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McDonnell Douglas Corp – ‘10-K’ for 12/31/94

As of:  Monday, 3/27/95   ·   For:  12/31/94   ·   Accession #:  63917-95-10   ·   File #:  1-03685

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  As Of                Filer                Filing    For·On·As Docs:Size

 3/27/95  McDonnell Douglas Corp            10-K       12/31/94   14:334K

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         23     96K 
 2: EX-3.B      By-Laws                                               12     44K 
 3: EX-4.J      Amendment to Rights Agreement                          4     20K 
 4: EX-10.C     Long-Term Incentive Plan                               6     25K 
 5: EX-10.D     Mdc Performance Sharing Plan                           4     18K 
 6: EX-10.H     H. C. Stonecipher Employment Agreement                13     56K 
 7: EX-10.I     Performance Accelerated Restricted Stock Agmt.         5     19K 
 8: EX-10.J     Performance Accelerated Restricted Stock Agmt.         5     21K 
 9: EX-11       Computation of Earnings Per Share                      1      8K 
10: EX-13       Annual Report to Shareholders                         80    265K 
11: EX-21       Subsidiaries                                           1      7K 
12: EX-23       Consents of Independent Auditors                       2     12K 
13: EX-27       Financial Data Schedule                                1      9K 
14: EX-99       Ratio of Earnings to Fixed Charges                     1      8K

10-K   —   Annual Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
6U.S. Government and Export Sales
7Backlog
11Item 2. Properties
"Item 3. Legal Proceedings
12Item 4. Submission of Matters to A Vote of Security Holders
13Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
"Item 6. Selected Financial Data
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 8. Financial Statements and Supplementary Data
"Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
14Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 
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1                         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, 1994   
                             -----------------------------------
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 of        (I.R.S. Employer Identification No.)     
Incorporation or Organization)                                                  

Post Office Box 516, St. Louis, MO                   63166-0516                 
----------------------------------      ----------------------------------      
(Address of Principal Executive                     (Zip Code)                  
Offices)                                                                        
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 a 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                     
                                   ---     ---


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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         
February 28, 1995:  $6.096 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 February 28, 1995:  115,578,101 shares   

DOCUMENTS INCORPORATED BY REFERENCE:    

Portions of the 1994 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 28, 1995 are incorporated by reference       
into Part III.                                                                  

Exhibit Index on Page 13                                              


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3                                              Form 10-K Page 2
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        
MDC).                                                                           

The Company, its divisions and its subsidiaries operate principally in
four industry segments:  military aircraft; missiles, space and electronic      
systems; commercial aircraft; and financial services and other.  Operations     
in the first two industry segments are conducted primarily by McDonnell         
Douglas Aerospace, an unincorporated operating division of the Company,         
which is engaged in design, development, production, and support of the         
following major products:  military transport aircraft; combat aircraft and     
training systems; 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, substantially all of the Company's information systems    
business has been divested.  In 1991, MDC sold substantially all of the         
assets of McDonnell Douglas Systems Integration Company and certain related     
assets of McDonnell Douglas Information Systems International (MDISI).  In      
1992, MDC sold all the outstanding stock of TeleCheck Services, Inc.  and       
in 1993, MDC sold its remaining MDISI business.                                 

The business segments in which the Company is engaged and discussion  
of certain of their respective products appear under the captions:              
"Military Aircraft," "Commercial Aircraft," "Missiles, Space and Electronic     
Systems," and "Complementary Businesses" on pages 4 through 20, and             
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" on pages 24 through 31 of the Company's 1994 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 32 of the Company's 1994 Annual Report to Shareholders, which is           
incorporated herein by this reference.                                          


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4                                              Form 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 29 through 31 in "Management's Discussion and          
Analysis of Financial Condition and Results of Operations" in the Company's     
1994 Annual Report to Shareholders, which are incorporated herein by this       
reference.                                                                      

COMPETITION                                                                     

Programs and products comprising most of the Company's business volume
are of a highly technical nature, comparatively few in number, high in unit     
cost, and have traditionally enjoyed relatively long production lives.          
There is significant competition in the aerospace industry, both in             
military and commercial programs.                                               

The Company's military segments compete in an industry composed of a  
few major competitors and a limited number of customers.  The number of         
competitors in these segments has decreased over the past few years due to      
consolidation brought about by reduced defense spending.  However,              
competition for military programs remains significant.                          

