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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 31, 1996
McDonnell Douglas Corporation
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(Exact Name of Registrant as Specified in its Charter)
Maryland 1-3685 43-0400674
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State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
Post Office Box 516, St. Louis, Missouri 63166-0516
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(Address of Principal Executive Offices) (Zip Code)
(314) 232-0232
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Registrant's Telephone Number
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
A summary of the Registrant's third quarter financial results is
filed as an exhibit hereto and is incorporated herein in
accordance with General Instruction F to Form 8-K.
EXHIBITS
Exhibit No.
12 Computations of Earnings to Fixed Charges for Nine Months
Ended September 30, 1996 and 1995
99 Summary of McDonnell Douglas Corporation's
Third Quarter Financial Results
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, hereunto duly authorized.
MCDONNELL DOUGLAS CORPORATION
October 31, 1996 By: /s/ Steven N. Frank
- --------------- ---------------------------------
(Date) Steven N. Frank
Vice President, Associate General Counsel
and Secretary
<PAGE>
Exhibit 12
MCDONNELL DOUGLAS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
NINE MONTHS ENDED SEPTEMBER 30 1996 1995
EARNINGS
Earnings from continuing
operations before income taxes $ 911 $ 806
ADD: Interest expense 187 167
Interest factor in rents 39 24
------------ ------------
$ 1,137 $ 997
============ ============
FIXED CHARGES
Interest expense $ 187 $ 167
Interest factor in rents 39 24
------------ ------------
$ 226 $ 191
============ ============
Ratio of earnings to fixed charges 5.0X 5.2X
============ ============
SUMMARY OF MCDONNELL DOUGLAS CORPORATION'S
THIRD QUARTER FINANCIAL RESULTS
McDonnell Douglas continued its record performance in 1996,
reporting strong earnings for the third quarter and first nine months of
1996. Earnings for the third quarter of 1996 were led by the military
aircraft segment, where operating margins exceeded 13 percent. Net
earnings in the third quarter of 1996 were $195 million, or 90 cents per share,
which included a charge of $9 million, or 4 cents per share, for settlement of
T-45 claims. That compares with earnings of $192 million, or 85 cents per share
in the 1995 third quarter, which included earnings of $25 million, or 11 cents
per share, as a result of resolution of tax issues.
Net earnings for the first nine months of 1996 were $581 million
compared with $520 million in the first nine months of 1995. Earnings
for the first nine months of 1996 of $2.66 per share were 17 percent
higher than the $2.28 per share reported in the 1995 same period.
Operating earnings for the third quarter of 1996 were $339 million, and
$1.014 billion for the first nine months of 1996.That compares with $295 million
and $888 million for the same periods in 1995. The operating earnings
improvement -- 15 percent in the quarter and 14 percent for the nine month
period -- was led by the military aircraft segment and, to a lesser extent,
improvement in the commercial aircraft segment.
Cash flow from aerospace operations was $366 million for the third
quarter of 1996, prior to reductions of $164 million used by McDonnell Douglas
for repurchase of its common stock. Cash flow included $209 million received
from settlement of long-standing T-45 claims with the U.S. Government. Cash flow
from aerospace operations was $362 million for the first nine months of 1996,
prior to reductions of $541 million for common stock repurchases. From November
1994 through Sept. 30, 1996, McDonnell Douglas has acquired 25.6 million shares,
or about 71 percent, of the 36 million shares of its common stock authorized for
repurchase by the board of directors as part of a stock repurchase plan
initiated in the fourth quarter of 1994.
Total revenues for the third quarter of both 1996 and 1995 were $3.3
billion. Total revenues for the first nine months of 1996 were $9.7 billion,
down from $10.6 billion in the first nine months of 1995. Lower revenue in the
commercial aircraft segment was only partially offset by increased nine month
revenues in the missiles, space and electronic systems segment. Operating
earnings in the military aircraft segment in the 1996 third quarter were
$253 million, compared with $237 million in the third quarter of 1995.
The C-17 and Longbow Apache programs led the improvement in 1996. Third
quarter 1996 results included an award fee on the C-17 program, partially offset
by a $14 million pre-tax charge associated with the settlement of the T-45
claims. Third quarter 1995 results included award fees on both the C-17 and
F/A-18E/F programs.
