Document/Exhibit Description Pages Size
1: 10-K Annual Report 27 106K
2: EX-2 Agreement and Plan of Merger 75 214K
3: EX-4.I Form of 6-7/8% Notes Due November 1, 2006 4 23K
4: EX-10.F Mdc Senior Executive Financial/Legal Services Plan 4 13K
5: EX-10.G Deferred Comp. Plan for Nonemployee Directors 7 29K
6: EX-10.L Employment Agreement 12 46K
7: EX-10.M Restricted Stock Award Agreement 3 18K
8: EX-10.N Form of Termination Benefits Agreement 21 95K
9: EX-10.O Settlement Agreement 9 39K
10: EX-10.P Settlement Agreement 10 40K
11: EX-10.S Form of 1997 Pars Agreement-Service Based 4 20K
12: EX-10.T Form of 1997 Pars Agreement - Performance Based 5 23K
13: EX-11 Computation of Earnings Per Share 1 7K
14: EX-12 Computation of Ratio of Earnings to Fixed Charges 1 9K
15: EX-13 Annual Report to Shareholders 69 254K
16: EX-21 Subsidiaries 1 8K
17: EX-23 Consents of Independent Auditors 2 13K
18: EX-27 Financial Data Schedule 1 9K
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
=== EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1996
----------------------------------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
---------------- -----------------
Commission file number 1-3685
MCDONNELL DOUGLAS CORPORATION
-------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Maryland 43-0400674
----------------------- - ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
Post Office Box 516, St. Louis, MO. 63166-0516
----------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
314-232-0232
---------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
-------------------------------------------------------------------------
Common Stock, par value $1 per share New York & Pacific Stock Exchanges
Preferred Stock Purchase Rights New York & Pacific Stock Exchanges
8 5/8% Notes due April 1, 1997 New York Stock Exchange
8 1/4% Notes due July 1, 2000 New York Stock Exchange
9 1/4% Notes due April 1, 2002 New York Stock Exchange
9 3/4% Debentures due April 1, 2012 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 such 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
---
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold or the
average bid and asked prices of such stock, as of a specified date within
60 days prior to the date of filing.
Aggregate market value of common stock held by non-affiliates of MDC at
March 7, 1997: $13.936 billion.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date:
Common shares outstanding at March 7, 1997: 209,963,660 shares
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1996 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV. Portions of the proxy statement for
the annual meeting to be held on April 25, 1997 are incorporated by
reference into Part III.
Exhibit Index on Page 14
(i)
10-K Page 1
PART I
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).
On December 14, 1996, McDonnell Douglas and The Boeing Company (Boeing)
entered into a definitive agreement whereby a wholly-owned subsidiary of Boeing
will merge into McDonnell Douglas in a stock-for-stock transaction with
McDonnell Douglas surviving as a wholly-owned subsidiary of Boeing. The
transaction is subject to approval by the shareholders of both companies and
certain regulatory agencies; it is expected to close as early as mid-1997. The
following discussions do not consider the effects the merger will have on future
products or operating results since the exact timing of the consummation is
uncertain and the future effects of the merger have not been quantified.
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; attack and fighter
aircraft, military and commercial helicopters, ordnance, and training systems
and spare parts; tactical missiles; space launch vehicles and space station
systems; defense electronics components and systems, and command, control,
communications, computers, 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 (MDRC), was
established in 1972 to develop the Company's surplus real estate. While
continuing to serve that role, MDRC has become a full-service developer and
property manager in the commercial real estate market as well as for the
Company's aerospace business.
The Company, beginning in 1988, divested its information systems business.
By the end of 1993 all of the business had been sold.