The Company's commercial aircraft sales are subject to intense        
competition from aircraft manufactured by other companies, both foreign and     
domestic, including companies which are nationally owned or subsidized and      
have a larger family of commercial aircraft to meet varied and changing         
airline requirements.  The Company's principal competitors in commercial        
aircraft are The Boeing Company and Airbus Industrie.  To meet competition,     
the Company maintains a continuous program directed toward enhancing the        
performance and capability of its products.  Additionally, product              
improvement programs which increase airplane operational capability,            
improve reliability, enhance maintainability and increase commonality           
within current airplane families and across the entire product line will        
continue.  A vital part of the Company's strategy is a program to develop       
derivatives of the current product line.                                        

MDFS is subject to competition from other financial institutions,     
including commercial banks, finance companies, and leasing companies.  Some     
full-service leasing companies are larger than MDFS and have greater            
financial resources, greater leverage ability, and lower effective              
borrowing costs.                                                                

SUBCONTRACTING, PROCUREMENT AND RAW MATERIALS                                   

The most important raw materials required for the Company's products, 
from the standpoint of aggregate cost, are aluminum (sheet, plate, forgings     
and extrusions), titanium (sheet, plate, forgings and extrusions) and           
composites (including carbon and boron).  All of these materials are            
purchased from outside sources and generally are available at competitive       
prices.  Additional sources and capacity exist for these raw materials, but     
it would take a year or more before they could become qualified alternate       
sources of supply.                                                              


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The Company purchases many components, such as engines and            
accessories, electrical power systems, radars, landing gears, fuel systems,     
refrigeration systems, navigational equipment, and flight and engine            
instruments for use in aircraft, and propulsion systems, guidance systems,      
telemetry and gyroscopic devices in support of its space systems and            
missile programs.  In addition, fabricated subassemblies such as engine         
pods and pylons, fuselage sections, wings and empennage surfaces, doors and     

                                                    Form 10-K Page 4

flaps, are sometimes subcontracted to outside suppliers.  The U.S.              
Government and commercial customers also furnish many components for            
incorporation into aircraft and other products they purchase from the           
Company.                                                                        

The Company is dependent upon the ability of its large number of      
suppliers and subcontractors to meet performance specifications, quality        
standards, and delivery schedules at anticipated costs, and their failure       
to do so would adversely affect production schedules and contract               
profitability, while jeopardizing the ability of the Company to fulfill         
commitments to its customers.  The Company has encountered some difficulty      
from time to time in assuring long-lead time supplies of essential parts,       
subassemblies, and materials.  The Company's success in forestalling            
shortages of critical commodities over the long term is difficult to            
predict because many factors affecting such shortages are outside its           
control.                                                                        

EMPLOYEES                                                                       

At December 31, 1994 the total employment of the Company, including   
subsidiaries, was 65,760.                                                       

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 31 in "Management's          
Discussion and Analysis of Financial Conditions and Results of Operations"      
in the Company's 1994 Annual Report to Shareholders, which is incorporated      
herein by this reference.                                                       


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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 $1.393 billion in 1994, $1.126 billion in 1993, and $1.018        
billion in 1992.  Company-initiated research and development and bid and        
proposal work, related to both commercial business and business with the        
U.S. Government, amounted to $297 million in 1994, $341 million in 1993,        
and $509 million in 1992.                                                       

U.S. GOVERNMENT AND EXPORT SALES                                                

Although there are additional risks to the Company attendant to its   
foreign operations, such as currency fluctuations and devaluations, the         
risk of war, changes in foreign governments and their policies, differences     
in foreign laws, uncertainties as to enforcement of contract rights, and        
difficulties in negotiating and litigating with foreign sovereigns, the         
Company's financial position has not been materially affected.                  

