<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-10913
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 31, 1996)
$250,000,000
MCDONNELL DOUGLAS CORPORATION
6 7/8% NOTES DUE NOVEMBER 1, 2006
----------------
Interest on the 6 7/8% Notes due November 1, 2006 (the "Notes") of McDonnell
Douglas Corporation (the "Company") is payable semiannually on May 1 and
November 1 of each year, commencing May 1, 1997. The Notes are not subject to
redemption by the Company prior to maturity.
Ownership of the Notes will be maintained in book-entry form by or through
the Depository (as hereinafter defined). Interests in the Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depository and its participants. Beneficial owners of the Notes will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein. Settlement for the
Notes will be made in immediately available funds. The Notes will trade in the
Depository's Same-Day Funds Settlement System and secondary market trading
activity for the Notes will therefore settle in immediately available funds.
All payments of principal and interest on the Notes will be made by the Company
in immediately available funds so long as the Notes are maintained in book-
entry form. Beneficial interests in the Notes may be acquired, or subsequently
transferred, only in denominations of $1,000 and integral multiples thereof.
----------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........................ 99.182% .65% 98.532%
- ----------------------------------------------------------------------------------------
Total........................... $247,955,000 $1,625,000 $246,330,000
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from November 5, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Plan of Distribution" in the attached Prospectus.
(3) Before deduction of expenses payable by the Company.
----------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of the Depository on or about
November 5, 1996.
----------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
J.P. MORGAN & CO.
----------------
The date of this Prospectus Supplement is October 31, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The 6 7/8% Notes due November 1, 2006 (the "Notes") are to be issued as a
series of Debt Securities under the Indenture, as amended, which is more fully
described in the accompanying Prospectus. The Notes will mature on November 1,
2006.
The Notes will bear interest from November 5, 1996, payable semiannually on
May 1 and November 1 of each year, commencing May 1, 1997, to the persons in
whose names the Notes are registered on the preceding April 15 or October 15,
respectively.
The Notes are not subject to redemption by the Company prior to maturity.
The Notes will be issued in denominations of $1,000 and integral multiples
thereof.
DEPOSITORY
Upon issuance, all Notes will be represented by one or more fully registered
global securities (the "Global Notes"). Each such Global Note will be deposited
with, or on behalf of, The Depository Trust Company ("DTC"), as Depository, and
registered in the name of DTC or a nominee thereof. Unless and until it is
exchanged in whole or in part for Notes in definitive form, no Global Note may
be transferred except as a whole by the Depository to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor of such Depository or a nominee of such successor.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities of its participants
("Participants") and to facilitate the clearance and settlement of securities
transactions among its Participants in such securities through electronic book-
entry changes in accounts of the Participants, thereby eliminating the need for
physical movement of securities certificates. DTC's Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations.
DTC is owned by a number of Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of DTC. The ownership interest of each actual
purchaser of each Note (the "Beneficial Owner") is in turn to be recorded on
the Participants' or Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Participant or Indirect Participant through which the Beneficial Owner entered
into the transaction. Ownership of beneficial interests in Global Notes will be
shown on, and the transfer of such ownership
S-2
<PAGE>
interests will be effected only through, records maintained by DTC (with
respect to interests of Participants) and on the records of Participants (with
respect to interests of persons held through Participants). The laws of some
states may require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in Global Notes.
So long as DTC, or its nominee, is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Indenture. Except as provided below, Beneficial Owners of a Global Note will
not be entitled to have the Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
the Notes in definitive form and will not be considered the owners or Holders
thereof under the Indenture. Accordingly, each Person owning a beneficial
interest in a Global Note must rely on the procedures of DTC and, if such
Person is not a Participant, on the procedures of the Participant through which
such Person owns its interest, to exercise any rights of a Holder under the
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any action of Holders or that an owner of a
beneficial interest in such a Global Note desires to give or take any action
which a Holder is entitled to give or take under the Indenture, DTC would
authorize the Participants holding the relevant beneficial interests to give or
take such action, and such Participants would authorize Beneficial Owners
owning through such Participants to give or take such action or would otherwise
act upon the instructions of Beneficial Owners. Conveyance of notices and other
communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Payment of the principal of, and interest on, Notes registered in the name of
DTC or its nominee will be made to DTC or its nominee, as the ease may be, as
the Holder of the Global Note or Notes representing such Notes. None of the
Company, the Trustee or any other agent of the Company or agent of the Trustee
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests or
for supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that DTC, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit the accounts of
the Participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interest in such Global Note as
shown on the records of DTC. The Company also expects that payments by
Participants to Beneficial Owners will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such Participants.
If (x) any Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company within 60
days, or (y) the Company executes and delivers to the Trustee a Company Order
to the effect that the Global Notes shall be exchangeable, or (z) an Event of
Default has occurred and is continuing with respect to the Notes, the Global
Note or Notes will be exchangeable for Notes in definitive form of like tenor
and of an equal aggregate principal amount, in denominations of $1,000 and
integral multiples thereof. Such definitive Notes shall be registered in such
name or names as the Depository shall instruct the Trustee. It is expected that
such instructions may be based upon directions received by the Depository from
Participants with respect to ownership of beneficial interests in Global Notes.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Notes will be
made by the Company in immediately available funds so long as the Notes are
maintained in book-entry form.