10-K Page 2
The business segments in which the Company is engaged and discussion of
certain of their respective products appear under the captions: "Military
Aircraft; Missiles, Space, and Electronic Systems" and "Commercial Aircraft" in
the Pullout Section appearing after page 24, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 26 through
33 and "Selected Financial Data by Industry Segment" on page 34 of the Company's
1996 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 34 of
the Company's 1996 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 1996 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 and high in unit cost;
they have traditionally had 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. The Company's presence in this industry will be
focused on its
10-K Page 3
existing product line, its current MD-95 twin jet development
program, and its commercial aircraft modification, support, spare parts and
related services. For additional information refer to the discussion in
"Business and Market Conditions - Commercial Aircraft Business" section on pages
31 through 32 in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's 1996 Annual Report to Shareholders
which is incorporated herein by this reference.
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 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 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.
10-K Page 4
EMPLOYEES
At December 31, 1996, the total employment of the Company, including
subsidiaries, was 63,873.
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 33 in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 1996
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 $.993
billion in 1996, $1.227 billion in 1995, and $1.393 billion in 1994.
Company-sponsored research and development and bid and proposal work, related to
both commercial business and business with the U.S. Government, amounted to $355
million in 1996, $311 million in 1995, and $297 million in 1994.
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.
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
10-K Page 5
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 52 of the Company's 1996 Annual Report to
Shareholders, which is incorporated herein by this reference.
BACKLOG
The Company's backlog of orders at December 31 follows:
1996 1995
Backlog % Backlog %
-------- ----- ------- -----
(Dollars in millions)
Firm backlog:
Military aircraft $12,934 54.6 $10,121 51.5
Commercial aircraft 7,000 29.6 7,175 36.5
Missiles, space, and
electronic systems 3,745 15.8 2,344 12.0
------- ----- ------- -----
Total Firm Backlog $23,679 100.0 $19,640 100.0
======= ===== ======= =====
Contingent backlog:
Military aircraft $18,977 91.8 $ 6,298 72.3
Commercial aircraft 1,252 6.0 1,669 19.1
Missiles, space, and
electronic systems 453 2.2 746 8.6
------- ----- ------- -----
Total Contingent Backlog $20,682 100.0 $ 8,713 100.0
======= ===== ======= =====
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 33 in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1996 Annual Report to
Shareholders, which is incorporated herein by this reference.
10-K Page 6
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 $4.3 billion at
December 31, 1996, and $5.2 billion at December 31, 1995.
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 31 in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1996 Annual Report to Shareholders, which is
incorporated herein by this reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company at February 28, 1997, were as
follows:
Edward C. Bavaria -64
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 -55
DAC Vice President/General Manager - Sales and Marketing since April 1996.
DAC Senior Vice President - Marketing and Airline Financing February to
April 1996. DAC Vice President/General Manager - Airline Financing Group
1994 - 1995. McDonnell Douglas Finance Corporation (MDFC) Executive Vice
President 1989 - 1994.
Dean C. Borgman -55
McDonnell Douglas Helicopter Systems (MDHS) Senior Vice President since
1995. McDonnell Douglas Helicopter Company (MDHC) President since 1992.
MDHS Senior Vice President/General Manager 1993 to 1995. MDHC Vice
President - Commercial Programs 1992. MDHC General Manager MDX Program
1990-1992.
10-K Page 7
Robert L. Brand -59
McDonnell Douglas Aerospace (MDA) Vice President/General Manager - Business
Management since February 1997. McDonnell Douglas Corporation (MDC) Vice
President and Controller 1992 - 1997. McDonnell Douglas Missile Systems
Company (MDMSC) Vice President-Business Management and Chief Financial
Officer 1992. MDC Controller 1987-1992.
Laurie A. Broedling -51
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.
Michael J. Cave -36
DAC Vice President - Business Operations and Chief Financial Officer since
April 1996. DAC Vice President/General Manager - Business Operations and
Chief Financial Officer 1995 - 1996. Military Transport Aircraft (MTA) Vice
President/General Manager - Business Management - C-17 Program 1995. MDA
Vice President - Business Management 1994 - 1995. MDA General Manager -
Business Programs 1993 - 1994. MDA General Manager - Controls and Pricing
1991 - 1993.
Gerald E. Daniels - 51
MDA Vice President/General Manager U.S. Marine Corps and Navy Programs
since February 1997. MDA Vice President/General Manager F/A-18 1996 - 1997.
