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Filed Pursuant to
Rule 424(b)(3)
File No. 33-31419
PRICING SUPPLEMENT NO. 129 DATED
March 31, 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 March 15th and September 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: $ 40,000.00
Original Issue Date
(Settlement Date): April 8, 1994
Stated Maturity Date: March 15, 2001
Issue Price to Public: 100.00% of Principal Amount
Interest Rate: 7.00% Per Annum
Interest Payment Dates: March 15 and September 15 commencing
September 15, 1994
Survivor's Option: [ X] Yes
[ ] No
Optional Redemption: [ X] Yes
[ ] No
Initial Redemption Date: March 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. $ 30,000.00
J. W. Korth & Company 10,000.00
Total $ 40,000.00
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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- $ 40,000.00
Agent's Discount
or Commission: $ 21.50 $ -0- $ 860.00
Maximum Dealer's
Discount or
Selling Concession: $ 16.00 $ -0- $ 640.00
Proceeds to the
Company: $ 978.50 $ -0- $ 39,140.00
CUSIP Number: 58017CFN7
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, 1992 and 1993 and for the years ended
December 31, 1992 and 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 Annual
Report on Form 10-K for the year ended December 31, 1993. See "Selected
Consolidated Financial Data" in the accompanying Prospectus.
(DOLLARS IN MILLIONS) Years Ended December 31,
1993 1992
Selected earnings data:
Operating income . . . . . . . . . . $ 198.5 $ 254.7
Interest expense . . . . . . . . . . 116.4 145.9
Net income . . . . . . . . . . . . . 16.8 27.7
Ratio of income from continuing
operations to fixed charges. . . . . . 1.34x 1.32x
Selected balance sheet data:
Total assets . . . . . . . . . . . . $ 2,063.2 $ 1,999.0
Total debt . . . . . . . . . . . . 1,361.2 1,330.4
Shareholder's equity . . . . . . . . 269.4 256.4
Cash dividends paid . . . . . . . . . 3.6 105.8
OTHER INFORMATION
The information in the Prospectus set forth under the caption "RISK FACTORS-
Relationship with MDC" is supplemented by the following:
As the Company focuses on its core businesses, and primarily aircraft
financing, its future business prospects become more closely tied to the
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success of MDC. At December 31, 1993, 56.5% of the Company's total
portfolio consisted of financings related to MDC aircraft, compared with
43.1% and 27.8% in 1992 and 1991.
Operating revenues for MDC's commercial aircraft segment decreased 28% in
1993. MDC believes it is likely that the weakness of the commercial
aircraft market will continue during 1994 and MDC does not expect a strong
industry-wide resumption in orders for new aircraft until 1995, at the
earliest.
One of MDC's largest programs for the U.S. Government is the C-17
Globemaster III. The C-17 program is completing development and moving
into full production. However, 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. In addition, as
of December 31, 1993, the U.S.Air Force had withheld approximately $312
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, which is subject to Congressional authorization and
appropriations. This process is expected to be completed during 1994.
The settlement covered 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. MDC estimated the financial impact of the settlement in
conjunction with a review of the estimated remaining costs on the C-17
development and initial production contracts. As a result, MDC recorded a
loss provision of $450 million (excluding general and administrative and
other period expenses) in the fourth quarter of 1993.
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.
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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