S-3
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and the Underwriters named
below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters has severally agreed to purchase,
the principal amount of the Notes set forth after its name below. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Notes if any of such Notes are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... $ 83,400,000
Chase Securities Inc. ......................................... 83,300,000
J.P. Morgan Securities Inc. ................................... 83,300,000
------------
Total..................................................... $250,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of .4% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of .25% of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
In the ordinary course of their respective businesses certain of the
Underwriters and/or their affiliates engage and may in the future engage in
commercial banking and investment banking transactions with the Company and
affiliates of the Company.
S-4
<PAGE>
PROSPECTUS
$1,198,000,000
MCDONNELL DOUGLAS CORPORATION
DEBT SECURITIES AND DEBT WARRANTS
McDonnell Douglas Corporation (the "Company") from time to time may offer and
sell up to $1,198,000,000 aggregate principal amount (or net proceeds in the
case of securities issued at an original issue discount), or its equivalent,
based on the applicable exchange rate at the time of offering, in such foreign
currencies, units or composites of two or more thereof as shall be designated
by the Company at the time of offering, of its debt securities (the "Debt
Securities") and of warrants to purchase Debt Securities (the "Debt Warrants").
The Debt Securities and Debt Warrants, which are collectively referred to
herein as the "Securities," may be offered in one or more separate series in
amounts, at prices and on terms to be determined at the time of sale. The
Company may sell Securities to or through dealers, acting as principals for
their own account or as agents, and also may sell Securities directly to other
purchasers. See "Plan of Distribution."
The Debt Securities will be unsecured obligations of the Company and will
rank equally with all other unsecured and unsubordinated indebtedness of the
Company. See "Description of Debt Securities" and "Description of Debt
Warrants."
The terms of the Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, maturity,
interest rate (which may be fixed or variable) and time of payment of interest,
if any, terms for any extension, redemption or repayment at the option of the
Company or the holder, terms for sinking fund payment, if any, whether the
Securities are Debt Securities or Debt Warrants, the initial public offering
price or purchase price, the names of, and the principal amounts to be
purchased by dealers, if any, the compensation of such dealers and the proceeds
to be received by the Company and the other terms in connection with the
offering and sale of the Securities in respect of which this Prospectus is
being delivered, are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"). The Company may elect to deliver to purchasers of
Securities an abbreviated term sheet setting forth a description of the
Securities being offered, or a summary thereof, instead of a Prospectus
Supplement. As used herein, Securities shall include securities denominated in
United States dollars or, at the option of the Company if so specified in the
applicable Prospectus Supplement, in any other currency or units or composite
currencies or in amounts determined by reference to an index.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Securities may be sold to underwriters for public offering pursuant to
terms of an offering fixed at the time of sale. Such underwriters may include,
or may be a group of underwriters represented by, Merrill Lynch, Pierce, Fenner
& Smith Incorporated or one or more other firms. In addition, the Securities
may be sold by the Company directly or through agents. No Securities may be
sold without delivery of a Prospectus Supplement or a term sheet describing
such issue of Securities and the method and terms of offering thereof.
----------------
The Date of this Prospectus is October 31, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") Registration Statements on Form S-3 with respect to the
Securities under the Securities Act of 1933, as amended (the "Act"). This
Prospectus does not contain all of the information set forth in such
Registration Statements, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information pertaining
to these Securities and the Company, reference is made to the Registration
Statements. The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports and other information with the Commission. Reports,
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and New York Regional
Office, Seven World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Company's common stock is listed on the New York Stock Exchange and Pacific
Stock Exchange. Reports, proxy and information statements and other information
concerning the Company may also be inspected at the offices of the New York
Stock Exchange and Pacific Stock Exchange. The Commission maintains a Web site
at http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, and
June 30, 1996, and Current Reports on Form 8-K dated April 17, 1996, May 31,
1996, June 5, 1996, July 8, 1996, August 2, 1996 and October 31, 1996, each as
filed with the Commission, are hereby incorporated by reference into this
Prospectus and made a part hereof.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
(without exhibits) of any or all documents incorporated by reference into this
Prospectus. Requests for such copies should be directed to Mr. Roger A. Krone,
Vice President-Treasurer, McDonnell Douglas Corporation, P.O. Box 516,
Mailcodes 1001330, St. Louis, Missouri 63166-0516; telephone number (314) 232-
3359.
Unless otherwise indicated, currency amounts in this Prospectus and the
Prospectus Supplement are stated in United States dollars ("U.S. dollars,"
"dollars," "$" or "U.S. $").
2
<PAGE>
THE COMPANY
GENERAL
The Company was incorporated in Maryland in 1939 under the name McDonnell
Aircraft Corporation. On April 19, 1967, the shareholders approved the merger
with Douglas Aircraft Company and the name of the corporation was changed to
McDonnell Douglas Corporation (the "Company" or "The Company").
The Company, its divisions and its subsidiaries operate principally in four
industry segments: military aircraft; missiles, space and electronic systems;
commercial aircraft; and financial services and other. Operations in the first
two industry segments are conducted primarily by McDonnell Douglas Aerospace
and by Military Transport Aircraft, unincorporated operating divisions of the
Company, which are engaged in design, development, production, and support of
the following major products: military transport aircraft; combat aircraft and
training systems; commercial and military helicopters and ordnance; missiles;
space launch vehicles and space station systems; and defense and commercial
electronics, lasers, sensors, and command, control, communications, and
intelligence systems. Operations in the commercial aircraft segment are
conducted by Douglas Aircraft Company ("DAC"), an unincorporated operating
division of the Company, which designs, develops, produces and sells commercial
transport aircraft and related spare parts.
