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 McDonnell Douglas).
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 and by Military Transport Aircraft, unincorporated operating divisions of the Company, which are engaged in design, development, production, and support of the following major products: military transport aircraft; combat aircraft and training systems; commercial and military helicopters and ordnance; missiles; space launch vehicles and space station systems; and defense and commercial electronics, lasers, sensors, and command, control, communications, and intelligence systems. 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 and related spare parts. Through its McDonnell Douglas Financial Services
Corporation (MDFS) subsidiary, the Company is engaged in aircraft financing and commercial equipment leasing. 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, the Company's information systems business has been divested. In 1991, McDonnell Douglas sold substantially all of the assets of McDonnell Douglas Systems Integration Company and certain related assets of McDonnell Douglas Information Systems International (MDISI). In 1992, the Company sold all the outstanding stock of TeleCheck Services, Inc. and in 1993, 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 caption: "Military Aircraft, Missiles, Space, and Electronic Systems" and "Commercial Aircraft" on the Pullout Section appearing after page 20, "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 22 through 29 and "Selected Financial Data by Industry Segment" on page 30 of the Company's 1995 Annual Report to Shareholders, the text portions of which are incorporated herein by this reference.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information regarding the Company's industry segments is provided under the caption "Selected Financial Data by Industry Segment" on page 30 of the Company's 1995 Annual Report to Shareholders, which is incorporated herein by this reference.
10-K Page 3 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 27 through 29 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1995 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 price and product 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. The Company's strategy includes analyzing potential derivatives of the current product line, and developing those derivatives that are economically appropriate.
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 aerospace 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.
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
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and flaps, are sometimes subcontracted to outside suppliers. The U.S. Government and commercial customers also furnish certain 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, 1995, the total employment of the Company, including subsidiaries, was 63,612.
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 29 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1995 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 $1.227 billion in 1995, $1.393 billion in 1994, and $1.126 billion in 1993. Company-sponsored research and development and bid and proposal work, related to both commercial business and business with the U.S. Government, amounted to $311 million in 1995, $297 million in 1994, and $341 million in 1993.
U.S. GOVERNMENT AND EXPORT SALES
Although there are additional risks to the Company attendant to its non-U.S. operations and transactions, 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 operations and financial position have not been materially adversely affected by these additional risks in its non-U.S. operations and transactions.
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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 military 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 18, "U.S. Government and Export Sales" on page 49 of the Company's 1995 Annual Report to Shareholders, which is incorporated herein by this reference.
BACKLOG
The Company's backlog of orders at December 31 follows:
1995 1994 Backlog % Backlog % -------- ----- ------- ----- (Dollars in millions) Firm backlog: Military aircraft $10,121 51.5 $ 8,340 47.6 Commercial aircraft 7,175 36.5 7,544 43.1 Missiles, space, and electronic systems 2,344 12.0 1,619 9.3 -------- ----- -------- ----- Total Firm Backlog $19,640 100.0 $17,503 100.0 ======== ===== ======== =====
Contingent backlog: Military aircraft $ 6,298 72.3 $ 8,597 73.3 Commercial aircraft 1,669 19.1 2,234 19.0 Missiles, space, and electronic systems 746 8.6 898 7.7 -------- ----- -------- ----- Total Contingent Backlog $ 8,713 100.0 $11,729 100.0 ======== ===== ======== =====
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 29 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1995 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.
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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 $5.2 billion at December 31, 1995, and $4.8 billion at December 31, 1994.
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, termination for convenience, and other government contracting risks, see "Business and Market Considerations - - Military Aerospace Business" on page 27 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1995 Annual Report to Shareholders, which is incorporated herein by this reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company at March 6, 1996, were as follows:
EXECUTIVE AGE POSITIONS AND OFFICES HELD - ---------- --- --------------------------- William M. Austin 49 McDonnell Douglas Aerospace (MDA) Vice President/General Manager - Business Management since July 1993. MDC Vice President - Treasurer 1991-1993.
