Contact: Larry McCracken McDonnell Douglas (314) 233-8957

FOR IMMEDIATE RELEASE

96-9

ST. LOUIS, Jan. 18, 1996 -- McDonnell Douglas reported strong earnings for the fourth quarter of 1995, prior to the recognition of an accounting change related to the MD-11 trijet. The military aircraft segment again led the way with record earnings.

Total revenue for 1995 increased to $14.3 billion, a nine percent increase over the 1994 revenues of $13.2 billion. Revenue in the fourth quarter of 1995 was $3.7 billion, a six percent increase over the 1994 fourth quarter revenue of $3.5 billion.

Excluding the effect of the accounting change related to the MD-11 trijet, McDonnell Douglas had 1995 profit of $707 million, an 18 percent improvement over the 1994 earnings of $598 million, and earnings per share of $6.24, a 24 percent increase over the $5.05 per share in 1994. Prior to the MD-11 trijet change, the corporation had 1995 fourth quarter earnings of $187 million, a 13 percent increase over the 1994 fourth quarter earnings of $165 million, and earnings per share of $1.68, a 21 percent increase over the $1.39 per share in 1994's fourth quarter.

Effective Oct. 1, 1995, McDonnell Douglas changed its accounting for the MD-11 trijet program from the program basis of accounting to the specific unit basis of accounting. The change had no impact on cash flow. Under the program basis, MD-11 costs for delivered aircraft were charged to cost of sales based upon the estimated average unit cost for the entire program. Actual costs in excess of the program average were deferred to be recovered by production and future delivery of lower-than-average cost units. Under the specific unit basis of accounting, MD-11 costs are charged to cost of sales based upon the unit cost of the delivered aircraft. This change to the specific unit costing method for the MD-11 program was made in recognition of production rates, existing order base, and length of time required to achieve program deliveries, and thus, the resultant increased difficulty in making estimates relating to program accounting.

To be consistent with the change to the specific unit basis, the method for allocating support costs and tooling costs to aircraft was changed from a pro rata basis over all units under a program accounting concept to an overhead allocation basis. This change resulted in a charge to operations for deferred production costs and for the reduction in the valuation of support and tooling cost.

The total impact of the MD-11 accounting change was a pre-tax charge to fourth quarter operations of $1.838 billion, or $10.03 per share on an after-tax basis. This amount was recorded as of Oct. 1, 1995, and therefore, resulted in a fourth quarter 1995 loss of $936 million, or $8.35 per share.

Cash flow from aerospace operations was $918 million for all of 1995, prior to reductions of $337 million used by McDonnell Douglas to purchase its common stock and of $150 million relating to fourth quarter tax payments associated with ongoing prior years' tax audits. McDonnell Douglas acquired 5.3 million shares of its common stock during 1995, bringing total acquisitions to 7.1 million shares, just under 40 percent of a common stock repurchase program authorization amount that was announced in late 1994.

Cash flow from aerospace operations was just under $300 million for the 1995 fourth quarter, prior to being reduced by $12 million for stock purchases and by the aforementioned tax payment.

Operating earnings in the military aircraft segment were $905 million for 1995 -- a record year -- compared with $708 million for 1994. The 1995 record was a 28 percent increase over the previous best year in this segment. Operating earnings in the 1995 fourth quarter were $253 million -- a record quarter -- compared with $207 million in 1994's fourth quarter. Improved earnings in the C-17 and F-15 programs led the way for all of 1995. Operating margins in this segment exceeded 11 percent in 1995 -- compared to 9 percent in 1994. Margins in the 1995 fourth quarter were slightly less than 12 percent, compared to ten percent in the 1994 same period.

Revenues from the military aircraft segment were $8.2 billion for all of 1995, an increase of 5 percent from 1994 revenues of $7.8 billion. Fourth quarter 1995 revenues totaled $2.2 billion, a 4 percent increase over $2.1 billion in the fourth quarter of 1994. The F-15 and F/A-18 programs were the main contributors to this increase.

Excluding the effect of the charge related to the MD-11 trijet, operating earnings in the commercial aircraft segment were $39 million for all of 1995. That compares with $47 million for 1994. Operating earnings were $13 million in the fourth quarter of 1995, compared with $12 million in the fourth quarter of 1994. The 1995 fourth quarter results included profits from the MD-11 trijet program accounted for on a specific unit basis, offset in part by a write-off of MD-80 inventory amounts.

Revenues from the commercial aircraft segment were $3.9 billion for all of 1995, an increase of 23 percent from the 1994 revenues of $3.2 billion. Revenues in the fourth quarter of 1995 were $926 million, an increase of 17 percent from $789 million in the fourth quarter of 1994.

McDonnell Douglas delivered three MD-80 and four MD-90 twin jets and five MD-11 trijets in 1995's fourth quarter. This compares with six MD-80 twin jets and four trijets in 1994's fourth quarter. There were 18 MD-80 and 14 MD-90 twin jet deliveries in all of 1995, compared with 22 MD-80 deliveries in 1994. Trijet deliveries for all of 1995 totaled 18, compared with 17 trijet deliveries in 1994.

McDonnell Douglas received orders for four MD-11 trijets, 40 MD-80/90 twin jets and 50 MD-95 twin jets in 1995's fourth quarter. The MD-95, a new 100 seat airliner, was launched with this fourth quarter order. On Dec. 31, 1995, McDonnell Douglas had firm orders for 21 MD-11 trijets, 141 MD-80/90 twin jets, and 50 MD-95 twin jets.

Operating earnings in the missiles, space and electronic systems segment were $198 million for all of 1995, down from $262 million for 1994. Operating earnings were $30 million in the fourth quarter of 1995, down from $66 million in the fourth quarter of 1994. Increased spending on the Delta III, a launch vehicle currently under development, contributed to lower earnings for 1995 and in 1995's fourth quarter. The first two quarters in 1995 were affected by increased costs related to the closing of a Florida missile facility.

Revenues from the missiles, space and electronic systems segment were $1.9 billion in both 1995 and 1994. Revenues in the fourth quarter of 1995 were $551 million, down slightly from $565 million in the fourth quarter of 1994. Higher revenue in the Delta and Space Station programs was offset by decreased volume in the higher margin Tomahawk missile program.

Operating earnings in the financial services and other segment were $61 million for all of 1995, compared with $50 million for 1994. Operating earnings were $19 million in the fourth quarter of 1995, compared with $7 million in the fourth quarter of 1994. Operating earnings in this segment in 1995 were at their highest level in the last five years.

Interest expense for the aerospace segments was $139 million for all of 1995, compared with $141 million in 1994, after excluding from 1995 the reversal of $23 million and from 1994 the reversal of $10 million associated with the resolution of tax issues. Interest expense in the fourth quarter of 1995 was $30 million, compared with $29 million in the 1994 same period.

The corporation's firm backlog on Dec. 31, 1995, was $19.640 billion, compared with $17.503 billion on Dec. 31, 1994. Firm backlog increased in both the military aircraft segment and the missiles, space and electronic systems segment. Total backlog on Dec. 31, 1995, was $28.353 billion, compared with $29.232 billion on Dec. 31, 1994.

Total employment at McDonnell Douglas was 63,612 on Dec. 31, 1995, down three percent from 65,760 on Dec. 31, 1994.