SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 17, 1995
Date of Report ........................................................
(Date of earliest event reported)
CHRYSLER FINANCIAL CORPORATION
........................................................................
(Exact name of registrant as specified in its charter)
State of Michigan 1-5966 38-0961430
......................................................................
(State or other jurisdiction (Commission) (IRS Employer
of incorporation) File No.) Identification No.)
27777 Franklin Rd., Southfield, Michigan 48034
..............................................
(Address of principal executive offices)
(810) 948-3060
Registrant's telephone number, including area code....................
<PAGE>
Item 5. Other Events.
On January 17, 1995, the registrant released its financial
statements for the year ended December 31, 1994 and the report thereon
of Deloitte & Touche LLP, Independent Auditors. A copy of such
financial statements and report of Deloitte & Touche LLP is annexed as
Exhibit 99 to this Report and by this reference incorporated herein
and made a part hereof.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
Listed below are the financial statements, pro forma financial
information and exhibits, if any, filed as a part of this Report:
(a) Financial statements of businesses acquired;
None
(b) Pro forma financial information:
None
(c) Exhibit:
23 Consent of Deloitte & Touche LLP, Independent Auditors.
27 Financial Data Schedule.
99 Copy of financial statements of Chrysler Financial
Corporation for the year ended December 31, 1994 and
the report thereon of Deloitte & Touche LLP,
Independent Auditors.
<PAGE>
SIGNATURES
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 hereunto duly authorized.
CHRYSLER FINANCIAL CORPORATION
Date: January 24, 1995 By: /s/ T. P. Dykstra
-------------------------
T. P. Dykstra
Vice President and Controller
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
Exhibit
23 Consent of Deloitte & Touche LLP, Independent Auditors.
27 Financial Data Schedule.
99 Copy of financial statements of Chrysler Financial
Corporation for the year ended December 31, 1994 and the
report of Deloitte & Touche LLP, Independent Auditors.
Exhibit 23
[Letterhead of Deloitte & Touche LLP]
Deloitte &
Touche LLP
____________ _________________________________________
Suite 900 Telephone (313) 396-3000
600 Renaissance Center
Detroit, Michigan 48243-1704
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-50385, 33-52421 and 33-55787 of Chrysler Financial Corporation on Form S-3
of our report dated January 16, 1995 relating to the financial statements of
Chrysler Financial Corporation for the year ended December 31, 1994 appearing
on Form 8-K/A of Chrysler Financial Corporation dated January 17, 1995.
/s/ DELOITTE & TOUCHE LLP
January 24, 1995
_______________
Deloitte Touche
Tohmatsu
International
_______________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CHRYSLER FINANCIAL CORPORATION'S FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $ 174
<SECURITIES> 583
<RECEIVABLES> 15,316
<ALLOWANCES> 512
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 786
<DEPRECIATION> 241
<TOTAL-ASSETS> 16,648
<CURRENT-LIABILITIES> 1,155
<BONDS> 10,671
0
0
<COMMON> 25
<OTHER-SE> 3,248
<TOTAL-LIABILITY-AND-EQUITY> 16,648
<SALES> 0
<TOTAL-REVENUES> 1,984
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 712
<LOSS-PROVISION> 203
<INTEREST-EXPENSE> 754
<INCOME-PRETAX> 315
<INCOME-TAX> 120
<INCOME-CONTINUING> 195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99
CONTACT: John R. Ferry
FOR IMMEDIATE RELEASE
---------------------
SOUTHFIELD, Mich., January 17, 1995 -- Chrysler Financial Corporation
(CFC) today reported 1994 net earnings of $195 million, compared to net
earnings of $129 million in 1993 which were adversely affected by $30 million
for the adoption of new accounting standards.
Thomas W. Sidlik, Chairman of CFC, said the 1994 net earnings increase is
the result of three factors: a higher volume of automotive financing, improved
credit loss experience and lower costs of bank facilities. These factors were
partially offset by continuing rate pressure on automotive consumer lending
margins.
At December 31, 1994, CFC was managing $32.9 billion in receivables, up
$4.6 billion from a year ago. The company's total assets at December 31, 1994,
were $16.6 billion, up $2.3 billion from a year ago. The increase in
receivables managed and total assets is the result of the company's higher
volume of automotive financing.
Chrysler Credit, CFC's core automotive finance operation, was managing
$30.1 billion in receivables at year end 1994, compared to $25.0 billion a year
ago, an increase of 20 percent.
During 1994, Chrysler Credit financed at wholesale 1.6 million vehicles
representing 73 percent of Chrysler's new U.S. factory shipments, compared to
1.5 million vehicles or 75 percent in 1993.
Chrysler Credit's retail automotive financing volume in 1994 was 525,000
new passenger cars, trucks and minivans representing 24 percent of Chrysler's
U.S. retail deliveries, compared to 516,000 or 25 percent in 1993.
Chrysler Insurance, an automotive related insurance operation, had direct
insurance premiums written of $174 million during 1994, compared to $151
million in 1993.
(more)
(195)
<PAGE>
- 2 -
CFC's nonautomotive operations, consisting of Chrysler Capital, a
commercial leasing and lending unit, and Chrysler First Business Credit, a
small business loan operation, were managing $2.8 billion in receivables at
December 31, 1994. A year ago, the company's nonautomotive operations were
managing $3.3 billion in receivables.
In 1994 capital markets activity, Chrysler Financial received net proceeds
of $6.2 billion from eight new placements of U.S. and Canadian securities
backed by retail automotive receivables, and raised $1.35 billion of funding
from three new long term revolving arrangements for dealer inventory financing.
In other capital markets activity, the company sold in excess of $1.0 billion
of U.S. medium term notes; raised $450 million in two underwritten debt
offerings; and raised $150 million in private term placements. Additionally,
Chrysler Credit Canada Ltd., CFC's Canadian automotive finance subsidiary,
re-established its medium note program in October and sold C$77 million by year
end. At the close of the year, CFC had commercial paper outstanding in the U.S.
and Canada of $4.3 billion, compared to $2.8 billion a year ago.
During 1994, all four U.S. rating agencies continued raising their
investment grade ratings of CFC's debt securities and commercial paper. Plus,
both Canadian rating agencies raised the ratings of Chrysler Credit Canada's
long term debt and commercial paper.
In the second quarter, CFC successfully put in place new U.S. and Canadian
bank facilities which replaced existing facilities scheduled to expire in 1995.
These facilities consist of $5.2 billion of revolving credit agreements which
expire in May 1998, and $1.7 billion of receivable sale agreements. As of
December 31, 1994, none of these facilities had been utilized.
Shortly after the close of the third quarter, John P. Tierney, 63,
announced he would retire December 31, 1994, after seven years as Chairman of
Chrysler Financial and 31 years in the automotive industry. Sidlik, 45, a Vice
President of Chrysler Corporation, was appointed Chairman of CFC effective
November 7, 1994.
