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1993
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(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, 1993
-----------------
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 1-977
WESTINGHOUSE ELECTRIC CORPORATION
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(Exact name of registrant as specified in its charter)
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<S> <C>
PENNSYLVANIA 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
11 STANWIX STREET, PITTSBURGH, PENNSYLVANIA 15222-1384 (412) 244-2000
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(Address of principal executive offices) (Zip Code) (Telephone No.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C> <C>
Common Stock, par value $1.00 per Share New York Stock Exchange Pacific Stock Exchange
Midwest Stock Exchange Boston Stock Exchange
Philadelphia Stock Exchange
$1.53 Depositary Shares, Each Representing
One-Quarter of a Share of Series B Conversion
Preferred Stock New York Stock Exchange
7 3/4% Notes due April 15, 1996 New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by checkmark 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 checkmark 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. _______
Westinghouse Electric Corporation had 353,366,776 shares of common stock
outstanding at February 5, 1994. As of that date, the aggregate market value of
common stock held by non-affiliates was $4.9 billion.
DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED:
1. Portions of Westinghouse Electric Corporation's Notice of 1994 Annual Meeting
and Proxy Statement filed with the Commission pursuant to Regulation 14A of
the Securities and Exchange Act of 1934 (the Proxy Statement). (Parts I and
III)
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The terms "Westinghouse" and "Corporation" as used in this Report on Form
10-K refer to Westinghouse Electric Corporation and its consolidated
subsidiaries unless the context indicates otherwise.
PART I
ITEM 1. BUSINESS.
General
Westinghouse Electric Corporation was founded in 1886 and since 1889 has
operated under a corporate charter granted by the Commonwealth of Pennsylvania
in 1872. Today, Westinghouse is a diversified, global, technology-based
corporation. The Corporation's key operations include television and radio
broadcasting, advanced electronics systems, environmental services, management
services at government-owned facilities, services and equipment for utility
markets and transport temperature control.
For management reporting purposes, Westinghouse applies a business unit
concept to its operating organizations, with each business unit consisting of
one or more divisions or subsidiaries that meet certain internal criteria for
profit center decentralization.
In November 1992, the Board of Directors of Westinghouse adopted a plan
(the Plan) that included exiting the financial services and other non-strategic
businesses. The Corporation classified the operations of Distribution and
Control Business Unit (DCBU), Westinghouse Electric Supply Company (WESCO)
(collectively, Other Operations) and Financial Services as discontinued
operations in accordance with Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" (APB 30). Under the Plan, the disposition of The Knoll
Group (Knoll) was scheduled to occur by the end of 1994 and WCI Communities,
Inc. (WCI) by the end of 1995. Financial Services was comprised primarily of
Westinghouse Credit Corporation (WCC) and Westinghouse Savings Corporation
(WSAV), each subsidiaries of Westinghouse Financial Services, Inc. (WFSI) and
the Corporation's leasing portfolio. On May 3, 1993, WFSI and WCC were merged
into Westinghouse. See notes 2 and 20 to the financial statements included in
Part II, Item 8 of this report.
In January 1994, the Corporation announced that the sale of WCI will be
accelerated from 1995 into 1994 and Knoll is no longer for sale. WCI will
continue to be reported as part of Continuing Operations until the requirements
of APB 30 are met. At that time, WCI will be classified as a discontinued
operation and appropriate restatements will be made to the Corporation's
financial statements.
For financial reporting purposes, the Corporation's Continuing Operations
are aligned into the following segments: Broadcasting, Electronic Systems,
Environmental, Industries, Power Systems, Knoll and WCI. Engineering and repair
services, previously included in the Industries segment, has been transferred to
the Power Systems segment where these businesses have been consolidated with the
power generation service organization. The Environmental segment now includes
the U.S. naval nuclear reactors programs previously reported in Power Systems.
The Longines-Wittnauer Watch Company and Westinghouse Communications have been
transferred from the Broadcasting segment to the Industries segment as part of
the Industrial Products and Services business unit.
The financial results of manufacturing entities located outside the United
States, and export sales and foreign licensee income are included in the
financial information of the reporting segment that had operating responsibility
for such activity. Financial and other information by segment and geographic
area is included in note 21 to the financial statements included in Part II,
Item 8 of this report. For information about principal acquisitions and
divestitures during the three years ended December 31, 1993, see note 20 to the
financial statements included in Part II, Item 8 of this report.
During 1993, the largest single customer of Westinghouse was the United
States government and its agencies, whose purchases accounted for 30% of 1993
consolidated sales of products and services. No material portion of the
Corporation's business was seasonal in nature.
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REPORTING SEGMENTS
BROADCASTING
Westinghouse Broadcasting Company, Inc. (Group W), a wholly-owned
subsidiary of the Corporation, provides a variety of communications services
consisting primarily of commercial broadcasting, program production and
distribution. It sells advertising time to radio, television and cable
advertisers through national and local sales organizations.
Group W currently owns and operates five network affiliated television
broadcasting stations and 14 radio stations. Group W's television stations are
located in Baltimore, Boston, Philadelphia, Pittsburgh and San Francisco and
their signals reach approximately ten percent of the United States viewing
audience. Four of the five Group W television stations are currently rated
either first or second in prime time and in news among adult viewers.
Group W's radio stations form the largest non-network radio group in the
United States. They are located in Boston, Chicago, Detroit, Houston, Los
Angeles, New York City, Philadelphia and Pittsburgh--seven of the top ten radio
markets in the nation. In addition, WINS, Group W's all-news radio station in
New York City, currently has more listeners over the age of 18 than any other
radio station in the United States.
Group W Satellite Communications provides sports programming and the
marketing and advertising sales for two country music entertainment channels.
Group W Satellite Communications is also the industry leader providing technical
services to broadcast and cable television networks.
The Broadcasting segment also includes Group W's program production and
distribution business, Group W Productions, which supplies television series and
special programs through national syndication to broadcast television stations
and cable networks throughout the United States.
Group W's broadcast stations have many competitors, both large and small,
and compete principally on the basis of audience ratings, price and service.
Group W's commercial broadcast television business experiences competition from
cable television which provides program diversification in addition to improved
reception. Broadcast television stations and cable television systems are also
in competition in varying degrees with other communications and entertainment
media, including movie theaters, videocassette distributors and over-the-air pay
television. Due to the rapid pace of technological advancement, broadcast
television stations can expect to face continued strong competition in the
future. Still, after years of such intense competition, these broadcast
television stations remain, by a wide margin, the dominant distributors of news
and entertainment programming in their geographical markets.
ELECTRONIC SYSTEMS
Electronic Systems is a world leader in the research, development,
production and support of advanced electronic systems for defense, government,
and commercial customers.
Products provided to the Department of Defense (DoD) and foreign
governments include surveillance and fire control radars, command and control
systems, electronic countermeasures equipment, electro-optical systems,
satellite-based sensors, missile launching and handling equipment, marine
propulsion systems, torpedoes, anti-submarine warfare systems and communications
equipment. Purchases by DoD, directly and through subcontractors, accounted for
70% of Electronic Systems' sales in 1993.
In 1991, Electronic Systems' DoD business began to experience a shift from
high margin production to lower margin development programs. These high priority
development programs, such as the Air Force Advanced Tactical Fighter and Army
Comanche Helicopter, are expected to transition to high margin production in the
late '90s. The termination of the Airborne Self Protection Jammer and reduced
torpedo production options will impact near-term sales.
Electronic Systems is pursuing growth of its core businesses and expansion
of its DoD product and customer base. Strong growth opportunities also exist
internationally for capitalizing on strong product positions in markets such as
air traffic control and airborne sensor systems.
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Electronic Systems has been successful in using its technology leadership
position to develop a broad spectrum of electronic products for domestic and
international markets. International sales were 18% of Electronic Systems' total
sales in 1993 and its products have a presence in over 100 countries.
In general, sales to the United States government and foreign military
sales through the United States government, are subject to termination
procedures prescribed by statute. Government contracts vary from fixed-price
contracts on production programs and some development programs, to cost-type
contracts on development activities. Reliability, performance and competitive
costs are the main criteria in the award of contracts of this type. This
segment's business is influenced by changes in the budgetary plans and
procurement policies of the United States government, as well as changes in its
diplomatic posture.
This segment encounters significant competition, primarily from large
electronics companies, on the basis of technology, price, service, warranty and
product performance. On any DoD weapons system platform, Electronic Systems
might be a prime bidder, or teamed or in competition with any one of the major
aerospace companies doing business within the United States or allied countries.
ENVIRONMENTAL
The Westinghouse Government & Environmental Services Company includes
Environmental Services, the management of certain government-owned facilities
and the U.S. naval nuclear reactors programs.
Environmental Services provides a variety of environmental remediation and
toxic, hazardous and radioactive waste treatment services.
Through Aptus, Inc., the Corporation offers toxic and hazardous waste
incineration, treatment, transportation, storage and analysis services.
Facilities performing these services are located in Kansas, Utah and Minnesota.
Westinghouse Remediation Services, Inc. provides comprehensive toxic and
hazardous waste remediation services, including mobile, on-site environmental
treatment technologies. The Scientific Ecology Group, Inc. offers a broad range
of on-and off-site services to manage radioactive materials and mixed wastes,
including the only commercially-licensed radioactive waste incinerator and the
only recycling facility for radioactively contaminated metals in the United
States. Through subsidiaries, Resource Energy Systems operates four
waste-to-energy plants that convert municipal solid waste into clean electrical
energy. Controlmatic, a group of affiliated indirect subsidiaries having
principal operations in Germany, Switzerland, Austria and Italy, offers products
and services relating to control, monitoring and industrial automation and
instrumentation.
Through the Westinghouse Savannah River Company and certain subsidiaries
and divisions of Westinghouse Government & Environmental Services Company, the
Corporation manages five government-owned facilities under contracts with the
United States Department of Energy (DoE). These DoE facilities are involved in
the production of uranium metal products, fuel reprocessing, nuclear waste
disposal and environmental restoration. The mission at the defense facilities
has been evolving in recent years to waste management and environmental cleanup.
These businesses are under contracts with the federal government, which reserves
the right to terminate these contracts for convenience.
The U.S. naval nuclear reactors programs consist of the Corporation's Navy
nuclear and technical support businesses. These businesses include the Bettis
Atomic Power Laboratory, the Plant Apparatus Division, Machinery Apparatus
Operation and the Machinery Technology Division, which provides technical
engineering services to the Naval Sea Systems Command.
Certain businesses within this segment have been identified for sale in
connection with the Corporation's planned disposition of certain non-strategic
businesses announced in January 1994. See Management's Discussion and
Analysis--Restructuring and Other Actions included in Part II, Item 7 of this
report.
Competition for services provided by businesses in the Environmental
segment is based on price, technology preference, environmental experience,
performance reputation and, with respect to certain businesses, availability of
permitted treatment or disposal facilities.
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INDUSTRIES
The Industries segment is comprised of the transport temperature control
business and the Industrial Products and Services business unit.
Thermo King Corporation (Thermo King), the world leader in its primary
businesses, manufactures a complete line of transport temperature control
equipment, including units for trucks, truck trailers, container ships, buses
and railway cars and service parts to support these units. The transport
refrigeration units are powered by diesel fuel, gasoline, propane or
electricity. Thermo King maintains international manufacturing facilities in
Ireland, Brazil, Spain, the Dominican Republic, the United Kingdom, the Czech
Republic and the People's Republic of China. It has dealerships throughout the
world, and its equipment is used in virtually every country.
Industrial Products and Services is a diverse group of businesses located
primarily in the United States, providing products and services to commercial,
industrial, utility, and government customers. These products and services
include: wide area and local area voice and data communications services;
watches; process rectifiers and associated renewal parts, electro-mechanical
parts, and maintenance and repair of continuous casting machines within the
steel industry; copper rod and magnet wire, liquid insulation and resins, and
flexible insulation; decorative and industrial high-pressure laminates; large
industrial motors; and commercial printing. Certain businesses within this
business unit have been identified for sale in connection with the Corporation's
planned disposition of certain non-strategic businesses announced in January
1994. See Management's Discussion and Analysis--Restructuring and Other Actions
included in Part II, Item 7 of this report.
Thermo King is subject to competition worldwide for all of its products.
Its products compete on the basis of service, technology, warranty, product
performance, and cost. In addition, Thermo King's customers and end users are
concerned about environmental issues, especially chloroflourocarbons, noise
pollution and engine emissions. Thermo King designs its products to meet or
exceed all environmental requirements. Industry Products and Services competes
in local geographic markets based on price, performance reputation, technology
preference and experience.
POWER SYSTEMS
The Power Systems segment includes the Power Generation and Energy Systems
business units which serve the worldwide market for electrical power generation.
The Power Generation business unit designs, manufactures and services steam
turbine-generators for commercial nuclear and fossil-fueled power plants, as
well as combustion turbine-generators for natural gas and oil-fired power
plants. In addition to serving the regulated electric utility industry, the
business unit supplies, services and operates power plants for independent power
producers and other non-utility customers. Growing demand for electrical energy
has contributed to the business unit's growth. In 1993, the business unit was
awarded orders for approximately 3,200 megawatts of new power generating
capacity. The domestic market for new generating equipment from 1994 through the
year 2002 is approximately 132 gigawatts; the international market is expected
to be over five times the size of the domestic market. With more than 2,800
operating units worldwide based on Westinghouse power generation technology, the
business unit has a substantial service business. The Power Generation business
unit is a participant in the development of emerging technologies which could
shape the future of power generation and place the business unit in a strong
position for continued growth.
The Energy Systems business unit primarily serves the worldwide nuclear
energy market. It also designs and develops solar-based energy systems and
process control systems for nuclear and fossil-fueled power plants and
industrial facilities. About 40% of the world's operating commercial nuclear
power plants incorporate Westinghouse technology. With virtually all of
Westinghouse's worldwide nuclear power plant projects now in operation, the
business unit focuses on supplying a wide range of operating plant services,
ranging from performance-based maintenance programs to new products and services
that enhance plant performance. The business unit also has complete capabilities
for supplying customers with nuclear fuel. The annual market for operating plant
services and fuel is over $10 billion in the United States and $30 billion
globally. The business
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unit is also working with government agencies and industry leaders to revitalize
the nuclear energy option, and is developing a simplified nuclear power plant
design that incorporates passive safety systems.
