<PAGE>1
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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
_____________
_X_ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
OR
___ Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
_____________
McDONNELL DOUGLAS FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-2564584 0-10795
(State or other (I.R.S. Employer (Commission File No.)
jurisdiction of Identification No.)
Incorporation or
Organization)
_____________
4060 Lakewood Boulevard, 6th Floor - Long Beach, California
90808-1700
(Address of principal executive offices)
_____________
(310) 627-3000
(Registrant's telephone number, including area code)
_____________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for each shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Common shares outstanding at November 13, 1996: 50,000 shares
Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
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<PAGE>
Table of Contents
Page
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . 3
Item 2. Management's Analysis of Results of Operations *
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 8
Item 2. Changes in Securities **
Item 3. Defaults Upon Senior Securities **
Item 4. Submission of Matters to a Vote of Security Holders **
Item 5. Other Information . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 9
* Management's Analysis of Results of Operations included in lieu of
Management's Discussion and Analysis of Financial Condition and
Results of Operations, which is omitted pursuant to General
Instruction H(2)(a) to Form 10-Q.
** Omitted pursuant to General Instruction H(2)(b) to Form 10-Q.
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Part I. Financial Information
Item 1. Financial Statements
McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in millions, except
stated value and par value amounts)
September 30, December 31,
1996 1995
ASSETS
Financing receivables:
Investment in finance leases $1,376.4 $1,249.7
Notes receivable 294.3 263.5
1,670.7 1,513.2
Allowance for losses on
financing receivables (46.3) (42.3)
Financing receivables, net 1,624.4 1,470.9
Cash and cash equivalents 15.4 12.6
Equipment under operating leases, net 706.5 475.5
Equipment held for sale or re-lease 16.2 28.6
Accounts with McDonnell Douglas and MDFS - 18.5
Other assets 42.3 43.5
$2,404.8 $2,049.6
LIABILITIES AND SHAREHOLDER'S EQUITY
Short-term notes payable $ 84.3 $ 13.7
Accounts payable and accrued expenses 23.1 41.8
Other liabilities 86.7 82.5
Deferred income taxes 333.8 305.4
Long-term debt:
Senior 1,451.5 1,206.3
Subordinated 114.8 119.7
2,094.2 1,769.4
Commitments and contingencies - Note 3
Shareholder's equity:
Preferred stock - no par value;
authorized 100,000 shares:
Series A; $5,000 stated value;
authorized, issued and
outstanding 10,000 shares 50.0 50.0
Common stock - $100 par value;
authorized 100,000 shares;
issued and outstanding 50,000 shares 5.0 5.0
Capital in excess of par value 89.5 89.5
Income retained for growth 166.1 135.7
310.6 280.2
$2,404.8 $2,049.6
See notes to consolidated financial statements.
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McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Statement of Income and Income Retained for Growth
Three months ended Nine months ended
September 30, September 30,
(Dollars in millions) 1996 1995 1996 1995
OPERATING INCOME
Finance lease income $ 30.0 $ 25.8 $ 87.3 $ 78.2
Interest income on notes
receivable 6.2 7.0 17.7 21.3
Operating lease income, net of
depreciation expense 14.9 10.5 41.2 30.4
Net an on disposal or re-lease
of assets 0.8 0.5 11.1 5.3
Other 0.5 1.9 3.1 5.9
52.4 45.7 160.4 141.1
EXPENSES
Interest expense 30.1 25.3 87.1 76.6
Provision for losses 3.5 3.0 10.8 7.4
Operating expenses 3.0 2.5 9.1 8.5
Other 1.4 2.5 2.6 3.9
38.0 33.3 109.6 96.4
Income before taxes on
income 14.4 12.4 50.8 44.7
Provision for income taxes 4.8 4.2 17.8 15.7
Net income 9.6 8.2 33.0 29.0
Income retained for growth 157.4 127.4 135.7 127.4
at beginning of period
Dividends (0.9) (9.4) (2.6) (30.2)
Income retained for growth
at end of period $ 166.1 $ 126.2 $ 166.1 $ 126.2
See notes to consolidated financial statements.