                                                Form 10-K Page 5

Since most of the Company's foreign export sales involve              
technologically advanced products, services and expertise, U.S. export          
control regulations limit the types of products and services that may be        
offered and the countries and governments to which sales may be made.  The      
Department of State issues and maintains the International Traffic in Arms      
Regulations pursuant to the Arms Export Control Act.  The Department of         
Commerce issues and maintains the Export Administration Regulations             
pursuant to the Export Administration Act and the Department of Treasury        
implements and maintains transaction controls, sanctions and trade              
embargoes pursuant to the Trading With the Enemy Act and the International      
Emergency Economic Powers Act.  Pursuant to these regulations, certain          
products and services cannot be exported without obtaining a license.  Most     
of the defense products that the Company sells abroad cannot be sold            
without such a license.  Consequently, the Company's international sales        
may be adversely affected by changes in the United States Government's          
export policy, the implementation of trade sanctions or embargoes, or the       
suspension or revocation of the Company's foreign export control licenses.      

Additional information required by this item is included in Note 19,  
"U.S. Government and Export Sales" on page 52 of the Company's 1994 Annual      
Report to Shareholders, which is incorporated herein by this reference.         


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BACKLOG                                                                         

The backlog of orders follows:                                        

December 31                             1994                 1993               
                       Backlog      %       Backlog        %
                         -------    -----     -------      -----
                         (Dollars in millions)
Firm backlog:                                                                   
Military aircraft             $ 8,340       47.6     $  7,997      41.3     
Commercial aircraft             7,544       43.1        9,172      47.3     
Missiles, space and                                                         
electronic systems           1,619        9.3        2,210      11.4  
                         -------      -----      -------     -----
Total Firm Backlog          $17,503      100.0      $19,379     100.0   
                         =======      =====      =======     =====

Contingent backlog:                                                             
Military aircraft             $ 8,597       73.3      $10,742      65.8     
Commercial aircraft             2,234       19.0        3,059      18.8     
Missiles, space and                                                         
electronic systems             898        7.7        2,518      15.4  
                         -------      -----      -------     -----
Total Contingent Backlog    $11,729      100.0      $16,319     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 31 in "Management's Discussion and Analysis of Financial      
Condition and Results of Operations" in the Company's 1994 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.                                                

                                                    Form 10-K Page 6

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 $4.8 billion at December 31, 1994, and $6.9 billion at             
December 31, 1993.                                                              

The Government may terminate its contracts for default, or for its    
convenience whenever it believes that such termination would be in the best     
interest of the Government.  For a further discussion of termination for        
default and termination for convenience risks, see "Military Aerospace          


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Business" on page 29 in "Management's Discussion and Analysis of Financial      
Condition and Results of Operations" in the Company's 1994 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, 1995, were as     
follows:                                                                        

EXECUTIVE        AGE        POSITIONS AND OFFICES HELD              
---------        ---        ---------------------------             

Dean C. Borgman         53   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.  MDHC Vice
                     President - Advanced Product and Technology
Division 1989-1990.   

Robert L. Brand         57   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    49    MDC Vice President - Human Resources since         
                     February 1995.  Associate Administrator for
                       Continual Improvement of National Aeronautics
                     and Space Administration 1992-1995.  Deputy
                   Under Secretary of Defense -Total Quality
Management 1990-1992. 

John P. Capellupo       60   McDonnell Douglas Aerospace President since        
                      December 1994.  MDC Executive Vice President
                        1992-1994.  McDonnell Aircraft Company (MCAIR)
                    President 1991-1992.  DAC Deputy President
                1990-1991.  MDMSC President 1989-1990.

Stanley Ebner           61   MDC Senior Vice President - Washington             
                Operations since December 1994.  Self-
                    employed 1990-1994. Senior Vice President-
                      Government Relations of Northrop Corporation
1979-1990.            

Patrick J. Finneran     49    MDC Vice President/General Manager -              
            Production Aircraft Programs since
                   January 1995.  MDC Vice President/General
                 Manager AV 8B 1992-1994.  MCAIR General
                     Manager 1992.  MCAIR Deputy General Manager
1990-1992.            