The Power Generation and Energy Systems business units have a number of
domestic and foreign competitors in the electric utility industry where
Westinghouse is recognized as a significant supplier. Positive factors with
respect to competitive position are technology, service and worldwide presence.
Negative factors are an increasing number of foreign competitors and small
competitors, particularly in the service area. The principal methods of
competition are technology, product performance, customer service, pricing and
financing.
KNOLL
The Knoll Group is comprised of the Corporation's office furniture
businesses. Knoll provides a wide range of furniture products ranging from
designer-oriented individual pieces to systems designed to improve work
environments and contribute to productivity. Products include individually
hand-crafted furniture, executive furniture, general office furniture,
furniture-grade textiles, office accessories and furniture systems.
Knoll is subject to a high degree of competition (including price, service,
design and product performance) for sales of products to the interior design,
construction, industrial and consumer markets from both large and small
competitors.
WCI
WCI develops land into master planned luxury communities located primarily
in Florida and California. Among WCI's major community developments are Coral
Springs, Parkland, Bermuda Bay, Pelican Bay, Pelican Marsh, Pelican Landing,
Gateway and Bay Colony, all in Florida, Tortolita Mountain Properties in Arizona
and Bighorn in Palm Springs, California.
DISCONTINUED OPERATIONS
Discontinued Operations consists of Financial Services and Other
Operations. Other Operations is comprised of DCBU and WESCO.
FINANCIAL SERVICES
Financial Services was comprised primarily of WCC and WSAV, WFSI and the
Corporation's leasing portfolio. WSAV sold Westinghouse Federal Bank, whose
assets represented the substantial majority of WSAV's assets, in January 1993.
On May 3, 1993, WFSI and WCC were merged into Westinghouse and, as a
consequence, ceased to exist as separate legal entities and their debt was
assumed by the Corporation. This merger gave management greater flexibility to
liquidate the assets of Financial Services and execute the strategy of exiting
the financial services business.
During 1993, Financial Services disposed of assets ahead of schedule at
prices more favorable than anticipated in the Plan. Financial Services disposed
of real estate, corporate and leasing assets for approximately $4,150 million in
cash during 1993, and significantly reduced debt. These dispositions included
the sale of over half of the commercial real estate portfolio to LW Real Estate
Investments, L.P. (LW) in several transactions. LW was formed in April 1993
between Westinghouse, the limited partner, and an affiliate of Lehman Brothers,
an investment banking firm. The Lehman Brothers affiliate is the general
partner. At December 31, 1993, the Corporation had a 44% limited partnership
interest in LW.
Financial Services portfolio investments are comprised of the remaining
real estate and corporate assets, and the Corporation's leasing portfolio, which
is expected to run-off in accordance with contractual terms. The remaining real
estate assets are primarily comprised of real estate properties, receivables and
the Corporation's investment in LW. The Corporation expects a significant
portion of its investment in LW to be liquidated during 1994 and the remaining
real estate assets by the end of 1995. The remaining corporate assets are
expected to be liquidated during 1994.
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DISTRIBUTION AND CONTROL
On August 11, 1993, the Corporation announced an agreement to sell the
majority of DCBU to Eaton Corporation for a purchase price of $1.1 billion and
the assumption by the buyer of certain liabilities. The Corporation completed
this sale on January 31, 1994.
WESTINGHOUSE ELECTRIC SUPPLY COMPANY
On February 16, 1994, the Corporation announced an agreement to sell WESCO
to an affiliate of Clayton Dubilier & Rice, Inc., a private investment firm, for
a purchase price of approximately $340 million. The Corporation completed this
sale on February 28, 1994.
RAW MATERIALS
The Corporation has experienced no significant difficulty with respect to
sources and availability of raw materials essential to the business.
PATENTS
Westinghouse owns or is licensed under a large number of patents and patent
applications in the United States and other countries that, taken together, are
of material importance to its business. Such patent rights are, in the judgment
of the Corporation, adequate for the conduct of its business. None of its
important products, however, are covered by exclusive controlling patent rights
that preclude the manufacture of competitive products by others.
BACKLOG
The backlog of firm orders of the Corporation from Continuing Operations
was $9,925 million at the end of 1993 and $9,617 million at the end of 1992,
excluding amounts associated with uranium supply contract settlements. Of the
1993 backlog, $5,686 million is expected to be liquidated after 1994. In
addition to the reported backlog, the Corporation provides certain
non-Westinghouse products primarily for nuclear steam supply systems customers.
Backlog for the Corporation is as follows:
Electronic Systems backlog at year-end 1993 and 1992 was $3,841 million and
$3,969 million. Backlog of $2,118 million is expected to be liquidated after
1994.
Environmental backlog at year-end 1993 and 1992 was $797 million and $778
million. Backlog of $645 million is expected to be liquidated after 1994.
Industries backlog at year-end 1993 and 1992 was $215 million and $196
million. Backlog of $36 million is expected to be liquidated after 1994.
Power Systems backlog at year-end 1993 and 1992 was $4,901 million and
$4,518 million. Backlog of $2,850 million is expected to be liquidated after
1994.
Knoll backlog at year-end 1993 and 1992 was $108 million and $106 million.
Backlog of $24 million is expected to be liquidated after 1994.
Also included in backlog at year-end of 1993 and 1992 was $63 million and
$50 million attributable to Corporate-Other, of which $13 million is expected to
be liquidated after 1994.
ENVIRONMENTAL MATTERS
Information with respect to Environmental Matters is incorporated herein by
reference to Management's Discussion and Analysis--Environmental Matters
included in Part II, Item 7 and note 17 to the financial statements included in
Part II, Item 8 of this report.
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RESEARCH AND DEVELOPMENT
Data with respect to research and development is incorporated herein by
reference to note 21 to the financial statements included in Part II, Item 8 of
this report.
EMPLOYEE RELATIONS
During 1993, Westinghouse employed an average of 103,063 people of whom
approximately 79,000 were located in the United States. During the same period,
approximately 14,000 domestic employees were represented in collective
bargaining by 24 labor organizations. Two-thirds of these represented employees
were represented by unions that are affiliated with, and/or bargain in
conjunction with, one of three national unions, namely, the International
Brotherhood of Electrical Workers, International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers and the Federation of
Independent Salaried Unions.
The current three-year agreements for these national unions which were
negotiated in August 1991 expire on August 27, 1994. The current agreements
provide a balanced and competitive package of pay and benefits which were
particularly well suited for Westinghouse and its employees.
In 1994 negotiations, management will place particular emphasis on
achieving an economic settlement and other provisions that are appropriate for
and supportive of current business conditions.
At December 31, 1993, the Corporation employed 101,654 people, of which
16,812 were employees of DCBU and WESCO. The Corporation completed the sales of
DCBU and WESCO in January 1994 and February 1994, respectively.
FOREIGN AND DOMESTIC OPERATIONS
Data with respect to foreign and domestic operations and export sales is
incorporated herein by reference to note 21 to the financial statements included
in Part II, Item 8 of this report.
ITEM 2. PROPERTIES.
At December 31, 1993, Westinghouse Continuing Operations owned or leased
791 locations totalling 40 million square feet of floor area in the United
States and 32 foreign countries. Domestic operations of Continuing Operations
comprised approximately 84% of the total space.
Facilities leased in the United States accounted for approximately 23% of
the total space occupied by Continuing Operations and facilities leased in
foreign countries accounted for approximately 7% of the total space occupied by
Continuing Operations. No individual lease was material.
A number of manufacturing plants and other facilities formerly used in
operations are either vacant, partially utilized, or leased to others. All of
these plants are expected to be sold, leased, or otherwise utilized. Except for
these facilities, the Corporation's physical properties are adequate and
suitable, with an appropriate level of utilization, for the conduct of its
business in the future.
ITEM 3. LEGAL PROCEEDINGS.
(a) On December 1, 1988, the Republic of the Philippines (Republic) and
National Power Corporation (NPC) filed a lawsuit in the United States District
Court (USDC) for the District of New Jersey asserting claims against the
Corporation, Westinghouse International Projects Company and Burns and Roe
Enterprises, Inc. (Burns and Roe) relating to a contract between NPC and
Westinghouse for the construction of a nuclear power plant in the Philippines as
well as an earlier consulting contract between NPC and Burns and Roe relating to
the same project. This action seeks recision of the Westinghouse and Burns and
Roe contracts and restitution of all money and other property paid to
Westinghouse and Burns and Roe or, alternatively, reformation of the
NPC-Westinghouse contract. Plaintiffs requested compensatory, punitive and
treble damages, costs and expenses of the lawsuit, and such other relief as the
USDC deems just and proper. The complaint alleges, among other things, bribery
and other fraudulent conduct, tortious interference with the fiduciary duty owed
by Ferdinand E. Marcos to the Republic and the people of the Philippines, common
law
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fraud, and violations of various New Jersey and federal statutes, including the
Federal Racketeer Influenced and Corrupt Organizations Act (RICO) statute.
Plaintiffs demanded a jury trial.
Also on December 1, 1988, Westinghouse filed a request for arbitration with
the International Chamber of Commerce Court of Arbitration (ICC) pursuant to the
NPC-Westinghouse contract, setting forth certain claims Westinghouse has against
NPC and the Republic and asking for arbitration of the anticipated claims of the
Republic and NPC related to the Philippines nuclear power plant. The Republic
and NPC challenged the jurisdiction of the ICC, arguing that the contract
between the parties, including its arbitration provision, was invalid due to
alleged bribery in the procurement of the contract. In December 1991, the ICC
arbitration panel issued its award finding that the Republic and NPC had failed
to carry their burden of proving the alleged bribery by the Corporation. The
panel thereby concluded that the arbitration clause and contract were valid and
that the panel has jurisdiction over the remaining disputes between NPC and the
Corporation. In January 1992, NPC filed an action for annulment of the award by
the ICC arbitration panel in the Swiss Federal Supreme Court. In September 1993,
the Swiss Federal Supreme Court issued an order dismissing NPC's annulment
action and assessing cost against NPC. Arbitration before the ICC is ongoing. An
evidentiary hearing is scheduled to begin in the first quarter of 1994, and a
final award is anticipated before the end of 1994.
With respect to the suit filed in the USDC, Westinghouse filed a motion
requesting that the action filed there be stayed in its entirety pending
arbitration of the Republic's claims. In 1989, the Court granted a motion
brought by the Corporation and ordered 14 of the 15 counts in the lawsuit stayed
pending arbitration. The Court retained jurisdiction over the remaining count
involving an alleged intentional interference with a fiduciary relationship.
Trial commenced with respect to this one count in March 1993. In May 1993, a
jury verdict was rendered in favor of the Corporation with respect to all claims
relating to the alleged intentional interference with a fiduciary relationship.
NPC and the Republic have indicated that they intend to appeal this decision.
(b) Duke Power Company (Duke) filed a lawsuit against the Corporation in
March 1990 in the USDC for the District of South Carolina, Charleston Division,
for an unspecified amount of damages, including treble and punitive damages,
based on 1970 and 1975 contracts for Westinghouse's supply of nuclear steam
supply systems at Duke's McGuire and Catawba plants. Subsequently, Duke
disclosed that it is seeking approximately $655 million for estimated past and
future damages for the four nuclear steam supply systems. Duke asserted counts
for negligence, promissory estoppel, fraud, negligent misrepresentation,
violation of the RICO statute, and violation of North Carolina and South
Carolina unfair trade practices statutes, and alleged that the steam generators
delivered by the Corporation were defectively designed and manufactured. Alleged
co-owners of the plants intervened in the litigation as additional plaintiffs.
In February 1993, the USDC granted the Corporation's motion to dismiss Duke's
negligent misrepresentation, negligent design and fabrication claims and
portions of its RICO claims. A motion to dismiss the remaining counts is
pending. Trial is scheduled for March 14, 1994.
(c) In March 1990, South Carolina Electric and Gas (SCE&G) filed a lawsuit
against the Corporation in the USDC for the District of South Carolina,
Charleston Division, for an unspecified amount of damages, including treble and
punitive damages, based on a 1970 contract for the Corporation's supply of a
nuclear steam supply system at the Summer plant. Subsequently, plaintiff
disclosed that it is seeking approximately $175 million for past damages and for
estimated future replacement of the nuclear supply system. SCE&G asserted counts
for breach of warranty, breach of contract, negligence, negligent
misrepresentation, promissory estoppel, fraud, violation of the RICO statute and
violation of a South Carolina unfair trade practices statute. SCE&G alleged that
the steam generators delivered by the Corporation were defectively designed and
manufactured. In February 1993, the court granted the Corporation's motion to
dismiss with respect to SCE&G's negligent misrepresentation, negligent design
and fabrication claim and portions of its RICO claims. On January 12, 1994, the
Corporation and SCE&G entered into a settlement agreement resolving all claims
asserted in this action and entered into a stipulated order dismissing the
action with prejudice.
(d) In October 1990, Commonwealth Edison Company (Commonwealth Edison)
filed a lawsuit against the Corporation and four individual defendants (all
employees of the Corporation or a Corporation subsidiary company) in Circuit
Court in Cook County, Illinois, for an unspecified amount of damages, including
treble
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and punitive damages, based on the Corporation's supply of nuclear steam supply
systems for Commonwealth Edison's Zion, Byron and Braidwood plants. The
complaint sets forth counts of common law fraud against the Corporation and the
employees, and violation of the Illinois Consumer Fraud and Deceptive Practices
Act and violations of the RICO statute against the Corporation. In November 1991
Commonwealth Edison dismissed the individual defendants and the parties are
currently engaged in discovery.
(e) In October 1990, Houston Lighting and Power Company and its co-owners
filed a lawsuit against the Corporation and two individual defendants (one
current and one retired employee of the Corporation) in the District Court of
Matagorda County, Texas, for an unspecified amount of damages. The claims arise
out of the Corporation's supply of nuclear steam supply systems for the South
Texas Project. The petition alleges breach of contract warranty,
misrepresentation, negligent misrepresentation and violation of the Texas
Deceptive Trade Practices Act. Plaintiffs later alleged $14 million plus, for
past damages. In January 1991, the parties reached agreement to dismiss the
individual defendants and to stay the litigation for the purpose of discussing
resolution of the issues between them. In November 1991, however, the plaintiffs
gave notice that they were activating the litigation.
