Record Profit Posted in ’91 at McDonnell : * Aerospace: The $423 million in earnings reflected improvement in its commercial aircraft programs.

McDonnell Douglas on Tuesday reported a significant increase in fourth-quarter earnings and a record profit in all of 1991, reflecting a sharp improvement in its commercial aircraft programs at Douglas Aircraft in Long Beach.

Aerospace analysts said the 1991 results demonstrated that McDonnell has rectified a number of short-term problems, lowered costs and improved productivity. But they expressed concern about erosion in the company’s backlog of orders.

“They are out of the hospital, off the critical list and looking good,” said Howard Rubel of C. J. Lawrence, Morgan Grenfell. “They have momentum behind them, so the numbers will be better next year, but the challenge is how much better. There is room for improvement.”

The company earned a best-ever $423 million on revenue of $18.4 billion in 1991, compared to $306 million on revenue of $15.9 billion in 1990.

In the fourth quarter, the corporation had net earnings of $211 million, or $5.50 per share, compared to essentially a break-even quarter the previous year. It posted a number of gains and charges on earnings in both years’ fourth quarters.

Its total aerospace debt fell from $2.970 billion at the end of 1990 (and $3.305 billion on March 31, 1991) to $2.386 billion at the end of 1991.

Chairman John McDonnell said in a message to employees, “We have definitely turned the corner. Now we must push hard for continuous improvement in everything we do. Based on the improvement we have already made, I am more confident than ever that we have the team to do it.”

The good earnings report, however, comes after a bumpy year and ironically after the company asserted that it could not afford to develop its next commercial jetliner, the MD-12, without selling 40% of its commercial aircraft business to Taiwanese business interests.

McDonnell also lost two competitions for new military aircraft in 1991, the LH helicopter program and the ATF jet fighter program. And the Navy canceled the firm’s A-12 attack jet program early in 1991.

John McDonnell noted that “1991 was a difficult year during which we had to reduce our total team by 12,067, or 10%. 1992 is going to be another challenging year. The aerospace industry is in a period of contraction that is more severe than anything we have faced since the end of the Korean war.”

The Douglas operation earned $200 million in 1991, contrasted with a loss of $177 million in 1990. 1991 earnings included $100 million written off against the troubled C-17 cargo jet program, the company noted.

Douglas delivered 138 MD-80 jetliners during the year, compared to 139 in 1990, apparently generating all of the operating income at the unit. The company delivered 31 MD-11s, which it described as “improved results,” but it declined to say if the program was profitable.

Phil Friedman, an analyst at Morgan Stanley, said, “Douglas did much better than anybody expected.” He noted, however, that backlogs on the MD-11 and MD-80 programs slipped. The company reported that its order backlog on Dec. 31, 1991, was $30.4 billion, down from $36.5 billion the year before.

Although the company’s results were sharply improved, they still lag the industry in some areas. Douglas, for example, earned an operating profit of 4% on sales of commercial aircraft in 1991, compared to a 10% margin at Boeing, securities analysts noted.

McDonnell’s combat aircraft segment posted 1991 operating earnings of $495 million, compared to $396 million in 1990, not including a $350-million loss provision for the canceled A-12 attack jet. Meanwhile, the missiles, space and electronic systems segment had operating earnings of $168 million in 1991, about the same as in 1990.

The 1991 results include net earnings of $68 million principally from a gain on the sale of McDonnell Douglas Systems Integration Co. in the fourth quarter. McDonnell also settled a dispute with the Internal Revenue Service, resulting in an increase to net earnings of $32 million.