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McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Nine months ended September 30,
(Dollars in millions) 1996 1995
OPERATING ACTIVITIES
Net income $ 33.0 $ 29.0
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation expense -
equipment under operating leases 42.9 35.6
Net gain on disposal or re- (11.1) (5.3)
lease of assets
Provision for losses 10.8 7.4
Change in assets and
liabilities:
Accounts with MDC and MDFS 18.5 16.1
Other assets 1.2 (15.8)
Accounts payable (19.6) (25.5)
Other liabilities 4.2 (11.2)
Deferred income taxes 28.4 2.6
Other, net (3.1) 5.6
105.2 38.5
INVESTING ACTIVITIES
Net change in short-term notes
and lease receivables 10.4 67.5
Purchase of equipment for
operating leases (267.2) (124.8)
Proceeds from disposition of
equipment, notes and leases
receivable 41.5 91.8
Collection of notes and leases
receivable 139.6 83.4
Acquisition of notes and leases
receivable (335.4) (148.6)
(411.1) (30.7)
FINANCING ACTIVITIES
Net change in short-term 70.6 (73.4)
borrowings
Debt having maturities more than
90 days:
Proceeds 408.3 351.5
Repayments (168.5) (258.8)
Payment of cash dividends (1.7) (29.3)
308.7 (10.0)
Increase (decrease) in cash and
cash equivalents 2.8 (2.2)
Cash and cash equivalents at
beginning of year 12.6 13.1
Cash and cash equivalents at end
of period $ 15.4 $ 10.9
See notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
Note 1 Basis of Presentation
McDonnell Douglas Finance Corporation (the "Company") is a wholly-owned
subsidiary of McDonnell Douglas Financial Services Corporation ("MDFS"), a
wholly-owned subsidiary of McDonnell Douglas Corporation ("McDonnell Douglas").
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the accompanying
consolidated financial statements reflect all adjustments (consisting
of normal recurring accruals) which are necessary to present fairly the
consolidated balance sheet and the related consolidated statements of income
and income retained for growth and cash flows for the interim periods
presented. Operating results for the nine-month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996. The statements should be read in
conjunction with the notes to the consolidated financial statements
included in the Company's Form 10-K for the year ended December 31, 1995.
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
Note 2 Credit Agreements and Long-Term Debt
The provisions of various credit and debt agreements require the Company to
maintain a minimum net worth, restrict indebtedness, and limit cash dividends
and other distributions. Under the most restrictive provision, $90.6 million
of the Company's income retained for growth was available for
dividends at September 30, 1996.
Note 3 Commitments and Contingencies
On November 1, 1996, The Allen Austin Harris Group, Inc. ("Plaintiff")
filed a Complaint in the Superior Court of the State of California, County
of Alameda, against the Company, McDonnell Douglas Corporation, McDonnell
Douglas Aerospace - Middle East Limited and The Selah Group, Inc. (the
"Defendants"). The Plaintiff, which had hoped to establish a manufacturing
plant abroad with various assistance from the Defendants, seeks more than
$57.0 million in alleged damages (primarily consisting of lost profits) based
on various theories. The Company believes it has meritorious defenses to all of
the allegations and that the litigation will have no material adverse effect on
the Company's earnings, cash flow or financial condition.
A certain commercial aircraft customer of the Company, which filed for
bankruptcy protection in Venezuela, was in default under a loan from the
Company secured by an MD-83 aircraft. The amount due and payable to the
Company under the loan at June 30, 1996, was approximately $12.1 million, net
of maintenance reserves held by the Company of $1.0 million. During the third
quarter of 1996, the Company successfully negotiated the return of the MD-83
aircraft, which had been in the possession of a Venezuelan bankruptcy trustee.
