ITEM 1 BUSINESS
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 MDC).
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, an unincorporated operating division of the Company, which is engaged in design, development, production, and support of the following major products: military transport aircraft; combat aircraft and training systems; missiles; space launch vehicles and space station systems and integration; defense and commercial electronics, lasers, sensors, and command, control, communications, and intelligence systems; and commercial and military helicopters and ordnance. 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.
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 caption of "transport aircraft". The "military aircraft" segment now includes the former "combat aircraft" segment plus the C-17 Globemaster III program and other 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. MDFS was previously engaged in a variety of commercial and industrial equipment and aircraft financing. During 1991 and 1992, portfolios of several non-core businesses were sold. The Company's subsidiary, McDonnell Douglas Realty Company, was established in 1972 to develop the Company's surplus real estate. While continuing to serve that role, McDonnell Douglas Realty Company has become a full-service developer and property manager in the commercial real estate market as well as for the Company's aerospace business.
Since 1988, substantially all of the Company's information systems business has been divested. The Company sold its network systems business and Health Systems Company in 1989, sold its North American Field Service business in 1990 and discontinued its information systems assembly operations in the U.S. in 1990. In 1991, MDC sold substantially all of the assets of McDonnell Douglas Systems Integration Company and certain related
assets of McDonnell Douglas Information Systems International (MDISI). In July 1992, MDC sold all the outstanding stock of TeleCheck Services, Inc. and in March 1993, MDC sold its remaining MDISI business.
The business segments in which the Company is engaged and discussion of certain of their respective products appear under the captions: "Military Aircraft", "Commercial Aircraft", "Missiles, Space and Electronic Systems", and "Complementary Businesses" on pages 6 through 20, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 24 through 32, of the Company's 1993 Annual Report to Shareholders, the text portions of which are incorporated herein by this reference.
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FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information regarding the Company's industry segments is provided under the caption "Selected Financial Data by Industry Segment - Continuing Operations" on page 33 of the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
MARKETING AND MAJOR CUSTOMER - MCDONNELL DOUGLAS AEROSPACE
Discussion regarding the Company's most significant customer in the military aircraft and missiles, space and electronic systems segments is included under the captions "Business and Market Considerations - Military Aerospace Business" and "Government Business Audits, Reviews and Investigations" on pages 30 through 32 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1993 Annual Report to Shareholders, which are incorporated herein by this reference.
COMPETITION
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. There is significant competition in the aerospace industry, both in military and commercial programs.
The Company's military segments compete in an industry composed of a few major competitors and a limited number of customers. The number of competitors in these segments has decreased over the past few years due to consolidation brought about by reduced defense spending. However, competition for military programs remains significant.
The Company's commercial aircraft sales are subject to intense competition from aircraft manufactured by other companies, both foreign and domestic, including companies which are nationally owned or subsidized and have a larger family of commercial aircraft to meet varied and changing airline requirements. The Company's principal competitors in commercial aircraft are The Boeing Company and Airbus Industrie. To meet competition,
the Company maintains a continuous program directed toward enhancing the performance and capability of its products. Additionally, product improvement programs which increase airplane operational capability, improve reliability, enhance maintainability and increase commonality within current airplane families and across the entire product line will continue. A vital part of the Company's strategy is a program to develop derivatives of the current product line.
MDFS is subject to competition from other financial institutions, including commercial banks, finance companies, and leasing companies. Some full-service leasing companies are larger than MDFS and have greater financial resources, greater leverage ability, and lower effective borrowing costs.
SUBCONTRACTING, PROCUREMENT AND RAW MATERIALS
The most important raw materials required for the Company's products, from the standpoint of aggregate cost, are aluminum (sheet, plate, forgings and extrusions), titanium (sheet, plate, forgings and extrusions) and composites (including carbon and boron). All of these materials are purchased from outside sources and generally are available at competitive prices. Additional sources and capacity exist for these raw materials, but it would take a year or more before they could become qualified alternate sources of supply.