In March 1993, plaintiffs filed an amended complaint seeking an unspecified
amount of future damages for replacement of the steam generator. The parties are
continuing discovery and a trial date is set for the third quarter of 1994.
(f) In April 1991, Duquesne Light Company (Duquesne) and its co-owners
filed a lawsuit against the Corporation in the USDC for the Western District of
Pennsylvania for an undetermined amount of damages, including treble and
punitive damages. Subsequently Duquesne disclosed that it is seeking
approximately $320 million in damages. The claims arise out of the Corporation's
supply of nuclear steam supply systems for the Beaver Valley plants. Duquesne
asserts counts for breach of contract, fraud, negligent misrepresentation, and
violations of the RICO statute. Pre-trial statements have been filed by all
parties and this case could go to trial in 1994.
(g) In February 1993, Portland General Electric Company (Portland) filed a
lawsuit against the Corporation in the USDC for the Western District of
Pennsylvania seeking unspecified damages based on claims for breach of contract,
negligence, fraud, negligent misrepresentation, and violations of the RICO
statute and the Oregon RICO statute relating to the Corporation's design,
manufacture and installation of steam generators at the Trojan Nuclear Plant, an
electric generating facility located in Ranier, Oregon. Portland also seeks a
declaratory judgment that the steam generators are defective and that the
Corporation is liable to plaintiff for expenses, including replacement power,
incurred as a result of the alleged defects. In April 1993, Portland filed a
motion to consolidate its case with a similar action filed by The Eugene Water &
Electric Board relating to the Trojan Nuclear Plant. This motion was
subsequently granted. In June 1993, the court granted the Corporation's motion
to dismiss plaintiff's claims for negligence and negligent misrepresentation.
The court also dismissed, in part, the plaintiff's claims under Section 1962(b)
of the federal RICO statute relating to the Trojan project enterprise. The
parties continue to engage in discovery. This case could go to trial in 1994.
(h) In February 1993, the City of Eugene, Oregon, acting by and through
The Eugene Water & Electric Board (the Board), filed a lawsuit against the
Corporation in the USDC for the District of Oregon seeking unspecified damages
based on claims for breach of contract, negligence, fraud, negligent
misrepresentation, and violations of the RICO statute and the Oregon RICO
statute relating to the Corporation's design, manufacture and installation of
steam generators at the Trojan Nuclear Plant, an electric generating facility
located in Ranier, Oregon. The Board is a 30% owner of the Trojan Nuclear Plant.
The Board also seeks a declaratory judgment that the steam generators are
defective and that the Corporation is liable to plaintiff for expenses incurred
as a result of the alleged defects. Also in February 1993, the Board filed a
motion to change venue from the USDC for the District of Oregon to the USDC for
the Western District of Pennsylvania. The Board's motion was subsequently
granted. This case was consolidated with the Portland case described in item (g)
above. The parties in both actions are seeking total damages of approximately
$350 million. In June 1993, the court granted the Corporation's motion to
dismiss plaintiff's claims for negligence and negligent misrepresentation. The
court also dismissed, in part, the plaintiff's claims under Section 1962(b) of
10
<PAGE> 11
the federal RICO statute relating to the Trojan project enterprise. The parties
continue to engage in discovery. This case could go to trial in 1994.
(i) In July 1993, Northern States Power Company (NSP) filed a lawsuit
against the Corporation in the USDC for the District of Minnesota for an
unspecified amount of damages, including treble and punitive damages, based on
the Corporation's supply of steam generators at NSP's Prairie Island Nuclear
Plant. The complaint sets forth counts for breach of contract, fraud, negligent
misrepresentation, violations of RICO and violations of the Minnesota Prevention
of Consumer Fraud Act.
(j) In August 1988, the Pennsylvania Department of Environmental Resources
(DER) filed a complaint against the Corporation alleging violations of the
Pennsylvania Clean Streams Law at the Corporation's Gettysburg, Pennsylvania,
elevator plant. The DER requested that the Environmental Hearing Board assess a
penalty in the amount of $9 million. The Corporation has denied these
allegations. The parties completed discovery and a portion of the hearing on the
complaint began in 1991. The hearing resumed in 1992 and concluded in February
1993. All post-trial briefs have been filed and the parties await a decision.
(k) The Corporation has been defending a consolidated class action, a
consolidated derivative action and certain individual lawsuits that have been
brought by shareholders of the Corporation against the Corporation, WFSI and
WCC, previously subsidiaries of the Corporation and/or certain present and
former directors and officers of the Corporation, as well as other unrelated
parties. Together, these actions allege various federal securities law and
common law violations arising out of alleged misstatements or omissions
contained in the Corporation's public filings concerning the financial condition
of the Corporation, WFSI and WCC in connection with a $975 million charge to
earnings announced on February 27, 1991, a public offering of Westinghouse
common stock in May 1991, a $1,680 million charge to earnings announced on
October 7, 1991, and alleged misrepresentations regarding the adequacy of
internal controls at the Corporation, WFSI and WCC. In July 1993, the USDC for
the Western District of Pennsylvania dismissed in its entirety the derivative
claim and dismissed most of the class action claims set forth above, with leave
to replead both actions. In August 1993, the plaintiffs refiled, in its
entirety, the derivative action. In September 1993, the plaintiffs refiled all
dismissed claims in the class-action suit. In September 1993, the Corporation
moved to strike and dismiss the refiled derivative action. In December 1993, the
Corporation filed a motion to dismiss the refiled class action claims. The
parties await a decision on both motions.
(l) In June 1990, a suit was filed against WCC in the USDC for the Western
District of Missouri by three affiliated entities (collectively American
Carriers) for the alleged breach of a commitment letter issued by WCC to lend up
to $65 million to American Carriers. American Carriers claims the alleged breach
caused it to file bankruptcy. The complaint alleged counts for breach of
contract, breach of implied duty of good faith, promissory estoppel and
negligent misrepresentation, and sought compensatory and punitive damages. By
agreement of the parties, in January 1992, the action in the USDC was dismissed
and an action was filed in the Circuit Court of Jackson County, Missouri with
substantially the same claims made, except allegations relating to negligent
misrepresentation and punitive damages were dropped by stipulation of the
parties. WCC counterclaimed alleging, among other things, fraud in the
inducement, which if proven would defeat plaintiffs' claims in their entirety.
In February 1993, the jury in this case returned a verdict in favor of the
plaintiffs in the amount of $70 million. In April 1993, the Corporation appealed
the decision of the court. A decision on the appeal is expected soon.
(m) In February 1993, the Corporation was sued by 108 former employees who
were laid off subsequent to the cancellation by the federal government of all
contracts pertaining to the carrier based A-12 aircraft program. The complaint
alleges age discrimination on the part of the Corporation. The suit was filed in
the USDC for the District of Maryland. The plaintiffs seek back pay with
benefits and reinstatement of jobs or front pay. Also, in April 1993, the Equal
Employment Opportunity Commission (EEOC) filed a class-action, age
discrimination suit against Westinghouse in the USDC for the District of
Maryland on behalf of 388 former Westinghouse employees who were laid off or
involuntarily terminated from employment subsequent to the federal government's
cancellation of all contracts pertaining to the carrier based A-12 aircraft
program. The suit alleges age discrimination and discriminatory employment
practices. The suit seeks back pay, interest, liquidated damages, reinstatement
of jobs, court costs and other appropriate relief. These two cases have been
consolidated by the court. Presently, the EEOC is reviewing various
discrimination charges relating
11
<PAGE> 12
to other involuntary terminations which have occurred at the Corporation's
Electronic Systems business unit. In October 1993, EEOC issued a determination
letter regarding age discrimination associated with certain layoffs at the
Corporation's Electronic Systems business unit. The letter invited the
Corporation to conciliate the issues. If the conciliation is unsuccessful, the
EEOC may file another lawsuit in federal court.
(n) Beginning in early 1990 and continuing into 1993, numerous asbestos
lawsuits have been filed against the Corporation and numerous other defendants
in the Circuit Court of Jackson County, Mississippi. The plaintiffs allege
personal injury, wrongful death and loss of consortium claims arising out of
exposure to products containing asbestos that were manufactured, supplied or
installed by the defendants. In April 1993, trial commenced in the Circuit Court
with respect to the claims of nine plaintiffs against a number of defendants,
including the Corporation. In August 1993, a jury awarded a verdict in favor of
five of the plaintiffs against the Corporation and certain other defendants and
awarded a defense verdict in favor of the Corporation against the four other
plaintiffs. The jury found Westinghouse approximately 38% liable on the
aggregate damage verdict of some $8.75 million awarded the five plaintiffs, with
punitive damages at 10% of compensatory damages. The Corporation is entitled to
offsets on these verdicts from settlements previously paid by certain defendants
and will also apply its insurance coverage to these verdicts. The judge has
previously ruled that the jury's findings on certain questions may apply to
approximately 6,400 other cases pending which, however, would still have to be
tried on issues of exposure, causation and the amount of compensatory damages,
if any. The Corporation, along with the other defendants who were found liable,
have filed post-trial motions seeking a judgment notwithstanding the verdict on
a new trial. The Corporation intends to appeal if the court denies its
post-trial motions.
(o) The Corporation is currently a defendant in approximately 7,400 out of
more than 12,000 asbestos cases pending in the Circuit Court of Kanawha County,
West Virginia. The plaintiffs allege personal injury, wrongful death and loss of
consortium claims arising out of alleged exposure to asbestos-containing
products that were manufactured, supplied or installed by the defendants,
including the Corporation. On March 24 1994, a trial is scheduled to begin on
the plaintiffs' claims generally, although no individual plaintiffs will be
asserting their claims at that time. Rather, the trial will focus on whether the
various defendants' asbestos-containing products were hazardous, and whether the
defendants had and/or breached a duty to warn of the alleged hazards associated
with those products. The trial will also determine whether the defendants are
liable for punitive damages arising from a failure to warn of alleged hazards
associated with their asbestos-containing products. The findings made in this
phase of trial regarding "duty to warn" and punitive damages may be applied in
future trials involving the individual plaintiffs.
(p) The Corporation is a direct defendant in approximately 527 of 2,100
consolidated cases alleging personal injury, wrongful death and loss of
consortium claims arising from exposure to asbestos-containing products
manufactured, supplied or installed by various defendants, including the
Corporation. Although pending in Baltimore County Circuit Court, Westinghouse
has removed 508 of the cases to Federal Court, and has thus far successfully
defended plaintiffs' attempts to remand the cases to state court. If the cases
are remanded, they will become part of a trial scheduled for March 1994, which
will adjudicate all issues raised by the claims of ten representative
plaintiffs, including the issue of punitive damages. Certain findings made with
respect to the representative plaintiffs will be applied to future trials of the
remaining plaintiffs. The March 1994 trial will also address cross-claims and
third-party claims filed by various defendants against the Corporation in an
earlier consolidated proceeding in which the Corporation was not a direct
defendant.
(q) On March 10, 1993, the State of Washington Department of Ecology
issued to the DoE and to Westinghouse Hanford Company (WHC) an administrative
penalty in the amount of $100,000 for violation of the Washington Dangerous
Waste regulations. Specifically, the penalty was assessed for failure to
designate certain waste at the tank farms at the DoE's Hanford, Washington
facility, which is managed by WHC. On November 1, 1993, the parties agreed to
fund certain projects in lieu of paying this amount directly to the State. The
Corporation believes that the penalty will be an allowable cost under WHC's
contract with the DoE.
(r) A description of the derivative litigation involving certain of the
Corporation's current and past directors is incorporated herein by reference to
"Litigation Involving Derivative Claims Against Directors" in the Proxy
Statement.
12
<PAGE> 13
Management believes that the Corporation has meritorious defenses to all of
the proceedings described above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1993.
EXECUTIVE OFFICERS
The name, offices, and positions held during the past five years by each of
the executive officers of the Corporation as of March 1, 1994 are listed below.
Officers are elected annually. There are no family relationships among any of
the executive officers of the Corporation.
<TABLE>
<CAPTION>
AGE AT
NAME, OFFICES, AND POSITIONS MARCH 1, 1994
------------------------------------------------------------ -----------------
<S> <C>
Michael H. Jordan -- Chairman and Chief Executive Officer 57
since June 30, 1993.
Gary M. Clark -- President since June 30, 1993; President 58
and Acting Chief Executive Officer from January 27, 1993
to June 30, 1993; Member of President's Office from
January 1, 1993 to January 27, 1993; Executive Vice
President, Industries and Corporate Resources from
December 1990 to December 1992; Executive Vice President,
Industries from January 1988 to December 1990.
Frank R. Bakos -- Vice President, Power Generation since 56
January 1989.
Louis J. Briskman -- Senior Vice President and General 45
Counsel since January 1994; Senior Vice President,
Secretary and General Counsel from January 1993 to January
1994; Deputy General Counsel from January 1988 to December
1992.
Thomas P. Costello -- Executive Vice President since October 62
1993; Group President from February 1993 to October 1993;
President, Thermo King Corporation from October 1985 to
February 1993.
Richard J. Hadala -- Vice President, Strategic Management 36
since January 1994.
Francis J. Harvey -- President, Westinghouse Government & 50
Environmental Services Company since January 1994; Vice
President, Science and Technology from July 1993 to
February 1994; General Manager, Marine Division from July
1986 to July 1993.
Warren H. Hollinshead -- Executive Vice President since 58
March 1, 1994; Executive Vice President Finance from
December 1990 to March 1, 1994; Vice President and Deputy,
Finance from July 1990 to December 1990; Vice President
and Treasurer from February 1990 to July 1990; Vice
President, Corporate Development from January 1988 to
February 1990.
Willard C. Korn -- President, Westinghouse Broadcasting 51
Company since January 1993; President, Group W Television
from June 1990 to January 1993.
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
AGE AT
NAME, OFFICES, AND POSITIONS MARCH 1, 1994
------------------------------------------------------------ -----------------
<S> <C>
Richard A. Linder -- Executive Vice President since October 62
1993; Group President from February 1993 to October 1993;
Member of President's Office from January 1993 to February
1993; Executive Vice President, Electronic Systems from
December 1987 to December 1992.