<PAGE>
Operating earnings in the military aircraft segment for the first nine
months of 1996 were $746 million compared with $652 million
in the 1995 same period, a 14 percent improvement over 1995. Improved earnings
in the C-17, F/A-18 and helicopter programs accounted for most of the 1996
improvement. The 1996 nine month results included a charge for the
aforementioned T-45 claims settlement, and the 1995 same period included an $18
million write-off on a modified KDC-10 Dutch tanker contract involving a new
product design.
Revenues for the military aircraft segment were $1.9 billion for the
third quarter and $5.9 billion for the first nine months of 1996. That compares
with $2.1 billion and $6.0 billion for the same periods in 1995.
Operating earnings in the missiles, space and electronic systems segment in
the 1996 third quarter and first nine months were $43 million and $154 million,
respectively, compared to $52 million and $168 million in the 1995 same periods.
Expenditures on the Delta III, a launch vehicle currently under development,
were partially offset by improved earnings in the Delta II program during each
of the first three quarters of 1996. Revenues for the missiles, space and
electronic systems segment were $533 million for the third quarter and $1.7
billion for the first nine months of 1996. That compares with $488 million and
$1.4 billion for the same periods in 1995. Higher revenue in the Delta II and
Space Station programs, partially offset by lower revenue in the missiles
programs, contributed to the increase in the 1996 periods.
Operating earnings in the commercial aircraft segment were $23 million
in the 1996 third quarter, compared with a loss of $7 million in the 1995
third quarter. Earnings from the sale of spare parts and related services
continued their contribution to earnings in the 1996 third quarter and
were partially offset by losses incurred on the MD-95 program which is
presently in the development phase. Loss provisions on several MD-90 twin
jets caused the loss in the 1995 third quarter.
Operating earnings in the commercial aircraft segment for the first
nine months of 1996 were $60 million, compared with $26 million in the 1995 same
period. Earnings in the 1996 second quarter included recoveries from an
insurance carrier of charges previously expensed related to a 1987 airline
accident, and in the first quarter included recoveries associated with
environmental insurance coverage.
Development costs associated with the MD-95, which were higher in
the 1996 first nine months compared with the 1995 same period, have more than
offset these insurance recoveries.
Revenues for the commercial aircraft segment were $773 million for the
third quarter of 1996, compared with $663 million in the third quarter of 1995.
Revenues for the first nine months of 1996 were $1.9 billion, down from $3.0
billion in the first nine months of 1995. McDonnell Douglas delivered four MD-80
and four MD-90 twin jets and three MD-11 trijets in 1996's third quarter. The
1995 third quarter had the same number of twin jet deliveries, and one less
MD-11 delivery. For the first nine months of 1996, twin jet deliveries totaled
19 (11 MD-80s and eight MD-90s), a decrease of six twin jets from the same
period in 1995. Trijet deliveries totaled 10 for the first nine months of 1996,
compared to 13 in the 1995 same period. In addition, three twin jet and two
trijet 1996 deliveries were accounted for as operating leases with minimal
revenue recorded on such transactions at the time of delivery.
<PAGE>
McDonnell Douglas received orders for seven MD-80 twin jets and one
MD-11 trijet in the third quarter of 1996. Recently announced orders for five
MD-11s and 10 MD-80s will be included in backlog when contracts are completed.
On Sept. 30, 1996, McDonnell Douglas had firm orders for 20 MD-80 twin jets, 121
MD-90 twin jets, 50 MD-95 twin jets and 17 MD-11 trijets.
Operating earnings in the financial services and other segment were $20
million for the third quarter and $54 million in the 1996 first nine months,
compared with $13 million and $42 million in the 1995 same periods. Revenues in
this segment were up $18 million during the quarter to $99 million and were $273
million for the first nine months of 1996, $31 million higher than in the first
nine months of 1995.
Pension income totaled $33 million in the third quarter and
$98 million in the 1996 first nine months, compared with $38 million and $131
million in the same periods of 1995. Increases announced in the second quarter
of 1995 in pension benefits and a change in the actuarial interest assumption
for the discount rate contributed to the 1996 reduction.
McDonnell Douglas had firm backlog of $22.271 billion on Sept. 30,
1996, compared with $19.640 billion on Dec. 31, 1995. Total backlog was $45.962
billion on Sept. 30, 1996, compared with $28.353 billion on Dec. 31, 1995. The
increase in firm backlog related to the Longbow Apache program and to finalizing
terms for the next eight C-17 aircraft. The 62 percent increase in total backlog
related largely to multi-year contracts on the C-17 and Longbow Apache programs,
and to a lesser extent increases in the Space Station and F/A-18 programs.