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The Company purchases many components, such as engines and accessories, electrical power systems, radars, landing gears, fuel systems, refrigeration systems, navigational equipment, and flight and engine instruments for use in aircraft, and propulsion systems, guidance systems, telemetry and gyroscopic devices in support of its space systems and missile programs. In addition, fabricated subassemblies such as engine pods and pylons, fuselage sections, wings and empennage surfaces, doors and flaps, are sometimes subcontracted to outside suppliers. The U.S. Government and commercial customers also furnish many components for incorporation into aircraft and other products they purchase from the Company.
The Company is dependent upon the ability of its large number of suppliers and subcontractors to meet performance specifications, quality standards, and delivery schedules at anticipated costs, and their failure to do so would adversely affect production schedules and contract profitability, while jeopardizing the ability of the Company to fulfill commitments to its customers. The Company has encountered some difficulty from time to time in assuring long-lead time supplies of essential parts, subassemblies, and materials. The Company's success in forestalling shortages of critical commodities over the long term is difficult to predict because many factors affecting such shortages are outside its control.
EMPLOYEES
At December 31, 1993 the total employment of the Company, including subsidiaries, was 70,016.
PATENTS AND LICENSES
The Company holds many patents and has licenses under patents held by others. The Company does not believe that the expiration of any patent or group of patents, nor the termination of any patent license agreement, would materially affect its business. The Company does not believe that any of its patents or trademarks are materially important to the conduct of its business.
ENVIRONMENTAL REGULATIONS
See "Environmental Expenditures" on page 32 in "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
RESEARCH AND DEVELOPMENT
A significant portion of the Company's business with the U.S. Government consists of research, development, test, and evaluation work, which are reflected as sales and costs in the Company's financial statements. Customer-sponsored research and development work amounted to approximately $1.126 billion in 1993, $1.018 billion in 1992, and $1.221 billion in 1991. Company-initiated research and development and bid and proposal work, related to both commercial business and business with the U.S. Government, amounted to $341 million in 1993, $509 million in 1992, and $429 million in 1991.
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U.S. GOVERNMENT AND EXPORT SALES
Although there are additional risks to the Company attendant to its foreign operations, such as currency fluctuations and devaluations, the risk of war, changes in foreign governments and their policies, differences in foreign laws, uncertainties as to enforcement of contract rights, and difficulties in negotiating and litigating with foreign sovereigns, the Company's financial position has not been materially affected.
Since most of the Company's foreign export sales involve technologically advanced products, services and expertise, U.S. export control regulations limit the types of products and services that may be offered and the countries and governments to which sales may be made. The Department of State issues and maintains the International Traffic in Arms Regulations pursuant to the Arms Export Control Act. The Department of Commerce issues and maintains the Export Administration Regulations pursuant to the Export Administration Act and the Department of Treasury implements and maintains transaction controls, sanctions and trade embargoes pursuant to the Trading With the Enemy Act and the International Emergency Economic Powers Act. Pursuant to these regulations, certain products and services cannot be exported without obtaining a license. Most of the defense products that the Company sells abroad cannot be sold without such a license. Consequently, the Company's international sales may be adversely affected by changes in the United States Government's export policy, the implementation of trade sanctions or embargoes, or the suspension or revocation of the Company's foreign export control licenses.
Additional information required by this item is included in Note 19, "U.S. Government and Export Sales" on page 52 of the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
BACKLOG
The backlog of orders at December 31 of the last two years has been as follows:
1993 1992 ------------------ ------------------- Backlog % Backlog % --------- ------- --------- ------- (Dollars in millions) Firm backlog: Military aircraft $ 7,997 41.3 $ 7,619 31.7 Commercial aircraft 9,172 47.3 13,364 55.5 Missiles, space and electronic systems 2,210 11.4 3,069 12.8 --------- ------- --------- ------- Total Firm Backlog $ 19,379 100.0 $ 24,052 100.0 ========= ======= ========= ======= Contingent backlog: Military aircraft $ 10,742 65.8 $ 10,760 60.6 Commercial aircraft 3,059 18.8 4,311 24.3 Missiles, space and electronic systems 2,518 15.4 2,683 15.1 --------- ------- --------- ------- Total Contingent Backlog $ 16,319 100.0 $ 17,754 100.0 ========= ======= ========= =======
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Backlog reported is that of the aerospace segments. Customer options and products produced for short-term lease are excluded from backlog. For a discussion of risks associated with backlog for commercial customers, see "Backlog" on page 32 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
Contingent backlog includes: (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.