James S. Moore -- Senior Vice President, Corporate Human 57
Resources and Total Quality since January 1993; Vice
President of Executive Resources and Development from July
1991 to January 1993; President, Westinghouse Savannah
River Company from September 1988 to July 1991.
Fredric G. Reynolds -- Executive Vice President, Finance 43
since March 1, 1994.
Burton B. Staniar -- Executive Vice President and Chairman 52
of The Knoll Group and Westinghouse Broadcasting Company
since October 1993; Group President from February 1993 to
October 1993; Member of President's Office from January
1993 to February 1993; Executive Vice President since
January 1993; Chairman and Chief Executive Officer,
Westinghouse Broadcasting Company from May 1987 to
December 1992.
James F. Watson, Jr. -- President, Thermo King since 56
February 1993; Vice President and General Manager, North
American Division of Thermo King from October 1983 to
February 1993.
Nathaniel D. Woodson -- Vice President, Energy Systems since 52
November 1990; President, International from March 1989 to
November 1990.
Laurence A. Chapman -- Vice President and Treasurer since 44
January 1992; Special Assistant to Executive Vice
President, Finance from August 1991 to January 1992;
Executive Vice President, Finance, Westinghouse Financial
Services, Inc. from June 1990 to August 1991; Vice
President, Finance, Westinghouse Financial Services, Inc.
from May 1988 to June 1990.
Robert E. Faust -- Vice President and Controller since 54
February 1988.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal markets for the Corporation's common stock are identified on
page 1 of this report. The remaining information required by this item appears
on page 58 of this report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on page 58 of this report and
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item appears on pages 16 through 28 of
this report and is incorporated herein by reference.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item, together with the report of Price
Waterhouse dated January 26, 1994, except as to the matter discussed in
paragraph 9 of note 2 which is as of February 28, 1994, appears on pages 29
through 57 of this report and is incorporated herein by reference.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Statement of Income for each of the three years in the 29
period ended December 31, 1993
Consolidated Balance Sheet at December 31, 1993 and 1992 30
Consolidated Statement of Cash Flows for each of the three years in the 31
period ended December 31, 1993
Notes to the Financial Statements 32
Report of Management 57
Report of Independent Accountants 57
Five-Year Summary Selected Financial and Statistical Data (unaudited) 58
Quarterly Financial Information (unaudited) 58
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
15
<PAGE> 16
FINANCIAL REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
In November 1992, the Corporation adopted a plan which included the disposition
of Distribution and Control Business Unit (DCBU), Westinghouse Electric Supply
Company (WESCO) and exiting Financial Services. These businesses comprise the
Corporation's Discontinued Operations.
The Corporation's Continuing Operations consist of its Broadcasting,
Electronic Systems, Environmental, Transport Temperature Control and Power
Systems businesses, as well as The Knoll Group (Knoll), its furniture business,
and WCI Communities, Inc. (WCI).
The Corporation reported a net loss of $326 million, or $1.07 per share, for
1993. Net losses in 1992 and 1991 were $1,394 million and $1,086 million, or
$4.11 and $3.46 per share, respectively. Included in 1993 results was a pre-tax
provision of $750 million for restructuring, the disposition of certain
non-strategic businesses and certain litigation and environmental
contingencies. The 1993 results also included an after-tax charge of $95
million for Discontinued Operations to reflect management's current estimates
of proceeds and costs associated with the plan adopted in November 1992. See
notes 1 and 2 to the financial statements for a description of the plan.
Included in 1992 results was an after-tax charge of $1,383 million to record
the estimated loss on disposal of Discontinued Operations. See note 2 to the
financial statements.
The Corporation reported a loss from Continuing Operations of $175 million or
$.64 per share for 1993. Excluding the pre-tax provision of $750 million
recorded in the fourth quarter of 1993, income from Continuing Operations was
$318 million or $.76 per share. Income from Continuing Operations was $357
million or $.95 per share for 1992 and $335 million or $1.07 per share for
1991. The loss from Discontinued Operations was $95 million or $.27 per share
in 1993, $1,413 million or $4.08 per share in 1992 and $1,421 million or $4.53
per share in 1991.
Included in 1993 results is the adoption, retroactive to January 1, 1993, of
Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits," which resulted in an after-tax charge
of $56 million or $.16 per share. The Corporation's results for the first
quarter of 1993 have been restated to reflect the implementation of SFAS No.
112. See notes 1 and 4 to the financial statements.
The Corporation's 1992 results included the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
concurrent with the adoption of SFAS No. 109, "Accounting for Income Taxes,"
which resulted in a net charge of $338 million or $.98 per share. See notes 1,
4, and 5 to the financial statements.
The 1991 results included a pre-tax valuation provision at Financial Services
of $1,680 million and a $160 million pre-tax charge for a corporate-wide
workforce reduction, $22 million of which related to Discontinued Operations.
In 1992, a $36 million pre-tax charge for corporate restructuring was recorded
in Continuing Operations in connection with the November 1992 plan.
The Corporation's goals during 1994 include improving the operating
performance of the continuing businesses, continuing to pay down debt,
rebuilding equity, and accelerating the pursuit of international opportunities
by certain of its businesses. Operating profit and results of operations will,
however, continue to be negatively impacted in 1994 by interest and litigation
costs and increased pension expense. The Corporation's objective is to reduce
these earnings constraints over the next several years. Sales for the first
quarter of 1994 are expected to be down compared to the first quarter of 1993.
Operating profit for the first quarter of 1994 is expected to be down
approximately 10% compared to the same period of 1993, after considering the
effects of higher pension expense and reduced licensee income in 1994, and a
change in accounting for nuclear fuel revenues that favorably impacted the
first quarter of 1993. The decline in the first quarter of 1994 operating
profit is expected to be caused primarily by the nuclear energy business of the
Power Systems segment and two businesses within the Environmental segment,
Resource Energy Systems and Controlmatic, both scheduled to be sold.
Reported earnings per share for the first quarter of 1994 are anticipated
to be down approximately $.10 per share from the same period of 1993.
RESTRUCTURING AND OTHER ACTIONS
On January 11, 1994, the Corporation announced a restructuring of its
continuing businesses, the disposition of certain non-strategic businesses and
provisions for certain litigation and environmental contingencies. These
actions resulted from an extensive review led by Chairman and Chief Executive
Officer Michael Jordan of all of the Corporation's Continuing and Discontinued
Operations and are designed to improve operating performance, accelerate the
divestiture of non-strategic businesses and improve financial flexibility. The
benefits of these actions are expected to be realized over the next several
years. In addition to the charges resulting from restructuring and other
actions, certain other charges were recorded related to Discontinued Operations
and the adoption of SFAS No. 112.
<TABLE>
<CAPTION>
NET INCOME EFFECT OF RESTRUCTURING AND OTHER ACTIONS (in millions)
<S> <C>
Restructuring of continuing businesses $350
Disposition of non-strategic businesses 215
Litigation provision 125
Environmental provision 60
- - --------------------------------------------------------------------
Subtotal pre-tax 750
- - --------------------------------------------------------------------
Subtotal after-tax 493
Estimated loss on disposal of Discontinued Operations,
net of income taxes 95
Adoption of SFAS No. 112, net of income taxes 56
- - --------------------------------------------------------------------
Net income effect $644
====================================================================
</TABLE>
Restructuring of continuing businesses--$350 million:
The $350 million charge includes costs directly related to employment
reductions which are comprised of approximately $225 million related to
separation costs for 3,400 employees, approximately $35 million associated with
asset writedowns, and approximately $45 million for facility closedown and
rationalization costs. The remaining portion of the $350 million charge is
approximately $45 million related to asset writedowns for process and product
redesign or reengineering. The Corporation anticipates that actions resulting
from implementation of its restructuring plan, directed to improving
productivity and operating performance, will result in the reduction of
approximately 6,000 employees, which includes the previously-
16
<PAGE> 17
discussed 3,400 separations and an additional 2,600 reductions expected to
result from normal attrition. The 3,400 employee separations that are included
as part of the restructuring charge are expected to result in annual pre-tax
savings of approximately $100 million primarily through reduced employment
costs. A substantial portion of this annual savings is expected to be realized
in 1994 and approximately $300 million over the next three-year period.
Additional savings will be realized as the anticipated reductions resulting
from normal attritions occur over the next two years. Total cash expenditures
for restructuring over the next three years are expected to approximate $270
million with expenditures of approximately $180 million in 1994, $55 million in
1995 and $35 million in 1996. Net cash expenditures in excess of savings are
expected to be funded through cash flows from operations of Continuing
Operations. See Liquidity and Capital Resources--Other Actions.
Disposition of non-strategic businesses--$215 million:
The Corporation plans to dispose of certain non-strategic businesses including
parts of the Environmental Services business unit and certain businesses in the
Industrial Products and Services business unit. This charge includes all
associated costs anticipated to be incurred in disposing of these businesses,
including estimates for the cost of certain possible environmental remediation
which may result from the selling process. Estimated sales proceeds for these
businesses of approximately $175 million were determined from various sources,
including offers contained in bona fide letters of interest received from third
parties, estimates from investment banking firms retained by the Corporation or
certain internal sources. Also included in the $215 million charge is
approximately $20 million for the writedown of certain assets related to
discontinued projects.
Litigation provision--$125 million:
As a result of a change in strategy with respect to certain litigation, the
Corporation has determined to provide for the possible settlement of these
matters when it is in the best interests of the Corporation and its
shareholders. See Legal Matters for a description of certain pending
litigation.
Environmental provision--$60 million:
The Corporation is a party to a 1985 Consent Decree to remediate toxic waste
resulting from its former manufacturing operations in Bloomington, Indiana. In
the Consent Decree, the Corporation agreed to construct and operate an
incinerator, which would be permitted under federal and state law to burn
excavated materials. Community opposition to the construction of the
incinerator has continued. Further, the State of Indiana has enacted
legislation that has resulted in indefinite delays in granting permits to
construct and operate toxic waste incinerators. Finally, the parties to the
Consent Decree have filed a status report with the court overseeing the Consent
Decree which outlines a plan to investigate alternative remedial measures which
would replace the incineration remedy. In light of these developments, the
Corporation no longer believes that it is probable that the Consent Decree will
be implemented under its present terms and has chosen to recognize and provide
for what it has determined to be the most likely alternative environmental
cleanup strategy if the Consent Decree is modified. Timing with respect to the
expenditure of the $60 million is entirely dependent on the outcome of
discussions between the parties and any resulting modifications to the Consent
Decree. However, the Corporation believes that should a modification to the
Consent Decree be agreed upon, the majority of these costs would be expended
during the 1994 to 1996 time period. See also Environmental Matters.
Estimated loss on disposal of Discontinued Operations--
$95 million, after-tax:
In the fourth quarter of 1993, the Corporation recorded an additional provision
for the estimated loss on disposal of Discontinued Operations of $95 million,
after-tax. This change in the estimated loss resulted from additional
information, obtained through negotiation activity, regarding the expected
selling prices of WESCO and the Australian subsidiary of DCBU. Also
contributing to this provision was a decision to bulk sell a Financial Services
residential development that the Corporation, upon adoption of the November
1992 plan, had intended to transfer to WCI for development. These matters and a
revision to the estimated interest costs expected to be incurred by the
Discontinued Operations during the disposal period resulted in the additional
fourth quarter provision. See note 2 to the financial statements.
In January 1994, the Corporation announced that the planned sale of WCI will
be accelerated from 1995 into 1994, and Knoll is no longer for sale. With
respect to Knoll, the Corporation's strategy will now be directed to create
shareholder value by continuing to operate this business.
EQUITY AND DIVIDEND ACTIONS
On January 11, 1994, the Corporation also announced its intention to take
actions to rebuild its equity base. These actions include a reduction in the
annual dividend on the Corporation's common stock from $.40 per share to $.20
per share and the issuance during 1994 of $700 million of new equity
securities. Approximately $200 million of the equity securities, proceeds from
the sale of such securities or a combination thereof, will be contributed to
the Corporation's pension plans during 1994.
As a result of the trend of declining long-term interest rates, the
Corporation remeasured its pension obligation as of June 30, 1993 and December
31, 1993. SFAS No. 87, "Employers' Accounting for Pensions," requires that
discount rates used to measure pension obligations reflect current and expected
to be available interest rates on high quality fixed-income investments. The
Corporation reduced its assumed discount rate from 9%, which was used at
December 31, 1992, to 8% at June 30, 1993 and 7.25% at December 31, 1993. The
Corporation also reduced its expected long-term rate of return on plan assets
and the expected rate of increase in future compensation levels. See note 3 to
the financial statements. These changes resulted in an increase in the
Corporation's accumulated benefit obligation at
17
<PAGE> 18
June 30, 1993 and December 31, 1993 of $551 million and $389 million,
respectively. Shareholders' equity was reduced after consideration of tax
effects at June 30, 1993 and December 31, 1993 by $459 million and $260
million, respectively, or a total of $719 million for the year.
RESULTS OF OPERATIONS--CONTINUING OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS--CONTINUING OPERATIONS (in millions)
Segment Operating Profit
Sales of Segment Operating (Loss) excluding Restructuring
Products and Services Profit (Loss) and Other Related Charges
--------------------- ------------- -------------------------
Year ended December 31 1993 1992 1991 1993 1992 1991 1993 1992 1991
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broadcasting $ 705 $ 719 $ 707 $136 $159 $137 $148 $159 $145
Electronic Systems 2,623 2,874 3,245 81 221 207 217 256 276
Environmental 542 605 561 (25) 93 13 7 93 22
Industries 1,153 1,122 1,054 114 108 99 120 108 107
Power Systems 3,177 3,218 3,046 (79) 237 218 217 237 247
Knoll 510 578 673 (39) (40) 26 (30) (14) 26
WCI 253 235 258 61 87 122 65 97 122
Other 59 70 61 (103) (72) (76) (598) (143) (199)
Intersegment Sales (147) (170) (196) -- -- -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------
Total $8,875 $9,251 $9,409 $146 $793 $746 $146 $793 $746
==================================================================================================================
</TABLE>
In 1993, the Corporation's reporting segments were realigned to more closely
reflect the ongoing businesses. Engineering and repair services, previously
included in the Industries segment, have been transferred to the Power Systems
segment, where these businesses have been consolidated with the power
generation service organization. The Environmental segment now includes the
U.S. naval nuclear reactors programs previously reported in Power Systems. The
Longines-Wittnauer Watch Company and Westinghouse Communications have been
transferred from the Broadcasting segment to the Industries segment as part of
the Industrial Products and Services business unit. Segment information for
1992 and 1991 has been restated to reflect these changes.