Edward C. Bavaria 63 DAC Deputy President since May 1995. Self-employed consultant 1993-1995 (subsequent to retirement from General Electric Company). Vice President and General Manager - General Electric Company 1983-1993.
Donald V. Black 54 DAC Senior Vice President - Marketing and Airline Financing since February 1996. DAC Vice President/General Manager - Airline Financing Group 1994-1995. MDFC Executive Vice President 1989-1994.
Dean C. Borgman 54 McDonnell Douglas Helicopter Systems 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.
Robert L. Brand 58 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.
Laurie A. Broedling 50 MDC Senior Vice President - Human Resources and Quality since May 1995. MDC Vice President - Human Resources 1995. Associate Administrator for Continual Improvement of National Aeronautics and Space Administration 1992-1995. Deputy Under Secretary of Defense -Total Quality Management 1990-1992.
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John P. Capellupo* 61 MDA President since December 1994. MDC Executive Vice President 1992-1994. McDonnell Aircraft Company (MCAIR) President 1991-1992. DAC Deputy President 1990-1991.
Michael J. Cave 35 DAC Vice President/General Manager - Business Operations and Chief Financial Officer since November 1995. MDA Vice President/General Manager - Business Management - C-17 Program 1995. MDA Vice President - Business Management 1994-1995. MDA General Manager - Business Program 1993-1994. MDA General Manager - Contracts and Pricing 1991-1993.
Stanley Ebner 62 MDC Senior Vice President - Washington Operations since December 1994. Self- employed attorney, consultant, and writer 1990-1994.
* Retiring, effective March 31, 1996.
George G. Field 57 DAC Senior Vice President - Product Support since January 1996. MDA Vice President/General Manager - Integrated Product Definition and C-17 Deputy Program Manager 1994-1996. MDA Vice President/General Manager - C-17 Engineering and Test 1993-1994. MDA Vice President/General Manager - Government Programs - Product Development and Technology 1993-1994. DAC Vice President MD-12 Design and Technology 1992-1993. DAC Vice President - MD-11 1990-1992.
Patrick J. Finneran Jr. 50 MDA Vice President/General Manager - Production Aircraft Programs since January 1995. MDA Vice President/ General Manager AV-8B 1992-1994. MCAIR General Manager AV-8B 1992. MCAIR Deputy General Manager AV-8B 1990-1992.
Steven N. Frank 47 MDC Vice President, Associate General Counsel and Secretary since April 1994. MDC Vice President, Associate General Counsel and Assistant Secretary 1992- 1994. Partner of Peper, Martin, Jensen, Maichel & Hetlage 1988-1992.
Thomas M. Gunn 52 MDC Senior Vice President - Business Development since May 1995. MDC Vice President/General Manager, Strategic Business and International Development 1994. MDC Vice President, Strategic Business Development 1993. MDC Vice President, Special Projects 1992. MDHC President 1990-1992.
Frederick W. Hill 46 MDC Senior Vice President - Communications and Community Relations since May 1995. Vice President - Public Affairs, Westinghouse Electric Corporation 1993 - 1995. Executive Director - Government Affairs, Westinghouse Electric Corporation 1990-1993.
Robert H. Hood Jr. 63 DAC President since January 1989.
Leonard F. Impellizzeri 57 MDA Vice President/General Manager - Production Operations and General Services since August 1995. MDA Vice President/General Manager - F/A-18 A/B/C/D 1992 - 1995. DAC Vice President, Deputy General Manager - C-17 Program 1990-1992.
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Donald R. Kozlowski 58 Military Transport Aircraft 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.
Roger A. Krone 39 MDC Vice President - Treasurer since September 1995. MDA Division Director - Information Systems 1994-1995. MDC Director - Financial Planning 1992 - 1994. Program Manager - Israeli Programs, General Dynamics Corporation 1991-1992.