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9                                                Form 10-K Page 7

Kenneth A. Francis      61   MDC Executive Vice President since August          
                1992.  McDonnell Douglas Space Systems
                     Company (MDSSC) President 1990-1992.  MDSSC
             Executive Vice President 1989-1990.

Steven N. Frank         46   MDC Vice President, Associate General Counsel      
                 & Secretary since April 1994.  MDC Vice
                President, Associate General Counsel &
                    Assistant Secretary 1992-1994.  Partner of
                  Peper, Martin, Jensen, Maichel & Hetlage
1988-1992.            

Robert H. Hood, Jr.    62    DAC President since January 1989.                  

Donald R. Kozlowski    57    MDC Senior Vice President - C-17 Program           
                Manager since December 1993.  MDC Vice
                     President/General Manager, High Speed Civil
                     Transport 1992-1993.  MCAIR Vice President/
                 General Manager F/A-18 1991-1992. MCAIR
                   Vice President/General Manager 1988-1991.

F. Mark Kuhlmann        46   MDC Senior Vice President - Administration         
               and General Counsel since April 1994.
                      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       49   MDC Executive Vice President and Chief             
              Financial Officer since August 1992.
             MDC Senior Vice President - Finance
1989-1992.            

James H. MacDonald      58   MDC Senior Vice President - Total Quality          
                      Management since September 1992.  MDC Senior
   Vice President 1989-1992.

John F. McDonnell       56   MDC Chairman of the Board since September          
                 1994.  MDC Chairman and Chief Executive
Officer 1988-1994.    

Willard P. Olson        55   MDC Senior Vice President - Space & Defense        
               Systems since January 1995.  MDC Vice
                      President/General Manager  - Space & Defense
                        Systems 1994-1995.  MDC Vice President/General
                       Manager Huntsville 1990-1994.  MDSSC Director
        Design & Technology 1989-1990.

James F. Palmer         45   MDC Vice President - Treasurer since July          
                     1993.  MDC Vice President/General Manager -
                     Business Management 1992-1993.  MCAIR Chief
                  Financial Officer 1991-1992.  Partner of
  Ernst & Young 1985-1991.


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James B. Peterson       50   MDC Vice President/General Manager - Missiles      
                      & Aerospace Support since January 1995.  MDC
                        Vice President/General Manager Cruise Missiles
                        1994-1995.  MDC Vice President/General Manager
                         Tomahawk Program 1993-1994.  MDC Vice President
                        & 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.

                                                        Form 10-K Page 8

Michael M. Sears        47   MDC Vice President/General Manager                 
              F/A-18 since January 1994.  MDC Vice
                        President/General Manager F/A-18E/F 1991-1994.
                  MCAIR Vice President/General Manager New
               Aircraft Products Division 1990-1991.

James M. Sinnett        55   MDC Senior Vice President - New Aircraft &         
                         Missile Products since December 1993.  MDC Vice
                         President/General Manager New Aircraft Products
                    Division 1991-1993.  MCAIR Vice President/
        General Manager ATF 1990-1991.

Harry C. Stonecipher    58   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.

All executive officers serve at the pleasure of the Board of Directors
of the Company and are appointed annually.  Non-executive officers may be       
appointed by the Board or the Chairman.  All of the executive officers have     
been employees of the Company at least five years except Laurie  A.             
Broedling, Stanley Ebner, Steven N. Frank, 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 attached hereto as Exhibit 10(h).  A summary of a          
proposed amendment to Mr.  Stonecipher's employment agreement appears on        
page 24 of the Company's definitive Proxy Statement for 1995 which is           
incorporated herein by the reference contained on page 10 hereof.               


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ITEM  2.  PROPERTIES                                                            

At December 31, 1994 the Company's manufacturing, laboratory, office  
and warehouse areas totaled 37.1 million square feet, of which 6.2 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.  The trend of reduced      
defense spending and reduced commercial aircraft orders has resulted in         
downsizing of personnel and facility needs.  In light of the Company's          
downsizing and current business economic conditions, many of the Company's      
facilities are currently underutilized.  Leases related to Tulsa, Oklahoma;     
Columbus, Ohio; and Culver City, California terminated during 1994.             