1993 VERSUS 1992
The 1993 results for Continuing Operations included a $750 million charge for
the restructuring and other actions announced on January 11, 1994 of which $555
million was charged to operating profit. The charges to operating profit were
allocated to each of the Corporation's segments with the exception of the $60
million environmental provision which was included in Other. The 1992 results
for Continuing Operations included a $36 million charge for corporate
restructuring related to the previous strategy to sell Knoll and WCI. See
Results of Operations--Discontinued Operations for a discussion of the November
1992 plan.
Revenues for Broadcasting decreased 2% in 1993 compared to 1992 due to poor
performance in a weak west coast television market and lower volume at Group W
Productions, which was partially offset by stronger performance in radio and
Group W Satellite Communications. In addition, 1992 benefitted from advertising
revenues from the Olympics and political campaigns. Included in 1993 operating
profit was $12 million of the charge for restructuring. Excluding that charge,
operating profit decreased 7% in 1993 compared to 1992 due to lower revenues
and an unfavorable mix of sales.
Revenues for Electronic Systems decreased 9% in 1993 compared to 1992 due to
lower revenues from Department of Defense (DoD) contracts and the 1992
divestitures of the Electrical Systems and Copper Laminates divisions. Included
in 1993 operating profit was $136 million of the charge for restructuring.
Included in 1992 operating profit was $35 million for a workforce reduction.
Excluding the charges in both years, operating profit decreased 15% in 1993
compared to 1992 primarily due to the decrease in DoD revenues.
Electronic Systems' business is influenced by changes in the budgetary plans
and procurement policies of the U.S. government. Reductions in defense
spending and program cancellations in recent years have adversely affected and
are likely to continue to affect the results of this segment. DoD revenues are
expected to be lower in 1994 than in 1993. However, the Corporation intends to
maintain a strong focus on DoD opportunities and believes that it is well
positioned, over the long-term, to benefit from the supply of advanced
electronic systems to the United States and foreign governments.
Revenues for Environmental decreased 10% in 1993 compared to 1992 due to
lower volume and reduced prices in the remediation services and hazardous waste
incineration businesses and the continued weak economic conditions in Europe.
Included in 1993 operating profit was $32 million of the charge for
restructuring and other actions. Excluding that charge, operating profit
decreased 92% in 1993 compared to 1992 due to project cost overruns at a German
subsidiary and the lower volume. Certain operations within this segment have
been identified for sale. In addition, the Corporation is reviewing the
remainder of the businesses in the Environmental segment to determine how best
to reposition these businesses. The Corporation does not anticipate that the
markets served by the businesses in the Environmental segment will improve in
the near-term.
18
<PAGE> 19
Revenues for Industries increased 3% in 1993 compared to 1992. Thermo King's
continued strong performance in North American truck and trailer and service
parts was partially offset by its lower revenues in Europe, which continues to
be impacted by a weak economy. Westinghouse Communications continues to
experience revenue growth. Lower production and delayed deliveries contributed
to lower revenues at Westinghouse Motor Company. Included in 1993 operating
profit was $6 million of the charge for restructuring. Excluding that charge,
operating profit increased 11% in 1993 compared to 1992 due to a favorable mix
of sales and cost improvements, partially offset by the lower production and
delayed deliveries at Westinghouse Motor Company. Certain operations within
this segment have been identified for sale in connection with the Corporation's
planned disposition of certain non-strategic businesses announced in January
1994.
Revenues for Power Systems decreased 1% in 1993 compared to 1992 due to
reduced shipments, lower sales in power generation services and projects
partially offset by the recognition of revenues on a percentage of completion
basis in the nuclear fuel business. Included in 1993 operating profit was $296
million of the charge for restructuring and other actions. Excluding that
charge, operating profit decreased 8% in 1993 compared to 1992 due to the
volume decreases, lower margin on power generation services and an unfavorable
mix of power generation sales partially offset by the revenue recognition
change in nuclear fuel.
Revenues for Knoll decreased 12% in 1993 compared to 1992 due to lower
shipments and reduced prices in the domestic market and poor economic
conditions in Europe. Included in 1993 operating loss was $9 million of the
charge for restructuring. Included in 1992 operating loss was $26 million of
the charge for corporate restructuring related to the November 1992 plan.
Excluding the charges in both years, the operating loss increased by $16
million due to the lower revenues.
Revenues for WCI increased 8% in 1993 compared to 1992 as strong sales in
South Florida were partially offset by the weak Southern California real estate
market. Included in 1993 operating profit was $4 million of the charge for
restructuring. Included in 1992 operating profit was $10 million of the charge
for corporate restructuring related to the November 1992 plan. Excluding the
charges in both years, the operating profit decreased 33% in 1993 compared to
1992 due to an unfavorable mix of sales.
1992 VERSUS 1991
The 1992 results for Continuing Operations included a $36 million charge for
corporate restructuring related to the previous strategy to sell Knoll and WCI.
The 1991 results for Continuing Operations included a charge of $138 million
for the corporate-wide workforce reduction.
Revenues for Broadcasting increased 2% in 1992 compared to 1991 primarily due
to increased revenues in Group W Satellite Communications. Included in 1991
operating profit was $8 million of workforce reduction costs. Excluding that
amount, operating profit increased 10% in 1992 compared to 1991 primarily due
to cost reductions in television and radio and volume increases in Group W
Satellite Communications.
Revenues for Electronic Systems decreased 11% in 1992 compared to 1991 due to
the termination settlement received in 1991 for the A-12 program cancellation,
the 1992 divestitures of Electrical Systems and Copper Laminates divisions and
lower DoD volume. In October 1992, Electronic Systems announced a workforce
reduction to adjust for the DoD budget decline. Operating profit for 1992
included a $35 million charge for that workforce reduction, compared to a $69
million charge included in 1991 for the Electronic Systems portion of the
corporate workforce reduction. Excluding the workforce reduction charges in
both years, operating profit decreased 7% in 1992 compared to 1991 due to the
lower DoD volume partially offset by cost improvements.
Environmental revenues increased 8% in 1992 compared to 1991 due to increased
volume in the incineration business. Included in 1991 was $9 million of
workforce reduction costs. Excluding that amount, operating profit was up $71
million in 1992 compared to 1991 due to the absence of cost overruns in the
waste-to-energy business, increased revenues in the incineration business and
higher operating results at the government-owned facilities.
Revenues for Industries increased 6% in 1992 compared to 1991 as higher
revenues from a stronger domestic truck and trailer market were partially
offset by lower revenues in industrial products and services, which continued
to be impacted by weak markets. Included in 1991 operating profit was $8
million of workforce reduction costs. Excluding that amount, operating profit
increased 1% in 1992 compared to 1991 as improvements in transport
refrigeration were partially offset by continued weak performance in industrial
products and services.
Power Systems revenues increased 6% in 1992 compared to 1991 as power
generation projects sales increased. These increases were partially offset by
lower licensee income, reduced shipments of manufactured products and lower
engineering and repair service revenues which continued to be impacted by weak
markets. Included in 1991 operating profit was $29 million of workforce
reduction costs. Excluding that amount, operating profit decreased 4% in 1992
compared to 1991 due to an unfavorable mix of products sold and lower
engineering and repair revenues.
Knoll revenues decreased 14% in 1992 compared to 1991 due to continued weak
European markets and weak domestic demand for Knoll products. Included in 1992
operating loss was $26 million of the charge for corporate restructuring
related to the November 1992 plan. Excluding that charge, the $14 million
operating loss in 1992, compared to a $26 million operating profit in 1991, was
due to reduced volume.
WCI revenues decreased 9% in 1992 compared to 1991 due to lower levels of
commercial and residential land sales. Included in 1992 operating profit was
$10 million of the charge for corporate restructuring related to the November
1992 plan. Excluding that charge, operating profit decreased 20% in 1992
compared to 1991 due to lower volume and the shift from land to building sales.
19
<PAGE> 20
RESULTS OF OPERATIONS--DISCONTINUED OPERATIONS
The Corporation adopted a plan in November 1992 (the Plan) to sell DCBU, WESCO
(collectively, Other Operations), Knoll and WCI, exit the financial services
business and pay down debt. The Corporation's financial services business
(Financial Services) was comprised primarily of Westinghouse Credit Corporation
(WCC) and Westinghouse Savings Corporation (WSAV), each subsidiaries of
Westinghouse Financial Services, Inc. (WFSI) and the Corporation's leasing
portfolio. On May 3, 1993, WFSI and WCC were merged into Westinghouse. Other
Operations and Financial Services were classified as discontinued operations in
accordance with Accounting Principles Board Opinion No. 30.
Since adoption of the Plan, the Corporation has made significant progress in
disposing of Financial Services assets.
On August 11, 1993, the Corporation announced an agreement to sell the
majority of DCBU to Eaton Corporation for a purchase price of $1.1 billion and
the assumption by the buyer of certain liabilities. The Corporation completed
this sale on January 31, 1994.
On February 16, 1994, the Corporation announced an agreement to sell WESCO to
an affiliate of Clayton Dubilier & Rice, Inc., a private investment firm, for a
purchase price of approximately $340 million. The Corporation completed this
sale on February 28, 1994.
The reserve for the estimated loss on disposal of Discontinued Operations
established in November 1992 consisted of an addition to the valuation
allowance for Financial Services portfolios, estimated future results of
operations and sales proceeds to be obtained from Discontinued Operations, as
well as estimates as to the timing of the divestitures and assumptions
regarding other relevant factors.
During 1993, the Corporation reviewed its estimates of proceeds from the
disposal of Discontinued Operations and the operating income or loss that would
be generated by these businesses during their disposal periods. Through the
third quarter of 1993, the Corporation had favorable experience with the sale
of Financial Services assets, selling them at prices in excess of original
estimates and on a more accelerated schedule than was anticipated at the time
the Plan was developed. The more rapid liquidation of the assets had the effect
of reducing the earned income from the Financial Services assets during the
disposal period, which, to a large degree, offset the favorable price
experience from the asset sales. In addition, the marketing process for Other
Operations indicated that expected proceeds would be less than the initial
forecast. Through the third quarter of 1993, all of these factors were reviewed
and considered to be largely offsetting.
During the fourth quarter of 1993, the Corporation recorded an additional
provision for the estimated loss on disposal of Discontinued Operations of $95
million, after-tax. See Overview--Restructuring and Other Actions and note 2 to
the financial statements.
The reserve for the estimated loss on disposal of Discontinued Operations may
require adjustment in future periods to reflect changes in any of the above
constituent elements, which may be affected by adverse economic, market or
other factors beyond what was anticipated at December 31, 1993.
Management has considered all of the above factors and believes that the
reserve for the estimated loss on disposal of Discontinued Operations should be
adequate. The adequacy of the reserve is evaluated each quarter and the actual
experience and any changes in expectations will be considered in determining
whether adjustment to the reserve is required.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS--OTHER OPERATIONS (in millions)
Year ended December 31 1993 1992 1991
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales of products and services $2,384 $2,428 $2,439
Operating profit 68 104 47
========================================================================================
</TABLE>
1993 VERSUS 1992
Revenues for Other Operations decreased 2% in 1993 compared to 1992 primarily
due to lower Canadian sales in a continued weak Canadian economy. Operating
profit decreased 35% in 1993 compared to 1992 due to lower revenues, an
unfavorable mix of sales and non-recurring costs for strategic initiatives at
WESCO partially offset by lower corporate support costs.
1992 VERSUS 1991
Other Operations revenues were flat in 1992 compared to 1991. Increased
revenues resulting from the consolidation of a joint venture previously
accounted for by the equity method for which the Corporation gained control in
1992, were offset by lower revenues due to weak U.S. and Canadian markets and
price competition. Included in 1991 operating profit was $22 million of
workforce reduction costs. Excluding that amount, operating profit increased
51% in 1992 compared to 1991 primarily due to cost reductions.
Included in 1992 are $198 million of revenues from Other Operations and $11
million of operating profit realized after the Board of Directors adopted the
Plan in November 1992. See notes 1 and 2 to the financial statements for
additional information about results of Other Operations.
FINANCIAL SERVICES
During 1993, the Corporation continued to downsize Financial Services,
resulting in a reduction in assets and debt. Financial Services revenues of
$305 million for 1993 decreased 59% compared to 1992, reflecting the
significant reduction in assets through dispositions. Revenues of $745 million
for 1992 decreased 30% compared to 1991 due primarily to a reduction in assets
through dispositions and reduced volume, and an increase in underperforming
assets. The Financial Services pre-tax losses of $2,831 million and $1,660
million in 1992 and 1991, respectively, were due primarily to the valuation
provisions recorded in each year.
At December 31, 1993 and 1992, Financial Services portfolio investments
totalled $1,551 million and $8,967 million, respectively. Portfolio
investments include receivables, real estate
20
<PAGE> 21
properties, investments in partnerships and other entities and nonmarketable
securities. In 1992, portfolio investments also included marketable securities
and equipment on operating leases. Financial Services portfolio investments at
December 31, 1993 are comprised of the remaining real estate and corporate
assets, and the Corporation's leasing portfolio.
In November 1992, the Financial Services real estate portfolio was valued
using the Derived Investment Value (DIV) method. DIV is the process developed
by the Resolution Trust Corporation for use in measuring the values of real
estate owned and loans secured by income-producing assets and land. Likewise,
the Financial Services corporate and leasing portfolios were valued using
various techniques which consider a number of factors, including trading desk
values with respect to the corporate portfolio and information provided by
independent consultants. Trading desk values arise from actual or proposed
current trades of identical or similar assets. See note 2 to the financial
statements.