F. Mark Kuhlmann 47 MDC Senior Vice President and General Counsel since March 1996. MDC Senior Vice President - Administration and General Counsel 1994-1996. MDC Senior Vice President - Administration, General Counsel and Secretary 1992- 1994. MDC Vice President, General Counsel and Secretary 1991-1992. McDonnell Douglas Systems Integration President 1989-1991.
Herbert J. Lanese 50 MDA President since March 1996. MDA Deputy President 1995-1996. MDC Executive Vice President and Chief Financial Officer 1992-1995. MDC Senior Vice President - Finance 1989-1992.
John F. McDonnell 57 MDC Chairman of the Board since September 1994. MDC Chairman and Chief Executive Officer 1988-1994.
Thomas J. Motherway 53 McDonnell Douglas Finance Corporation and McDonnell Douglas Realty Company President since January 1995. McDonnell Douglas Realty Company President 1991-1994. McDonnell Douglas Realty Company Assistant to President 1991.
Willard P. Olson 56 MDA Senior Vice President - Space and Defense Systems since January 1995. MDA Vice President/General Manager - Space and Defense Systems 1994-1995. MDA Vice President/General Manager - Huntsville 1990-1994.
Walter J. Orlowski 52 DAC Senior Vice President - MD-11, MD-80 and MD-90 Programs since January 1996. DAC Vice President/General Manager - Marketing and Business Development 1993-1996. DAC Vice President/General Manager - Development Programs 1992-1993. DAC Vice President/General Manager - MD-12 Program 1991-1992.
James F. Palmer 46 MDC Senior Vice President and Chief Financial Officer since July 1995. MDC Vice President - Treasurer 1993-1995. MDA Vice President/General Manager - Business Management 1992-1993. MCAIR Chief Financial Officer 1991-1992. Partner of Ernst & Young LLP 1985-1991.
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James B. Peterson 51 MDA Vice President/General Manager - Integrated Product Definition since September 1995. MDA Vice President/General Manager - Missiles and Aerospace Support 1995. MDA Vice President/General Manager - Cruise Missiles 1994-1995. MDA Vice President/ General Manager - Tomahawk Program 1993-1994. MDA Vice President and Deputy - New Aircraft & Missile Products 1992-1993. MDMSC Vice President - Advanced Programs & Technology 1992. MDMSC Vice President - Technology Division 1991-1992. MDMSC Director - Tomahawk All-Up-Round (Block III) 1986-1991.
James C. Restelli 54 MDA Vice President/General Manager - Missile Systems and Aerospace Support since September 1995. MDA Senior Vice President - Operations 1995. MDA Senior Vice President - Tactical Aircraft and Missile Systems 1992 - 1995. MDA Executive Vice President 1991-1992. MDA Vice President - Business Operations 1990 - 1991.
Michael M. Sears 48 MDA Vice President/General Manager - F/A-18 since January 1994. MDA Vice President/General Manager - F/A-18E/F 1991-1994. MCAIR Vice President/ General Manager - New Aircraft Products Division 1990-1991.
James M. Sinnett 56 MDA Senior Vice President - New Aircraft and Missile Products since December 1993. MDA Vice President/ General Manager - New Aircraft Products Division 1991-1993. MCAIR Vice President/General Manager - ATF 1990-1991.
Harry C. Stonecipher 59 MDC President and Chief Executive Officer since September 1994. Chairman of the Board, President and Chief Executive Officer of Sundstrand Corporation 1991-1994. President and Chief Executive Officer of Sundstrand Corporation 1989-1991.
William L. Stowers 48 MDA Vice President/General Manager - Supplier Management and Procurement since October 1992. MDA Vice President - Procurement 1990-1992.
Robert H. Trice Jr. 49 MDA Vice President/General Manager - Business Development since October 1992. MCAIR Vice President - Business Development 1991-1992. MCAIR Vice President - Program Development 1990-1991.
John J. Van Gels 52 DAC Senior Vice President - Operations since February 1996. DAC Executive Vice President - Operations and Production Programs 1994-1996. DAC Vice President/General Manager - Production Programs 1993-1994. DAC Vice President/General Manager- MD-11 1992-1993. DAC Vice President/General Manager - Production Center Operations 1990-1992.