The Company's principal locations are in six states and Canada.  Those  
in St. Louis, Missouri are chiefly devoted to military aircraft,                
electronics, training systems, and missiles.  Those in Mesa, Arizona are        
primarily used for development, manufacture, and assembly of helicopters.       
In the Los Angeles, California area, principal properties are located in        
Huntington Beach and Long Beach.  Huntington Beach, California properties       
are utilized for research and manufacture of spacecraft, launch vehicles,       
and electronics.  Long Beach, California properties are devoted to the          
development, manufacture, and assembly of commercial and military transport     
aircraft, and to the financial services and other segment.  Subassembly         
work for the commercial and military aircraft business segments is              
performed at Macon, Georgia; Salt Lake City, Utah; and Toronto, Canada for      
shipment to operations at Long Beach.  Florida facilities are devoted to        
production of missiles and space operations.                                    

In early March 1995, the Company announced that in late 1995 it will    
close two facilities, one in Titusville, Florida and another in St.             
Charles, Missouri, as part of its continuing consolidation of facilities        
due to excess capacity throughout the Company.  The plant in Titusville         
will close after production of Tomahawk cruise missiles for the U.S. Navy       
and other operations come to an end there in August 1995.  Operations at        
the St. Charles facility, which included production of electrical wire          
bundles and ground support equipment for aircraft and missile systems, will     
be reassigned to other Company locations.                                       

                                                Form 10-K Page 9

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 41 of the Company's 1994 Annual Report to      
Shareholders, which is incorporated herein by this reference.  See also         
Note 17, "Commitments and Contingencies" on page 51 of the Company's 1994       
Annual Report to Shareholders and "Management's Discussion and Analysis of      
Financial Condition and Results of Operations - Government Business Audits,     
Reviews and Investigations," page 30, which are incorporated herein by this     
reference.                                                                      


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MDC is a party to a number of proceedings brought under the             
Comprehensive Environmental Response, Compensation and Liability Act,           
commonly known as Superfund, or similar state statutes.  MDC has been           
identified as a potentially responsible party (PRP) at 29 sites.  Of these,     
MDC believes that it has de minimis liability at 19 sites, including 14         
sites at which it believes that it has no future liability.  At eight of        
the sites at which MDC's liability is not considered to be de minimis,          
either final or interim cost sharing agreements have been effected between      
the cooperating PRPs, although such agreements do not fix the amount of         
cleanup costs which the parties will bear.  At the two remaining sites, MDC     
lacks sufficient information to determine its probable share or amount of       
liability.  In addition, MDC is remediating, or has begun environmental         
engineering studies to determine cleanup requirements, at certain of its        
current operating sites or former sites of industrial activity.  MDC            
estimates total reasonably possible costs of approximately $42 million for      
study and remediation expenditures at Superfund sites and MDC's current and     
former operating sites, of which $27 million is accrued at December 31,         
1994.  Claims for recovery have not been netted against the disclosed           
environmental liabilities.  While ongoing litigation may eventually result      
in recovery of costs expended at certain of the waste sites, any gain is        
contingent upon a successful outcome and has not been accrued.                  

On August 2, 1994 MDC received notice of a complaint filed by the Long  
Beach, California City Prosecutor against MDC in the Long Beach Municipal       
Court arising out of a spill of jet fuel in March 1994 to the storm sewer       
system at the Douglas Aircraft facility in Long Beach.  This complaint          
alleges violations of state law for:  disposal of hazardous waste without a     
permit; discharge of a water pollutant without providing the proper report;     
discharging oil to marine waters; failure to immediately report the spill;      
permitting petroleum to pass into waters of the state; and discharging a        
substance deleterious to wildlife.  The complaint seeks statutory               
penalties.  On December 24, 1994 a jet fuel spill to the storm sewer system     
at the Douglas Aircraft facility in Long Beach occurred.  The South Coast       
Air Quality Management District has issued a notice of violation alleging       
creation of a nuisance and failure to obtain a permit for an oil/water          
separator involved in the spill.  No penalty has been proposed.  No charges     
have been filed respecting the December 24 spill.  Settlement negotiations      
are in progress as to both events.  Resolution of these matters is not          
expected to have a materially adverse effect on MDC's financial position,       
results of operations, or cash flow.                                            

A number of legal proceedings and claims are pending or have been       
asserted against MDC including legal proceedings and claims relating to         
alleged injuries to persons associated with the disposal of hazardous           
waste.  A substantial portion of such legal proceedings and claims is           
covered by insurance.  MDC believes that the final outcome of such              
proceedings and claims will not have a material adverse effect on MDC's         
financial position, results of operations, or cash flow.                        

