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Filed Pursuant to
Rule 424(b)(3)
File No. 33-31419
Revised
PRICING SUPPLEMENT NO. 158 DATED
June 02, 1994 TO PROSPECTUS
DATED May 21, 1993
McDONNELL DOUGLAS FINANCE CORPORATION
General Term Notes (R), Series A
Due 9 Months to 25 Years from date of issue
Interest payable Semi-annually on May 15th and November 15th
and at maturity
Except as set forth herein, the General Term Notes(R) offered hereby (the
"Notes") have such terms as are described in the accompanying Prospectus dated
May 21, 1993, as amended and supplemented by the Prospectus Supplement dated
November 18, 1993 (the "Prospectus").
Aggregate Principal Amount: $ 175,000.00
Original Issue Date
(Settlement Date): June 9, 1994
Stated Maturity Date: May 15, 2004
Issue Price to Public: 100.00% of Principal Amount
Interest Rate: 8.00% Per Annum
Interest Payment Dates: May 15th and November 15th commencing November
15, 1994
Survivor's Option: [ X ] Yes
[ ] No
Optional Redemption: [ X ] Yes
[ ] No
Initial Redemption Date: May 15, 1997
Redemption Price: Initially 102.00% of Principal Amount and
declining by 1.00% of the Principal Amount on
each anniversary of the Initial Redemption Date
until the Redemption Price is 100% of the
Principal Amount.
Principal Amount of Notes
Agent Solicited by Each Agent
PaineWebber, Inc. $ 35,000.00
J. W. Korth & Company 140,000.00
Total $ 175,000.00
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Per Note Per Note
Sold by Agents Sold by Agents
To Public To Employees Total
Issue Price: $ 1,000.00 $ -0- $ 175,000.00
Agent's Discount
or Commission: $ 15.50 $ -0- $ 2,712.50
Maximum Dealer's
Discount or
Selling Concession: $ 10.00 $ -0- $ 1,750.00
Proceeds to the
Company: $ 984.50 $ -0- $ 172,287.50
CUSIP Number: 58017CGV8
SELECTED CONSOLIDATED FINANCIAL DATA
The following amends and supplements the information set forth under the
caption "SELECTED CONSOLIDATED FINANCIAL DATA" on page 10 of the Prospectus:
The following table presents selected consolidated financial information
of the Company as of December 31, 1993, and for the three months ended March
31, 1994 and March 31, 1993. The information in the table should be read in
conjunction with, and is qualified in its entirety by reference to, the
Company's consolidated financial statements included in the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1994. Results
for the three months ended March 31, 1994 and 1993 are not necessarily
indicative of the results for the entire year. Such results are unaudited,
but include all adjustments, consisting of normal accruals, that the Company
considers necessary for a fair presentation of the results for such interim
periods. See "Selected Consolidated Financial Data" in the accompanying
Prospectus.
(DOLLARS IN MILLIONS) Three Months Ended Mar 31,
1994 1993
Selected earnings data (Unaudited):
Operating income . . . . . . . . . . $ 48.0 $ 47.3
Interest expense . . . . . . . . . . 28.2 29.9
Net income . . . . . . . . . . . . . 8.2 4.5
Ratio of income from continuing
operations to fixed charges. . . . . . 1.45x 1.23x
Mar 31, 1994 Dec 31, 1993
Selected balance sheet data: (Unaudited)
Total assets . . . . . . . . . . . . $2,076.2 $2,055.5
Total debt . . . . . . . . . . . . 1,406.6 1,361.2
Shareholder's equity . . . . . . . . 271.1 269.4
Cash dividends paid . . . . . . . . . 5.5 3.6
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OTHER INFORMATION
The information in the Prospectus set forth under the caption "RISK FACTORS"
is supplemented by the following:
Erosion of Commercial Aircraft Values. A substantial portion of the
Company's aircraft financings are to airlines which either have recently
emerged from bankruptcy or are in poor financial health. Two of the Company's
largest commercial aircraft financing customers emerged from bankruptcy in
1993. In addition, a substantial portion of the Company's total portfolio is
concentrated among a small number of the Company's commercial aircraft finance
customers. Repossession of aircraft in the currently depressed aircraft
market could materially adversely affect earnings from continuing operations.
Relationship with MDC. As the Company focuses on its core businesses, and
primarily aircraft financing, its future business prospects become more
closely tied to the success of MDC. At March 31, 1994, 61.1% of the Company's
total portfolio consisted of financings related to MDC aircraft, compared with
56.5%, 43.1% and 27.8% at December 31, 1993, 1992 and 1991, respectively. The
Company no longer believes that a greater portion of its future aircraft
financing volume will be guaranteed in whole or part by MDC. Approximately
25% of the receivables from the Company's total aircraft portfolio are
supported by guarantees from MDC.