The Company has accepted return of the aircraft, together with the maintenance
reserve payments held by the Company, in settlement of the borrower's
obligations under the loan agreement.
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The $100.0 million aircraft purchase bridge facility made available by the
Company to ValuJet Airlines, Inc. ("ValuJet") in 1995 was reduced in
maximum scope to $50.0 million by mutual agreement during the third quarter
of 1996. As of September 30, 1996, there were no outstanding receivables under
this facility, which had been utilized for a number of transactions by
ValuJet during the first half of 1996. On September 27, 1996, the
Company loaned approximately $10.4 million to ValuJet for a five-year term,
secured by two used DC-9-32 aircraft which had previously been held under the
aircraft purchase bridge facility.
Certain scheduled rental payments under the lease of a used DC-10 aircraft to a
Mexican charter operator are past due and the Company is pursuing legal action
to repossess the aircraft. The net asset value of the aircraft at September 30,
1996, was $13.6 million. Although it is too early to determine the ultimate
outcome, the Company does not expect to suffer a material adverse impact on
its earnings, cash flow or financial condition on account of this transaction.
In conjunction with prior asset dispositions and certain guarantees, at
September 30, 1996 the Company was subject to a maximum recourse of $28.6
million. Based on trends to date, the Company's loss related to such exposure
is not expected to be significant.
At September 30, 1996, the Company had commitments to provide leasing and other
financing totaling $201.4 million.
The Company leases aircraft under capital leases which have been subleased to
others. At September 30, 1996, the Company had guaranteed the repayment of $7.5
million in capital lease obligations associated with a 50% partner.
Item 2. Management's Analysis of Results of Operations
Finance lease income increased $9.1 million (11.6%) for the first nine months
of 1996, primarily attributable to increased volume for 1996.
Interest on notes receivable decreased $3.6 million (16.9%) for the first nine
months of 1996, primarily attributable to aircraft-related notes and real
estate notes that matured in 1995.
Operating lease income increased $10.8 million (35.5%) for the first nine
months of 1996, primarily attributable to the March 1996 financing of two
MD-11s and the March 1995 financing of two MD-82s under operating lease
agreements.
Net gain on disposal or re-lease of assets increased $5.8 million (greater
than 109.4%) for the first nine months of 1996, attributable primarily to
equipment sales within the commercial equipment leasing portfolio.
Interest expense increased $10.5 million (13.7%) for the first nine months
of 1996, primarily attributable to a higher level of debt borrowings in 1996,
resulting from increased financing activity.
Provision for losses increased $3.4 million (45.9%) for the first nine months
of 1996, primarily attributable to increased financing activity.
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<PAGE>8
Part II. Other Information
Item 1. Legal Proceedings
On November 1, 1996, The Allen Austin Harris Group, Inc. ("Plaintiff") filed a
Complaint in the Superior Court of the State of California, County of Alameda,
against the Company, McDonnell Douglas Corporation, McDonnell Douglas Aerospace
- Middle East Limited and The Selah Group, Inc. (the "Defendants"). The
Plaintiff, which had hoped to establish a manufacturing plant abroad with
various assistance from the Defendants, seeks more than $57.0 million in
alleged damages (primarily consisting of lost profits) based on various
theories. The Company believes it has meritorious defenses to all of the
allegations.
Item 5. Other Information
Information on the Company's portfolio balances; new business volume; analysis
of allowance for losses on financing receivables and credit loss experience;
and receivable write-offs, net of recoveries by business unit are summarized
below.