DAC separated its commercial and government programs into two operating units
effective January 1, 1992. Prior to the reorganization of DAC, the results of
operations of both the commercial and military programs were reported under the
combined caption of "transport aircraft". The "military aircraft" segment now
includes the former "combat aircraft" segment plus the C-17 Globemaster III
program and certain minor military programs reported under the "transport
aircraft" caption prior to 1992. The "commercial aircraft" segment includes the
commercial programs previously reported under the caption "transport aircraft".
In August 1992, the DAC military programs became part of the McDonnell Douglas
Aerospace division.
Through its McDonnell Douglas Financial Services Corporation ("MDFS")
subsidiary, the Company is engaged in aircraft financing and commercial
equipment leasing. The Company's subsidiary, McDonnell Douglas Realty Company
("MDRC"), was established in 1972 to develop the Company's surplus real estate.
While continuing to serve that role, MDRC has become a full-service developer
and property manager in the commercial real estate market as well as for the
Company's aerospace business.
The Company is a major participant in both the defense and the commercial
aerospace industries. The Company has a wide range of programs in production
and development, and is the world's leading producer of military aircraft. The
Company is one of the largest U.S. defense contractors and NASA prime
contractors based on prime contracts awarded and is one of the principal
manufacturers of large commercial transport aircraft. Programs and products
comprising most of the Company's business volume are of a highly technical
nature, comparatively few in number, high in unit cost, and have traditionally
enjoyed relatively long production lives.
MILITARY AIRCRAFT
The Company's McDonnell Douglas Aerospace division is currently producing the
F-15 Eagle, the F/A-18 Hornet, the AV-8B Harrier II Plus, and the T-45 Goshawk
and military training systems. The Company's Military Transport Aircraft
division is currently producing the C-17 Globemaster III. Additionally, the
Company is developing the F/A-18 E/F Super Hornet. The Super Hornet is expected
to add greater range and payload carrying ability and maintainability and allow
for the integration of new systems and technologies. The F-15 Eagle is a
supersonic, tactical fighter that is currently operated by the U.S. Air Force,
Japan, Saudi Arabia and Israel. The F/A-18 Hornet is a multi-mission strike
fighter produced primarily for the U.S. Navy and Marine Corps. The F/A-18
Hornet's customers include: Canada, Australia, Spain, Kuwait, Finland,
Switzerland, and Malaysia. The Company is the prime contractor for the U.S. Air
3
<PAGE>
Force C-17 Globemaster III military transport. The C-17 is designed to carry
outsize cargo over intercontinental distances into austere airfields. The AV-8B
Harrier II is a vertical/short takeoff and landing attack aircraft which began
U.S. Marine Corps service in January 1984. The AV-8B Harrier II is also
currently operated by the United Kingdom, Spain, and Italy. The T-45 Goshawk is
a carrier capable single engine trainer which the U.S. Navy selected in 1984 to
replace its intermediate T-2C and advanced TA-4J trainers. McDonnell Douglas
Helicopter Company, which operationally is part of the McDonnell Douglas
Aerospace division, currently produces the AH-64 Apache, an advanced attack
helicopter for the U.S. Army, Israel, Egypt, Saudi Arabia, United Arab
Emirates, Greece, the United Kingdom and the Netherlands.
MISSILES, SPACE AND ELECTRONIC SYSTEMS
The Company, through its McDonnell Douglas Aerospace division, is also
engaged in a wide variety of programs in tactical missiles and related systems.
The division produces several missile systems, including the Harpoon anti-ship
missile and the Standoff Land Attack Missile.
In addition, the McDonnell Douglas Aerospace division includes the Delta
Launch Vehicle, Space Products, Space Station, payload fairings and technical
services businesses. The McDonnell Douglas Aerospace division also develops and
produces a variety of defense and electronic systems and products, including
commercial and military aircraft avionics; command and information systems;
surveillance, detection, and tracking systems; and laser systems.
COMMERCIAL AIRCRAFT
The Company, through DAC, is producing MD-80 and MD-90 twin jets and MD-11
trijet commercial aircraft, developing the MD-95 twin jet commercial aircraft
and supporting commercial aircraft, spare parts and related services. The MD-90
is an advanced derivative of the MD-80, featuring additional seat capacity and
new fuel-efficient engines with reduced noise and exhaust emissions. Initial
customer deliveries of the MD-90 began in early 1995. The MD-11 is an advanced
technology trijet designed to fulfill airline needs in the l990s and beyond.
Current customers for the Company's commercial transport aircraft include
American Airlines, Delta Air Lines, and Federal Express Corporation in the
United States; and Alitalia, China Eastern, China Northern, Garuda Indonesia,
Japan Airlines, Japan Air Systems, KLM Royal Dutch Airlines, Korean Air,
Swissair, and Varig, among international carriers.
FINANCIAL SERVICES
MDFS, headquartered in Long Beach, California, is the parent company of
McDonnell Douglas Finance Corporation ("MDFC"), a subsidiary that is engaged in
aircraft financing and commercial equipment leasing. During 1991 and 1992, MDFS
significantly scaled back its operations, disposed of certain selected lines of
business and assets, and focused its new business efforts almost entirely
within its two core business lines, aircraft financing and commercial equipment
leasing.