Financial Services remaining real estate assets totalled $399 million at
December 31, 1993 and included $212 million of investments in partnerships,
$141 million of real estate properties and $46 million of receivables. At
December 31, 1992 real estate assets totalled $4,748 million and included
$3,442 million of receivables, $663 million of real estate properties, $402
million of investments in partnerships and $241 million of marketable
securities. Of the real estate assets at December 31, 1992, $341 million of
receivables and real estate properties and all of the marketable securities
were assets of Westinghouse Federal Bank, WSAV's Illinois-based thrift, and
were sold to First Financial Bank, F.S.B., in January 1993.
Real estate investments in partnerships at December 31, 1993 were comprised
primarily of the Corporation's investment in LW Real Estate Investments, L.P.,
discussed below. Real estate properties were acquired through foreclosure
proceedings or represent "in-substance" foreclosures and are being operated by
Financial Services or contracted professional management until sold. Real
estate receivables consist of loans for commercial and residential real estate
properties. At December 31, 1993, the remaining real estate receivables were
primarily residential loans. Management expects a significant portion of the
Corporation's investment in LW Real Estate Investments, L.P. to be liquidated
during 1994, and the remaining real estate properties and real estate
receivables by the end of 1995.
On April 8, 1993, Westinghouse agreed to sell $1.7 billion, book value before
reserves, of the remaining commercial real estate assets for in excess of $878
million after closing adjustments. The sale was completed in May 1993.
Additionally, during the remainder of 1993, the Corporation sold additional
commercial real estate assets totalling $349 million, book value before
reserves, for $122 million after closing adjustments. The assets in these
transactions were sold to LW Real Estate Investments, L.P., a partnership
formed in April 1993. An affiliate of the investment banking firm, Lehman
Brothers, is the general partner. Additionally, LW Real Estate Investments,
L.P. assumed certain off-balance-sheet financing commitments related to the
assets. Westinghouse initially invested a total of $141 million for a 49%
limited partnership interest. At December 31, 1993, the Corporation's
investment in the partnership totalled $133 million which represented a 44%
interest.
Financial Services entered into participation agreements with lending
institutions which provided for the recourse sale of a senior interest in
certain real estate loans. During 1993, Financial Services sold its
subordinated interest in the remaining loans subject to certain servicing
obligations. At December 31, 1992, the outstanding balance of receivables
previously sold under participation agreements totalled $57 million.
Financial Services remaining corporate portfolio assets totalled $144 million
at December 31, 1993 and included $82 million of investments in partnerships
and other entities, $47 million of receivables and $15 million of nonmarketable
equity securities. Management expects the remaining corporate assets to be
liquidated during 1994. At December 31, 1992, corporate assets totalled $2,929
million and included $2,140 million of receivables, $457 million of investments
in partnerships and other entities and $332 million of nonmarketable equity
securities.
Corporate investments in partnerships and other entities represent
investments in limited partnerships engaged in subordinated lending to, and
investing in, highly leveraged borrowers. Corporate receivables are generally
considered highly leveraged financing that involves a buyout, acquisition, or
recapitalization of an existing business with a high debt-to-equity ratio.
Borrowers in the corporate portfolio generally are middle market companies and
located throughout the U.S. Industry concentrations included manufacturing,
retail trade, media and financial services.
The Corporation's leasing portfolio totalled $1,008 million at December 31,
1993 and included $969 million of receivables and $39 million of investments in
partnerships. The Plan calls for the run-off of the leasing portfolio in
accordance with contractual terms. At December 31, 1992, the leasing portfolio
totalled $1,290 million and included $1,146 million of receivables, $101
million of equipment on operating leases and $43 million of investments in
partnerships and other assets. The equipment on operating lease portfolio was
sold during 1993.
Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1993 and 1992, 77% and 66%, respectively, related to aircraft and
19% and 22%, respectively, related to cogeneration facilities. Leasing
receivables at December 31, 1992 also included leases for railcars, marine
vessels and trucking equipment.
Certain leasing receivables classified as performing and totalling $162
million at December 31, 1993, have been identified by management as potential
problem receivables. Management believes that the characterization of
receivables as potential problems is mitigated by the valuation allowance
attributed to such receivables at December 31, 1993.
Nonearning receivables at December 31, 1993 totalled $30 million, a decrease
of $1,893 million from year-end
21
<PAGE> 22
1992. At December 31, 1993 there were no reduced earning receivables, compared
to $881 million at year-end 1992. These decreases were primarily the result of
dispositions and the write-off of receivables.
The difference between the income for 1993 that would have been earned under
original contractual terms on nonearning receivables at December 31, 1993, and
the income that was actually earned, was not significant. The income for 1992
that would have been earned under original contractual terms on nonearning and
reduced earning receivables at December 31, 1992 totalled $268 million, and the
income actually earned was $98 million.
Financial Services had issued various loan or investment commitments,
guarantees, standby letters of credit and standby commitments. These
commitments totalled $111 million at December 31, 1993, compared to $1,418
million at year-end 1992. The Corporation's efforts to reduce assets and debt
were impacted by these commitments. However, management expects the remaining
commitments to either expire unfunded, be assumed by the purchaser in asset
dispositions or be funded with the resulting assets being sold shortly after
funding.
The primary reasons for the $1,307 million reduction in commitments during
1993 were that Financial Services was released from $959 million of commitments
through asset sales, restructurings and commitment expirations, funded $340
million of commitments and transferred $76 million of guarantees to Continuing
Operations. These decreases were partially offset by $68 million of new
commitments.
At December 31, 1993, the valuation allowance for portfolio investments
totalled $424 million. Management believes that under current economic
conditions, the valuation allowance at Financial Services should be adequate to
cover losses that are expected from the disposal of the remaining portfolios.
OTHER INCOME AND EXPENSES
Other income and expenses was a net expense of $18 million in 1992 and a net
expense of $165 million in 1993 and changed primarily due to a $195 million
charge recorded for the disposition of certain non-strategic businesses in
connection with the actions announced on January 11, 1994.
Other income and expenses was a net expense of $19 million in 1991 and a net
expense of $18 million in 1992 and changed due to lower interest income,
partially offset by improved operating results from affiliates. In addition,
1991 included a provision for the loss on investment in an affiliate.
Interest expense decreased $8 million in 1993 compared to 1992 due to lower
effective interest rates on average outstanding debt, partially offset by
higher fees associated with the revolving credit facility (see Liquidity and
Capital Resources--Revolving Credit Facility) and the replacement of short-term
floating-rate debt with higher coupon long-term fixed-rate debt. Interest
expense decreased $6 million in 1992 compared to 1991 due to lower effective
interest rates on average outstanding debt, partially offset by fees associated
with the revolving credit facility.
INCOME TAXES
The Corporation's 1993 benefit for income taxes was 32.6% of the net losses
from all sources. The 1993 benefit totalled $153 million and was comprised of a
$70 million tax benefit from Continuing Operations, a benefit of $53 million
from the estimated loss on disposal of Discontinued Operations, and a benefit
of $30 million from the cumulative effect of the change in accounting principle
for postemployment benefits.
The Corporation's 1992 benefit for income taxes was 52.7% of the net losses
from all sources. The 1992 benefit totalled $1,530 million and was comprised of
$187 million tax expense on income from Continuing Operations, a benefit of
$882 million on losses from Discontinued Operations, and a benefit of $835
million on the cumulative effect of changes in accounting principles for
postretirement benefits other than pensions and for the adoption of SFAS No.
109. The consolidated net loss before taxes, minority interest in income of
consolidated subsidiaries and provision for postretirement benefits other than
pensions totalled $2,905 million and was comprised of income from Continuing
Operations of $550 million, the loss from Discontinued Operations of $2,282
million and pre-tax charge for the adoption of SFAS No. 106 of $1,173 million.
The net deferred tax asset at December 31, 1993 was $2,505 million as shown
in the Consolidated Deferred Income Tax Sources table in note 5 to the
financial statements.
There are three significant components of the deferred tax asset balance: (i)
the tax effect of net operating loss carryforwards of $3,437 million, $922
million of which will expire by the year 2007 and the balance by 2008, (ii) the
tax effect of cumulative net temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes of $2,667 million that represents future net income tax
deductions. Of this net temporary difference, approximately $1,100 million
represents a net pension obligation and approximately $1,300 million represents
an obligation for postretirement and postemployment benefits, and (iii)
alternative minimum tax credit carryforwards of $257 million which have no
expiration date.
Management believes that the Corporation will have sufficient future taxable
income to make it more likely than not that the net deferred tax asset will be
realized. In making this assessment, management considered the net losses
generated in recent years as aberrations caused by liquidation of a substantial
portion of Financial Services assets and not recurring conditions; further that
the Corporation's Continuing Operations have been consistently profitable and
that the loss from Continuing Operations in 1993 is due to the decision to
reduce the workforce and dispose of underperforming businesses. Management
further considered the actual historic operating performance and taxable income
generated by the Continuing Operations.
Certain of the tax losses will not occur until future years. Each tax loss
year would receive a new 15 year carryforward
22
<PAGE> 23
period. Under the most conservative assumption, however, that all net
cumulative temporary differences reversed in 1993, the Corporation would have
through the year 2008 to recover the tax asset. This would require the
Corporation to generate a minimum of approximately $400 million of annual
taxable income. Management believes that average annual future taxable income
will exceed this minimum amount.
In addition, there are certain tax planning strategies that could be employed
to utilize a net operating loss carryforward that would otherwise expire. Some
of the strategies that would be most feasible are sale and leaseback of
facilities, adjustment of tax deductible depreciation, purchase of leases that
would generate taxable income and capitalization of research and development
expense.
The following table shows a reconciliation of income or loss from Continuing
Operations before income taxes to taxable income from Continuing Operations.
<TABLE>
<CAPTION>
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
TO TAXABLE INCOME (in millions)
Year ended December 31 1993 1992 1991
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from Continuing Operations
before income taxes $(236) $ 550 $ 496
- - -------------------------------------------------------------------------------------------
Permanent increases (decreases):
Income earned in foreign activities
and Puerto Rico (115) (162) (180)
State income taxes (33) (29) (14)
Goodwill amortization 39 22 21
Other 21 (15) 23
- - -------------------------------------------------------------------------------------------
Net permanent decrease (88) (184) (150)
- - -------------------------------------------------------------------------------------------
Temporary increases (decreases):
Pension expense greater (less) than
amount deducted for tax purposes 104 71 (306)
Long-term contract adjustment 16 29 20
Depreciation 41 22 (10)
Provision for restructuring
and other actions 713 -- --
Other 116 97 (21)
- - -------------------------------------------------------------------------------------------
Net temporary increase (decrease) 990 219 (317)
- - -------------------------------------------------------------------------------------------
Taxable income from
Continuing Operations $ 666 $ 585 $ 29
===========================================================================================
</TABLE>
Income from Continuing Operations in 1992 included a $36 million pre-tax
charge for corporate restructuring related to the previous strategy to sell
Knoll and WCI.
Included in income from Continuing Operations for 1991 was a pre-tax
provision for the corporate-wide workforce reduction totalling $138 million.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
The Corporation's liquidity has improved through the disposition of Financial
Services assets ahead of schedule and the sale of DCBU and WESCO. Management
believes that the net proceeds anticipated from the disposition of assets of
Discontinued Operations, WCI and certain identified and to be identified
non-strategic businesses, as well as cash flow from Discontinued Operations
until sold, will be sufficient but not in excess of the liquidity required to
fund Discontinued Operations, including the repayment of its debt. Other
sources of liquidity generally available to the Corporation include significant
levels of cash and cash equivalents, unused borrowing capacity under the
Corporation's revolving credit facility, cash flow from the operations of
Continuing Operations and borrowings from other sources, including funds from
the capital markets, subject to then existing market conditions and other
considerations.
Significant progress was made during 1993 in reducing net debt (total debt
less cash and cash equivalents) due to the disposition of Financial Services
assets ahead of schedule at prices more favorable than anticipated in the Plan.
The Corporation's net debt was $5,102 million at December 31, 1993, a reduction
of $3,277 million from $8,379 million at December 31, 1992. The principal
source of cash for this reduction was the disposal of Financial Services assets
for $4,150 million, partially offset by Financial Services commitment fundings
of $340 million and investments totalling $141 million in LW Real Estate
Investments, L.P. Funding of Financial Services commitments has slowed the
Corporation's efforts to reduce debt. However, the level of remaining unfunded
commitments has substantially declined. Unfunded commitments were $111 million
at December 31, 1993 compared to $1,418 million at December 31, 1992, a
decrease of $1,307 million. Management anticipates that the remaining
commitments will either expire unfunded, be assumed by the purchaser in asset
dispositions or be funded with the resulting assets being sold shortly after
funding. See note 17 to the financial statements.
On August 11, 1993, the Corporation announced an agreement to sell DCBU for a
purchase price of approximately $1.1 billion. See note 2 to the financial
statements. The proceeds of $1.1 billion were received on January 31, 1994 and
were used primarily to reduce debt of Discontinued Operations.
On February 16, 1994, the Corporation announced an agreement to sell WESCO
for approximately $340 million. See note 2 to the financial statements. This
sale was completed on February 28, 1994. The proceeds of approximately $340
million were comprised of approximately $275 million in cash, approximately $50
million in first mortgage notes and the remainder in stock and options in the
new company. Cash proceeds were used primarily to reduce debt of Discontinued
Operations.
On October 8, 1993, the Corporation redeemed at par value $100 million of
outstanding 8 3/8% senior notes due March 1, 1996 and the remaining $45
million of outstanding 7.60%
23
<PAGE> 24
debentures due October 15, 1997. These notes and debentures were originally
issued by WCC, which until May 1993, was a subsidiary of the Corporation.
Additionally, on November 30, 1993, the Corporation redeemed the remaining $41
million of its 9% convertible subordinated debentures due August 15, 2009. The
notes, debentures and subordinated debentures were redeemed with a portion of
the net proceeds received from the sale of $600 million principal amount of
notes and debentures on September 1, 1993. This sale included $275 million
principal amount of 6 7/8% notes due September 1, 2003 and $325 million
principal amount of 7 7/8% debentures due September 1, 2023.