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    

No matters were submitted to a vote of security holders during the      
fourth quarter.                                                                 


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13                                               Form 10-K Page 10

PART  II    

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER      
MATTERS                                                       

Information required by this item is included on pages 45, 46 and 55 of 
the Company's 1994 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, 1994,     
consisting of the data under the captions "Summary of Operations" and           
"Balance Sheet Information" are included at page 54 of the Company's 1994       
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 24 through 31 of the 1994 Annual Report     
to Shareholders, and under the captions "Military Aircraft," "Commercial        
Aircraft" and "Missiles, Space and Electronic Systems" on pages 4 through       
19 of the 1994 Annual Report to Shareholders, the text portions, including      
tables, which are incorporated herein by this reference.                        

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                            

The information called for by this item is included on pages 32 through 
53, and on page 56 of the 1994 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.                                          


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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       
1995 pursuant to Regulation 14A, to be filed with the Commission within 120     
days after the close of the fiscal year ended December 31, 1994, and is         
incorporated herein by this reference.  The report of the Management            
Succession and Compensation Committee and the performance graph contained       
in the Company's definitive Proxy Statement for 1995, 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.            

                                               Form 10-K Page 11

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 1994 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,  
1994, 1993, and 1992, page 33.                                  

Balance Sheet, December 31, 1994 and 1993, page 34.             

Consolidated Statement of Shareholders' Equity, years ended     
December 31, 1994, 1993, and 1992, page 36.                     

Consolidated Statement of Cash Flows, years ended December 31,  
1994, 1993, and 1992, page 37.                                  

Notes to Consolidated Financial Statements, pages 38 through 52.

Selected Financial Data by Industry Segment, page 32.           

Quarterly Results of Operations, page 56.                       


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(a)2.   LIST OF FINANCIAL STATEMENT SCHEDULES                                   

See Index to Financial Statement Schedules on page 16.          

 All other schedules for which provision is made in the applicable
regulation of the Securities and Exchange Commission are omitted
either because they are not applicable or because the required  
information is included in the financial statements or notes    
thereto.                                                        

(a)3.   EXHIBITS                                                                

See Index to Exhibits on pages 13 through 15.                   

(b)     Reports on Form 8-K filed during the fourth quarter of 1994:            

Form 8-K filed on November 3, 1994 in response to Item 5.       

Form 8-K filed on December 12, 1994 in response to Item 5.      


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16                                            Form 10-K Page 12

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 27, 1995              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     Director, President & Chief      March 27, 1995    
------------------------     Executive Officer                                  
Harry C. Stonecipher         (Principal Executive Officer)                      

/s/ Herbert J. Lanese        Executive Vice President and     March 27, 1995    
----------------------       Chief Financial Officer                            
Herbert J. Lanese            (Principal Financial Officer)                      

/s/ Robert L. Brand          Vice President and Controller    March 27, 1995    
---------------------        (Principal Accounting Officer)                     
Robert L. Brand                                                                 

/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           


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/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 27, 1995                                                           


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18                                                 Form 10-K Page 13

                                                                [Download Table]

                        MCDONNELL DOUGLAS CORPORATION                            
                              AND SUBSIDIARIES                                   

                              INDEX TO EXHIBITS                                  
                                                                                 
               EXHIBIT                                                           

3(a) Articles of Restatement of the        Incorporated by reference to Exhibit  
     Company's Charter, as filed           4(b) to the Company's Registration    
     June 13, 1994.                        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                                           
     October 28, 1994.                                                           

4(a) Indenture dated as of September 1,    Incorporated by reference to Exhibit  
     1985 between the Company and The      4(a) to the Company's Registration    
     Bank of New York as Successor         Statement on Form S-3, Commission     
     Trustee to Citibank, N.A.             File No. 33-36180, filed with the     
                                           Commission on August 1, 1990.         