John D. Wolf 51 DAC Senior Vice President - MD-95 since February 1996. DAC Executive Vice President - Development 1994-1996. DAC Executive Vice President 1991-1994. DAC Vice President/General Manager - MD-90/MD-80/DC-9 Programs 1989-1991.
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All of the executive officers have been employees of the Company at least five years except Edward C. Bavaria, Laurie A. Broedling, Stanley Ebner, Steven N. Frank, Frederick W. Hill, Roger A. Krone, James F. Palmer and Harry C. Stonecipher. 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, except for Harry C. Stonecipher, who is party to an employment agreement incorporated by reference herein as Exhibit 10(i).
ITEM 2.
ITEM 2. PROPERTIES
At December 31, 1995 the Company's manufacturing, laboratory, office, and warehouse areas totaled 35.8 million square feet, of which 6.1 million square feet were leased. The Company plants are well maintained and in good operating condition. The Company 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; and Mesa, Arizona. Reduced defense spending and reduced commercial aircraft orders over the past several years has resulted in downsizing of personnel and facility needs. As a result of the Company's downsizing, certain of the Company's facilities are held for sale and certain other facilities are currently underutilized.
The Company's principal locations are in five states and Canada. Those in St. Louis, Missouri are chiefly devoted to military aircraft, 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.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In 1991, McDonnell Douglas Corporation and General Dynamics (GD) filed a legal action to contest the Navy's termination for default on the A-12 contract. Additional information relative to this matter and claims filed with the Navy on the T45 contract is included in Note 5, "Contracts in Process and Inventories" on page 39 of the Company's 1995 Annual Report to Shareholders, which is incorporated herein by this reference. See also Note 16, "Commitments and Contingencies" on page 48 of the Company's 1995 Annual Report to Shareholders and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Government Business Audits, Reviews, and Investigations," page 28, which are incorporated herein by this reference.
McDonnell Douglas 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. For additional information, see "Environmental Expenditures" on page 29 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1995 Annual Report to Shareholders, which is incorporated herein by this reference.
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A number of legal proceedings and claims are pending or have been asserted against the Company 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. The Company believes that the final outcome of such proceedings and claims will not have a material adverse effect on the Company's earnings, cash flow, or 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 of 1995.
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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 44, 45, 52, and 56 of the Company's 1995 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, 1995, consisting of the data under the captions "Summary of Operations" and "Balance Sheet Information" are included at page 52 of the Company's 1995 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 22 through 29 of the 1995 Annual Report to Shareholders, which is incorporated herein by this reference.
In March 1996, Standard & Poor's raised its ratings of McDonnell Douglas and McDonnell Douglas Finance Corporation senior debt to A-minus from BBB. The rating agency also upgraded its rating on the MDFC subordinated debt to BBB-plus from BBB-minus.
In March 1996, Duff & Phelps Credit Rating Co. raised its ratings of McDonnell Douglas and MDFC senior debt to A-minus from BBB-plus. The rating agency also upgraded its rating on the MDFC subordinated debt to BBB-plus from BBB-minus.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is included on pages 30 through 49, 51, and 56 of the 1995 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 11 "Executive Compensation," Item 12
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 1995 Annual Report to Shareholders at the pages indicated, are incorporated herein by this reference:
Report of Ernst & Young LLP, Independent Auditors, page 51.
Consolidated Statement of Operations, years ended December 31, 1995, 1994, and 1993, page 31.
Balance Sheet, December 31, 1995 and 1994, page 32.
Consolidated Statement of Shareholders' Equity, years ended December 31, 1995, 1994, and 1993, page 34.
Consolidated Statement of Cash Flows, years ended December 31, 1995, 1994, and 1993, page 35.
Notes to Consolidated Financial Statements, pages 36 through 49.
Selected Financial Data by Industry Segment, page 30.
Quarterly Results of Operations, page 56.
(a)2. LIST OF FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statement Schedules on page 19.
