SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 17, 1997
McDonnell Douglas Corporation
Exact name of Registrant as Specified in Charter
Maryland 1-3685 43-0400674
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
Post Office Box 516, St. Louis, Missouri 63166-0516
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (314) 232-0232
----------------------------
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
A summary of the Registrant's second quarter financial results is filed as an
exhibit hereto, and is incorporated herein in accordance with General
Instruction F to Form 8-K.
EXHIBIT
Exhibit No.
99 Summary of McDonnell Douglas Corporation's Second Quarter Financial
Results
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.
McDonnell Douglas Corporation
(Registrant)
/s/ Steven N. Frank
July 17, 1997 By: -----------------------------------------
(Date) Steven N. Frank
Vice President, Associate General Counsel
and Secretary
Contact: Larry McCracken
McDonnell Douglas
(314) 233-8957
FOR IMMEDIATE RELEASE
MCDONNELL DOUGLAS REPORTS SOLID SECOND QUARTER EARNINGS
ST. LOUIS, July 17, 1997 -- McDonnell Douglas (NYSE: MD) reported 1997
second quarter earnings of $195 million, or 93 cents per share. That compares to
earnings of $188 million, or 87 cents per share, in the second quarter of 1996.
Costs related to merger activities in the second quarter of 1997 were offset by
favorable resolution of state tax issues.
Net earnings for the first six months of 1997 were $376 million, or
$1.79 per share. That compares to earnings of $386 million, or $1.76 per share,
in the first six months of 1996. Weighted-average shares outstanding through the
first six months in 1997 are lower by 4.5 percent as compared to the same period
in 1996, as a result of the Company's stock repurchase plan. The repurchase plan
was suspended in December 1996 as a result of the pending merger with The Boeing
Company.
"Solid financial results for the second quarter of 1997 are
gratifying," said Harry Stonecipher, president and chief executive officer of
McDonnell Douglas. "I am pleased to see that we kept our eye on the ball, and
did not let the merger distract us from running our business."
Total revenues for the second quarter of 1997 were $3.6 billion, up from
$3.3 billion in the second quarter of 1996. Revenues increased in all segments,
with the largest gain in the military aircraft segment. Total revenues for the
first six months of 1997 were $6.8 billion, up from $6.4 billion in the first
six months of 1996.
Cash used by aerospace operations was slightly less than $300 million
for the second quarter of 1997, with $655 million used for the first six months
of 1997. An increase in inventory, largely in the commercial aircraft segment in
advance of deliveries in the second half of 1997, contributed significantly to
the use of cash in the first half of 1997.
Operating earnings for the second quarter of 1997 were $320 million, and
totaled $641 million for the first six months of 1997. That compares with $328
million and $675 million, respectively, for the same periods in 1996.
Operating earnings in the military aircraft segment in the 1997 second
quarter were $238 million, compared with $243 million in the second quarter of
1996. Improved earnings in the C-17 and F-15 programs largely offset lower
earnings in the F/A-18 program. Earnings in the second quarter of 1996 included
an award fee on the development portion of the F/A-18 program. Operating
earnings in this segment for the first six months of 1997 were $497 million,
compared with $493 million in the 1996 same period.
Revenues for the military aircraft segment were $2.1 billion for the
second quarter of 1997. That compares with $1.9 billion for the same period in
1996. Increased revenues in the F-15, C-17 and classified programs were
partially offset by lower revenues in the F/A-18 C/D program. Revenues for the
first six months in 1997 and 1996 were $4.0 billion.
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Operating earnings in the missiles, space and electronic systems
segment in the 1997 second quarter and first six months were $45 million and $81
million, respectively, compared to $53 million and $111 million in the 1996 same
periods. Profit margins in this segment were down two percentage points in the
second quarter and three percentage points for the first six months of 1997, as
compared to 1996. Expenditures on the Delta III, a launch vehicle currently
under development, and lower earnings on the Space Station and Delta II programs
caused the decrease during the first six months of 1997.