Portfolio Balances
Portfolio balances are summarized as follows:
September 30, December 31,
(Dollars in millions) 1996 1995
McDonnell Douglas aircraft financing
Finance leases $ 938.8 $ 857.4
Operating leases 443.5 256.8
Notes receivable 89.2 110.9
1,471.5 1,225.1
Other commercial aircraft financing
Finance leases 141.5 126.1
Operating leases 57.1 49.6
Notes receivable 4.6 4.9
203.2 180.6
Commercial equipment leasing
Finance leases 296.0 266.3
Operating leases 205.9 169.1
Notes receivable 143.2 67.0
645.1 502.4
Other 57.4 80.6
$ 2,377.2 $ 1,988.7
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<PAGE>9
New Business Volume
New business volume summarized is as follows:
Nine months Year ended
ended December
September 30, 31,
(Dollars in millions) 1996 1995
McDonnell Douglas aircraft financing $ 338.8 $ 338.7
Other commercial aircraft financing 20.1 11.0
Commercial equipment leasing 236.6 241.1
$ 595.5 $ 590.8
Analysis of Allowance for Losses on Financing Receivables
and Credit Loss Experience
Nine months Year ended
ended December
September 30, 31,
(Dollars in millions) 1996 1995
Allowance for losses on financing
receivables at beginning $ 42.3 $ 40.7
of year
Provision for losses 10.8 12.2
Write-offs, net of recoveries (4.9) (10.6)
Other (1.9) -
Allowance for losses on financing
receivables at end of period $ 46.3 $ 42.3
Allowance as percent of total
portfolio 2.0% 2.1%
Net write-offs as percent of average
portfolio 0.3% 0.6%
More than 90 days delinquent:
Amount of delinquent installments $ 1.4 $ 10.0
Total receivables due from
delinquent obligors $ 4.2 $ 12.1
Total receivables due from
delinquent obligors
as a percentage of total
portfolio 0.2% 0.6%
Receivable Write-offs, Net of Recoveries by Business Unit
The following table summarizes the loss experience of each of the
Company's continuing businesses:
Nine months
ended Year ended
September 30, December 31,
(Dollars in millions) 1996 1995
Commercial aircraft financing $ - $ 5.0
Commercial equipment leasing 3.3 1.7
$ 3.3 $ 6.7
<PAGE>
<PAGE>10
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 10 Amendment No. 2, dated as of August 16, 1996, to Credit
Agreement, dated as of September 29, 1994, among the
Company and MDFS and the banks listed therein.
Exhibit 12 Computation of ratio of income to fixed charges.
Exhibit 27 Financial Data Schedule.
B. Reports on Form 8-K
None.
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, its principal financial officer and principal
accounting officer, thereunto duly authorized.
McDonnell Douglas Finance Corporation
November 13, 1996 /s/ STEVEN W. VOGEDING
__________________________________
Steven W. Vogeding
Vice President and Chief Financial
Officer (Principal Financial Officer) and
Registrant's Authorized Officer
/s/ MAURA R. MIZUGUCHI
__________________________________
Maura R. Mizuguchi
Controller (Principal Accounting Officer)
<PAGE>1 EXHIBIT 10
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT No. 2 dated as of August 16, 1996 among MCDONNELL DOUGLAS
FINANCE CORPORATION (the "Company"), MCDONNELL DOUGLAS FINANCIAL SERVICES
CORPORATION, the BANKS listed on the signature pages hereof (the "Banks")
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent (the
"Documentation Agent") and THE CHASE MANHATTAN BANK, as Administrative Agent.
W I T N E S S E T H :
WHEREAS, certain of the parties hereto have heretofore entered into
a Credit Agreement dated as of September 29, 1994 and amended as of August 31,
1995 (collectively, the "Agreement");
WHEREAS, the parties hereto desire to increase the aggregate amount
of the Syndicated Commitments from $220,000,000 to $240,000,000; and
WHEREAS, the parties hereto desire to amend further the Agreement to
(i) extend the Termination Date from August 30, 1999 to August 16, 2001, (ii)
reduce certain interest rates and Commitment Fee Rates and (iii) make certain
other changes as hereinafter provided;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined herein, each capitalized term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other
similar reference contained in the Agreement shall from and after the date
hereof refer to the Agreement as amended hereby. The term "Notes" defined in
the Agreement shall include from and after the date hereof the New Notes (as
defined below).