MDA Vice President/General Manager F/A-18E/F 1994-1996. MDA Vice
President/Deputy General Manager F/A-18E/F 1993 - 1994. MDA Vice
President/General Manager Harpoon/SLAM 1992 - 1993. MDMSC Vice
President/General Manager Harpoon/SLAM 1992 - 1993. MDMSC Senior Director
Harpoon/SLAM 1992. Missiles & Defense Electronics Division Senior Director
1991 - 1992.
Stanley Ebner -63
MDC Senior Vice President - Washington Operations since December 1994.
Self-employed attorney, consultant, and writer 1990-1994.
George G. Field -58
DAC Vice President/General Manager-Product Support since April 1996. DAC
Senior Vice President - Product Support February - April 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.
10-K Page 8
Patrick J. Finneran Jr. -51
MDA Vice President/General Manager F/A-18 since February 1997. MDA Vice
President/General Manager - Market Development 1996 - 1997. MDA Vice
President/General Manager - Production Aircraft Programs 1995 - 1996. MDA
Vice President/General Manager AV-8B 1992-1994. McDonnell Aircraft Company
(MCAIR) General Manager AV-8B 1992. MCAIR Deputy General Manager AV-8B
1990-1992.
Steven N. Frank -48
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 -53
MDA Senior Vice President Business Development since February 1997. MDC
Senior Vice President - Business Development 1995 - 1997. 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 -47
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.
Donald R. Kozlowski -59
MTA Senior Vice President since February 1997. MTA Senior Vice President -
C-17 1996 - 1997. MTA Senior Vice President - C-17 Program Manager 1993 -
1996. MDC Vice President/General Manager-High Speed Civil Transport
1992-1993. MCAIR Vice President/General Manager - F/A-18 1991-1992.
Roger A. Krone -40
MDC Vice President - Treasurer since September 1995. MDA Division Director
- Information Systems 1994 - 1995. MDC Director - Financial Planning 1992 -
1994. Program Manager - F-16 Israeli Programs, General Dynamics Corporation
1991 - 1992.
F. Mark Kuhlmann -48
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.
Michael D. Marks -54
MDA Vice President/General Manager F-15 since August 1996. MDA Program
Manager 1995 - 1996. MDA Deputy General Manager 1992 - 1995. MCAIR Director
Program Engineering 1991 - 1992.
10-K Page 9
John F. McDonnell -58
MDC Chairman of the Board since September 1994. MDC Chairman and Chief
Executive Officer 1988-1994.
Thomas J. Motherway -54
MDFC and MDRC President since January 1995. MDRC President 1991 - 1994.
William A. Norman - 57
MDA Vice President/General Manager Engineering since February 1997. MDA
Division Director Program Integrated Product Definition 1993 - 1997. MDA
Director Program Engineering 1989 - 1993.
Walter J. Orlowski -53
DAC President since February 1997. DAC Vice President/General Manager
Production Program Management 1996 - 1997. DAC Senior Vice President -
MD-11, MD-80 and MD-90 Programs 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 -47
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.
James B. Peterson -52
MDA Vice President/General Manager U.S. Air Force programs since February
1997. MDA Vice President/General Manager - Integrated Product Definition
1995 - 1997. 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.
James R. Phillips - 53
DAC Vice President/General Manager MD-95 since February 1997. DAC Vice
President/Deputy General Manager MD-95 1996-1997. DAC Vice
President/General Manager MD-95 1996. DAC Vice President Program Manager
MD-95 Development 1994 - 1996. DAC Vice President/General Manager - Product
Support 1993 - 1994. DAC Vice President/General Manager - Commercial
Product Support 1991 - 1993.
James C. Restelli -55
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.
10-K Page 10
R. Gale Schluter - 56
MDA Vice President/General Manager - Space & Defense Systems since September
1996. MDA Vice President/General Manager Space Transportation 1996. MDA Vice
President/General Manager - Space Flight Programs 1996. MDA Vice
President/General Manager - Space Station 1993 - 1996. MDA Vice
President/Deputy General Manager - Space Station Division 1992 - 1993. MDA
Vice President/General Manager Surveillance & Electronic Systems 1991 -
1992.