Revenues for the missiles, space and electronic systems segment were
$587 million for the second quarter of 1997. That compares with $529 million for
the same period in 1996. The Delta programs contributed to the higher revenues
in the 1997 second quarter. Revenues for the first six months in 1997 and 1996
were $1.1 billion.
Operating earnings in the commercial aircraft segment in the 1997
second quarter and first six months were $14 million and $18 million,
respectively, compared with $18 million and $37 million in the 1996 same
periods. Earnings from the sale of spare parts and related services were largely
offset by losses from development activities and sale of production aircraft.
Increased losses in both 1997 quarters on the MD-95 program, currently
in development, were in part offset by reduction in cost estimates related to
prior deliveries of trijet and twin-jet aircraft. Additionally, earnings in the
1996 first quarter included recoveries from an insurance carrier related to
environmental coverage at several sites, and in the 1996 second quarter included
recoveries from an insurance carrier of charges previously expensed related to a
1987 airline accident.
Revenues for the commercial aircraft segment were $805 million for the
second quarter and $1.4 billion for the first six months of 1997, up from $722
million in the second quarter and $1.2 billion in the first six months of 1996.
McDonnell Douglas deliveries in the first two quarters of 1997 and 1996 were as
follows:
Three Months Ended Six Months Ended
30 June 30 June
1997 1996 1997 1996
---- ---- ---- ----
MD-80 8 3 8 7
MD-90 4 1 11 4
MD-11 2 4 4 7
One twin jet delivery in the second quarter of 1997, two of the twin jet
deliveries in the first quarter of each year and two of the 1996 first quarter
trijet deliveries were accounted for as operating leases with minimal revenue
recorded on such transactions at the time of delivery.
McDonnell Douglas received one MD-11 trijet order in the second quarter
of 1997. On June 30, 1997, McDonnell Douglas had firm orders for 21 MD-80 twin
jets, 96 MD-90 twin jets, 50 MD-95 twin jets, and 17 MD-11 trijets.
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Operating earnings in the financial services and other segment were $23
million for the second quarter and $45 million in the 1997 first six months,
compared with $14 million and $34 million, respectively, in the 1996 same
periods. Revenues in this segment were up $10 million during the quarter to $97
million and were $198 million for the first six months of 1997, $24 million
higher than in the first six months of 1996. The earnings and revenue growth
reflects the corporation's continued focus on growing this segment of its
business.
Interest expense totaled $21 million in the second quarter of 1997,
down from $31 million in the second quarter of 1996. The decrease in 1997
largely reflects interest reductions associated with favorable resolution of
prior years' state tax issues.
Pension income totaled $39 million in the second quarter and $79
million in the 1997 first six months, compared with $33 million and $65 million
in the same periods of 1996. The increase is associated with a higher level of
plan assets.
McDonnell Douglas had firm backlog of $21.9 billion on June 30, 1997,
compared with $23.7 billion on Dec. 31, 1996. Total backlog was $42.2 billion on
June 30, 1997, compared with $44.4 billion on Dec. 31, 1996.
Total employment at McDonnell Douglas was 64,322 on June 30, 1997, compared
to 63,873 on Dec. 31, 1996.