SECTION 2. AMENDMENT OF TERMINATION DATE. The definition of
"Termination Date" in Section 1.01 of the Agreement is amended to read in its
entirety as follows:
"Termination Date" means August 16, 2001, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day,
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the Termination Date shall be the next preceding Euro-Dollar
Business Day.
SECTION 3. AMENDMENT OF SECTION 1.01. (a) Each reference to
"1994" in the definition of "Company s 1994 Form 10-K" is amended to read
"1995".
(b) Each reference to "Adjusted Debt" in the definition of
"Unrestricted Subsidiary" is amended to read "Consolidated Adjusted Debt".
<PAGE>
<PAGE>2
(c) The text "(other than Non-Recourse Debt)" is deleted at eachplace
it appears in the definition of "Unrestricted Subsidiary".
(d) Section 1.01 of the Agreement is amended by inserting, in their
appropriate alphabetical positions, the following definitions:
"Adjusted Tangible Net Worth" means the sum (without duplication) of
(i) the consolidated stockholders' equity of the Company PLUS (ii)
preferred stock of the Company not reflected in clause (i) PLUS (iii)
preferred stock of any Subsidiary of the Company not reflected in clause
(i), PROVIDED that such Subsidiary has no material assets other than
subordinated obligations owed it by the Company all terms and conditions
of which shall have been approved by Banks having at least 51% of the
aggregate amount of the Syndicated Commitments, MINUS (iv) to the extent
reflected in clause (i), Intangible Assets.
"Consolidated Adjusted Debt" means the sum (without duplication) of
(i) the consolidated amount of Debt of the Company and its Restricted
Subsidiaries, (ii) the consolidated amount of Non-Recourse Debt of the
Company and its Restricted Subsidiaries and (iii) the aggregate amount of
discounted Net Rental Payments described in Section 5.11.
"Leverage Ratio" means, at any date, the ratio of (i) Consolidated
Adjusted Debt at such date to (ii) Adjusted Tangible Net Worth at such
date.
SECTION 4. AMENDMENT OF ARTICLE IV. (a) Each reference to "Decem-
ber 31, 1994" in Sections 4.04 and 4.11 of the Agreement is amended to read
"December 31, 1995".
(b) Each reference to "March 31, 1995" in Sections 4.04(b), 4.04(c)
and 4.11 of the Agreement is amended to read "March 31, 1996".
SECTION 5. AMENDMENT OF ARTICLE V. (a) Section 5.07 of the
Agreement is amended to read in its entirety as follows:
SECTION 5.07. LEVERAGE RATIO. The Leverage Ratio shall not exceed
800% as of the last day of any Fiscal Quarter.
(b) Each reference to "Adjusted Debt" in Section 5.09 of the
Agreement is amended to read "Consolidated Adjusted Debt".
(c) Each reference to "Adjusted Debt" in Section 5.10 of the
Agreement is amended to read "Consolidated Adjusted Debt".
(d) Each reference to "Adjusted Debt" in Section 5.11 of the
Agreement is amended to read "Consolidated Adjusted Debt".
(e) The text "(other than Non-Recourse Debt)" is deleted at each
place it appears in Sections 5.09 and 5.10.
SECTION 6. AMENDMENT OF SECTION 6.01(f). Section 6.01(f)is amended
to read in its entirety as follows:
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Financial Obligations or
enables the holder of such Material Financial Obligations or any Person
<PAGE>
<PAGE>3
acting on such holder's behalf to accelerate the maturity thereof;
SECTION 7. CHANGES IN SYNDICATED COMMITMENTS. With effect from and
including the date this Amendment No. 2 becomes effective in accordance with
Section 11 hereof, (i) each Person listed on the signature pages hereof which
is not a party to the Agreement (a "New Bank") shall become a Bank party to
the Agreement and (ii) the Syndicated Commitment of each Bank shall be the
amount set forth opposite its name on the signature pages hereto. Any Bank
whose Syndicated Commitment is changed to zero shall upon such effectiveness
cease to be a Bank party to the Agreement, and all accrued fees and other
amounts payable under the Agreement for the account of such Bank shall be due
and payable on such date; PROVIDED that the provisions of Sections 8.03 and
9.03 of the Agreement shall continue to inure to the benefit of each such
Bank.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants that as of the date hereof and after giving effect
hereto:
(a) no Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in
the Agreement is true and correct as though made on and as of this date.