- 0 -
<PAGE>
FINANCIAL STATEMENTS
CHRYSLER FINANCIAL
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Chrysler Financial Corporation and Subsidiaries
Highlights
(in millions of dollars)
Year Ended December 31,
1994 1993
<S> <C> <C>
After-Tax Earnings:
Earnings before changes in accounting principles $ 195 $ 159
Cumulative effect of accounting changes -- (30)
Net earnings $ 195 $ 129
Automotive Financing Volume:
Retail $ 16,572 $ 13,910
Wholesale and other 53,864 45,856
Total automotive financing volume $ 70,436 $ 59,766
<CAPTION>
- ---------------------------------------------------------------------------
December 31,
1994 1993
<S> <C> <C>
Finance Receivables Managed
(Including Receivables Serviced for Others):
Automotive financing:
Retail $ 19,362 $ 16,108
Wholesale and other 10,730 8,903
Total automotive financing 30,092 25,011
Nonautomotive financing 2,775 3,251
Total finance receivables managed $ 32,867 $ 28,262
Debt Payable Within One Year $ 5,119 $ 4,080
Debt Payable After One Year $ 5,552 $ 4,355
Shareholder's Investment $ 3,273 $ 3,131
<FN>
See Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Chrysler Financial Corporation and Subsidiaries
Consolidated Statement of Net Earnings
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Interest income (Notes 1, 2 and 10):
Automotive financing:
Retail $ 555 $ 526 $ 669
Wholesale and other 523 463 429
Nonautomotive financing 279 429 841
Total interest income 1,357 1,418 1,939
Interest expense (Note 5) (754) (791) (1,022)
Interest margin 603 627 917
Other revenues:
Servicing fee income 247 214 209
Insurance premiums earned (Note 6) 137 128 132
Investment and other income (Notes 3 and 4) 243 279 295
Interest margin and other revenues 1,230 1,248 1,553
Costs and expenses:
Operating expenses 497 463 595
Provision for credit losses (Notes 1 and 2) 203 216 309
Insurance losses and adjustment expenses (Note 6) 109 108 112
Depreciation and other expenses 106 194 242
Total costs and expenses 915 981 1,258
Earnings before income taxes and cumulative
effect of changes in accounting principles 315 267 295
Provision for income taxes (Note 7) 120 108 115
Earnings before cumulative effect of changes
in accounting principles 195 159 180
Cumulative effect of changes in accounting
principles (Notes 7 and 11) -- (30) 51
Net Earnings $ 195 $ 129 $ 231
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Chrysler Financial Corporation and Subsidiaries
Consolidated Balance Sheet
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Assets (Note 1):
Finance receivables - net (Note 2) $12,553 $ 9,626
Retained interests in sold receivables and other
related amounts - net (Notes 2 and 3) 2,251 2,620
Total finance receivables and retained interests - net 14,804 12,246
Cash and cash equivalents (Note 4) 174 265
Marketable securities (Note 4) 583 348
Dealership properties leased - net 407 423
Equipment leased to others - net 104 176
Repossessed collateral 162 269
Amounts due from affiliated companies (Note 10) 66 --
Other assets 348 524
Total Assets $16,648 $14,251
Liabilities (Note 1):
Debt (Note 5) $10,671 $ 8,435
Accounts payable, accrued expenses and other 1,155 1,147
Amounts due to affiliated companies (Note 10) -- 24
Deferred income taxes (Note 7) 1,549 1,514
Total Liabilities 13,375 11,120
Commitments and contingent liabilities (Notes 3 and 8)
Shareholder's Investment (Note 9):
Common stock - par value $100 per share:
Authorized, issued and outstanding 250,000 shares 25 25
Additional paid-in capital 1,168 1,168
Retained earnings 2,080 1,938
Total Shareholder's Investment 3,273 3,131
Total Liabilities and Shareholder's Investment $16,648 $14,251
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Chrysler Financial Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 195 $ 129 $ 231
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of changes in accounting
principles -- 30 (51)
Net gains from receivable sales (59) (127) (146)
Provision for credit losses 203 216 309
Depreciation, amortization and
write-off of intangibles 72 118 184
Change in deferred income taxes and income
taxes payable 42 35 (71)
Change in amounts due affiliates (82) (19) 102
Change in accounts payable, accrued
expenses and other 150 (143) (284)
Net cash provided by operating activities 521 239 274
Cash Flows From Investing Activities:
Acquisitions of finance receivables (66,477) (58,034) (48,990)
Collections of finance receivables 27,726 22,225 22,549
Purchases of marketable securities (Note 1) (2,013) (1,551) (3,896)
Sales and maturities of marketable securities 2,056 1,536 3,861
Proceeds from sales of nonautomotive assets -- 2,375 903
Proceeds from sales of receivables 35,887 36,049 28,600
Other 21 300 115
Net cash (used in) provided by investing activities (2,800) 2,900 3,142
Cash Flows From Financing Activities:
Change in short-term notes and affiliated borrowings 1,535 2,428 13
Borrowings under revolving credit facilities:
Proceeds -- 4,792 43,917
Payments -- (10,716) (44,626)
Proceeds from issuance of term debt 1,762 2,305 400
Repayment of term debt (882) (2,108) (3,189)
Payment of dividends (40) -- --
Redemption of preferred stock -- -- (75)
Other (187) (8) 55
Net cash provided by (used in) financing activities 2,188 (3,307) (3,505)
Change in cash and cash equivalents (91) (168) (89)
Cash and cash equivalents at beginning of year 265 433 522
Cash and Cash Equivalents at End of Year $ 174 $ 265 $ 433
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Chrysler Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Chrysler
Financial Corporation and its domestic and foreign subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation. All of the Company's common shares are owned by
Chrysler Corporation (together with its subsidiaries, "Chrysler"). Amounts for
prior years have been reclassified to conform with current year's
classifications.
Receivable Sales
The Company sells significant amounts of automotive receivables in transactions
subject to limited recourse provisions. The Company generally sells its
receivables to a trust and remains as servicer for which it is paid a servicing
fee. Normal servicing fees are earned on a level yield basis over the remaining
terms of the related sold finance receivables. In a subordinated capacity, the
Company retains excess servicing cash flows, a limited interest in the
principal balances of the sold receivables and certain cash deposits provided
as credit enhancements for investors.
Gains or losses from the sales of retail receivables are recognized in the
period in which such sales occur. In determining the gain or loss for each
qualifying sale of retail receivables, the investment in the sold receivable
pool is allocated between the portion sold and the portion retained based on
their relative fair values on the date of sale. Gains or losses are reflected
in the consolidated statement of net earnings under the caption "Investment and
other income." Gains on sales of wholesale receivables are not material.
