McDonnell Has 20% Decline in 1986 Earnings : Writeoff, Price Cut Cited as 4th-Quarter Net Income Also Dips

McDonnell Douglas posted a 20% drop in 1986 earnings Friday, because of a $61.6-million writeoff on its AH-64 Army helicopter program earlier in the year and a $71.1-million price reduction on a sale of military aircraft to Canada.

The St. Louis-based firm earned $277.5 million on revenue of $12.661 billion, compared to earnings of $345.7 million on sales of $11.478 billion in 1985.

In the fourth quarter of 1986, the company earned $92.6 million on revenue of $3.478 billion, compared to earnings of $94.8 million on revenue of $3.092 billion in the comparable period of 1985. McDonnell said the decline resulted from a substantial increase in tax rates on profits.

Sales in the corporation’s aerospace divisions were 11% higher in 1986 than in 1985, with most of the change coming from increased commercial aircraft deliveries and increased business volume in the tactical-missiles field, the company said.

Earnings on transport aircraft, produced at the firm’s Douglas Aircraft unit in Long Beach, were essentially unchanged for the year. However, the transport aircraft segment’s earnings in the fourth quarter of 1986 declined because of cost increases resulting from increased production rates and introduction of a new variant of the MD-80 airliner.

McDonnell said earnings of the transport aircraft segment will be adversely affected in 1987 by parts shortages and other disruptions resulting from an increase in production rates and the failure to reach union agreements.

The firm’s troubled information systems group posted a pretax loss for the year of $69.7 million, compared to a loss of $109.3 million in 1985. Fourth-quarter performance improved over the year earlier.

McDonnell also disclosed that it will spend $1.5 billion by 1990 to develop and otherwise prepare for deliveries of MD-11s, the new airliner that is a derivative of the company’s veteran DC-10.

Previously, the company had said only that it would invest $500 million to develop the aircraft. The additional $1 billion is for tooling and inventory, which the company does not consider development costs, a spokesman said. The tooling and inventory costs are written off as aircraft deliveries are made, a spokesman said.

Companywide employment at the end of 1986 was 105,696, compared to 97,067 at the end of 1985.