MDRC, a subsidiary of the Company, was established to develop the Company's
surplus real estate. MDRC has since become a full-service developer and
property manager in the commercial real estate market. MDRC is active in
developing property adjacent to the Company's offices and plants, and is
involved in other property and construction projects that are not connected
with the Company's own requirements.
ADDRESS OF COMPANY
The Company's principal executive offices are located at the intersection of
J. S. McDonnell Boulevard and Airport Road, P.O. Box 516, St. Louis, Missouri
63166-0516; telephone (314) 232-0232.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following tables present selected consolidated financial information
concerning the Company and its consolidated subsidiaries. The information in
the tables and the notes thereto should be read in conjunction with the
consolidated financial statements and related notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, the
Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996 and the Company's Current Report on
Form 8-K dated October 31, 1996. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS(1)
Revenues by industry
segment:(2)
Military aircraft..... $ 8,158 $ 7,804 $ 6,852 $ 7,238 $ 7,795
Commercial aircraft... 3,891 3,155 4,760 6,595 6,752
Missiles, space and
electronic systems... 1,917 1,877 2,575 3,169 2,979
Financial services and 334 326 287 352 519
other................ ------- ------- ------- ------- -------
Operating revenues(2)... 14,300 13,162 14,474 17,354 18,045
Earnings (Loss) from
continuing operations
before cumulative
effect of accounting
change................. (416)(6) 598 359 698 (4) 357
Per share(3).......... (1.83)(6) 2.53 1.53 2.99 (4) 1.55
Net earnings (loss)..... (416)(6) 598 396 (781)(5) 423
Per share(3).......... (1.83)(6) 2.53 1.68 (3.35)(5) 1.84
Interest expense:
Aerospace segments(2). 116 (7) 131(7) 89(7) 309 232(7)
Financial services and 109 118 126 159 221
other segment........ ------- ------- ------- ------- -------
Total(2)............ 225 249 215 468 453
BALANCE SHEET INFORMA-
TION(1)
Total assets............ $10,466 $12,216 $12,026 $13,781 $14,601
Notes payable and long-
term debt:
Aerospace segments.... 1,251 1,272 1,625 2,767 2,324
Financial services and
other segment........ 1,469 1,297 1,513 1,474 1,891
Shareholders' equity.... 3,041 3,872 3,413 3,022 3,877
Per share(3).......... 13.60 16.59 14.47 12.85 16.83
Debt-to-equity ratios:
Aerospace segments.... .46 .36 .52 1.01 .66
Financial services and
other segment........ 4.44 4.14 5.22 5.42 5.25
OTHER INFORMATION(8)
Firm backlog............ $19,640 $17,503 $19,379 $24,052 $30,448
Total backlog(9)........ $28,353 $29,232 $35,698 $41,806 $42,577
Ratio of Earnings to
Fixed
Charges(1)(2)(10)...... -- (12) 4.2x 2.8x 3.1x 2.2x
</TABLE>
(Notes to table appear on page 7)
5
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
---------- ----------
(DOLLAR AMOUNTS IN
MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
SUMMARY OPERATIONS (8)
Revenues by industry segment:
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
Net earnings.......................................... 581 520
Per share........................................... 2.66 2.28(11)
Interest expense:
Aerospace segments.................................. 93 86
Financial services and other segment................ 94 81
---------- ----------
Total............................................. 187 167
BALANCE SHEET INFORMATION(8)
Total assets.......................................... $ 10,948 $ 12,113
Notes payable and long-term debt:
Aerospace segments.................................. 1,196 1,250
Financial services and other segment................ 1,794 1,308
Shareholders' equity.................................. 3,024 4,016
Per share........................................... 14.21 17.92(11)
Debt-to-equity ratios:
Aerospace segments.................................. .45 .34
Financial services and other segment................ 4.88 4.13
OTHER INFORMATION (8)
Firm backlog.......................................... $ 22,271 $ 16,080
Total backlog(9)...................................... $ 45,962 $ 25,862
Ratio of Earnings to Fixed Charges(10)................ 5.0 5.2
</TABLE>
(Notes to table appear on page 7)
6
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(1) Summary of Operations, Balance Sheet Information and Ratio of Earnings to
Fixed Charges have been restated to reflect discontinued operations. The
captions "military aircraft" and "commercial aircraft" were shown as
"combat aircraft" and "transport aircraft" prior to 1992. "Military
aircraft" now includes the former "combat aircraft" segment plus the C-17
program and other minor military programs previously included in the
"transport aircraft" segment.
(2) In 1993, the Company reclassified certain income and expense related to an
executive life insurance program to general and administrative expenses.
These items were previously reflected as revenues or interest expense.
Years prior to 1993 have been restated.
(3) Per share data has been restated to reflect the 1994 three-for-one stock
split and the 1996 two-for-one stock split.
(4) Includes a gain of $676 million ($2.90 per share) from a postretirement
benefit curtailment relating to Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employer's Accounting for Postretirement
Benefits Other Than Pensions."
(5) Includes a net charge of $860 million ($3.69 per share) relating to the
initial adoption and subsequent curtailment gain associated with SFAS No.
106.
(6) Includes a charge of $1.123 billion ($4.95 per share) related to a change
in accounting for the MD-11 commercial aircraft.
(7) Includes reduction of $107 million in 1991, $135 million in 1993, $10
million in 1994, and $23 million in 1995 from resolution of several issues
with the Internal Revenue Service.