4(b) First Supplemental Indenture dated    Incorporated by reference to Exhibit  
     as of July 1, 1986 between the        4(b) to the Company's Registration    
     Company and The Bank of New York as   Statement on Form S-3, Commission     
     Successor Trustee to Citibank, N.A.   File No. 33-36180, filed with the     
                                           Commission on August 1, 1990.         

4(c) Second Supplemental Indenture dated   Incorporated by reference to Exhibit  
     as of April 2, 1992 between the       4(c) to the Company's Annual Report   
     Company and The Bank of New York as   on Form 10-K for the year ended       
     Successor Trustee to Citibank, N.A.   December 31, 1992.                    

4(d) Agreement of Resignation, Appoint-    Incorporated by reference to Exhibit  
     ment and Acceptance dated as of       4(d) to the Company's Annual Report   
     May 17, 1993 by and among the         on Form 10-K for the year ended       
     Company, Citibank, N.A., as           December 31, 1993.                    
     Resigning Trustee, and The Bank                                             
     of New York, as Successor Trustee.                                          

4(e) Form of 8-5/8% Notes due              Incorporated by reference to Exhibit  
     April 1, 1997.                        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              Incorporated by reference to Exhibit  
     April 1, 2002.                        4(g) to the Company's Annual Report   
                                           on Form 10-K for the year ended       
                                           December 31, 1992.                    


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4(g)  Form of 9-3/4% Debentures due        Incorporated by reference to Exhibit  
      April 1, 2012.                       4(h) to the Company's Annual Report on
                                           Form 10-K for the year ended          
                                           December 31, 1992.                    

                                                            Form 10-K Page 14    

4(h) Form of 8-1/4% Notes due              Incorporated by reference to Exhibit  
     July 1, 2000.                         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          Incorporated by reference to Exhibits 
     August 2, 1990 between the            1 and 2 to the Company's Report       
     Company and First Chicago Trust       on Form 8-K filed with the            
     Company of New York, which includes   Commission on August 6, 1990.         
     as Exhibit B thereto the form of                                            
     Rights Certificate.                                                         

4(j) Amendment Number One to Rights                                              
     Agreement, dated as of                                                      
     January 3, 1995.                                                            

Pursuant to Item 601(b)(4)(iii) of                                               
Regulation S-K, the Company is not filing                                        
certain instruments with respect to                                              
long-term debt because the amount of                                             
securities currently authorized under any                                        
of them does not exceed 10 percent of the                                        
total assets of the Company and its                                              
subsidiaries on a consolidated basis.                                            
The Company hereby agrees to furnish a                                           
copy of any such instrument to the                                               
Commission upon request.                                                         

10(a)* McDonnell Douglas Corporation       Incorporated by reference to Exhibit  
       Incentive Award Plan, as amended    10(b) to the Company's Annual Report  
       and restated as of July  20, 1990.  on Form 10-K for the year ended       
                                           December  31, 1990.                   

10(b)* Incentive Compensation Program,     Incorporated by reference to Exhibit  
       as amended and restated as of       10(b) to the Company's Annual Report  
       March 2, 1992 under the McDonnell   on Form 10-K for the year ended       
       Douglas Corporation Incentive       December 31, 1991.                    
       Award Plan.                                                               

10(c)* Long-Term Incentive Program, as                                           
       amended and restated as of                                                
       February 8, 1995 under the                                                
       McDonnell Douglas Corporation                                             
       Incentive Award Plan.                                                     


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10(d)* McDonnell Douglas Corporation                                             
       Performance Sharing Plan, as                                              
       amended and restated as of                                                
       February 8, 1995.                                                         

10(e)* McDonnell Douglas Corporation       Incorporated by reference to Exhibit  
       Deferred Compensation Plan for      10(e) to the Company's Annual Report  
       Nonemployee Directors.              on Form 10-K for the year ended       
                                           December  31, 1992.                   