Operating revenues for MDC's commercial aircraft segment decreased
substantially in 1993 and in the first quarter of 1994 and MDC's market share
of firm order backlog for new commercial aircraft has declined significantly
in the past several years. MDC expects the weakness of the commercial
aircraft market to continue during the remainder of 1994. MDC also has made
guarantees to non-affiliate third parties in connection with the marketing of
commercial aircraft. MDC's outstanding guarantees include approximately $125
million related to MD-11s operated by a foreign carrier. During March 1994,
this carrier notified its aircraft lenders and lessors that it was temporarily
suspending payments pending a restructuring of its financial obligations, and
requested a "standstill" agreement to protect itself from default remedies for
sixty days. MDC is currently participating in restructuring discussions with
this airline and the creditor group. MDC does not anticipate that the
existence of these or other guarantees made to non-affiliate third parties in
connection with the marketing of commercial aircraft will have a material
adverse effect upon its financial condition.
One of MDC's largest programs for the U.S. Government is the C-17
Globemaster III. MDC has incurred significant C-17 related losses as a result
of its cost estimate at completion exceeding the fixed-price ceiling set for
development and initial production. As of March 31, 1994, the U.S. Air Force
had withheld approximately $282 million from MDC's progress payment requests
principally as a result of the higher cost estimates and the reclassification
of certain costs. In May 1993, a Defense Acquisition Board initiated by the
Under Secretary of Defense for Acquisition began a review of the C-17 program
in an effort to resolve outstanding issues and to make recommendations
regarding the C-17's future. In connection with the review, MDC provided data
and participated in numerous discussions. In January 1994, MDC and the
Department of Defense agreed to a business settlement of a variety of issues
concerning the C-17. MDC and the U.S. Air Force will be developing plans and
contractual modifications and agreements to implement the business settlement.
MDC has begun to implement certain aspects of the settlement pending
Congressional authorization and appropriations expected to be completed during
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1994. The settlement covered many issues open as of the date of the
settlement, including the allocation of sustaining engineering costs to the
development and production contracts, the sharing of flight test costs over a
previous level, and the resolution of claims and of performance/specification
issues. The settlement also stipulated that MDC will expend additional funds
in an effort to achieve product and systems improvements. During the fourth
quarter of 1993, MDC recorded a $450 million pretax charge associated with the
business settlement arranged with the Department of Defense and with cost
growth on the development and initial production lots. Based upon further
definition and pricing of issues in the settlement, in the first quarter of
1994, MDC reduced cost estimates associated with the settlement. At the same
time, MDC recognized additional cost growth for work yet to be completed in
the development and initial production lots. The $450 million provision
recognized at the end of 1993 has been increased by $5 million during 1994 to
cover net cost growth.
On June 7, 1991, the U.S. Navy notified MDC and General Dynamics Corporation
("GD") that it was terminating for default the contract for development and
initial production of the A-12 aircraft. The Navy has agreed to continue to
defer repayment of $1.335 billion alleged to be due, with interest, from MDC
and GD as a result of the termination for default of the A-12 program. The
agreement provides that it will remain in force until the dispute as to the
type of termination is resolved by pending litigation in the U.S. Court of
Federal Claims or negotiated settlement, subject to review by the U.S.
Government annually on December 1, to determine if there has been a
substantial change in the financial condition of either MDC or GD such that
deferment is no longer in the best interest of the Government. The
Government, which extended the December 1, 1993 review beyond the time to
which MDC and GD agreed, has not advised the contractors of the results of
that review. However, the United States Court of Federal Claims has issued an
order deferring rulings on the merits of the A-12 termination case until
July 21, 1994. The court's order is based upon an undertaking by the
Government that it would not seek to terminate the A-12 deferment agreement
between MDC, GD and the Navy in the interim. MDC firmly believes it is
entitled to continuation of the deferment agreement in accordance with its
terms. However, if the agreement is not continued, MDC intends to contest
collection efforts. If payment of the deferred amounts were required, such
payment would have a material adverse effect on MDC's cash flows. Although
MDC has established a provision of $350 million for loss on the contract, if,
contrary to MDC's belief, the termination of the contract is not determined to
be for the convenience of the U.S. Government, it is estimated that an
additional loss would be incurred which could amount to approximately $1.2
billion.
(R) Registered Servicemark of J. W. Korth & Company