The backlog amounts include units scheduled for delivery over extended future periods. Since substantially all work for the U.S. and other governments is accounted for on the percentage of completion method of accounting whereby sales are recorded as work is performed, such amounts included in backlog cannot be segregated on the basis of scheduled deliveries. However, with respect to commercial jetliners and related products included in the commercial segment (which are accounted for on a delivery method), the firm backlog related to deliveries scheduled after one year was $6.9 billion at December 31, 1993, and $9.2 billion at December 31, 1992.
The Government may terminate its contracts for default, or for its convenience whenever it believes that such termination would be in the best interest of the Government. For a further discussion of termination for default and termination for convenience risks, see "Military Aerospace Business" on page 30 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company at February 28, 1994, were as follows:
EXECUTIVE AGE POSITIONS AND OFFICES HELD - ------------------ --- ---------------------------------------
Dean C. Borgman 52 McDonnell Douglas Helicopter Systems (MDHS) Senior Vice President - General Manager since September 1993 and McDonnell Douglas Helicopter Company (MDHC) President since March 1992. MDHC Vice President - Commercial Programs 1992. MDHC General Manager MDX Program 1990-1992. MDHC Vice President - Advanced Product and Technology Division 1989-1990. MDHC Vice President - Engineering 1986-1989.
Robert L. Brand 56 MDC Vice President and Controller since September 1992. McDonnell Douglas Missile Systems Company (MDMSC) Vice President - Business Management and Chief Financial Officer 1992. MDC Controller 1987-1992.
John P. Capellupo 59 MDC Executive Vice President since August 1992. McDonnell Aircraft Company (MCAIR) President 1991-1992. DAC Deputy President 1990-1991. MDMSC President 1989-1990. MCAIR Vice President - General Manager F/A-18 Program 1985-1989.
Kenneth A. Francis 60 MDC Executive Vice President since August 1992. McDonnell Douglas Space Systems Company (MDSSC) President 1990- 1992. MDSSC Executive Vice President 1989-1990. MDSSC Senior Vice President - Operations 1987-1989.
Robert H. Hood, Jr. 61 DAC President since January 1989. MDMSC President 1988-1989.
Gerald A. Johnston 62 MDC President and Chief Operating Officer since July 1991. MDC President 1988-1991. MCAIR President 1991. Mr. Johnston is retiring from the Company effective March 31, 1994.
Donald R. Kozlowski 56 MDC Senior Vice President - C-17 Program Manager since December 1993. MDC Vice President/General Manager, High Speed Civil Transport 1992-1993. MCAIR Vice President/General Manager - F/A-18 1991-1992. MCAIR Vice President/General Manager 1988-1991.
F. Mark Kuhlmann 45 MDC Senior Vice President - Administration, General Counsel and Secretary since September 1992. MDC Vice President, General Counsel and Secretary 1991-1992. McDonnell Douglas Systems Integration (MDSI) President 1989-1991. McDonnell Douglas Health Systems Company (MDHSC) Senior Vice President and General Manager 1988-1989.
Herbert J. Lanese 48 MDC Executive Vice President and Chief Financial Officer since August 1992. MDC Senior Vice President - Finance 1989-1992. MDC Senior Vice President 1989. Vice President and Controller of Tenneco, Inc. 1986-1989.
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James H. MacDonald 57 MDC Senior Vice President - Total Quality Management since September 1992. MDC Senior Vice President 1989-1992. MDC Senior Vice President - Employee and External Relations 1988-1989.
John F. McDonnell 55 MDC Chairman and Chief Executive Officer since March 1988.