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MCDONNELL DOUGLAS CORPORATION CONSOLIDATED STATEMENT OF EARNINGS (Amounts in
millions, except per share data)
Quarter Ended
June 30
1997 1996
-------- --------
Unaudited
Revenues $ 3,559 $ 3,264
Costs and Expenses:
Cost of products, services and
rentals 2,926 2,640
General and administrative expenses 187 177
Research and development 97 91
Interest expense:
Aerospace segments 21 31
Financial services and other
segment 33 32
-------- --------
Total costs and expenses 3,264 2,971
-------- --------
Earnings Before Income Taxes 295 293
Income taxes 100 105
-------- --------
Net Earnings $ 195 $ 188
======== ========
Earnings Per Share $ .93 $ .87
======== ========
Dividends Declared Per Share $ .12 $ .12
======== ========
Weighted-average Shares Outstanding 210.0 217.9
======== ========
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MCDONNELL DOUGLAS CORPORATION CONSOLIDATED STATEMENT OF EARNINGS (Amounts in
millions, except per share data)
Six Months Ended
June 30
1997 1996
-------- --------
Unaudited
Revenues $ 6,789 $ 6,435
Costs and Expenses:
Cost of products, services and
rentals 5,533 5,177
General and administrative expenses 358 346
Research and development 191 179
Interest expense:
Aerospace segments 56 62
Financial services and other
segment 68 62
-------- --------
Total costs and expenses 6,206 5,826
-------- --------
Earnings Before Income Taxes 583 609
Income taxes 207 223
-------- --------
Net Earnings $ 376 $ 386
======== ========
Earnings Per Share $ 1.79 $ 1.76
======== ========
Dividends Declared Per Share $ .24 $ .24
======== ========
Weighted-average Shares Outstanding 209.9 220.1
======== ========
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MCDONNELL DOUGLAS CORPORATION
BUSINESS SEGMENT DATA
(Millions of dollars)
Quarter Ended
June 30
1997 1996
-------- --------
Unaudited
Revenues
Military aircraft $ 2,065 $ 1,923
Commercial aircraft 805 722
Missiles, space and electronic
systems 587 529
Financial services and other 97 87
-------- --------
Operating revenues 3,554 3,261
Non-operating income 5 3
-------- --------
Total Revenues $ 3,559 $ 3,264
======== ========
Earnings
Military aircraft $ 238 $ 243
Commercial aircraft 14 18
Missiles, space and electronic
systems 45 53
Financial services and other 23 14
-------- --------
Operating earnings 320 328
Corporate and other (4) (4)
Interest expense (21) (31)
Income tax expense (100) (105)
-------- --------
Net Earnings $ 195 $ 188
======== ========
Operating earnings of the financial services and other segment have been reduced
by interest expense, an operating expense of that segment.
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MCDONNELL DOUGLAS CORPORATION
BUSINESS SEGMENT DATA
(Millions of dollars)
Six Months Ended
June 30
1997 1996
-------- --------
Unaudited
Revenues
Military aircraft $ 4,011 $ 3,962
Commercial aircraft 1,429 1,150
Missiles, space and electronic
systems 1,140 1,137
Financial services and other 198 174
-------- --------
Operating revenues 6,778 6,423
Non-operating income 11 12
-------- --------
Total Revenues $ 6,789 $ 6,435
======== ========
Earnings
Military aircraft $ 497 $ 493
Commercial aircraft 18 37
Missiles, space and electronic
systems 81 111
Financial services and other 45 34
-------- --------
Operating earnings 641 675
Corporate and other (2) (4)
Interest expense (56) (62)
Income tax expense (207) (223)
-------- --------
Net Earnings $ 376 $ 386
======== ========
Operating earnings of the financial services and other segment have been reduced
by interest expense, an operating expense of that segment.