Income Recognition
Interest income from finance receivables is recognized using the interest
method. Lending fees and certain direct loan origination costs are deferred and
amortized to interest income using the interest method over the contractual
terms of the finance receivables. Interest accrued on finance receivables at
the balance sheet date is included in the consolidated balance sheet caption
"Finance Receivables - net."
Recognition of interest income is generally suspended when a loan becomes
contractually delinquent for periods ranging from 60 to 90 days. Income
recognition is resumed when the loan becomes contractually current, at which
time all past due interest income is recognized.
Property and casualty premiums are earned on a straight-line basis over the
term of the respective policies.
<PAGE>
Note 1 - Summary of Significant Accounting Policies - continued
Lease Transactions
Leasing operations consist of direct finance leases of vehicles and other
equipment, leveraged leases of major equipment and real estate, and operating
leases, all of which are accounted for in accordance with the classification of
the leases. The related revenue is recorded as interest income. Dealership
properties leased to others are stated at cost less accumulated depreciation of
$120 million and $116 million at December 31, 1994 and 1993, respectively.
Equipment leased to others is stated at cost less accumulated depreciation of
$89 million and $164 million at December 31, 1994 and 1993, respectively.
Allowance for Credit Losses
An allowance for credit losses is generally established during the period in
which receivables are acquired. The allowance for credit losses is maintained
at a level deemed appropriate, based primarily on loss experience. Other
factors affecting collectibility are also evaluated, and appropriate
adjustments are recorded. Retail automotive receivables not supported by a
dealer guaranty are charged to the allowance for credit losses net of the
estimated value of repossessed collateral at the time of repossession.
Nonautomotive finance receivables are reduced to the estimated fair value of
collateral when loans are deemed to be impaired.
In May 1993, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan," effective for fiscal years beginning after December
15, 1994. In October 1994, the FASB issued SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures," as an
amendment to SFAS No. 114. These new accounting standards require creditors to
evaluate the collectibility of both contractual interest and principal of
receivables when assessing the need for a loss accrual. The Company will adopt
these standards effective January 1, 1995. Adoption of these standards is not
expected to have a material impact upon the Company's results of operations or
financial position.
Cash Equivalents
Temporary investments of excess borrowed funds with a maturity of less than
three months when purchased are considered to be cash equivalents.
Marketable Securities
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Under SFAS No. 115, the
Company's debt and equity securities are classified as either
available-for-sale or held-to-maturity. The Company does not hold debt or
equity securities for trading. Available-for-sale securities are reported at
fair value. Changes in the fair value of available-for-sale securities are
recorded as an adjustment to retained earnings, net of applicable deferred
taxes. Held-to-maturity securities are carried at cost adjusted for amortized
premium or discount. On January 1, 1994, the adjustment of available-for-sale
securities to market value resulted in a $6 million increase to retained
earnings. The adjustment at December 31, 1994 resulted in a $13 million
decrease to retained earnings. Prior to the adoption of SFAS No. 115,
marketable securities were carried at cost, adjusted for amortized premium or
discount on bonds, plus accrued interest. The Company determines realized gains
and losses on securities using the specific identification method.
During 1994, the Company acquired $300 million of marketable securities in a
non-cash transaction relating to the securitization of retail receivables.
<PAGE>
Note 1 - Summary of Significant Accounting Policies - continued
Repossessed Collateral
Repossessed collateral is carried at the lower of fair value less estimated
selling expenses, or cost. Repossessed collateral carrying costs and gains or
losses from disposition of such assets are recognized in the period incurred.
Real estate owned is carried at the lower of fair value less estimated selling
expenses or cost. Fair value of real estate owned is determined by appraisal.
Other factors affecting collectibility are also evaluated, and appropriate
adjustments are recorded.
Term Debt and Revolving Credit Fees and Costs
Term debt commissions and expenses are amortized over the life of the related
debt issue in relation to the outstanding principal balances. Up-front fees and
costs incurred in connection with revolving credit facilities are deferred and
amortized over the expected term of the facilities.
Derivative Financial Instruments
During 1994, the Company adopted SFAS No. 119, "Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments." The Company
uses derivative financial instruments to manage its exposure arising from
changes in interest rates and currency exchange rates as part of its asset and
liability management program. These derivative financial instruments include
interest rate swaps, interest rate caps, forward interest rate contracts, and
currency exchange agreements. The Company does not use derivative financial
instruments for trading purposes.
Due to changing interest rates, interest rate derivatives are used to stabilize
interest margins. Interest differentials resulting from interest rate swap and
cap agreements are recorded on an accrual basis as an adjustment to interest
expense.
The Company hedges against borrowings denominated in currencies other than the
borrowers' local currency. Such borrowings are translated in the financial
statements at the rates of exchange established under the related currency
exchange agreements.
Forward interest rate contracts are used to manage exposure to fluctuations in
funding costs for anticipated securitizations of retail receivables. Unrealized
gains or losses on forward interest rate contracts that qualify for hedge
accounting treatment are deferred. Unrealized gains or losses on forward
interest rate contracts that do not qualify for hedge accounting treatment are
included in other income. No such amounts were recorded in 1994. Realized
gains or losses are included in the determination of the gain or loss from the
related sale of retail receivables.
Gains or losses on early terminations of derivative financial instruments that
modify the interest rate characteristics of debt are deferred and amortized as
adjustments to interest expense over the remaining term of the related
borrowing.
Income Taxes
Chrysler Financial Corporation and its U.S. subsidiaries are included in
Chrysler's consolidated U.S. income tax returns. The Company's provision for
income taxes is determined on a separate return basis. Under the Tax Sharing
Agreement between the Company and Chrysler, U.S. income taxes have been settled
substantially without regard to alternative minimum tax or limitations on
utilization of net operating losses and foreign tax credits.
<PAGE>
Note 2 - Finance Receivables and Retained Interests - Net
Outstanding balances of "Finance receivables - net" were as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Automotive:
Retail $ 4,982 $ 3,536
Wholesale and other (Note 10) 3,113 2,520
Retained senior interests in sold wholesale receivables* 2,173 967
Total automotive 10,268 7,023
Nonautomotive:
Leveraged leases 1,545 1,559
Other commercial 955 1,244
Total nonautomotive 2,500 2,803
Total finance receivables 12,768 9,826
Less allowance for credit losses (215) (200)
Total finance receivables - net $ 12,553 $ 9,626
<FN>
* Represents receivables held in trust eligible to be securitized or
returned to the Company.