Charles A. Ordahl 59 MDC Senior Vice President - Space and Defense Systems since October 1993. MDC Senior Vice President - Space Systems 1992-1993. MDSSC Vice President/General Manager Advanced Product Development and Technology Division 1989-1992.
James F. Palmer 44 MDC Vice President - Treasurer since July 1993. MDC Vice President/General Manager - Business Management 1992-1993. MCAIR Chief Financial Officer 1991-1992. Partner of Ernst & Young 1985-1991.
James C. Restelli 52 MDC Senior Vice President - Tactical Aircraft and Missile Systems since January 1993. MDC Senior Vice President - Tactical Aircraft 1992. MCAIR Executive Vice President 1991-1992. MCAIR Vice President - Business Operations 1990-1991. MCAIR Vice President - Fiscal Management 1989-1990. MCAIR Vice President - Contracts and Pricing 1986-1989.
Charles E. Suyo 50 MDHS Senior Vice President - Operations since September 1993. MDHS Senior Vice President - Programs 1993. MDC Senior Vice President - Missile Systems 1992-1993. MDMSC Vice President - Program Manager Harpoon/SLAM 1989-1992. MDSI Senior Vice President 1988-1989.
All executive officers serve at the pleasure of the Board of Directors of the Company and are appointed annually. Non-executive officers may be appointed by the Board or the Chairman. All of the executive officers have been employees of the Company at least five years except H. J. Lanese and J. F. Palmer. There are no arrangements or understandings between any of the executive officers and any other person pursuant to which he was selected as an officer.
ITEM 2.
ITEM 2. PROPERTIES
At December 31, 1993, the Company's manufacturing, laboratory, office and warehouse areas totaled 45.8 million square feet, of which 14.8 million square feet were leased. The Company plants are well maintained and in good operating condition. Leases with the U.S. Government cover plants in Columbus, Ohio and Tulsa, Oklahoma. A major commercial lease covers a plant in Culver City, California. The Company also has long-term arrangements with airport authorities enabling it to share the use of runways, taxiways, and other airport facilities at various locations, including St. Louis, Missouri; Long Beach, California; Tulsa, Oklahoma; and Mesa, Arizona. The trend of reduced defense spending and reduced commercial aircraft orders has resulted in downsizing of personnel and facility needs. In light of the Company's downsizing and current business economic conditions, many of the Company's facilities are currently underutilized. The Company has announced plans to close its plants in Tulsa, Oklahoma; Columbus, Ohio; and Torrance and Culver City, California. Although these plants continued to be operational at December 31, 1993, the Company will move the operations to other existing facilities during 1994. Leases related to Tulsa, Oklahoma; Columbus, Ohio; and Culver City, California terminate during 1994.
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The Company's principal locations are in six states and Canada. Those in St. Louis, Missouri are chiefly devoted to military aircraft, electronics, training systems, and missiles. Those in Mesa, Arizona are primarily used for development, manufacture, and assembly of helicopters. In the Los Angeles, California area, principal properties are located in Huntington Beach and Long Beach. Huntington Beach, California properties are utilized for research and manufacture of spacecraft, launch vehicles, and electronics. Long Beach, California properties are devoted to the development, manufacture, and assembly of commercial and military transport aircraft, and to the financial services and other segment. Subassembly work for the commercial and military aircraft business segments is performed at Macon, Georgia; Salt Lake City, Utah; and Toronto, Canada for shipment to operations at Long Beach. Florida facilities are devoted to production of missiles and space operations. The Culver City facilities have been devoted to helicopters. The Columbus, Ohio and Torrance, California facilities have been used for fabrication work for military transport aircraft and commercial aircraft, respectively. Subassembly work has been performed at Tulsa, Oklahoma. Work performed at the facilities to be closed during 1994 will be moved to existing facilities.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Navy on January 7, 1991, notified McDonnell Douglas Corporation and General Dynamics Corporation (the Team) that it was terminating for default the Team's contract for development and initial production of the A-12 aircraft. On June 7, 1991, the Team filed a legal action to contest the Navy's default termination, assert its rights to convert the termination to one for "the convenience of the Government," and obtain payment for work done and costs incurred on the A-12 contract, but not paid to date. Additional information relative to this matter and claims filed with the Air Force on the C-17 contract and the Navy on the T45 contract is included in Note 5, "Contracts in Process and Inventories" on page 42 of the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference. See also Note 17, "Commitments and Contingencies" on page 51 of the Company's 1993 Annual Report to Shareholders and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Government Business Audits, Reviews and Investigations", page 31, which are incorporated herein by this reference.