Mark N. Schroeder - 40
MDC Vice President and Controller since February 1997. MDC Director -
Accounting 1992 - 1997. MDC Director - Auditing 1992. Senior Manager of
Ernst & Young LLP 1988 - 1992.
Michael M. Sears -49
MDA President since January 1997. DAC President 1996 - 1997. MDA Vice
President/General Manager - F/A-18 1994 - 1996. MDA Vice President/General
Manager - F/A-18E/F 1991-1994.
James M. Sinnett -57
MDC Vice President - Technology since October 1996. MDA Senior Vice
President - New Aircraft and Missile Products 1993 - 1996. MDA Vice
President/General Manager - New Aircraft Products Division 1991-1993.
E. David Spong - 58
MTA Vice President/General Manager C-17 Program since February 1997. MTA
Vice President/General Manager Integrated Product Definition 1996 - 1997.
MTA Vice President Engineering 1995 - 1996. MTA General Manager Engineering
1995. MTA Director - Engineering 1994 - 1995. MTA Director - Aircraft
Performance 1992 - 1994. MTA General Manager - Aircraft Performance 1991 -
1992.
John W. Steurer - 59
MDA Vice President/General Manager Quality since February 1997. MDA Vice
President/General Manager Joint Advanced Strike Technology 1995 - 1997. MDA
Vice President/General Manager Integrated Product Definition 1992 - 1995.
MDA Vice President Engineering 1991 - 1992.
Harry C. Stonecipher -60
MDC President and Chief Executive Officer since September 1994. Chairman of
the Board, President and Chief Executive Officer of Sundstrand Corporation
1991-1994.
William L. Stowers -49
MDA Vice President/General Manager - Supplier Management and Procurement
since October 1992. MDA Vice President - Procurement 1990 - 1992.
10-K Page 11
David O. Swain - 54
MDA Vice President/General Manager Advanced Systems & Technology - Phantom
Works since September 1995. MDA Vice President/General Manager New Aircraft
& Missile Products 1994 - 1995. MTA Senior Vice President - Transport
Aircraft Division 1993 - 1994. MTA Executive Vice President - Government
1991 - 1993.
John D. Tyson - 54
MDA Vice President Business Development since February 1997. MDA Vice
President/General Manager AV8B/T-45 1996 - 1997. MDA Vice President
Business Development U.S. Government Programs 1994 - 1996. MDA Vice
President Defense Systems 1992 - 1994. MDA Director Business Development
1992. MCAIR Program Manager 1991 - 1992.
John J. Van Gels -53
MDA Vice President/General Manager Production Operations and General
Services since February 1997. DAC Senior Vice President/General Manager -
Manufacturing 1996 - 1997. DAC Senior Vice President - Operations 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.
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, Mark N. Schroeder 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 and Edward C. Bavaria, who are parties
to employment agreements incorporated by reference herein as Exhibits 10(j) and
10(l).
ITEM 2. PROPERTIES
At December 31, 1996 the Company's manufacturing, laboratory, office, and
warehouse areas totaled 34.7 million square feet, of which 5.0 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 the development, manufacture and
assembly of military aircraft,
10-K Page 12
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 development and manufacture of space launch
vehicles, space station components, and defense 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. LEGAL PROCEEDINGS
In 1991, McDonnell Douglas Corporation and General Dynamics filed a legal
action to contest the Navy's termination for default on the A-12 contract.
Additional information relative to this matter and the settlement of claims
filed with the Navy on the T-45 contract is included in Note 5, "Contracts in
Process and Inventories" on page 43 of the Company's 1996 Annual Report to
Shareholders, which is incorporated herein by this reference. See also Note 16,
"Commitments and Contingencies" on page 51 of the Company's 1996 Annual Report
to Shareholders and "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Government Business Audits, Reviews, and
Investigations," page 32, 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 33 in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Company's 1996 Annual
Report to Shareholders, which is incorporated herein by this reference.