</TABLE>
The Company's retained interests in sold receivables and other related amounts
are generally restricted and subject to limited recourse provisions. The
following is a summary of amounts included in "Retained interests in sold
receivables and other related amounts - net":
<TABLE>
<CAPTION>
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Cash and investments $ 669 $ 586
Subordinated interests in receivables 1,475 1,783
Excess servicing 135 200
Other restricted and securitized assets 269 345
Less allowance for credit losses (297) (294)
Total retained interests in sold receivables
and other related amounts - net $ 2,251 $ 2,620
</TABLE>
Changes in the allowance for credit losses, including receivables sold subject
to limited recourse provisions, were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Balance at beginning of year $ 494 $ 573 $ 557
Provision for credit losses 203 216 309
Net credit losses (158) (197) (310)
Transfers related to nonautomotive asset sales -- (79) --
Other adjustments (27) (19) 17
Balance at end of year $ 512 $ 494 $ 573
</TABLE>
<PAGE>
Note 2 - Finance Receivables and Retained Interests - Net - continued
Nonearning finance receivables, including receivables sold subject to limited
recourse, totaled $282 million and $333 million, at year-end 1994 and 1993,
respectively, which represented 0.9 percent and 1.2 percent of such receivables
outstanding, respectively.
Contractual maturities of total finance receivables at December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
Automotive Nonautomotive Total
(in millions of dollars)
<S> <C> <C> <C>
Past due installments $ 40 $ 26 $ 66
Due in year ending December 31:
1995 7,137 245 7,382
1996 1,170 201 1,371
1997 860 248 1,108
1998 647 215 862
1999 370 179 549
Thereafter 44 1,386 1,430
Total finance receivables $ 10,268 $2,500 12,768
Less allowance for credit losses (215)
Total finance receivables - net $12,553
</TABLE>
Actual cash flow experience will vary from contractual cash flows due to future
receivable sales and prepayments.
The Company's investment in automotive and nonautomotive direct financing
leases included in "Finance receivables - net" was as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Aggregate future lease payments $ 408 $ 403
Estimated residual values 184 186
Less unearned income (139) (173)
Net investment in direct financing leases $ 453 $ 416
</TABLE>
The Company's investment in leveraged leases included in "Finance receivables -
net" and related deferred income taxes was as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Rentals receivable (net of principal
and interest on non-recourse debt) $ 1,401 $ 1,425
Estimated residual values 827 834
Less: Unearned income (588) (604)
Deferred investment tax credits (95) (96)
Net receivable 1,545 1,559
Less deferred income taxes (1,414) (1,377)
Net investment in leveraged leases $ 131 $ 182
</TABLE>
The Company revised its calculations of leveraged lease cash flows to adjust
for the enacted tax rate increase in 1993. This change increased 1993 earnings
before income taxes by $9 million and increased the provision for income taxes
by $20 million, primarily due to the adjustment of the associated net deferred
tax liabilities (see Note 7 - Income Taxes).
<PAGE>
Note 3 - Sales of Receivables
The Company sells receivables subject to limited recourse provisions.
Outstanding balances of sold finance receivables, excluding retained senior
interests in sold wholesale receivables, were as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Automotive:
Retail $12,464 $12,027
Wholesale 5,416 5,389
Nonautomotive 275 449
Total $18,155 $17,865
</TABLE>
Gains or losses from the sales of retail receivables are recognized in the
period in which such sales occur. Provisions for expected credit losses are
generally provided during the period in which such receivables are acquired.
Since the allowance for credit losses is separately provided prior to the
receivable sales, gains from receivable sales are not reduced for expected
credit losses. Included in "Investment and other income" are net gains before
expected credit losses totaling $59 million, $127 million and $146 million for
the years ended December 31, 1994, 1993 and 1992, respectively. The provision
for credit losses related to such sales amounted to $130 million, $135 million
and $137 million for the years ended December 31, 1994, 1993 and 1992,
respectively.
The Company is committed to sell all wholesale receivables related to certain
dealer accounts.
Note 4 - Securities
Contractual maturities of marketable debt securities at December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
Available-for-sale Held-to-maturity
securities securities
------------------ ----------------
Fair Fair
Cost Value Cost Value
---- ----- ---- -----
(in millions of dollars)
<S> <C> <C> <C> <C>
Within one year $ 29 $ 29 $247 $247
After one year through five years 129 125 1 1
After five years through ten years 48 45 1 1
After ten years 118 106 19 19
Total $324 $305 $268 $268
</TABLE>
The proceeds from sales of available-for-sale securities for the year ended
December 31, 1994, were $1.6 billion. The related gross realized gains and
losses were immaterial.
<PAGE>
Note 4 - Securities - continued
Information with respect to the Company's portfolio of securities, which
includes investments classified as marketable securities and cash equivalents
was as follows:
<TABLE>
<CAPTION>
December 31, January 1,
1994 1994
------------------------------------- -------------
Gross Unrealized
Fair ---------------- Fair
Cost Value Gains Losses Cost Value
---- ----- ----- ------ ---- -----
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Available-for-sale securities:
Bonds - Corporate/Public Utility $112 $107 $ 1 $ 6 $ 95 $ 99
State/Municipal 11 9 -- 2 8 8
Government securities -
United States and Canada 184 172 -- 12 169 171
Preferred stocks 11 10 -- 1 9 9
Short-term notes 17 17 -- -- 26 26
Total available-for-sale securities 335 315 $ 1 $ 21 307 313
Excess of cost over fair value (20) n/a
Available-for-sale securities 315 315 307 313
Held-to-maturity securities:
Bonds - Corporate/Public Utility 1 1 5 5
State/Municipal 5 5 6 6
Government securities -
United States and Canada 16 16 30 31
Asset-backed securities* 246 246 - -
Total held-to-maturity securities 268 268 41 42
Total Marketable securities 583 583 348 355
Cash equivalents 37 37 138 138
Total securities $620 $620 $486 $493
<FN>
* Money market notes purchased from trusts established in connection with the
Company's securitization of retail receivables.
</TABLE>
Note 5 - Debt
Average effective cost of borrowings was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1994 1993
----------------------------- ----------------------------
Short-term Term Total Short-term Term Total
Notes Debt Debt Notes Debt Debt
---------- ---- ------ ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Average effective cost of borrowings:
United States operations 5.5% 7.2% 7.4% 4.7% 8.0% 8.0%
Consolidated operations 5.5% 8.1% 8.0% 4.7% 8.8% 8.6%
</TABLE>
<PAGE>
Note 5 - Debt - continued
Debt outstanding at December 31, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
Weighted Average
Interest Rates* at December 31,
Maturity December 31, 1994 1994 1993
(in millions of dollars)
<S> <C> <C> <C>
Short-term notes placed primarily in the
open market:
United States $ 3,901 $ 2,513
Canada 414 259
Total short-term notes (primarily
commercial paper) 4,315 2,772
Senior term debt:
United States, due
1994 -- 813
1995 6.3% 574 574
1996 6.7% 1,602 1,053
1997 6.2% 653 197
1998 6.3% 943 696
1999 9.4% 1,227 797
Thereafter 7.3% 994 969
Total United States 5,993 5,099
Canada, due 1994-1998 10.0% 78 42
Less unamortized discount 2 2
Total senior term debt 6,069 5,139
Subordinated term debt - United States:
Senior, due 1994-1995 8.3% 27 77
Mexico borrowings and other 260 447
Total debt $10,671 $ 8,435
<FN>
* The weighted average interest rates, including the effects of interest rate
exchange agreements, have been calculated on the basis of rates in effect at
December 31, 1994 including $1,184 million of variable rate senior term debt.