10(f)* McDonnell Douglas Corporation       Incorporated by reference to Exhibit  
       1994 Performance and Equity         4(a) to the Company's Registration    
       Incentive Plan.                     Statement on Form S-8, Commission File
                                           No. 33-56129, filed with the          
                                           Commission on October 21, 1994.       

                                                         Form 10-K Page 15       

10(g)* Service Agreement between           Incorporated by reference to Exhibit  
       Kenneth M. Duberstein and           10(f) to the Company's Annual Report  
       McDonnell Douglas Corporation,      on Form 10-K for the year ended       
       amended as of June 1, 1993.         December 31, 1993.                    

10(h)* Employment Agreement between                                              
       Harry C. Stonecipher and McDonnell                                        
       Douglas Corporation, dated as of                                          
       September 24, 1994.                                                       

10(I)* Form of Performance Accelerated                                           
       Restricted Stock Award Agreement                                          
       (Service-Based Vesting)                                                   

10(j)* Form of Performance Accelerated                                           
       Restricted Stock Award Agreement                                          
       (Performance-Based Vesting)                                               

11     Computation of earnings per share.                                        

13     1994 McDonnell Douglas Corporation                                        
       Annual Report to Shareholders,                                            
       excluding the "Financial Highlights,"                                     
       MDC Chairman/CEO's letter                                                 
       "To All Shareholders and Teammates,"                                      
       "Community Involvement," and                                              
       "Directors and Executive Officers."                                       

21     Subsidiaries.                                                             

23     Consents of Independent Auditors                                          
       regarding incorporation of their                                          
       report included in the 1994                                               
       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.                                      


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27     Financial Data Schedule                                                   

99     Computation of Ratio of Earnings to Fixed Charges.                        

* Represents management contract or compensatory plan or                         
  arrangement required to be filed as an exhibit pursuant to                     
  Item 14(c) of Form 10-K.                                                       


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22                                              Form 10-K Page 16

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, 1994       
are included herein:                                                            

Report of Independent Auditors                                          

Schedule II   Valuation and Qualifying Accounts                         

                                                 Form 10-K Page 17

REPORT OF INDEPENDENT AUDITORS    

We have audited the consolidated financial statements of McDonnell Douglas      
Corporation and subsidiaries (MDC) as of December 31, 1994 and 1993, and for    
each of the three years in the period ended December 31, 1994, and have         
issued our report thereon dated January 17, 1995 (incorporated by reference     
elsewhere in this Annual Report on Form 10K).  Our audits also included the     
financial statement schedule listed in item 14(a) of this Annual Report on      
Form 10K.  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,      
present fairly in all material respects the information set forth therein.      

/s/ Ernst & Young LLP                                                           

St. Louis, Missouri                                                             
January 17, 1995                                                                


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23                                               Form 10-K Page 18

                                                                [Download Table]

              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS                       
                          McDonnell Douglas Corporation                             
                Years Ended December 31, 1994, 1993, and 1992                       
                               (Millions of dollars)                                

                                  BALANCE     CHARGED                        BALANCE
                                     AT          TO     CHARGED                AT   
                                  BEGINNING  COSTS AND     TO                  END  
                                     OF         AND      OTHER                 OF   
DESCRIPTION                        PERIOD    EXPENSES   ACCOUNTS DEDUCTIONS  PERIOD 
-----------                        ------    --------   -------- ----------  ------ 
                                                                                    
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 
                                     ===         ===        ===        ===      === 

Year Ended December 31, 1992:                                                       
  Allowance for commercial                                                          
    aircraft financing               $ 6         $          $          $        $ 6 
  Allowance for uncollectible                                                       
   accounts                           57          22                    31       48 
                                     ---         ---        ---        ---      --- 
                                     $63         $22        $          $31      $54 
                                     ===         ===        ===        ===      === 

NOTE:   Amounts charged to other accounts are principally reclassifications.        
        Deductions are principally the write off of uncollectible accounts.

Dates Referenced Herein   and   Documents Incorporated by Reference

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