(8) Unaudited.
(9) Total backlog includes firm backlog plus (a) U.S. and other government
orders not yet funded, (b) U.S. and other government orders being
negotiated as continuations of authorized programs, and (c) unearned price
escalation on firm commercial aircraft orders. Backlog is that of the
aerospace segments only and includes all but a minor portion of the work
to be performed under long-term contracts. Customer options and products
produced for short-term lease are excluded from backlog.
(10) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" have been calculated by adding interest expense (including
amortization of capitalized interest) and the portion of rentals estimated
to represent the interest factor to earnings from continuing operations
before income taxes and cumulative effect of accounting change, and
eliminating therefrom the undistributed earnings of less than 50% owned
affiliates. "Fixed charges" include interest charges (including
capitalized interest) and the portion of rentals estimated to represent
the interest factor.
(11) Per share data has been restated to reflect the 1996 two-for-one stock
split.
(12) For the year ended December 31, 1995, earnings were inadequate to cover
fixed charges. The amount of such deficiency for the period was $749
million.
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USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, including the repayment of existing indebtedness.
Management of the Company expects that it will, on a recurrent basis, engage in
additional financings as the need arises to finance the operations of the
Company and its subsidiaries or to lengthen the average maturity of its
borrowings.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an indenture, as amended (the
"Indenture"), between the Company and The Bank of New York, (successor to
Citibank, N.A.) as trustee ("Trustee"). A copy of the Indenture is filed as an
exhibit to the Registration Statement. The Indenture provides that there may be
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities.
The following information concerning the Debt Securities and certain
provisions of the Indenture is intended to provide a summary thereof and does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Indenture, including the definitions
therein of certain terms. Wherever reference is made to defined terms (which
are capitalized herein) of the Indenture, such defined terms are incorporated
herein by reference.
GENERAL
Reference is made to the Prospectus Supplement relating to a particular
series of Debt Securities offered thereby for the following terms of such Debt
Securities: (1) the title of such Debt Securities and the series of which such
Debt Securities shall be a part; (2) whether such Debt Securities are issuable
in global form; (3) the aggregate principal amount of such Debt Securities; (4)
the date or dates on which such Debt Securities will mature; (5) the rate or
rates per annum (which may be fixed or variable) at which such Debt Securities
will bear interest, if any; (6) the times at which such interest, if any, will
be payable; (7) the provisions for redemption, if any, of such Debt Securities
and the redemption prices; (8) the sinking fund requirements, if any, with
respect to such Debt Securities; (9) whether the Debt Securities are
denominated or provide for payment in United States dollars or a foreign
currency, units or composites of two or more foreign currencies; (10) whether
payment of the Debt Securities is to be determined by reference to an index,
formula or other method based on a coin or currency other than that in which
the Debt Securities are stated to be payable; (11) additional provisions, if
any, for the defeasance of such Debt Securities; and (12) any other terms of
such Debt Securities (which terms shall not be inconsistent with the provisions
of the Indenture).
The Debt Securities may be issued as Original Issue Discount Debt Securities
to be sold at a substantial discount below their principal amount and may be
denominated in currencies other than United States dollars. Special United
States federal income tax considerations applicable to any such Debt Securities
will be set forth in a Prospectus Supplement relating thereto.
The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured and unsubordinated indebtedness of
the Company.
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder or of any particular series of such
Debt Securities and provides that securities, in addition to the Debt
Securities, may be issued thereunder from time to time in one or more series.
All Debt Securities issued under the Indenture will rank equally and ratably
with any such additional securities issued under the Indenture.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue Debt Securities with terms the same as or different from those
of Debt Securities previously issued, to "reopen" a previous series of Debt
Securities and issue additional Debt Securities of such series.
8
<PAGE>
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Debt Securities of a series may be issued only in fully registered form
without coupons and may be issuable in whole or in part in the form of one or
more global Debt Securities, as described below under "Global Securities."
Debt Securities may be presented for exchange, and, unless otherwise
indicated in an applicable Prospectus Supplement, may be presented for
registration of transfer (duly endorsed, or accompanied by a duly executed
written instrument of transfer), at the office of The Bank of New York, 101
Barclay Street, New York, New York, Attention: Corporate Trust Office (Trustee
being a "Security Registrar"), in each case, without service charge and upon
payment of any taxes and other governmental charges as described in the
Indenture. In addition, Debt Securities may be presented for exchange or
registration of transfer at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in the Prospectus Supplement relating thereto. Such transfer or
exchange will be effected by the Security Registrar, being satisfied with the
documents of title and identity of the person making the request. If a
Prospectus Supplement refers to any transfer agents (in addition to the
Security Registrar) designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts. The Company may at any time designate additional transfer
agents with respect to any series of Debt Securities.
In the event of any partial redemption of Debt Securities of any series, the
Company will not be required to (i) issue, register the transfer of or exchange
Debt Securities of that series during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Debt Securities selected for redemption and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed
in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Prospectus Supplement relating thereto,
payment of principal of and interest, if any, on Debt Securities will be made
at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company, payment
of any interest may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the security register, or (ii)
by wire transfer to an account maintained by the Person entitled thereto as
specified in such security register. Unless otherwise indicated in the
Prospectus Supplement relating thereto, payment of any installment of interest
on Debt Securities will be made to the Person in whose name such Debt Security
is registered at the close of business on the Regular Record Date for such
interest.