SECTION 9. Amendment of Pricing Schedule. The Pricing Schedule is
amended to read in its entirety as set forth in Exhibit I to this Amendment
No. 2.
SECTION 10. Governing Law. This Amendment No. 2 shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 11. Counterparts; Effectiveness. This Amendment No. 2 may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Amendment No. 2 shall become effective as of the date
hereof when (i) the Documentation Agent shall have received duly executed
counterparts hereof signed by each of the parties hereto (or, in the case of
any party as to which an executed counterpart shall not have been received,
the Documentation Agent shall have received telegraphic, telex or other
written confirmation from such party of execution of a counterpart hereof by
such party); (ii) the Documentation Agent shall have received a duly executed
Note for each of the New Banks (a "New Note"), dated on or before the date of
effectiveness hereof and otherwise in compliance with Section 2.03 of the
Agreement; (iii) the Documentation Agent shall have received an opinion of the
Associate General Counsel of the Company (or such other counsel for the
Company as may be acceptable to the Documentation Agent), substantially in the
form of Exhibit B to the Agreement with reference to the New Notes, this
Amendment No. 2 and the Agreement as amended hereby; and (iv) the
Documentation Agent shall have received all documents it may reasonably
request relating to the existence of the Company, the corporate authority for
and the validity of the Agreement as amended hereby, the New Notes and any
other matters relevant hereto, all in form and substance satisfactory to the
Documentation Agent.
<PAGE>
<PAGE>4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be duly executed by their respective authorized officers as of theday and
year first above written.
MCDONNELL DOUGLAS
FINANCE CORPORATION
By /s/Phillip B. Dandridge
Title: Treasurer
MCDONNELL DOUGLAS FINANCIAL
SERVICES CORPORATION
By /s/Phillip B. Dandridge
Title: Treasurer
<PAGE>
<PAGE>5
Syndicated
Commitments
- -----------
$25,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/Diana H. Imhof
Title: Vice President
$25,000,000 THE BANK OF NEW YORK
By /s/Lisa Brown
Title: Vice President
$25,000,000 THE CHASE MANHATTAN BANK
By /s/Matthew H. Massie
Title: Vice President
$25,000,000 THE INDUSTRIAL BANK OF JAPAN, LTD
By /s/Toshinari Iyoda
Title: Senior Vice President
$20,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/Gina M. West
Title: Vice President
<PAGE>
<PAGE>6
$20,000,000 BANK OF MONTREAL
By /s/Claudia C. Heldring
Title: Director
$20,000,000 DEUTSCHE BANK AG, LOS ANGELES
AND/OR CAYMAN ISLAND BRANCHES
By /s/Olaf Janke
Title: Associate
By /s/J. Scott Jessup
Title: Vice President
$20,000,000 NATIONAL WESTMINSTER BANK PLC
By /s/Caroline A. Percy
Title: Vice President
$20,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/Al R. Chircop
Title: Authorized Agent
$20,000,000 THE LONG-TERM CREDIT BANK OF JAPAN
LTD.