MDC is a party to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, or similar state statutes. MDC has been identified as a potentially responsible party (PRP) at 28 sites. Of these, MDC believes that it has de minimis liability at 19 sites, including 9 sites at which it believes that it has no future liability. At the 9 sites at which MDC's liability is not considered to be de minimis, either final or interim cost sharing agreements have been effected between the cooperating PRPs, although such agreements do not fix the amount of cleanup costs which the parties will bear. In addition, MDC is remediating, or has begun environmental engineering studies to determine cleanup requirements, at certain of its current operating sites or former sites of industrial activity. MDC estimates total reasonably possible costs of approximately
$48 million for study and remediation expenditures at Superfund sites and MDC's current and former operating sites, of which $21 million is accrued at December 31, 1993.
A number of legal proceedings and claims are pending or have been asserted against MDC including legal proceedings and claims relating to alleged injuries to persons associated with the disposal of hazardous waste. A substantial portion of such legal proceedings and claims is covered by insurance. MDC believes that the final outcome of such proceedings and claims will not have a material adverse effect on MDC's financial position.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter.
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PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this item is included on pages 46, 47 and 55 of the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data for the five years ended December 31, 1993, consisting of the data under the captions "Summary of Operations" and "Balance Sheet Information" are included at page 54 of the Company's 1993 Annual Report to Shareholders, which is incorporated herein by this reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is contained on pages 24 through 32 of the 1993 Annual Report to Shareholders, and under the captions "Military Aircraft," "Commercial Aircraft" and "Missiles, Space and Electronic Systems" on pages 6 through 19 of the 1993 Annual Report to Shareholders, the text portions, including tables, which are incorporated herein by this reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is included on pages 33 through 53, and on page 56 of the 1993 Annual Report to Shareholders, which are incorporated herein by this reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
This item is not applicable.
PART III
ITEMS 10, 11, 12 and 13
The information called for by Part III, Item 10
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of McDonnell Douglas Corporation and Subsidiaries included in the 1993 Annual Report to Shareholders at the pages indicated, are incorporated herein by this reference:
Report of Ernst & Young, Independent Auditors, page 53.
Consolidated Statement of Operations, years ended December 31, 1993, 1992, and 1991, page 34.
Consolidated Balance Sheet, December 31, 1993 and 1992, page 35.
Consolidated Statement of Shareholders' Equity, years ended December 31,1993, 1992, and 1991, page 36.
Consolidated Statement of Cash Flows, years ended December 31, 1993, 1992, and 1991, page 37.
Notes to Consolidated Financial Statements, pages 38 through 52.
Selected Financial Data by Industry Segment - Continuing Operations, page 33.
Quarterly Results of Operations, page 56.
(a)2. LIST OF FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statement Schedules on page 16.
All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are omitted either because they are not applicable or because the required information is included in the financial statements or notes thereto.
(a)3. EXHIBITS
See Index to Exhibits on pages 13 through 15.
(b) Reports on Form 8-K filed in 1993: ---------------------------------- Form 8-K filed on January 29, 1993 in response to Item 5. Form 8-K filed on June 2, 1993 in response to Item 5. Form 8-K filed on December 2, 1993 in response to Item 5. Form 8-K filed on December 15, 1993 in response to Item 5. Form 8-K filed on December 27, 1993 in response to Item 5.