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 15 through 18.
(b) REPORTS ON FORM 8-K FILED DURING THE FOURTH QUARTER OF 1995:
Form 8-K/A filed on October 11, 1995, in response to Item 5.
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SIGNATURES
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 25, 1996 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 --------- ----- ---- /s/ Harry C. Stonecipher March 25, 1996 - ------------------------ Harry C. Stonecipher Director, President & Chief Executive Officer (Principal Executive Officer)
/s/ James F. Palmer March 25, 1996 - ------------------------- James F. Palmer Senior Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ Robert L. Brand March 25, 1996 - ------------------------- Robert L. Brand Vice President and Controller (Principal Accounting Officer)
/s/ John F. McDonnell /s/ Kenneth M. Duberstein - --------------------------- ------------------------------- John F. McDonnell, Director Kenneth M. Duberstein, Director
/s/ John H. Biggs /s/ William S. Kanaga - --------------------------- ------------------------------- John H. Biggs, Director William S. Kanaga, Director
/s/ B.A. Bridgewater, Jr. /s/ James S. McDonnell III - -------------------------- ------------------------------ B.A. Bridgewater, Jr., Director James S. McDonnell III, Director
/s/ Beverly B. Byron /s/ George A. Schaefer - -------------------------- --------------------------------- Beverly B. Byron, Director George A. Schaefer, Director
/s/ William E. Cornelius /s/ Ronald L. Thompson - --------------------------- --------------------------------- William E. Cornelius, Director Ronald L. Thompson, Director
/s/ William H. Danforth /s/ P. Roy Vagelos - -------------------------- --------------------------------- William H. Danforth, Director P. Roy Vagelos, Director
Date: March 25, 1996
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MCDONNELL DOUGLAS CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT
3(a) Articles of Restatement of the Company's Charter, as filed June 13, 1994. - Incorporated by reference to Exhibit 4(b) to the Company's Registration Statement on Form S-8, Commission File No. 33-56129, filed with the Commission on October 21, 1994.
3(b) Bylaws of the Company, as amended March 6, 1996.
4(a) Indenture dated as of September 1, 1985 between the Company and The Bank of New York as Successor Trustee to Citibank, N.A. - Incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3, Commission File No. 33-36180, filed with the Commission on August 1, 1990.
4(b) First Supplemental Indenture dated as of July 1, 1986 between the Company and The Bank of New York as Successor Trustee to Citibank, N.A. - Incorporated by reference to Exhibit 4(b) to the Company's Registration Statement on Form S-3, Commission File No. 33-36180, filed with the Commission on August 1, 1990.
4(c) Second Supplemental Indenture dated as of April 2, 1992 between the Company and The Bank of New York as Successor Trustee to Citibank, N.A. - Incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
4(d) Agreement of Resignation, Appointment 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. - Incorporated by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.
4(e) Form of 8-5/8% Notes due April 1, 1997. - Incorporated by reference 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, 2002. - Incorporated by reference 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 due April 1, 2012. - Incorporated by reference to Exhibit 4(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
4(h) Form of 8-1/4% Notes due July 1, 2000. - Incorporated by reference to Exhibit 4(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.
4(i) Rights Agreement dated as of August 2, 1990 between the Company and First Chicago Trust Company of New York, which includes as Exhibit B thereto the form of Rights Certificate. - Incorporated by reference to Exhibits 1 and 2 to the Company's Report on Form 8-K filed with the Commission on August 6, 1990.
4(j) Amendment Number One to Rights Agreement, dated as of January 3, 1995. - Incorporated by reference to Exhibit 4(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
10(a)* McDonnell Douglas Corporation Incentive Award Plan, as amended and restated as of July 20, 1990. - Incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.
10(b)* Incentive Compensation Program, as amended and restated as of March 2, 1992 under the McDonnell Douglas Corporation Incentive Award Plan. - Incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.