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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
10-K Page 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information required by this item is included on pages 54, 55, and 57 of
the Company's 1996 Annual Report to Shareholders, which is incorporated herein
by this reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data for the five years ended December 31, 1996,
consisting of the data under the captions "Summary of Operations" and "Balance
Sheet Information" are included at page 54 of the Company's 1996 Annual Report
to Shareholders, which is incorporated herein by this reference.
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 26 through 33 of the 1996 Annual Report to
Shareholders, which is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is included on pages 34 through 52,
53, and 55 of the 1996 Annual Report to Shareholders, which are incorporated
herein by this reference.
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 "Directors and Executive
Officers of the Registrant" (except for certain information concerning Executive
Officers which is provided in Part I above), Item 11 "Executive Compensation,"
Item 12 "Security Ownership of Certain Beneficial Owners and Management," and
Item 13 "Certain Relationships and Related Transactions" is included in the
Company's definitive Proxy Statement for 1997 pursuant to Regulation 14A, to be
filed with the Commission within 120 days after the close of the fiscal year
ended December 31, 1996, the text portion of which is incorporated herein by
this reference. The report of the Management
10-K Page 14
Compensation and Succession
Committee and the performance graph contained in the Company's definitive Proxy
Statement for 1997, however, are not incorporated herein by reference and shall
not be deemed filed under the Securities Act of 1933 or under the Securities
Exchange Act of 1934.
PART IV
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 1996 Annual Report to
Shareholders at the pages indicated, are incorporated herein by this
reference:
Report of Ernst & Young LLP, Independent Auditors, page 53.
Consolidated Statement of Operations, years ended December 31, 1996,
1995, and 1994, page 35.
Balance Sheet, December 31, 1996 and 1995, page 36.
Consolidated Statement of Shareholders' Equity, years ended December
31, 1996, 1995, and 1994, page 38.
Consolidated Statement of Cash Flows, years ended December 31, 1996,
1995, and 1994, page 39.
Notes to Consolidated Financial Statements, pages 40 through 52.
Selected Financial Data by Industry Segment, page 34.
Quarterly Results of Operations, page 55.
(a)2. LIST OF FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statement Schedules on page 18.
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 21 through 25.
(b) Reports on Form 8-K filed during the fourth quarter of
1996:
10-K Page 15
1. Form 8-K filed on November 1, 1996, in response to Item 5.
Also filed were Exhibit 12 Computations of Earnings to
Fixed Charges for Nine Months Ended September 30, 1996 and
1995, and Exhibit 99 Summary of McDonnell Douglas
Corporation's Third Quarter Financial Results.
2. Form 8-K filed on December 24, 1996, in response to Item
5 and Item 7.
10-K Page 16
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 14, 1997 By: /s/ Mark N. Schroeder
--------------- ------------------------------
Mark N. Schroeder
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 14, 1997
------------------------
Harry C. Stonecipher Director, President & Chief
Executive Officer
(Principal Executive Officer)
/s/ James F. Palmer March 14, 1997
-------------------------
James F. Palmer Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Mark N. Schroeder March 14, 1997
-------------------------
Mark N. Schroeder 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
10-K Page 17
/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 14, 1997
10-K Page 18
MCDONNELL DOUGLAS CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of McDonnell Douglas
Corporation and Subsidiaries for the year ended December 31, 1996, are included
herein:
Report of Independent Auditors
Schedule II Valuation and Qualifying Accounts
10-K Page 19
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of McDonnell Douglas
Corporation and subsidiaries (MDC) as of December 31, 1996 and 1995, and for
each of the three years in the period ended December 31, 1996, and have issued
our report thereon dated January 22, 1997 (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.