Total employment at McDonnell Douglas was 64,644 on Sept. 30, 1996, up
slightly from 63,612 on Dec. 31, 1995.
<PAGE>
MCDONNELL DOUGLAS CORPORATION CONSOLIDATED STATEMENT OF EARNINGS (Amounts in
millions, except per share data)
Three Months Ended
September 30
1996 1995
-------- --------
Unaudited
Revenues $ 3,308 $ 3,346
Costs and expenses:
Cost of products, services and
rentals 2,666 2,784
General and administrative expenses 183 160
Research and development 94 75
Interest expense:
Aerospace segments 31 14
Financial services and other
segment 32 26
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Total costs and expenses 3,006 3,059
-------- --------
Earnings Before Income Taxes 302 287
Income taxes 107 95
-------- --------
Net Earnings $ 195 $ 192
======== ========
Earnings Per Share $ .90 $ .85
======== ========
Dividends Declared Per Share $ .12 $ .10
======== ========
Weighted-average Shares Outstanding 214.6 225.1
======== ========
<PAGE>
Nine Months Ended
September 30
1996 1995
-------- --------
Unaudited
Revenues $ 9,743 $10,601
Costs and expenses:
Cost of products, services and
rentals 7,843 8,914
General and administrative expenses 529 499
Research and development 273 215
Interest expense:
Aerospace segments 93 86
Financial services and other
segment 94 81
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Total costs and expenses 8,832 9,795
-------- --------
Earnings Before Income Taxes 911 806
Income taxes 330 286
-------- --------
Net Earnings $ 581 $ 520
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Earnings Per Share $ 2.66 $ 2.28
======== ========
Dividends Declared Per Share $ .36 $ .30
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Weighted-average Shares Outstanding 218.2 228.1
======== ========
<PAGE>
MCDONNELL DOUGLAS CORPORATION
BUSINESS SEGMENT DATA
(Millions of dollars)
Three Months Ended
September 30
1996 1995
-------- --------
Unaudited
Revenues
Military aircraft $ 1,902 $ 2,102
Commercial aircraft 773 663
Missiles, space and electronic
systems 533 488
Financial services and other 99 81
-------- --------
Operating revenues 3,307 3,334
Non-operating income 1 12
-------- --------
Total Revenues $ 3,308 $ 3,346
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Earnings (Losses)
Military aircraft $ 253 $ 237
Commercial aircraft 23 (7)
Missiles, space and electronic
systems 43 52
Financial services and other 20 13
-------- --------
Operating earnings 339 295
Corporate and other (6) 6
Interest expense (31) (14)
Income taxes (107) (95)
-------- --------
Net Earnings $ 195 $ 192
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<PAGE>
Nine Months Ended
September 30
1996 1995
-------- --------
Unaudited
Revenues
Military aircraft $ 5,864 $ 6,000
Commercial aircraft 1,923 2,965
Missiles, space and electronic
systems 1,670 1,366
Financial services and other 273 242
-------- --------
Operating revenues 9,730 10,573
Non-operating income 13 28
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Total Revenues $ 9,743 $10,601
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Earnings
Military aircraft $ 746 $ 652
Commercial aircraft 60 26
Missiles, space and electronic
systems 154 168
Financial services and other 54 42
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Operating earnings 1,014 888
Corporate and other (10) 4
Interest expense (93) (86)
Income taxes (330) (286)
-------- --------
Net Earnings $ 581 $ 520
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Operating earnings of the financial services and other segment have been reduced
by interest expense, an operating expense of that segment.
