common Stock deliverable to Selling stockholder named therein S-8 33-55817 Chrysler Corporation 1991 Stock Compensation Plan S-3 33-21589 Chrysler Corporation Debt Securities S-4 333-21849 Chrysler Corporation Debt Securities S-3 333-64195 Chrysler Corporation Common Stock deliverable to Selling Stockholders named therein
We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. Deloitte & Touche LLP Detroit, Michigan EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 6,963 3,665 1,548 73 5,979 0 29,756 9,936 67,736 0 11,344 0 0 824 12,378 67,736 45,805 48,758 36,642 0 0 22 942 4,353 1,616 2,737 0 0 0 2,737 4.23 4.14 Excludes depreciation and special tools amortization and employee retirement benefits Less than $50 thousand
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