SIGNATURES [HARD COPY PG. 12]
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MCDONNELL DOUGLAS CORPORATION (Registrant)
Date: March 22, 1994 By: /s/ Robert L. Brand -------------------------------- Robert L. Brand Vice President and Controller and Registrant's Authorized Officer (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated below.
Signature Title Date - -------------------------- ---------------------------- -------------
John F. McDonnell* Director, Chairman & March 22, 1994 - -------------------------- Chief Executive Officer John F. McDonnell (Principal Executive Officer)
Herbert J. Lanese* Executive Vice President and March 22, 1994 - -------------------------- Chief Financial Officer Herbert J. Lanese (Principal Financial Officer)
/s/ Robert L. Brand Vice President and Controller March 22, 1994 - -------------------------- (Principal Accounting Officer) Robert L. Brand
John H. Biggs* Director March 22, 1994 B.A. Bridgewater, Jr.* Director March 22, 1994 Beverly B. Byron* Director March 22, 1994 William E. Cornelius* Director March 22, 1994 William H. Danforth* Director March 22, 1994 Kenneth M. Duberstein* Director March 22, 1994 Julian B. Goodman* Director March 22, 1994 Gerald A. Johnston Director March 22, 1994 William S. Kanaga* Director March 22, 1994 James S. McDonnell III* Director March 22, 1994 Sanford N. McDonnell* Director March 22, 1994 George A. Schaefer* Director March 22, 1994
*By his signature below, S. N. Frank has signed this Form 10-K as Attorney- in-fact on behalf of the persons listed above whose names are followed by an asterisk, pursuant to a Power of Attorney, a copy of which is filed with this Form 10-K.
/s/ S. N. Frank - ----------------------------- S. N. Frank, Attorney-in-fact
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MCDONNELL DOUGLAS CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT
3(a) Articles of Restatement of the Incorporated by reference Company's Charter, as filed to Exhibit 3(a) to the April 13, 1992. Company's Annual Report on Form 10-K for the year ended December 31, 1992.
3(b) Bylaws of the Company, as amended July 30, 1993.
4(a) Indenture dated as of September 1, Incorporated by reference 1985 between the Company and The to Exhibit 4(a) to the Bank of New York as Successor Company's Registration Trustee to Citibank, N.A. Statement on Form S-3, Commission File No. 33-36180, filed with the Commission on August 1, 1990.
4(b) First Supplemental Indenture Incorporated by reference dated as of July 1, 1986 to Exhibit 4(b) to the between the Company and The Company's Registration Bank of New York as Successor Statement on Form S-3, Trustee to Citibank, N.A. Commission File No. 33-36180, filed with the Commission on August 1, 1990.
4(c) Second Supplemental Indenture Incorporated by reference dated as of April 2, 1992 to Exhibit 4(c) to the between the Company and The Company's Annual Report on Bank of New York as Successor Form 10-K for the year ended Trustee to Citibank, N.A. December 31, 1992.
4(d) Agreement of Resignation, Appoint- ment and Acceptance dated as of May 17, 1993 by and among the Company, Citibank, N.A., as Resigning Trustee, and The Bank of New York, as Successor Trustee.
4(e) Form of 8-5/8% Notes due April 1, Incorporated by reference 1997. to Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
4(f) Form of 9-1/4% Notes due April 1, Incorporated by reference 2002. to Exhibit 4(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
4(g) Form of 9-3/4% Debentures Incorporated by reference due April 1, 2012. to Exhibit 4(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
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4(h) Form of 8-1/4% Notes due July 1, 2000.
4(i) Rights Agreement dated as of Incorporated by reference August 2, 1990 between the to Exhibits 1 and 2 to the Company and First Chicago Trust Company's Report on Form Company of New York, which 8-K filed with the includes as Exhibit B thereto Commission on the form of Rights Certificate. August 6, 1990.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company is not filing certain instruments with respect to long-term debt because the amount of securities currently authorized under any of them does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company hereby agrees to furnish a copy of any such instrument to the Commission upon request.