10(c)* Long-Term Incentive Program, as amended and restated as of February 8, 1995 under the McDonnell Douglas Corporation Incentive Award Plan. - Incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
10(d)* McDonnell Douglas Corporation Senior Executive Performance Sharing Plan
10(e)* McDonnell Douglas Corporation Performance Sharing Plan, as amended and restated as of 5 March 1996.
10(f)* McDonnell Douglas Corporation Deferred Compensation Plan for Nonemployee Directors. - Incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.
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10(g)* McDonnell Douglas Corporation 1995 Compensation Plan for Nonemployee Directors.
10(h)* McDonnell Douglas Corporation 1994 Performance and Equity Incentive Plan. - Incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-8, Commission File No. 33-56129, filed with the Commission on October 21, 1994.
10(i)* Employment Agreement between Harry C. Stonecipher and McDonnell Douglas Corporation, dated as of September 24, 1994, as amended as of March 25, 1995.
10(j)* Stock Option Agreement between Harry C. Stonecipher and McDonnell Douglas Corporation, dated as of September 24, 1994.
10(k)* Form of Termination Benefits Agreement between the Company and eight Executive Officers of the Company, dated as of March 15, 1996.
10(l)* Settlement Agreement and General and Special Release between the Company and John P. Capellupo, dated as of March 7, 1996.
10(m)* Form of Performance Accelerated Restricted Stock Award Agreement (Service-Based Vesting) - Incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
10(n)* Form of Performance Accelerated Restricted Stock Award Agreement (Performance-Based Vesting) - Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
11 Computation of earnings per share.
12 Computation of Ratio of Earnings to Fixed Charges.
10-K Page 18
13 Sections of 1995 McDonnell Douglas Corporation Annual Report to Shareholders appearing under the caption: "Military Aircraft, Missiles, Space, and Electronic Systems," "Commercial Aircraft," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Financial Data by Industry Segment," "Consolidated Statement of Operations," "Balance Sheet," "Consolidated Statement of Shareholders' Equity," "Consolidated Statement of Cash Flows," "Notes to Consolidated Financial Statements," "Report of Ernst & Young LLP, Independent Auditors," "Five-Year Consolidated Financial Summary," and "Supplemental Information."
21 Subsidiaries.
23 Consents of Independent Auditors regarding incorporation of their report included in the 1995 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.
27 Financial Data Schedule.
* Represents management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
10-K Page 19
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, 1995, are included herein:
Report of Independent Auditors
Schedule II Valuation and Qualifying Accounts
10-K Page 20
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of McDonnell Douglas Corporation and subsidiaries (MDC) as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated January 17, 1996 (incorporated by reference elsewhere in this Annual Report on Form 10-K). Our audits also included the financial statement schedule listed in item 14(a) of this Annual Report on Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
St. Louis, Missouri January 17, 1996
10-K Page 21
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS McDonnell Douglas Corporation Years Ended December 31, 1995, 1994, and 1993 (Millions of Dollars)
BALANCE CHARGED BALANCE AT TO CHARGED AT BEGINNING COSTS AND TO END OF EXPENSES OTHER DEDUCTIONS OF PERIOD ACCOUNTS PERIOD -------- ---------- -------- ---------- -------
Year Ended December 31, 1995: Allowance for commercial aircraft financing $10 $ 3 $ $ 1 $12 Allowance for uncollectible accounts 50 13 13 50 --- --- --- --- --- $60 $16 $ $14 $62 === === === === ===
Year Ended December 31, 1994: Allowance for commercial aircraft financing $20 $ $ $10 $10 Allowance for uncollectible accounts 50 13 13 50 --- --- --- --- --- $70 $13 $ $23 $60 === === === === ===
Year Ended December 31, 1993: Allowance for commercial aircraft financing $ 6 $14 $ $ $20 Allowance for uncollectible accounts 48 15 2 15 50 --- --- --- --- --- $54 $29 $ 2 $15 $70 === === === === ===
NOTE: Amounts charged to other accounts are principally reclassifications. Deductions are principally the write off of uncollectible accounts.