</TABLE>
Interest paid by the Company for the years ended December 31, 1994, 1993 and
1992 amounted to $733 million, $847 million and $1,250 million, respectively.
The Company has contractual debt maturities of $5.1 billion in 1995 (including
$4.3 billion of short-term notes), $1.7 billion in 1996, $0.7 billion in 1997,
$1.0 billion in 1998, $1.2 billion in 1999 and $1.0 billion in years
thereafter. Short-term notes outstanding at December 31, 1994 had an average
remaining term of 31 days.
The Company manages its exposure arising from changes in interest rates and
currency exchange rates by utilizing derivative financial instruments. These
derivative financial instruments include interest rate swaps, interest rate
caps, forward interest rate contracts, and currency exchange agreements (see
Note 12 - Financial Instruments).
<PAGE>
Note 5 - Debt - continued
Credit Facilities
During 1994, the Company replaced its revolving credit and receivable sale
agreements which were originally scheduled to expire in 1995. The Company's
current credit facilities, which expire in 1998, consist of $4.6 billion of
U.S. and $.6 billion of Canadian credit facilities. The Company's automotive
receivable sale agreements consist of a $1.5 billion U.S. agreement (of which
$.5 billion expires in 1995, and $1.0 billion expires in 1998) and a $.2
billion Canadian agreement (of which $.1 billion expires in 1995, and $.1
billion expires in 1998). These agreements contain restrictive covenants,
which, among other things, require the Company to maintain a minimum net worth
of $1.5 billion. As of December 31, 1994, no amounts were outstanding under the
Company's revolving credit or receivable sale agreements.
Note 6 - Reinsurance Arrangements and Reserves
The Company enters into various reinsurance contracts with other insurance
enterprises or reinsurers to reduce the losses that may arise from catastrophes
or other events. Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to fulfill their
obligations could result in losses to the Company.
The amounts reported as "Insurance premiums earned" are net of related ceded
reinsurance premiums of $40 million, $46 million and $36 million for the years
ended December 31, 1994, 1993 and 1992, respectively. Amounts reported as
"Insurance losses and adjustment expenses" are net of related reinsurance loss
and loss adjustment expenses of $28 million, $38 million and $35 million for
the years ended December 31, 1994, 1993 and 1992, respectively.
Included in "Accounts payable, accrued expenses and other" are net unearned
insurance premiums and net reserves for insurance losses and adjustment
expenses as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
(in millions of dollars)
<S> <C> <C>
Direct and assumed unearned premiums $ 68 $ 69
Reinsurance ceded (8) (9)
Net unearned premiums $ 60 $ 60
Direct and assumed reserve for insurance losses
and adjustment expenses $ 225 $ 221
Reinsurance ceded (44) (48)
Net reserve for insurance losses and adjustment expenses $ 181 $ 173
</TABLE>
<PAGE>
Note 6 - Reinsurance Arrangements and Reserves - continued
Changes in the net reserve for unpaid losses and loss adjustment expenses
net of reinsurance, salvage and subrogation for Chrysler Insurance Company's
property and casualty operations were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Balance at beginning of year (net of reinsurance
ceded of $47 million, $38 million and
$29 million) $ 166 $ 142 $117
Incurred related to:
Current year 115 113 98
Prior years (8) (11) 3
Total incurred 107 102 101
Paid related to:
Current year (42) (37) (35)
Prior years (54) (41) (41)
Total paid (96) (78) (76)
Balance at end of year (net of reinsurance
ceded of $44 million, $47 million and
$38 million) $ 177 $ 166 $142
</TABLE>
Note 7 - Income Taxes
Chrysler Financial Corporation and its U.S. subsidiaries are included in
Chrysler's consolidated U.S. income tax returns. The Company's provision for
income taxes is determined on a separate return basis. Under the Tax Sharing
Agreement between the Company and Chrysler, U.S. income taxes have been settled
substantially without regard to alternative minimum tax or limitations on
utilization of net operating losses and foreign tax credits.
The provision for income taxes in the consolidated statement of net
earnings includes the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Current tax expense:
United States $ 86 $ 61 $ 130
State and local 10 3 6
Foreign 22 13 20
Total current tax expense 118 77 156
Deferred tax expense (credit):
United States (8) (2) (43)
State and local 11 11 5
Foreign (1) -- (3)
Total deferred tax expense (credit) 2 9 (41)
Effect of restating deferred taxes for
enacted U.S. tax rate increase including
leveraged leases (Note 2) -- 22 --
Total provision for income taxes $ 120 $ 108 $ 115
</TABLE>
Effective January 1, 1992, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which resulted in a favorable cumulative effect of the change in
accounting principle of $51 million.
<PAGE>
Note 7 - Income Taxes - continued
Income taxes paid by the Company for the years ended December 31, 1994, 1993
and 1992 amounted to $27 million, $82 million and $172 million, respectively.
Included in these amounts are taxes paid (net of refunds) to Chrysler under
the Tax Sharing Agreement of $15 million, $63 million and $141 million, in
1994, 1993 and 1992, respectively.
The provision for income taxes differs from the amount of income tax determined
by applying the U.S. statutory income tax rate to earnings before income taxes
and cumulative effect of changes in accounting principles, as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Tax at U.S. statutory rate $ 110 $ 93 $ 101
State and local income taxes 14 9 7
Amortization of investment tax credits (1) (2) (5)
Income not subject to taxes (2) (2) (4)
Purchase accounting adjustments 2 (5) 19
Leveraged lease rate adjustments (6) (8) (5)
Rate adjustment of U.S. deferred tax assets
and liabilities -- 22 --
Other 3 1 2
Total provision for income taxes $ 120 $ 108 $ 115
Effective tax rate 38.1% 40.5% 39.0%
Statutory tax rate 35.0% 35.0% 34.0%
</TABLE>
The tax-effected temporary differences which comprise deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------------- -----------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
--------- ----------- --------- -----------
(in millions of dollars)
<S> <C> <C> <C> <C>
Provision for losses $178 $ -- $161 $ --
Leasing transactions -- 1,654 -- 1,611
State and local taxes -- 100 -- 85
Postretirement benefits other
than pensions 17 -- 17 --
Other 83 73 62 58
Total $278 $1,827 $240 $1,754
</TABLE>
<PAGE>
Note 8 - Commitments and Contingent Liabilities
Various legal actions are pending against Chrysler Financial Corporation and
certain of its subsidiaries, some of which seek damages in large or unspecified
amounts and other relief. The Company believes each proceeding constitutes
routine litigation encountered in the normal course of business. Although the
ultimate amount of liability with respect to such matters cannot be determined
at December 31, 1994, the Company has established reserves which it believes
will be sufficient to cover these matters. After giving effect to these
reserves, management believes the ultimate resolution of these matters will not
have a material adverse effect on the Company's financial position.