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
principal office of The Bank of New York will be designated as the Company's
sole Paying Agent for payments with respect to Debt Securities. Any Paying
Agents outside the United States and any other Paying Agents in the United
States initially designated by the Company for the Debt Securities will be
named in an applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts.
All moneys paid by the Company to the applicable Paying Agent for the payment
of principal of or interest, if any, on any Debt Security which remain
unclaimed at the end of three years after such principal or interest shall have
become due and payable, will be repaid to the Company and the Holder of any
such Debt Security will thereafter look only to the Company for payment
thereof.
GLOBAL SECURITIES
The Indenture provides that the Debt Securities may be issued in global form.
If any series of Debt Securities is issuable in global form, the applicable
Prospectus Supplement will describe the circumstances, if
9
<PAGE>
any, under which beneficial owners of interests in any such global Debt
Securities may exchange such interests for Debt Securities of such series and
of like tenor and principal amount in any authorized form and denomination.
Principal of, and any premium and interest on, a global Debt Security will be
payable in the manner described in the applicable Prospectus Supplement.
CERTAIN DEFINED TERMS
The definitions which follow are qualified in their entirety by reference to
the definitions contained in the Indenture.
"Net Tangible Assets" is defined to mean the aggregate amount at which assets
of the Company and all Restricted Subsidiaries are reported on the asset side
of the consolidated statement of financial position (after deducting all
related depreciation, amortization and other valuation reserves and after
excluding patents, trademarks, goodwill and similar intangibles and investments
in and advances to Subsidiaries other than Restricted Subsidiaries) less all
current liabilities (excluding deferred taxes) on the consolidated statement of
financial position.
"Original Issue Discount Security" is defined as any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof, as provided in the
Indenture.
"Principal Property" is defined to mean any manufacturing plant owned by the
Company or any Restricted Subsidiary which is located within North America and
the gross book value of which (without deduction of any depreciation reserves)
on the date as of which the determination is being made exceeds 5% of Net
Tangible Assets. Principal Property excludes, however, (i) aircraft and
aerospace products and spare parts, (ii) certain other types of personal
property and equipment, (iii) property financed through tax-exempt state or
municipal securities and (iv) any real property held for development, lease or
sale.
"Restricted Subsidiary" is defined as a Subsidiary other than MDRC, MDFC,
MDFS or any other Subsidiary which is primarily engaged in the business of
financing or leasing.
"Subsidiary" of the Company is defined as a corporation more than 50% of the
voting stock of which is owned by the Company and/or one or more Subsidiaries.
LIMITATIONS ON LIENS
The Indenture provides that if the Company or any Restricted Subsidiary shall
issue, assume or guarantee any evidence of indebtedness for money borrowed
("indebtedness") secured by a mortgage, security interest, pledge or lien
("mortgage") on any Principal Property of the Company or any Restricted
Subsidiary, or shares of stock or indebtedness of any Restricted Subsidiary,
the Company will secure or cause such Restricted Subsidiary to secure the Debt
Securities equally and ratably with such secured indebtedness, unless the
aggregate amount of all such secured indebtedness, together with all
indebtedness with respect to sale and lease-back transactions involving
Principal Properties (with the exception of such transactions which are
excluded as described in "Limitations on Sale and Lease-Back Transactions"
below), would not exceed 10% of Net Tangible Assets.
Such limitation will not apply to indebtedness secured by (a) mortgages on
property of any corporation existing at the time such corporation becomes a
Restricted Subsidiary, (b) mortgages on any property existing at the date of
the Indenture or at the time of acquisition by the Company or a Restricted
Subsidiary (including acquisition through merger or consolidation), (c)
mortgages securing indebtedness of a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (d) purchase money and construction mortgages
entered into within specified time limits, (e) mechanics' liens, tax liens,
liens in favor of any governmental body to secure progress, advance or other
payments for the acquisition of real or personal property from such
governmental body pursuant to contract or provision of statute; any other
liens, charges and encumbrances incidental to construction, conduct of business
or ownership of property of the Company or any Restricted
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Subsidiary which were not incurred in connection with borrowing money,
obtaining advances or credits for the acquisition of property and which in the
aggregate, do not materially impair use of any Principal Property, or which are
being contested in good faith, or (f) any extension, renewal or replacement of
any of the aforementioned mortgages not in excess of the principal amount of
such indebtedness plus the fee incurred in connection with such transaction.
LIMITATIONS ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture provides that neither the Company nor any Restricted Subsidiary
may enter into any Sale and Lease-Back Transaction involving any Principal
Property, unless the aggregate amount of all attributable debt (as defined in
the Indenture) with respect to such transaction plus all indebtedness secured
by mortgages on Principal Properties (with the exception of secured
indebtedness which is excluded as described in "Limitations on Liens" above)
would not exceed 10% of Net Tangible Assets.
Such limitation will not apply to any sale and lease-back transaction if (a)
the lease is for a period of not more than three years, (b) the sale or
transfer of the Principal Property is made within a specified period after its
acquisition or construction, (c) the rent payable pursuant to such lease is to
be reimbursed under a contract with the United States Government or any
instrumentality or agency thereof, (d) the transaction is between the Company
and a Restricted Subsidiary or between Restricted Subsidiaries, or (e) the
Company or such Restricted Subsidiary, within 180 days after the sale is
completed, applies to the retirement of indebtedness of the Company or a
Restricted Subsidiary, an amount not less than the greater of (i) the net
proceeds of the sale of the Principal Property leased or (ii) the fair market
value of the Principal Property leased. In lieu of applying proceeds to the
retirement of indebtedness, debentures or notes (including the Debt Securities)
of the Company or a Restricted Subsidiary may be surrendered to the applicable
trustee for cancellation at a value equal to the redemption price thereof or
the Company or a Restricted Subsidiary may credit the principal amount of
indebtedness voluntarily retired within 180 days after such sale.