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MCDONNELL DOUGLAS CORPORATION
BALANCE SHEET
(Millions of dollars)
McDonnell Douglas Corporation
and Consolidated Subsidiaries
-----------------------------
June 30 December 31
1997 1996
-------- ----------
Unaudited
ASSETS
Cash and cash equivalents $ 167 $ 1,094
Accounts receivable 942 882
Finance receivables and property
on lease 3,305 3,090
Contracts in process and inventories 3,980 3,486
Prepaid income taxes - -
Property, plant and equipment 1,494 1,453
Investment in Financial Services - -
Other assets 1,740 1,626
-------- --------
TOTAL ASSETS $11,628 $11,631
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 2,472 $ 2,595
Accrued retiree benefits 1,109 1,109
Income taxes 111 83
Advances and billings in excess
of related costs 1,449 1,310
Notes payable and long-term debt
Aerospace segments 1,168 1,438
Financial services and other segment 1,877 1,995
-------- --------
8,186 8,530
Minority Interest 63 63
Shareholders' Equity 3,379 3,038
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $11,628 $11,631
======== ========
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MDC Aerospace
------------------------
June 30 December 31
1997 1996
----------- -----------
Unaudited
ASSETS
Cash and cash equivalents $ 152 $ 1,077
Accounts receivable 1,024 964
Finance receivables and property
on lease 544 254
Contracts in process and inventories 3,980 3,486
Prepaid income taxes 273 278
Property, plant and equipment 1,435 1,391
Investment in Financial Services 413 383
Other assets 1,652 1,535
-------- --------
TOTAL ASSETS $ 9,473 $ 9,368
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 2,375 $ 2,470
Accrued retiree benefits 1,109 1,109
Advances and billings in excess
of related costs 1,394 1,265
Notes payable and long-term debt
Aerospace segments 1,153 1,423
Financial services and other segment - -
-------- --------
6,031 6,267
Minority Interest 63 63
Shareholders' Equity 3,379 3,038
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 9,473 $ 9,368
======== ========
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Financial Services
----------------------
June 30 December 31
1997 1996
-------- -----------
Unaudited
ASSETS
Cash and cash equivalents $ 15 $ 17
Accounts receivable - -
Finance receivables and property
on lease 2,761 2,836
Contracts in process and inventories - -
Property, plant and equipment 59 62
Investment in Financial Services - -
Other assets 88 91
-------- --------
TOTAL ASSETS $ 2,923 $ 3,006
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 179 $ 207
Accrued retiree benefits - -
Income taxes 384 361
Advances and billings in excess
of related costs 55 45
Notes payable and long-term debt
Aerospace segments 15 15
Financial services and other segment 1,877 1,995
-------- --------
2,510 2,623
Shareholders' Equity 413 383
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,923 $ 3,006
======== ========
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.
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MCDONNELL DOUGLAS CORPORATION
(Amounts in millions, except for ratios and deliveries)
CAPITAL STRUCTURE
June 30, 1997
------------------------------------
Unaudited
Financial
Services
Aerospace and Other
Segments Segment Total
--------- --------- --------
Debt $1,168 $1,877 $3,045
======= ======= =======
Equity $2,966 $ 413 $3,379
======= ======= =======
Debt-to-equity ratio .39 4.54
======= =======
Common Shares outstanding 210.0
=======
December 31, 1996
------------------------------------
Financial
Services
Aerospace and Other
Segments Segment Total
--------- --------- --------
Debt $1,438 $1,995 $3,433
======= ======= =======
Equity $2,655 $ 383 $3,038
======= ======= =======
Debt-to-equity ratio .54 5.21
======= =======
Common Shares outstanding 209.6
=======
COMMERCIAL AIRCRAFT DELIVERIES
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
------ ------ ------ ------
MD-80 8 3 8 7
MD-90 4 1 11 4
MD-11 2 4 4 7
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MCDONNELL DOUGLAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
Six Months Ended
June 30
1997 1996
-------- --------
Unaudited
OPERATING ACTIVITIES
Net earnings $ 376 $ 386
Adjustments to reconcile net earnings
to net cash provided (used)by
operating activities:
Depreciation and amortization 131 130
Pension income (79) (65)
Changes in other operating assets and
liabilities (528) (252)
-------- --------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (100) 199
INVESTING ACTIVITIES
Property, plant and equipment acquired (135) (87)
Finance receivables and property on
lease (251) (318)
Other (3) (6)
-------- --------
NET CASH USED BY INVESTING
ACTIVITIES (389) (411)
FINANCING ACTIVITIES
Net change in borrowings (maturities
90 days or less) 12 33
Debt having maturities more than
90 days:
New borrowings 66 366
Repayments (466) (156)
Common shares purchased - (377)
Dividends paid (50) (49)
-------- --------
NET CASH USED BY FINANCING
ACTIVITIES (438) (183)
-------- --------
DECREASE IN CASH AND CASH
EQUIVALENTS (927) (395)
Cash and cash equivalents at beginning
of year 1,094 797
-------- --------
Cash and cash equivalents at end of
period $ 167 $ 402
======== ========