The Company is obligated under terms of noncancelable operating leases for the
majority of its office facilities and equipment, as well as for a number of
dealership facilities which are subleased to Chrysler-authorized automotive
dealers. These leases are generally renewable and provide that certain expenses
related to the properties are to be paid by the lessee.
Future minimum lease commitments under the aforementioned leases with remaining
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, (in millions of dollars)
<S> <C>
1995 $ 45
1996 41
1997 36
1998 29
1999 23
Thereafter 85
Total $259
</TABLE>
Future minimum lease commitments have not been reduced by minimum sublease
rentals of $185 million due in the future under noncancelable subleases.
Rental expense for operating leases for the years ended December 31, 1994, 1993
and 1992 was $53 million, $58 million and $69 million, respectively. Sublease
rentals of $42 million were received in 1994, 1993 and 1992.
The Company is contingently liable for guarantees totaling $113 million at
December 31, 1994 provided in connection with an automotive receivable funding
arrangement.
<PAGE>
Note 9 - Shareholder's Investment
Shareholder's Investment is summarized as follows:
<TABLE>
<CAPTION>
Additional Total
Preferred Common Paid-in Retained Shareholder's
Stock Stock Capital Earnings Investment
(in millions of dollars)
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1991 $ 75 $ 25 $ 1,168 $ 1,574 $ 2,842
Net earnings -- -- -- 231 231
Preferred stock redeemed (75) -- -- -- (75)
Preferred stock dividends -- -- -- (1) (1)
Minimum pension liability
in excess of unrecognized
prior service cost -- -- -- 1 1
Balance - December 31, 1992 -- 25 1,168 1,805 2,998
Net earnings -- -- -- 129 129
Minimum pension liability
in excess of unrecognized
prior service cost -- -- -- 4 4
Balance - December 31, 1993 -- 25 1,168 1,938 3,131
Net earnings -- -- -- 195 195
Common stock dividends -- -- -- (40) (40)
Net unrealized holding losses
on securities -- -- -- (13) (13)
Balance - December 31, 1994 $ -- $ 25 $ 1,168 $ 2,080 $ 3,273
</TABLE>
Note 10 - Transactions with Affiliates
Since 1968, the Company has had an Income Maintenance Agreement with Chrysler.
The agreement provides for payments to maintain the Company's required coverage
of earnings available for fixed charges at 110 percent. No payments were
required pursuant to the Income Maintenance Agreement for 1994, 1993 or 1992.
Gains and losses from translating assets and liabilities outside the United
States to U.S. dollar equivalents are credited or charged to Chrysler in
accordance with an agreement indemnifying the Company against losses incurred
as a result of foreign risks. Pursuant to this agreement Chrysler was charged
$24 million in 1994, $10 million in 1993 and $20 million in 1992.
During 1994, the Company had short-term borrowings aggregating $425 million
from Chrysler. The Company repaid $150 million of these borrowings, including
interest, during the year. In addition, the Company loaned a total of $375
million to Chrysler in 1994. Chrysler repaid $100 million of these loans,
including interest, to the Company during the year.
<PAGE>
Note 10 - Transactions with Affiliates - continued
During 1993, the Company had short-term borrowings aggregating $500 million
from Chrysler. All of these borrowings, including $11 million of interest
expense, were repaid during 1993.
Certain business arrangements exist providing for guarantees from Chrysler to
the Company. Pursuant to these arrangements the Company received $1 million, $8
million and $56 million in 1994, 1993 and 1992, respectively.
Pursuant to an agreement between Chrysler and Chrysler Realty Corporation, the
Company received fees of $22 million in 1994, $25 million in 1993 and $28
million in 1992. These fees include charges for administrative services
rendered in the management of dealership land and facilities, reimbursement of
holding costs on vacant facilities, reimbursement of charges by the Company to
dealer tenants for rent in amounts less than the Company pays as rent on
certain leased facilities and for rent in amounts less than current market rent
on certain owned facilities.
The Company provides financing related to programs sponsored by Chrysler for
the sale and lease of Chrysler vehicles. Under these programs, interest rate
differentials received from Chrysler are earned on a level yield basis over the
term of the receivables, or if the related receivables are sold, unearned
amounts are included in the calculation of gains or losses from the sale of
retail receivables. In addition, the Company provides secured financing to
Chrysler in the normal course of business. At December 31, 1994, $2,185 million
was outstanding under these agreements compared to $1,866 million at December
31, 1993.
Note 11 - Employee Benefit Plans
The Company's retirement programs include pension plans providing
noncontributory benefits and contributory benefits. The noncontributory pension
plans cover substantially all employees of Chrysler Financial Corporation and
certain of its consolidated subsidiaries.
Chrysler Financial Corporation and certain of its consolidated subsidiaries
provide benefits based on a fixed rate for each year of service. Additionally,
contributory benefits and supplemental noncontributory benefits are provided to
substantially all salaried employees of Chrysler Financial Corporation and
certain of its consolidated subsidiaries under the Salaried Employees'
Retirement Plan. This plan provides contributory benefits based on the
employee's cumulative contributions and a supplemental noncontributory benefit
based on years of service and the employee's average salary during the
consecutive five years in which salary was highest in the fifteen years
preceding retirement. Net pension cost was $11 million for 1994, $7 million for
1993, and $8 million for 1992.
Annual payments to the pension trust fund for U.S. plans are in compliance with
the Employee Retirement Income Security Act ("ERISA") of 1974, as amended. All
pension trust fund assets and income accruing thereon are used solely to
administer the plan and pay pension benefits. Plan assets are invested in a
diversified portfolio that primarily consists of equity and debt securities. At
December 31, 1994, plan assets included 216,000 shares of Chrysler common stock
with a fair value of $11 million. Dividends received on the Chrysler common
stock totaled $201 thousand in 1994.
The Company provides health and life insurance benefits to substantially all of
its U.S. and Canadian employees. Upon retirement from the Company, employees
may become eligible for continuation of these benefits. However, benefits and
eligibility rules may be modified periodically. Effective January 1, 1993, the
Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("OPEB"), which requires the accrual of such
benefits during the years the employees provide services. The adoption of SFAS
No. 106
<PAGE>
Note 11 - Employee Benefit Plans - continued
resulted in an after-tax charge of $29 million in 1993, which represented the
immediate recognition of the OPEB transition obligation of $45 million,
partially offset by $16 million of estimated tax benefits. Implementation of
SFAS No. 106 did not increase the Company's cash expenditures for
postretirement benefits.
Effective January 1, 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." The adoption of this accounting
standard resulted in the recognition of an after-tax charge of $1 million in
1993.