10(a)* McDonnell Douglas Corporation Incorporated by reference Incentive Award Plan, as amended to Exhibit 10(b) to the and restated as of July 20, 1990. Company's Annual Report on Form 10-K for the year ended December 31, 1990.
10(b)* Incentive Compensation Program, Incorporated by reference as amended and restated as of to Exhibit 10(b) to the March 2, 1992 under the McDonnell Company's Annual Report on
Award Plan. December 31, 1991.
10(c)* Long-Term Incentive Program, Incorporated by reference as amended and restated as of to Exhibit 10(d) to the July 20, 1990 under the McDonnell Company's Annual Report on Douglas Corporation Incentive Form 10-K for the year ended Award Plan. December 31, 1990.
10(d)* McDonnell Douglas Corporation Incorporated by reference Performance Sharing Plan. to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
10(e)* McDonnell Douglas Corporation Incorporated by reference Deferred Compensation Plan for to Exhibit 10(e) to the Nonemployee Directors. Company's Annual Report on Form 10-K for the year ended December 31, 1992.
10(f)* Service Agreement between Kenneth M. Duberstein and McDonnell Douglas Corporation, amended as of June 1, 1993.
11 Computation of earnings per share.
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13 1993 McDonnell Douglas Corporation Annual Report to Shareholders, excluding the "Financial Highlights," MDC Chairman's letter "To All Shareholders and Teammates," "Community Involvement," and "Directors and Management."
21 Subsidiaries.
23 Consents of Independent Auditors regarding incorporation of their report included in the 1993 Annual Report to Shareholders of McDonnell Douglas Corporation into Form 10-K and incorporation of Form 10-K into Registration Statements on Form S-3 and Form S-8.
99(a)** Form 11-K, Employee Savings Plan of McDonnell Douglas Corporation - Salaried Plan.
99(b)** Form 11-K, Employee Savings Plan of McDonnell Douglas Corporation - Component Plan.
99(c)** Form 11-K, Employee Thrift Plan of McDonnell Douglas Corporation - Subsidiary Plan.
99(d)** Form 11-K, Employee Thrift Plan of McDonnell Douglas Corporation - Hourly Plan.
99(e)** Form 11-K, McDonnell Douglas Helicopter Company Savings Plan for Hourly Employees.
99(f)** Form 11-K, Employee Investment Plan of McDonnell Douglas Corporation - Hourly West Plan.
99(g)** Form 11-K, Employee Investment Plan of McDonnell Douglas Corporation - Hourly East Plan.
99(h) Computation of Ratio of Earnings to Fixed Charges.
* Represents management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
** Financial Statements and schedules prepared in accordance with ERISA have been filed on Form SE on March 21, 1994.
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MCDONNELL DOUGLAS CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of McDonnell Douglas Corporation and Subsidiaries for the year ended December 31, 1993 are included herein:
Report of Independent Auditors
Schedule II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties
Schedule VII Guarantees of Securities of Other Issuers
Schedule VIII Valuation and Qualifying Accounts
Schedule IX Short-Term Borrowings
Schedule X Supplementary Income Statement Information
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of McDonnell Douglas Corporation and subsidiaries (MDC) as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated January 18, 1994 (incorporated by reference elsewhere in this Annual Report on Form 10K). Our audits also included the financial statement schedules listed in item 14(a) of this Annual Report on Form 10K. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As described in the notes to the consolidated financial statements, the fixed price development contract for the A-12 advanced tactical aircraft program was terminated for default by the United States Government on January 7, 1991. MDC believes it will be successful in converting the termination for default into a termination for convenience; however, failure to do so could have a material impact on the financial position of MDC in the future.
/s/ Ernst & Young
St. Louis, Missouri January 18, 1994
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION McDonnell Douglas Corporation Years Ended December 31, 1993, 1992, and 1991 (Dollars in Millions)
ITEM CHARGED TO COSTS AND EXPENSES
Years Ended December 31 1993 1992 1991 ---- ---- ----
Maintenance and repairs $170 $271 $288
NOTE: Items not presented amount to less than 1% of revenues.