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
The Company, without the consent of any Holder of Outstanding Debt
Securities, may consolidate or merge with or into, or transfer or lease its
assets substantially as an entirety to, any corporation or may acquire or lease
the assets of any Person, provided that the corporation formed by such
consolidation or into which the Company is merged or which acquires or leases
the assets of the Company substantially as an entirety is organized under the
laws of any United States jurisdiction and assumes the Company's obligations on
the Debt Securities and under the Indenture, that after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing, and that certain other conditions are met.
The Indenture provides that neither the Company nor any Restricted Subsidiary
may transfer any Principal Property to MDRC, MDFC, MDFS or to any other
Subsidiary other than to a Restricted Subsidiary.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the Company
and the Trustee with the consent of the Holders of 66 2/3% in principal amount
of the outstanding Debt Securities of each series affected thereby, provided
that no such modification or amendment may, without the consent of the Holder
of each outstanding Debt Security affected thereby, (a) change the Stated
Maturity of any installment of principal of, or interest on, any Debt Security
or change the Redemption Price; (b) reduce the principal amount of, or the
interest on, any Debt Security or reduce the amount of principal which could be
declared due and payable prior to the Stated Maturity; (c) change the place or
currency of any payment of principal or interest on any Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security; (e) reduce the percentage in principal
amount of the outstanding Debt Securities of any series, the consent of whose
Holders is required to modify or amend such Indenture; or (f)
11
<PAGE>
modify the foregoing requirements or reduce the percentage of outstanding Debt
Securities necessary to waive any past default to less than a majority. Except
with respect to certain fundamental provisions, the Holders of at least a
majority in principal amount of outstanding Debt Securities of any series may,
with respect to such series, waive past defaults under the Indenture and waive
compliance by the Company with certain provisions of the Indenture.
DEFEASANCE
If the terms of the particular series of Debt Securities so provide, the
Company may discharge its indebtedness and its obligations under the Indenture
with respect to such series by depositing funds or obligations issued or
guaranteed by the United States with the Trustee. The Prospectus Supplement
will more fully describe the provisions, if any, relating to such discharge.
EVENTS OF DEFAULT
Under the Indenture, the following will be Events of Default with respect to
any series of Debt Securities: (a) default in the payment of any interest upon
any Debt Security of that series when due, continued for 30 days; (b) default
in the payment of any principal or premium, if any, on any Debt Security of
that series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Debt Security of that series; (d) default in the
performance of any other covenant of the Company contained in the Indenture or
in the Debt Securities of such series, continued for 90 days after written
notice as provided in the Indenture; (e) acceleration of any indebtedness for
money borrowed in an aggregate principal amount exceeding $10 million by the
Company or any Restricted Subsidiary under the terms of the instrument under
which such indebtedness is issued or secured, if such acceleration is not
annulled, or such indebtedness is not discharged, within 10 days after written
notice as provided in the Indenture; (f) certain events in bankruptcy,
insolvency or reorganization; and (g) any other Event of Default provided with
respect of Securities of that series. The Trustee or the Holders of 25% in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount (or such lesser amount as may be provided for in the Debt
Securities of that series) of all outstanding Debt Securities of that series
due and payable immediately if an Event of Default with respect to Debt
Securities of such series shall occur and be continuing at the time of
declaration. At any time after a declaration of acceleration has been made with
respect to Debt Securities of any series but before a judgment or decree for
payment of money due has been obtained by the Trustee, the Holders of a
majority in principal amount of the outstanding Debt Securities of that series
may rescind any declaration of acceleration and its consequences, if all
payments due (other than those due as a result of acceleration) have been made
and all Events of Default have been remedied or waived. Any Event of Default
with respect to Debt Securities of any series may be waived by the Holders of a
majority in principal amount of all outstanding Debt Securities of that series,
except (i) in a case of failure to pay principal or premium, if any, or
interest on any Debt Security of that series for which payment had not been
subsequently made or (ii) in respect of a covenant or provision which cannot be
modified or amended without the consent of the Holder of each Outstanding
Security of such series affected.
The Holders of a majority in principal amount of the outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of such series,
provided that such direction shall not be in conflict with any rule of law or
the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of such Holders, the Trustee shall be entitled to
receive from such Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Indenture.
THE TRUSTEE UNDER THE INDENTURE
The Bank of New York is the Trustee under the Indenture. The Company
maintains banking and borrowing relations with The Bank of New York.
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DESCRIPTION OF DEBT WARRANTS
The Company may issue, together with Debt Securities or separately, Debt
Warrants for the purchase of Debt Securities. The Debt Warrants are to be
issued under Debt Warrant Agreements (each a "Debt Warrant Agreement") to be
entered into between the Company and a bank or trust company, as Debt Warrant
Agent (the "Debt Warrant Agent"), all as shall be set forth in the Prospectus
Supplement relating to Debt Warrants being offered thereby. A copy of the form
of Debt Warrant Agreement, including the form of Warrant Certificates
representing the Debt Warrants (the "Debt Warrant Certificates"), reflecting
the alternative provisions to be included in the Debt Warrant Agreements that
will be entered into with respect to particular offerings of Debt Warrants, is
filed as an exhibit to the Registration Statement relating to the Securities.