Note 12 - Financial Instruments
Derivative Financial Instruments
The Company manages its exposure arising from changes in interest rates and
currency exchange rates by utilizing derivative financial instruments. These
derivative financial instruments include interest rate swaps, interest rate
caps, forward interest rate contracts, and currency exchange agreements. The
Company manages exposure to counterparty credit risk by entering into
derivative financial instruments with major financial institutions that can be
expected to fully perform under the terms of such agreements. Notional amounts
are used to measure the volume of derivative financial instruments and do not
represent exposure to credit loss.
The Company does not use derivative financial instruments for trading purposes.
The Company enters into interest rate swap agreements to change the interest
rate characteristics of its debt. Interest rate caps are utilized to reduce
exposure to increases in interest rates.
Interest rate swaps related to term debt are matched with specific obligations.
Interest rate swaps are also utilized to hedge against exposure to interest
rate fluctuations on the anticipated issuances of commercial paper. Interest
rate swaps associated with commercial paper are matched with groups of such
obligations on a layered basis.
The Company also entered into a forward interest rate contract to manage its
exposure to fluctuations in funding costs for an anticipated securitization of
retail receivables during the first quarter of 1995. An unrealized gain of
$1 million on the forward interest rate contract was deferred at December 31,
1994.
<PAGE>
Note 12 - Financial Instruments - continued
The impact of interest rate derivatives on interest expense was immaterial in
1994, 1993 and 1992.
The following table summarizes off-balance sheet interest rate derivatives and
related financial instruments as of December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Notional Amounts Outstanding
and Weighted Average Rates
Interest Rate Derivatives Variable Rate Maturing December 31,
and Related Financial Instruments Indices Through 1994 1993
(in millions of dollars)
<S> <C> <C> <C> <C>
Pay Fixed Interest Rate Swaps
Short-term notes 1998 $ 500 $ 527
Weighted avg. pay rate 9.09% 9.08%
Weighted avg. receive rate Money Market 5.98% 3.20%
Term notes 1995 $ 90 $ 190
Weighted avg. pay rate 9.44% 9.63%
Weighted avg. receive rate LIBOR 5.81% 3.40%
Receive Fixed Interest Rate Swaps
Term notes 2006 $ 126 $ 404
Weighted avg. pay rate LIBOR 5.84% 3.46%
Weighted avg. receive rate 9.41% 9.03%
Pay / Receive Variable Interest
Rate Swaps
Term notes 1999 $ 61 $ --
Weighted avg. pay rate LIBOR 6.16% --
Weighted avg. receive rate Treasury 6.89% --
Pay Fixed Interest Rate Caps
Retained Interests in
Sold Receivables 1995 $ 134 $ 403
Weighted avg. pay rate 0.04% 0.04%
Weighted avg. receive rate LIBOR 0.14% --
Forward Interest Rate Contract
Retained Interests in
Sold Receivables 1995 $ 500 $ --
Weighted avg. contract rate Treasury 7.70% --
Total Notional Amounts Outstanding $ 1,411 $ 1,524
</TABLE>
The Company enters into currency exchange agreements to manage its exposure
arising from changing exchange rates related to specific funding transactions.
The Company hedges against borrowings denominated in currencies other than the
borrowers' local currency. The borrowings are translated in the financial
statements at the rates of exchange established under the related currency
exchange agreement. The reported amount of such currency borrowings was $734
million. If the Company had not entered into currency exchange agreements, the
recorded amount of debt would have been $220 million higher at December 31,
1994.
<PAGE>
Note 12 - Financial Instruments - continued
The following table summarizes the Company's portfolio of currency derivative
financial instruments as of December 31, 1994:
<TABLE>
<CAPTION>
Currency - Net
Derivative Financial Currency Weighted Average Contract or Unrealized
Instrument Amount Maturity Interest Rate Notional Amount Gain
(in millions) (in millions of dollars)
<S> <C> <C> <C> <C> <C>
Deutsche marks -
Fixed Rate
Senior Term Debt DM 500 1995-1997 7.11% $251 $ 79
Swiss francs -
Fixed Rate
Senior Term Debt SF 260 1996 7.26% 132 72
U.S. dollars (1) -
Fixed Rate
Short-term Notes US$ 78 1995 6.16% 78 2
Fixed Rate
Short-term Notes US$ 273 1995 6.57% 273 88
Total $734 $241
<FN>
(1) Amounts represent U.S. dollar funding for the Company's Canadian and
Mexican operations.
</TABLE>
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments," as amended by SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by the
Company using available market information and valuation methodologies as
described below. However, considerable judgment is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions or valuation methodologies may have a material effect on the
estimated fair value amounts.
<PAGE>
Note 12 - Financial Instruments - continued
The carrying amounts and estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
(in millions of dollars)
<S> <C> <C> <C> <C>
Balance Sheet financial instruments:
Marketable securities $ 583 $ 583 $ 348 $ 355
Finance receivables - net (1) $10,555 $10,513 $ 7,651 $ 7,671
Retained interests in sold receivables
and other related amounts - net (2) $ 2,210 $ 2,222 $ 2,563 $ 2,636
Debt (3) $10,877 $10,870 $ 8,541 $ 8,837
Currency exchange agreements $ 220(4) $ 241 $ 121(4) $ 145
<FN>
(1) The carrying value of finance receivables excludes approximately
$1,998 million and $1,975 million of direct finance and leveraged leases
classified as "Finance receivables - net" in the Company's Consolidated
Balance Sheet at December 31, 1994 and 1993, respectively. December 31,
1994 and 1993 data includes approximately $6,851 million and $5,416
million, respectively, of finance receivables which reprice monthly at
current market rates. The carrying value of these finance receivables
approximates fair value.
(2) The carrying value of retained interests in sold receivables and other
related amounts excludes approximately $41 million and $57 million of
retail lease securities at December 31, 1994 and 1993, respectively.
(3) The carrying value of debt excludes approximately $14 million and $15
million of obligations under capital leases at December 31, 1994 and 1993,
respectively. December 31, 1994 and 1993 data includes approximately
$5,643 million and $4,173 million, respectively, of short-term notes,
term debt and other borrowings which reprice at current market rates.
The carrying amount and fair value of debt excludes the effect of the
foreign currency exchange agreements.
(4) Recorded in the balance sheet as a reduction in debt.