SECURITIES RATINGS
<TABLE>
<CAPTION>
SECURITIES RATINGS
Moody's S & P Fitch
------- ----- -----
<S> <C> <C> <C>
At January 1, 1993
Commercial paper Prime-3 A-2 F-1
Senior long-term debt Baa3 A- A
Subordinated debt Ba1 BBB+ Not rated
Preferred stock--
depositary shares ba1 BBB+ Not rated
- - -----------------------------------------------------------------------------------------
At December 31, 1993
Commercial paper Prime-3 A-3 F-2
Senior long-term debt Baa3 BBB BBB+
Subordinated debt None outstanding
Preferred stock--
depositary shares ba1 BBB- Not rated
- - -----------------------------------------------------------------------------------------
At January 31, 1994
Commercial paper Not-Prime A-3 F-2
Senior long-term debt Ba1 BBB BBB
Subordinated debt None outstanding
Preferred stock--
depositary shares ba3 BBB- Not rated
==========================================================================================
</TABLE>
On March 9, 1993, Standard and Poor's (S&P) lowered its ratings on the
Corporation's senior debt from A- to BBB; subordinated debt and preferred stock
from BBB+ to BBB-; and commercial paper from A-2 to A-3. S&P cited the
Corporation's weakened financial profile caused by the high level of impaired
assets at Financial Services as the reason for the downgrades. On January 11,
1994, S&P affirmed its ratings of the Corporation's securities with a negative
outlook. S&P cited that the ratings reflect an above average business profile,
as a major diversified manufacturing firm, and a temporarily weakened financial
profile. The affirmation was partially conditioned upon the completion by the
Corporation of an equity financing plan announced on January 11, 1994 (see
Overview--Equity and Dividend Actions) and the Corporation's progress in
completing the Plan.
On March 10, 1993, Fitch Investor's Service, Inc. (Fitch) lowered its ratings
on the Corporation's senior debt from A to BBB+ and commercial paper from F-1
to F-2. Fitch cited the Corporation's diminished financial flexibility
resulting from large losses at Financial Services, lower than expected
operating results from Continuing Operations and a less than favorable
intermediate term outlook as reasons for the downgrades. On January 11, 1994,
Fitch lowered its ratings on the senior debt from BBB+ to BBB and has placed
the debt on FitchAlert with negative implications. Fitch cited the
Corporation's continued operating difficulties and its announcement to take a
substantial charge to its fourth quarter 1993 earnings as reasons for the
downgrade. Fitch also noted that a further downgrade could occur if the
Corporation fails to raise additional equity.
On March 23, 1993, Moody's Investors Service (Moody's) affirmed its ratings
of the Corporation's senior debt at Baa3 and commercial paper at Prime-3.
Moody's cited its assessment that reserves taken for Financial Services' assets
are adequate and the expected future benefits of restructuring activities as
reasons for the affirmation. On January 7, 1994, Moody's lowered its ratings on
the Corporation's senior debt from Baa3 to Ba1; its preferred stock from ba1 to
ba3; and its commercial paper from Prime-3 to Not-Prime. Moody's downgrades
were based on an expectation that the Corporation's efforts to rebuild its
depleted capital structure will take longer than previously believed.
The Corporation does not believe that the recent actions by the rating
agencies will materially impact its operations or financial condition or its
ability to borrow in the capital markets.
REVOLVING CREDIT FACILITY
In December 1991, the Corporation entered into a $6 billion revolving credit
agreement (revolver) with a syndicate of domestic and international banks. This
facility expires in December 1994. The revolver is available for use by the
Corporation subject to the maintenance of certain financial ratios and
compliance with other covenants and subject to there being no material adverse
change with respect to the Corporation taken as a whole. Among other things,
the covenants place restrictions on the incurrence of liens, the amount of debt
on a consolidated basis and at the subsidiary level, and the amount of
contingent liabilities. The covenants also require the maintenance of a maximum
leverage ratio, minimum interest coverage ratios and a minimum consolidated net
worth. Certain of the covenants become more restrictive over the term of the
revolver. At December 31, 1993, the Corporation was in compliance with these
covenants. See Financing Activities for a discussion of interest costs and fees
related to this facility.
The borrowing status of this facility at December 31, 1993 and 1992 is
presented in the following table:
<TABLE>
<CAPTION>
BORROWING STATUS OF REVOLVING CREDIT FACILITY (in millions)
At December 31 1993 1992
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
Commitment level $4,000 $6,000
Borrowings (2,855) (5,495)
- - ---------------------------------------------------------------------------------------
Availability before letters of credit 1,145 505
Letters of credit issued under
revolving credit facility (149) --
- - ---------------------------------------------------------------------------------------
Availability $ 996 $ 505
=======================================================================================
</TABLE>
24
<PAGE> 25
During 1993, the Corporation made repayments of borrowings under this
facility totalling $2,640 million and increased its use of the letter of credit
portion of the facility by $149 million. Also during 1993, the Corporation and
the bank syndicate negotiated certain amendments to the revolver wherein the
Corporation agreed to reduce the commitment level by a total of $2 billion in
1993, and by an additional $500 million upon completion of the sale of DCBU.
The Corporation decided to reduce the commitment level by an additional $500
million, to $3 billion in February 1994.
Amendments to the revolver negotiated during 1993 also included changes which
affect various covenants and calculations, as well as certain costs paid by the
Corporation. These changes included a one-year delay of a scheduled increase in
the minimum consolidated net worth covenant, additional provisions for
increased costs in the event of certain rating agency downgrades, and an
exclusion of certain of the provisions for restructuring and other actions
announced on January 11, 1994 from the calculation of certain ratios until, in
certain cases, such time as the Corporation expends cash for these charges. As
a result of the January 7, 1994 downgrade by Moody's, discussed above, the
margin paid by the Corporation under the revolver increased by an additional
.125% per annum. The downgrade by Fitch on January 11, 1994 had no effect on
the margin.
The Corporation made several repayments of borrowings under the revolver
during the first two months of 1994 totalling $1,565 million. The primary
source of cash for these repayments was the $1.1 billion of cash proceeds
received by the Corporation in January 1994 from the sale of DCBU and the $275
million of cash received from the sale of WESCO. Of the $1,565 million of total
repayments, $1,355 million related to Discontinued Operations and the remainder
related to Continuing Operations.
The Corporation intends to negotiate a revolving credit facility during 1994
to replace its existing facility upon expiration. The new facility is expected
to have a commitment level of $2 billion to $3 billion with terms and
conditions based upon market conditions existing at the time of negotiation.
OPERATING ACTIVITIES
Cash provided by operating activities of Continuing Operations was $735 million
for 1993, an increase of $118 million from the amount provided in 1992.
Cash provided by operating activities of Discontinued Operations was $45
million for 1993, a decrease of $420 million from the amount provided in 1992.
INVESTING ACTIVITIES
Excluding cash provided to Discontinued Operations, investing activities of
Continuing Operations used $164 million of cash in 1993, compared to $69
million of cash used in 1992. The principal reason for this additional use of
cash was lower cash proceeds received in 1993 from business dispositions. In
addition, during 1993, Continuing Operations purchased assets from Discontinued
Operations for $233 million primarily for contribution to the Corporation's
pension plans.
Investing activities of Discontinued Operations provided $3,065 million of
cash during 1993, primarily as a result of the sale of Financial Services
assets, an increase of $2,800 million from 1992.
Capital expenditures of Continuing Operations were $237 million in 1993
compared to $259 million in 1992. Management expects that capital expenditures
for Continuing Operations in 1994 will exceed the 1993 level. Capital
expenditures of Discontinued Operations were $35 million in 1993 compared to
$45 million in 1992.
FINANCING ACTIVITIES
Total debt of the Corporation was $6,350 million at December 31, 1993, a
decrease of $3,583 million from $9,933 million at December 31, 1992. Cash and
cash equivalents of the Corporation were $1,248 million at December 31, 1993, a
decrease of $306 million from $1,554 million at December 31, 1992, primarily
related to the sale of Westinghouse Federal Bank in January 1993.
Short-term debt, including current maturities of long-term debt, of the
Corporation totalled $3,818 million at December 31, 1993 compared to $6,990
million at December 31, 1992. See notes 11 and 13 to the financial statements.
Short-term debt, including current maturities of long-term debt, of
Continuing Operations was $671 million at December 31, 1993 compared to $1,554
million at December 31, 1992. The decrease of $883 million was due primarily to
the repayment of $600 million of revolver borrowings.
Short-term debt, including current maturities of long-term debt, of
Discontinued Operations totalled $3,147 million at December 31, 1993 compared
to $5,436 million at December 31, 1992, a decrease of $2,289 million. This
decrease is primarily attributed to repayment of $2,040 million of revolver
borrowings.
Total borrowings outstanding under the revolver were $2,855 million at
December 31, 1993 (excluding $149 million of letters of credit), of which $500
million was attributable to Continuing Operations and $2,355 million to
Discontinued Operations. These borrowings carried a composite interest rate of
4.0% for Continuing Operations and 4.1% for Discontinued Operations. The
current interest rate for borrowings under the revolver is based on the London
Interbank Offer Rate (LIBOR) plus an interest rate margin based upon the
Corporation's debt ratings and interest coverage ratio, and utilization of the
facility. An increase or decrease in LIBOR will result in higher or lower
interest expense to the Corporation. The Corporation's interest rate margin
increased .125% upon Moody's downgrade on January 7, 1994. The utilization fee
has decreased from .25% to .125% as a result of a lower average revolver
balance outstanding during the second half of 1993. The revolver is also
subject to facility fees. The facility fee, also based on the Corporation's
debt ratings and interest coverage ratio, increased .125% per annum
25
<PAGE> 26
upon the S&P downgrade on March 9, 1993. However, the commitment level on which
the facility fee is based has declined (see Liquidity and Capital
Resources--Revolving Credit Facility).
Long-term debt of the Corporation totalled $2,532 million at December 31,
1993, a $411 million decrease from December 31, 1992. See note 13 to the
financial statements. Long-term debt of Continuing Operations was $1,885
million at December 31, 1993 compared to $1,341 million at December 31, 1992.
The $544 million increase was primarily due to the sale of notes and
debentures as discussed in Liquidity and Capital Resources--Overview.
Long-term debt of Discontinued Operations was $647 million at December 31,
1993, a decrease of $955 million since year-end 1992.
The Corporation's net debt-to-capital ratio for Continuing Operations was 65%
at December 31, 1993 compared to 49% at December 31, 1992. For this ratio, the
reduction of net debt during 1993 was more than offset by non-cash charges to
shareholders' equity. See notes 1, 4 and 5 to the financial statements.
The Corporation's foreign exchange exposure policy includes selling in
national currencies where possible, and hedging those transactions in excess of
$250,000 which occur in currencies other than those of the originating country.
In addition, the Corporation's accounting policies require translation of local
currency financial statements of subsidiaries in highly inflationary and
unstable economies into U.S. dollars in accordance with SFAS No. 52, "Foreign
Currency Translation," in order to minimize foreign exchange rate risks and
provide for appropriate accounting treatment where exchange rates are most
volatile.
With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52, the
combined total sales for those operations were less than 0.5% of the
Corporation's sales for 1993. Any translation adjustments resulting from
converting the local currency balance sheets and income statements of
designated hyperinflationary subsidiaries into U.S. dollars are recorded as
period costs in accordance with SFAS No. 52.
OTHER ACTIONS
The restructuring of the Corporation's continuing businesses, announced on
January 11, 1994 (see Overview--Restructuring and Other Actions), is expected
to require total cash expenditures over the next three years of approximately
$270 million, with expenditures of approximately $180 million in 1994, $55
million in 1995 and $35 million in 1996. These expenditures are expected to be
funded through cash flows from operations of the Continuing Operations and will
be offset by savings, resulting in an expected net cash outflow of
approximately $85 million in 1994, and net cash inflows of approximately $55
million and $70 million for 1995 and 1996, respectively. The disposition of
certain non-strategic businesses is expected to generate, over the next two
years, total cash proceeds of approximately $175 million as these businesses
are sold.
On January 11, 1994, the Corporation also announced its intention to take
actions to rebuild its equity base. These actions include a reduction in the
annual dividend on the Corporation's common stock from $.40 per share to $.20
per share and the issuance during 1994 of $700 million of new equity
securities. Approximately $200 million of the equity securities, proceeds from
the sale of such securities or a combination thereof, will be contributed to
the Corporation's pension plans during 1994. The reduction in the common stock
dividend became effective with the quarterly dividend declared by the Board of
Directors in January 1994, which is payable on March 1, 1994.
On August 26, 1992, Westinghouse filed a registration statement on Form S-3
for the issuance of up to $1 billion of Westinghouse debt securities. At
December 31, 1993, $400 million of this shelf registration was unused.
On May 3, 1993, WFSI and WCC were merged into Westinghouse and, as a
consequence, WFSI and WCC ceased to exist as separate legal entities and their
debt was assumed by the Corporation. This merger gave management greater
flexibility to liquidate the assets of Financial Services and execute the
strategy of exiting the financial services business.
Prior to the merger, a support agreement existed between Westinghouse and WCC
that required the Corporation to provide financial support necessary to
maintain WCC's total debt-to-equity ratio at not more than 6.5 to 1 and
maintain WCC's equity at a minimum of $1 billion. On December 31, 1992,
Westinghouse assumed $1,800 million of WCC's revolver debt to satisfy its
obligation under the support agreement. No payments were required under the
support agreement during 1993. Payments of $73 million and $1,405 million were
made under the support agreement during 1992 and 1991, respectively. The
support agreement terminated on May 3, 1993, the effective date of the merger.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local regulations relating to the discharge
of substances into the environment, the disposal of hazardous wastes and other
related activities affecting the environment have had and will continue to have
an impact on the Corporation. While it is difficult to estimate the timing and
ultimate costs to be incurred in the future due to uncertainties about the
status of laws, regulations, technology and information available for
individual sites, management estimates the total probable and reasonably
possible remediation costs that could be incurred by the Corporation based on
the facts and circumstances currently known. Such estimates include the
Corporation's experience to date with investigating and evaluating site cleanup
costs, the professional judgment of the Corporation's environmental experts,
outside environmental specialists and other experts and, when necessary,
counsel. In addition, the likelihood that other parties which have been named
as potentially responsible parties (PRPs) will have the financial resources to
fulfill their obligations at Superfund sites where they and the Corporation may
be jointly and severally liable has been considered. These estimates have been
used to assess materiality for financial statement disclosure purposes and in
the following discussion.