The following summaries of certain provisions of the Debt Warrant Agreement and
the Debt Warrant Certificates do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Debt Warrant Agreement and the Debt Warrant Certificates, respectively,
including the definitions therein of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificates representing such Debt Warrants, including the
following: (1) the designation, aggregate principal amount and terms of the
Debt Securities purchasable upon exercise of such Debt Warrants and the
procedures and conditions relating to the exercise of such Debt Warrants; (2)
the designation and terms of any related Debt Securities with which such Debt
Warrants are issued and the number of such Debt Warrants issued with each such
Debt Security; (3) the date, if any, on and after which such Debt Warrants and
the related Debt Securities will be separately transferable; (4) the principal
amount of Debt Securities purchasable upon exercise of each Debt Warrant and
the price at which such principal amount of Debt Securities may be purchased
upon such exercise; (5) the date on which the right to exercise such Debt
Warrants shall commence and the date on which such right shall expire (the
"Expiration Date"); (6) if the Debt Securities purchasable upon exercise of
such Debt Warrants are Original Issue Discount Debt Securities, a discussion of
federal income tax considerations applicable thereto; and (7) where Debt
Warrant Certificates may be transferred and registered.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of Holders
of the Debt Securities purchasable upon such exercise and will not be entitled
to payments of principal or premium, if any, or interest, if any, on the Debt
Securities purchasable upon such exercise.
EXERCISE OF DEBT WARRANTS
Each Debt Warrant will entitle the Holder to purchase for cash (or such other
consideration as may be set forth in the Prospectus Supplement relating to the
Debt Warrants offered thereby) such principal amount of Debt Securities at such
exercise price as shall in each case be set forth in, or be determinable as set
forth in, the Prospectus Supplement relating to the Debt Warrants offered
thereby. Debt Warrants may be exercised at any time up to the close of business
on the Expiration Date set forth in the Prospectus Supplement relating to the
Debt Warrants offered thereby. After the close of business on the Expiration
Date, unexercised Debt Warrants will become void.
Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and the
Debt Warrant Certificate properly completed and duly executed at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Debt Securities purchasable upon such exercise. If less than all of the Debt
Warrants represented by such Debt Warrant Certificate are exercised, a new Debt
Warrant Certificate will be issued for the remaining amount of Debt Warrants.
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PLAN OF DISTRIBUTION
The Company may sell the Securities to or through underwriters, and also may
sell the Securities directly to other purchasers or through agents. Such
underwriters may include Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") or may be a group of underwriters represented by Merrill
Lynch or one or more other firms. Only underwriters named in the Prospectus
Supplement are deemed to be underwriters in connection with the Securities
offered thereby.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of the Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters, dealers and agents that participate in the distribution of the
Securities may be deemed to be underwriters, and any discounts or commissions
received by them and any profit on the resale of the Securities by them may be
deemed to be underwriting discounts and commissions under the Act. Any such
underwriter or agent will be identified, and any such compensation will be
described, in the Prospectus Supplement.
If so indicated in the Prospectus Supplement, the Company will authorize the
underwriters to solicit offers by certain institutions to purchase Securities
from the Company pursuant to Delayed Delivery Contracts providing for payment
and delivery on the date stated in the Prospectus Supplement. Delayed Delivery
Contracts will not be subject to any conditions except that the purchase by an
institution of the Securities covered thereby shall not at the time of delivery
be prohibited under the laws of any jurisdiction to which such institution is
subject.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of the Securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Act, or to contribution with respect to
payments which the underwriters, dealers or agents may be required to make in
respect thereof.
The Company may authorize dealers or other persons acting as the Company's
agents to solicit offers by certain institutions to purchase the Securities
from the Company pursuant to contracts providing for payment and delivery on a
future date. The dealers and such other persons acting as the Company's agents
will not have any responsibility in respect of the validity or performance of
such contracts.
LEGAL MATTERS
The validity of each issue of the Securities will be passed upon for the
Company by F. Mark Kuhlmann, Esq., Senior Vice President and General Counsel of
the Company, and for the underwriters or agents by Brown & Wood LLP. As of the
date hereof, Mr. Kuhlmann beneficially owns approximately 53,650 shares of the
Company's common stock.
EXPERTS
The consolidated financial statements of McDonnell Douglas Corporation and
subsidiaries incorporated by reference in the Company's annual report (Form 10-
K) for the year ended December 31, 1995 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNEC-
TION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OF-
FER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
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PROSPECTUS SUPPLEMENT
<S> <C>
Description of Notes....................................................... S-2
Underwriting............................................................... S-4
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Summary Financial Information.............................................. 5
Use of Proceeds............................................................ 8
Description of Debt Securities............................................. 8
Description of Debt Warrants............................................... 13
Plan of Distribution....................................................... 14
Legal Matters.............................................................. 14
Experts.................................................................... 14
</TABLE>
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$250,000,000
MCDONNELL DOUGLAS CORPORATION
6 7/8% NOTES
DUE NOVEMBER 1, 2006
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
CHASE SECURITIES INC.
J.P. MORGAN & CO.
OCTOBER 31, 1996
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