By /s/Motokazu Uematsu
Title: Deputy General Manager
$20,000,000 THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/Scott J. Paige
Title: Senior Vice President
Total Syndicated
Commitments
- ----------------
$240,000,000
============
<PAGE>
<PAGE>7
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/Diana H. Imhof
Title: Vice President
THE CHASE MANHATTAN BANK,
as Agent
By /s/Matthew H. Massie
Title: Vice President
<PAGE>
<PAGE>8 EXHIBIT I
PRICING SCHEDULE
The "LIBOR Margin" and "Commitment Fee Rate" for any day are the
respective percentage set forth below in the applicable row under the column
corresponding to the Status that exists on such day:
Level Level Level Level Level Level
Status I II III IV V VI
- -------------------------------------------------------------------------
LIBOR Margin 0.225% 0.25% 0.30% 0.375% 0.475% 0.75%
Commitment Fee Rate 0.075% 0.08% 0.10% 0.125% 0.175% 0.250%
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Company's long-
term debt is rated A or higher by S&P or A2 or higher by Moody's.
"Level II Status" exists at any date if, at such date, (i) the Company's
long-term debt is rated A- or higher by S&P or A3 or higher by Moody's and
(ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the Company's
long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by Moody's and
(ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the Company's
long-term debt is rated BBB or higher by S&P or Baa2 or higher by Moody's and
(ii) none of Level I Status, Level II Status and Level III Status exists.
"Level V Status" exists at any date if, at such date, (i) the Company's
long-term debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's and
(ii) none of Level I Status, Level II Status, Level III Status or Level IV
Status exists.
"Level VI Status" exists at any date if, at such date, no other Status
exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard and Poor's Ratings Group.
"Status" means, at any date, whichever of Level I Status, Level II
Status, Level III Status, Level IV Status, Level V Status or Level VI Status
exists at such date.
The credit ratings to be utilized for purposes of determining a Status
<PAGE>
<PAGE>9
are the publicly announced ratings assigned to unsecured senior obligations
ofthe Company without third party credit support (the "Long-Term Securities").
Ratings assigned to any obligation which is secured or which has the benefit
of third party credit support shall be disregarded. Notwithstanding the
foregoing two sentences, if the obligations of the company under this
Agreement and its Notes are hereafter secured or entitled to the benefit of
any third party credit support, then the credit ratings utilized in
determining a Status shall, if the Company so requests by written notice to
the Documentation Agent, be the ratings assigned to any other senior
obligations of the Company that are secured by the same collateral or entitled
to the benefit of the same third party credit support, in each case equally
and ratably with the obligations of the Company under this Agreement and the
Notes (and such obligations shall be "Long-Term Securities" for purposes of
the next succeeding paragraph).
For purposes of determining Status, if at any date the rating of the Long-Term
Securities by Moody's shall be higher or lower than the comparable rating by
S&P by two or more rating levels (it being understood that for these purposes
an S&P rating of A+ is comparable to a Moody's rating of A1, an S&P rating of
A is comparable to a Moody s rating of A2, and so forth), then the rating of
the Long-Term Securities by each of Moody's and S&P shall be deemed to be one
rating level above the lower of the two actual ratings.
EXHIBIT 12
McDonnell Douglas Finance Corporation and Subsidiaries
Computation of Ratio of Income to Fixed Charges
Nine months ended
September 30,
(Dollars in millions) 1996 1995
Income:
Income before taxes on income $ 50.8 $ 44.7
Fixed charges 89.7 79.2
Income before taxes on income and $ 140.5 $ 123.9
fixed charges
Fixed charges:
Interest expense $ 87.1 $ 76.6
Preferred stock cash dividends 2.6 2.6
$ 89.7 $ 79.2
Ratio of income before taxes on income
and fixed charges to fixed charges 1.57 1.56
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,400
<SECURITIES> 0
<RECEIVABLES> 294,300
<ALLOWANCES> (46,300)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,404,800
<CURRENT-LIABILITIES> 0
<BONDS> 1,566,300
<COMMON> 5,000
0
50,000
<OTHER-SE> 166,100
<TOTAL-LIABILITY-AND-EQUITY> 2,404,800
<SALES> 0
<TOTAL-REVENUES> 160,400
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,600
<LOSS-PROVISION> 10,800
<INTEREST-EXPENSE> 87,100
<INCOME-PRETAX> 50,800
<INCOME-TAX> 17,800
<INCOME-CONTINUING> 33,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