St. Louis, Missouri /s/Ernst & Young LLP
January 22, 1997
10-K Page 20
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
McDonnell Douglas Corporation
Years Ended December 31, 1996, 1995, 1994
(Dollars in Millions)
BALANCE BALANCE
AT CHARGED TO CHARGED TO AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
--------- ---------- ---------- ---------- -------
Year Ended
December 31, 1996:
Allowance for
commercial
aircraft financing $12 $ 1 $ $ $13
Allowance for
uncollectible
accounts 50 17 12 55
--- --- --- --- ---
$62 $18 $ $12 $68
=== === === === ===
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
=== === === === ===
NOTE: Deductions are principally the write off of uncollectible accounts.
10-K Page 21
MCDONNELL DOUGLAS CORPORATION
INDEX TO EXHIBITS
EXHIBIT
2 Agreement and Plan of Merger among The Boeing Company, West Acquisition
Corp. and McDonnell Douglas Corporation, dated as of December 14, 1996.
.
3(a) Articles of Amendment and Restatement of the Company's Charter, as
filed May 8, 1996.
- Incorporated by reference to Exhibit 3(a) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1996.
3(b) Bylaws of the Company, as amended October 25, 1996.
- Incorporated by reference to Exhibit 3(b) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
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.
10-K Page 22
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) Form of 6-7/8% Notes due November 1, 2006.
4(j) Amended and Restated Rights Agreement, dated as of May 31, 1996 between
McDonnell Douglas Corporation and First Chicago Trust Company of New
York which includes the form of Articles Supplementary for Series A
Junior Participating Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Preferred Stock Purchase
Rights as Exhibit C.
- Incorporated by reference to Exhibit 4 to the Company's Current
Report on Form 8-K, filed with the Commission on June 3, 1996.
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-K Page 23
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.
- Incorporated by reference to Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10(e)* McDonnell Douglas Corporation Performance Sharing Plan, as amended and
restated as of 5 March 1996.
- Incorporated by reference to Exhibit 10(e) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10(f)* McDonnell Douglas Corporation Executive Financial/Legal Services Plan.
10(g)* McDonnell Douglas Corporation Deferred Compensation Plan for
Nonemployee Directors, amended and restated as of March 6, 1995.
10(h)* McDonnell Douglas Corporation 1995 Compensation Plan for Nonemployee
Directors.
- Incorporated by reference to Exhibit 10(g) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10(i)* 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(j)* Employment Agreement between Harry C. Stonecipher and McDonnell Douglas
Corporation, dated as of September 24, 1994, as amended as of March 25,
1995.
- Incorporated by reference to Exhibit 10(i) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10-K Page 24
10(k)* Stock Option Agreement between Harry C. Stonecipher and McDonnell
Douglas Corporation, dated as of September 24, 1994.
- Incorporated by reference to Exhibit 10(j) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10(l)* Employment Agreement between Edward C. Bavaria and McDonnell Douglas
Corporation, dated as of May 5, 1995.
10(m)* Restricted Stock Award Agreement between Edward C. Bavaria and
McDonnell Douglas Corporation, dated as of May 5, 1995.
10(n)* Form of Termination Benefits Agreement between the Company and certain
officers of the Company.
10(o)* Settlement Agreement and General and Special Release between the
Company and Herbert J. Lanese, dated as of October 31, 1996.
10(p)* Settlement Agreement and General and Special Release between the
Company and Robert H. Hood, Jr., dated as of December 10, 1996.
10(q)* Form of 1995 and 1996 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(r)* Form of 1995 and 1996 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.
10(s)* Form of 1997 Performance Accelerated Restricted Stock Award Agreement
(Service-Based Vesting).
10(t)* Form of 1997 Performance Accelerated Restricted Stock Award Agreement
(Performance-Based Vesting).
11 Computation of Earnings per Share.
12 Computation of Ratio of Earnings to Fixed Charges.
10-K Page 25
13 Sections of 1996 McDonnell Douglas Corporation Annual Report to
Shareholders appearing under the captions: "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," "Supplemental Information," and "Quarterly Results of
Operations (unaudited)".
21 Subsidiaries.
23 Consents of Independent Auditors regarding incorporation of their
report included in the 1996 Annual Report to Shareholders and Board of
Directors 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.
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000063917-97-000005 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Fri., Mar. 29, 10:47:03.1am ET