</TABLE>
The carrying value of cash and cash equivalents and accounts payable
approximates market value due to the short maturity of these instruments.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------ ------------------------
Contract or Unrealized Contract or Unrealized
Notional Gains Notional Gains
Amount (Losses) Amount (Losses)
------------ ---------- ---------- ----------
(in millions of dollars)
<S> <C> <C> <C> <C>
Derivative financial instruments with
off-balance sheet risk:
Aggregate unrealized gain positions
Interest rate swaps $101 $ 4 $314 $ 15
Interest rate caps $134 $ -- $403 $ --
Forward interest rate contract $500 $ 1 $ -- $ --
Aggregate unrealized loss positions
Interest rate swaps $676 $(16) $807 $(60)
</TABLE>
<PAGE>
Note 12 - Financial Instruments - continued
Although not a counterparty to certain derivative financial instruments
entered into between securitization trusts and third parties, the Company
receives an indirect beneficial interest from such instruments. Such
indirect beneficial interests are subject to reduction in the event of a
counterparty's non-performance. If a counterparty had failed to perform at
December 31, 1994, the Company would have been exposed to a $27 million
loss.
The methods and assumptions used to estimate the fair value of financial
instruments are summarized as follows:
Marketable Securities
The fair value of marketable securities was estimated using quoted market
prices.
Finance Receivables - net
The carrying value of variable rate finance receivables was assumed to
approximate fair value since they are priced at current market rates. The
fair value of fixed rate finance receivables was estimated by discounting
expected cash flows using rates at which loans of similar maturities would
be made as of December 31, 1994 and 1993, respectively.
Retained Interests in Sold Receivables and Other Related Amounts - Net
The fair value of excess servicing cash flows and other subordinated
amounts due the Company arising from receivable sale transactions was
estimated by discounting expected cash flows.
Debt
The fair value of public debt was determined using quoted market prices.
The fair value of other long-term debt was estimated by discounting cash
flows using rates currently available for debt with similar terms and
remaining maturities.
Interest Rate Swaps and Interest Rate Caps
The fair value of the Company's existing interest rate swaps, interest
rate caps and forward interest rate contract was estimated by discounting
net cash flows using quoted market interest rates.
Currency Exchange Agreements
The fair value of currency exchange agreements was estimated by
discounting expected cash flows using market exchange rates and relative
market interest rates over the remaining term of the agreements.
The fair value estimates presented herein are based on pertinent information
available as of the date of the consolidated balance sheet. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been revalued since the date of the
consolidated balance sheet and, therefore, current estimates of fair value may
differ significantly from the amounts presented herein.
<PAGE>
Note 13 - Revenues, Earnings and Assets by Business Segment and Geographical
Area
The Company provides financing and insurance products and services through the
following major operating subsidiaries: Chrysler Credit Corporation -
automotive retail, wholesale and fleet financing; Chrysler Capital Corporation
- - servicing commercial loans and leases and originating tax advantaged
leveraged leases; Chrysler First Inc. - secured small business financing;
Chrysler Insurance Company - property, casualty and other insurance; Chrysler
Realty Corporation - automotive dealership facility development and management.
Revenues, earnings and assets of finance and insurance operations are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Interest income and other revenues:
Finance operations $ 1,820 $ 1,878 $ 2,412
Insurance operations 164 161 163
Consolidated interest income and
other revenues $ 1,984 $ 2,039 $ 2,575
Earnings before income taxes and cumulative
effect of changes in accounting
principles:
Operating earnings:
Finance operations $ 302 $ 257 $ 310
Insurance operations 20 18 14
322 275 324
Amortization of costs in excess of
book value of companies acquired (7) (8) (29)
Consolidated earnings before income taxes and
cumulative effect of changes in accounting
principles $ 315 $ 267 $ 295
<CAPTION>
December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Assets:
Finance operations $16,274 $13,870 $17,201
Insurance operations 374 381 384
Consolidated assets $16,648 $14,251 $17,585
</TABLE>
Revenues, earnings and assets by geographical area are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Interest income and other revenues:
United States $1,778 $1,854 $2,346
Canada 87 84 137
Mexico 119 101 92
Consolidated interest income
and other revenues $1,984 $2,039 $2,575
</TABLE>
<PAGE>
Note 13 - Revenues, Earnings and Assets by Business Segment and Geographical
Area - continued
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Earnings before income taxes and cumulative
effect of changes in accounting principles:
United States $ 278 $ 236 $ 251
Canada 26 13 29
Mexico 11 18 15
Consolidated earnings before income taxes and
cumulative effect of changes in accounting
principles $ 315 $ 267 $ 295
<CAPTION>
December 31,
1994 1993 1992
(in millions of dollars)
<S> <C> <C> <C>
Assets:
United States $15,507 $13,259 $16,477
Canada 708 515 670
Mexico 433 477 438
Consolidated assets $16,648 $14,251 $17,585
</TABLE>
Note 14 - Selected Quarterly Financial Data - Unaudited
Selected quarterly financial data for the years ended December 31, 1994 and
1993 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1994
-----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in millions of dollars)
<S> <C> <C> <C> <C>
Total interest income $331 $324 $329 $373
Interest expense $185 $193 $178 $198
Interest margin and other revenues $299 $279 $315 $337
Provision for credit losses $ 47 $ 40 $ 71 $ 45
Provision for income taxes $ 28 $ 25 $ 32 $ 35
Net earnings $ 47 $ 44 $ 50 $ 54
</TABLE>
<PAGE>
Note 14 - Selected Quarterly Financial Data - Unaudited
<TABLE>
<CAPTION>
Year Ended December 31, 1993
-----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in millions of dollars)
<S> <C> <C> <C> <C>
Total interest income $368 $354 $354 $342
Interest expense $219 $208 $186 $178
Interest margin and other revenues $292 $324 $321 $311
Provision for credit losses $ 46 $ 66 $ 57 $ 47
Provision for income taxes $ 13 $ 18 $ 42* $ 35
Earnings before cumulative effect
of change in accounting principle $ 37 $ 44 $ 22 $ 56
Cumulative effect of change in
accounting principles $(30) $ -- $ -- $ --
Net earnings $ 7 $ 44 $ 22 $ 56
<FN>
* Includes $25 million for increase in statutory tax rate
</TABLE>
<PAGE>
[Letterhead of Deloitte & Touche LLP]
Deloitte &
Touche LLP
____________ _________________________________________
Suite 900 Telephone (313) 396-3000
600 Renaissance Center
Detroit, Michigan 48243-1704
INDEPENDENT AUDITORS' REPORT
Shareholder and Board of Directors
Chrysler Financial Corporation
Southfield, Michigan
We have audited the accompanying consolidated balance sheet of Chrysler
Financial Corporation (a subsidiary of Chrysler Corporation) and
consolidated subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of net earnings and cash flows for each of the
three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Chrysler Financial Corporation and
consolidated subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in the notes to the consolidated financial statements, the
Company adopted new Statements of Financial Accounting Standards and,
accordingly, changed its method of accounting for certain investments in
debt and equity securities in 1994, its method of accounting for
postretirement benefits other than pensions and postemployment benefits in
1993, and its method of accounting for income taxes in 1992.
/s/ DELOITTE & TOUCHE LLP
January 16, 1995
_______________
Deloitte Touche
Tohmatsu
International
_______________