<PAGE>
MCDONNELL DOUGLAS CORPORATION
BALANCE SHEET
(Millions of dollars)
McDonnell Douglas Corporation
and Consolidated Subsidiaries
-----------------------------
September 30 December 31
1996 1995
-------- --------
Unaudited
ASSETS
Cash and cash equivalents $ 567 $ 797
Accounts receivable 879 821
Finance receivables and property
on lease 2,819 2,347
Contracts in process and inventories 3,652 3,421
Property, plant and equipment 1,446 1,471
Other assets 1,585 1,609
-------- --------
TOTAL ASSETS $10,948 $10,466
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 2,408 $ 2,284
Accrued retiree benefits 1,131 1,205
Income taxes 76 3
Advances and billings in excess
of related costs 1,252 1,147
Notes payable and long-term debt:
Aerospace segments 1,196 1,251
Financial services and other segment 1,794 1,469
-------- --------
7,857 7,359
Minority Interest 67 66
Shareholders' Equity 3,024 3,041
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $10,948 $10,466
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<PAGE>
MDC Aerospace
----------------
September 30 December 31
1996 1995
-------- --------
Unaudited
ASSETS
Cash and cash equivalents $ 550 $ 784
Accounts receivable 963 934
Finance receivables and property
on lease 235 165
Contracts in process and inventories 3,652 3,421
Prepaid income taxes 274 315
Property, plant and equipment 1,384 1,358
Investment in Financial Services 368 331
Other assets 1,513 1,527
-------- --------
TOTAL ASSETS $ 8,939 $ 8,835
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 2,331 $ 2,183
Accrued retiree benefits 1,131 1,205
Advances and billings in excess
of related costs 1,211 1,111
Notes payable and long-term debt:
Aerospace segments 1,175 1,229
-------- --------
5,848 5,728
Minority Interest 67 66
Shareholders' Equity 3,024 3,041
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 8,939 $ 8,835
======== ========
<PAGE>
Financial Services
---------------------
September 30 December 31
1996 1995
-------- --------
Unaudited
ASSETS
Cash and cash equivalents $ 17 $ 13
Accounts receivable 3 2
Finance receivables and property
on lease 2,584 2,182
Property, plant and equipment 62 113
Other assets 72 82
-------- --------
TOTAL ASSETS $ 2,738 $ 2,392
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 164 $ 216
Income taxes 350 318
Advances and billings in excess
of related costs 41 36
Notes payable and long-term debt:
Aerospace segments 21 22
Financial services and other segment 1,794 1,469
-------- --------
2,370 2,061
Shareholders' Equity 368 331
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,738 $ 2,392
======== ========
As used on this page, "MDC Aerospace" represents the consolidation of McDonnell
Douglas Corporation and its subsidiaries other than McDonnell Douglas Financial
Services Corporation (MDFS) and McDonnell Douglas Realty Company (MDRC), which
are presented on a one-line basis as Investment in Financial Services.
"Financial Services" means MDFS and all of its affiliates and associated
companies and MDRC. Transactions between MDC Aerospace and Financial Services
have been eliminated from the "McDonnell Douglas Corporation and Consolidated
Subsidiaries" columns.
<PAGE>
MCDONNELL DOUGLAS CORPORATION
CAPITAL STRUCTURE
(Amounts in millions, except for ratios and deliveries)
September 30, 1996
------------------------------------
Unaudited
Financial
Services
Aerospace and Other
Segments Segment Total
--------- --------- --------
Debt $1,196 $1,794 $2,990
======= ======= =======
Equity $2,656 $ 368 $3,024
======= ======= =======
Debt-to-equity ratio .45 4.88
======= =======
Common Shares outstanding 212.9
=======
December 31, 1995
------------------------------------
Financial
Services
Aerospace and Other
Segments Segment Total
--------- --------- --------
Debt $1,251 $1,469 $2,720
======= ======= =======
Equity $2,710 $ 331 $3,041
======= ======= =======
Debt-to-equity ratio .46 4.44
======= =======
Common Shares outstanding 223.6
=======
COMMERCIAL AIRCRAFT DELIVERIES
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
------ ------ ------ ------
MD-80 4 4 11 15
MD-90 4 4 8 10
MD-11 3 2 10 13
<PAGE>
MCDONNELL DOUGLAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
Nine Months Ended
September 30
1996 1995
-------- --------
Unaudited
OPERATING ACTIVITIES
Net earnings $ 581 $ 520
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 198 197
Pension income (98) (131)
Changes in other operating assets and
liabilities 54 189
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 735 775
INVESTING ACTIVITIES
Property, plant and equipment acquired (141) (99)
Finance receivables and property on
lease (506) (25)
Proceeds from sale of assets - 25
Other 27 (33)
-------- --------
NET CASH USED BY INVESTING
ACTIVITIES (620) (132)
FINANCING ACTIVITIES
Net change in borrowings (maturities
90 days or less) 64 (95)
Debt having maturities more than
90 days:
New borrowings 366 411
Repayments (160) (327)
Proceeds of stock options exercised 1 1
Common shares purchased (541) (325)
Dividends paid (75) (69)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (345) (404)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (230) 239
Cash and cash equivalents at beginning
of year 797 421
-------- --------
Cash and cash equivalents at end of
period $ 567 $ 660
======== ========