26
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
PRP SITES
With regard to remedial actions under federal and state superfund laws, the
Corporation has been named as a PRP at numerous sites located throughout the
country. At many of these sites, the Corporation is either not a responsible
party or its site involvement is very limited or de minimus. However, the
Corporation may have varying degrees of cleanup responsibilities at 52 of these
sites, excluding those discussed in the preceding sentence. With regard to
cleanup costs at these sites, in many cases the Corporation will share these
costs with other responsible parties and the Corporation believes that any
liability incurred will be satisfied over a number of years. Management
believes the total remaining probable costs which the Corporation could incur
for remediation of these sites as of December 31, 1993 are approximately $69
million, all of which has been accrued. These remediation actions are expected
to occur over a period of several years. As the remediation activities
progress, additional information may be obtained which may require additional
investigations or an expansion of the remediation activities. This may result
in an increase in site remediation costs; however, until such time as
additional requirements are identified during the remediation process, the
Corporation is unable to reasonably estimate what those costs might be.
BLOOMINGTON CONSENT DECREE
The Corporation is a party to a 1985 Consent Decree relating to remediation of
six sites in Bloomington, Indiana. The Corporation has additional
responsibility for two other sites in Bloomington not included as part of the
Consent Decree. In the Consent Decree, the Corporation agreed to construct and
operate an incinerator, which would be permitted under federal and state law to
burn excavated materials. The incinerator would also burn municipal solid waste
provided by the City of Bloomington (City) and Monroe County. Applications for
permits to build an incinerator are pending with the United States
Environmental Protection Agency, the State of Indiana and other local
permitting agencies. There is continuing community opposition to the
construction of the incinerator and the State of Indiana has enacted
legislation that has resulted in indefinite delays in granting permits. As a
result, the parties to the Consent Decree have met several times on a
cooperative basis and have decided to explore whether alternative remedial
measures should be used to replace the incineration remedy set forth in the
Consent Decree. On February 8, 1994 the parties filed a status report with the
United States District Court for the Southern District of Indiana, which is
responsible for overseeing the implementation of the Consent Decree. This
report advised the court of the parties' intention to investigate alternatives
and provided the court with operating principles for this process. It is the
goal of the parties to reach a consensus on an alternative which is acceptable
to all parties and to the Bloomington public. However, the parties recognize
that at the end of the process they may conclude that the remedy currently
provided in the Consent Decree is the most appropriate. The parties also
recognize that the Consent Decree shall remain in full force during this
process. These actions have resulted in the Corporation's belief that it no
longer is probable that the Consent Decree will be implemented under its
present terms. The Corporation and the other parties may have claims against
each other under the Consent Decree if a mutually agreeable alternative is not
reached. The Corporation may be required to post security for 125% of the net
cost to complete remediation in the event certain requirements of the Consent
Decree are not met. The Corporation believes it has met all of these
requirements.
If necessary permits were to be granted and the Consent Decree fully
implemented in its present form, the Corporation estimates that its total
remaining cost would be approximately $300 million at December 31, 1993. As
part of the Consent Decree, and in addition to burning contaminated materials,
the incinerator would also be used to burn municipal solid waste and generate
electricity which would be purchased by various public utilities. The
Corporation would receive revenues from tipping fees and sale of electricity
which are estimated to be approximately $210 million. The Consent Decree also
provides the City with an option to purchase the incinerator after the
remediation is completed. The Corporation has assumed that proceeds from the
sale of the incinerator would be in the range of $100 million to $160 million.
Based on the above estimates, the Corporation continues to believe that the
ultimate net cost of the environmental remediation under the present terms of
the Consent Decree would not result in a material adverse effect on its future
financial condition or results of operation.
However, because the Corporation believes it is probable the Consent Decree
will be modified to an alternate remediation action, the Corporation estimates
that its cost to implement the most reasonable and likely alternative would be
approximately $60 million, all of which has been accrued. Approximately $16
million of this estimate represents operating and maintenance costs which will
be incurred over an approximate 30 year period. These costs are expected to be
distributed equally over this period and, based on the Corporation's experience
with similar operating and maintenance costs, have been determined to be
reliably determinable on a year to year basis. Accordingly, the estimated $44
million gross cost of operating and maintenance has been discounted at a rate
of 5% per year which results in the above described $16 million charge. The
remaining portion of the $60 million charge represents site construction and
other related costs and is valued as of the year of expenditure. Analyses of
internal experts and outside consultants have been used in forecasting
construction and other related costs. The estimates of future period costs
include an assumed inflation rate of 5% per year. This estimate of $60 million
is within a range of reasonably possible alternatives and one which the
Corporation believes to be the most likely outcome. This alternative includes a
combination of containment, treatment, remediation and monitoring. Other
alternatives, while considered less likely, could cause such costs to be as
much as $100 million.
OTHER SITES
The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters the Corporation has estimated that its potential total remaining
reasonably possible costs are insignificant.
27
<PAGE> 28
The Corporation currently manages under contract several government-owned
facilities, which among other things are engaged in the remediation of
hazardous and nuclear wastes. To date, under the terms of the contracts, the
Corporation is not responsible for costs associated with environmental
liabilities, including environmental cleanup costs, except under certain
circumstances associated with negligence and willful misconduct. There are
currently no known claims for which the Corporation believes it is responsible.
In 1994, the U.S. Department of Energy (DoE) announced its intention to
renegotiate its existing contracts for maintenance and operation of DoE
facilities to address environmental issues.
The Corporation has or will have responsibilities for environmental
remediation such as dismantling incinerators, decommissioning nuclear licensed
sites, and other similar commitments at various sites. The Corporation has
estimated total potential cost to be incurred for these actions to be
approximately $133 million, of which $35 million had been accrued at December
31, 1993. The Corporation's policy is to accrue these costs over the estimated
lives of the individual facilities which in most cases is approximately 20
years. The anticipated annual costs currently being accrued are $6 million.
As part of the agreement for the sale of DCBU to Eaton Corporation, the
Corporation agreed to a cost sharing arrangement if future, but as yet
unidentified, remediation is required as a result of any contamination caused
during the Corporation's operation of DCBU prior to its sale. Under the terms
of the agreement, the Corporation's share of any such environmental remediation
costs, on an annual basis, will be at the rate of $2.5 million of the first $6
million expended, and 100% of such costs in excess of $6 million. The
Corporation has provided for all known environmental liabilities related to
DCBU. These estimated costs and related reserves are included in the discussion
of PRP sites above. Environmental liabilities related to the sale of WESCO are
insignificant.
CAPITAL EXPENDITURES
Capital expenditures related to environmental remediation activities in 1993
totalled $5 million. Management believes that the total estimated capital
expenditures related to current operations necessary to comply with present
governmental regulations will not have a material adverse effect on capital
resources, liquidity, financial condition and results of operations.
INSURANCE RECOVERIES
In 1987, the Corporation filed an action in New Jersey against over 100
insurance companies seeking recovery for these and other environmental
liabilities and litigation involving personal injury and property damage. The
Corporation has received certain recoveries from insurance companies related to
environmental costs. The Corporation has not accrued for any future insurance
recoveries.
Based on the above discussion and including all information presently known to
the Corporation, management believes that the environmental matters described
above will not have a material adverse effect on the Corporation's capital
resources, liquidity, financial condition and results of operations.
LEGAL MATTERS
At present, there are seven pending actions brought by utilities claiming a
substantial amount of damages in connection with alleged tube degradation in
steam generators sold by the Corporation as components for nuclear steam supply
systems. One previous action, which was pending in 1991 and was resolved in
1992 after a full arbitration hearing before the International Chamber of
Commerce, found that no damages were warranted on any of the steam generator
claims against the Corporation. Two other previous actions which were pending
in 1992 were resolved, one in 1993 and the other in January 1994, through
settlements with the respective utilities. The Corporation is also a party to
six agreements with utilities or utility plant owners' groups which toll the
statute of limitations regarding their steam generator tube degradation claims
and permit the parties time to engage in discussions. The parties have agreed
that no litigation will be initiated for agreed upon periods of time as set
forth in the respective tolling agreements. The term of each tolling agreement
varies. The Corporation has notified its insurance carriers of the pending
steam generator actions and claims. While some of the carriers have denied
coverage in whole or in part, most have reserved their rights with respect to
obligations to defend and indemnify the Corporation. The coverage is the
subject of litigation between the Corporation and these carriers.
The Corporation has been defending a consolidated class action, a
consolidated derivative action and certain individual lawsuits brought against
the Corporation, WFSI and WCC, both previously subsidiaries of the Corporation,
and/or certain present and former directors and officers of the Corporation, as
well as other unrelated parties. Together, these actions allege various federal
securities law and common law violations arising out of alleged misstatements
or omissions contained in the Corporation's public filings concerning the
financial condition of the Corporation, WFSI and WCC in connection with a $975
million charge to earnings announced on February 27, 1991, a public offering of
Westinghouse common stock in May 1991, a $1,680 million charge to earnings
announced on October 7, 1991, and alleged misrepresentations regarding the
adequacy of internal controls at the Corporation, WFSI and WCC.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in each of the foregoing cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect upon the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes the
Corporation has meritorious defenses to the litigation described above and
management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
28
<PAGE> 29
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(in millions except per share amounts)
Year Ended December 31 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Product sales $ 5,771 $ 6,222 $ 6,288
Service sales 3,104 3,029 3,121
- - -----------------------------------------------------------------------------------------------------------------------
Sales of products and services 8,875 9,251 9,409
- - -----------------------------------------------------------------------------------------------------------------------
Cost of products sold (4,459) (4,586) (4,846)
Cost of services sold (2,018) (2,192) (2,076)
- - -----------------------------------------------------------------------------------------------------------------------
Costs of products and services (6,477) (6,778) (6,922)
- - -----------------------------------------------------------------------------------------------------------------------
Marketing, administration and general expenses (1,591) (1,379) (1,425)
Depreciation and amortization (311) (301) (316)
Provision for restructuring (note 20) (350) -- --
Other income and expenses, net (note 19) (165) (18) (19)
Interest expense (217) (225) (231)
- - -----------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations before income taxes and
minority interest in income of consolidated subsidiaries (236) 550 496
Income taxes (notes 1 and 5) 70 (187) (159)
Minority interest in income of consolidated subsidiaries (9) (6) (2)
- - -----------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations (175) 357 335
Discontinued Operations, net of income taxes (note 2):
Loss from Operations -- (30) (1,421)
Estimated loss on disposal of Discontinued Operations (95) (1,383) --
- - -----------------------------------------------------------------------------------------------------------------------
Loss from Discontinued Operations (95) (1,413) (1,421)
- - -----------------------------------------------------------------------------------------------------------------------
Loss before cumulative effects of changes in accounting principles (270) (1,056) (1,086)
Cumulative effect of changes in accounting principles:
Postemployment benefits (notes 1 and 4) (56) -- --
Postretirement benefits other than pensions (notes 1 and 4) -- (742) --
Income taxes (notes 1 and 5) -- 404 --
- - -----------------------------------------------------------------------------------------------------------------------
Net loss $ (326) $(1,394) $(1,086)
- - -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share (note 15):
From Continuing Operations $ (.64) $ .95 $ 1.07
From Discontinued Operations (.27) (4.08) (4.53)
From cumulative effect of changes in accounting principles (.16) (.98) --
- - -----------------------------------------------------------------------------------------------------------------------
Loss per common share $ (1.07) $ (4.11) $ (3.46)
- - -----------------------------------------------------------------------------------------------------------------------
Cash dividends per common share (note 15) $ .40 $ .72 $ 1.40
=======================================================================================================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
29
<PAGE> 30
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(in millions)
At December 31 1993 1992(a)
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 637 $ 769
Customer receivables (note 6) 1,381 1,321
Inventories (note 7) 1,549 1,392
Uncompleted contracts costs over related billings (note 7) 371 331
Prepaid and other current assets (note 8) 836 701
- - -----------------------------------------------------------------------------------------------------------------------
Total current assets 4,774 4,514
Plant and equipment, net (note 9) 1,964 2,028
Intangible and other noncurrent assets (note 10) 3,815 3,303
- - -----------------------------------------------------------------------------------------------------------------------
Total assets $10,553 $ 9,845
- - -----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt (note 11) $ 662 $ 1,259
Current maturities of long-term debt (note 13) 9 295
Accounts payable 656 609
Uncompleted contracts billings over related costs (note 7) 672 657
Other current liabilities (note 12) 1,926 1,315
- - -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,925 4,135
Long-term debt (note 13) 1,885 1,341
Net liabilities of Discontinued Operations (note 2) 211 116
Other noncurrent liabilities (note 14) 3,453 1,997
- - -----------------------------------------------------------------------------------------------------------------------
Total liabilities 9,474 7,589
- - -----------------------------------------------------------------------------------------------------------------------
Contingent liabilities and commitments (note 17)
Minority interest in equity of consolidated subsidiaries 34 33
Shareholders' equity (note 15):
Preferred stock, $1.00 par value (25 million shares authorized):
Series A preferred (no shares issued) -- --
Series B conversion preferred (8 million shares issued) 8 8
Common stock, $1.00 par value (480 million shares authorized, 393 million shares issued) 393 393
Capital in excess of par value 1,475 1,523
Common stock held in treasury (972) (1,102)
Other (1,260) (516)
Retained earnings 1,401 1,917
- - -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,045 2,223
- - -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $10,553 $ 9,845
=======================================================================================================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
(a) Certain amounts have been reclassified for comparative purposes.
30
<PAGE> 31
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(in millions)
Year Ended December 31 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Cash Flows from Operating Activities
Income (loss) $ (175) $ 357 $ 335
Adjustments to reconcile income to cash:
Depreciation and amortization 311 301 316
Deferred income taxes (145) 134 48
Restructuring and other actions 750 -- --
Change in assets and liabilities, net of effects of acquisitions
and divestitures of businesses:
Customer receivables (60) (95) 230
Inventories (182) (62) (189)
Deferred income taxes (155) (194) (184)
Other working capital 50 (54) (22)
Other assets and liabilities 341 230 (159)
- - -----------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 735 617 375
- - -----------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Business divestitures 73 238 52
Marketable securities -- (48) 90
Capital expenditures (237) (259) (326)
Cash from (to) Discontinued Operations (233) 239 (1,704)
Other -- -- (55)
- - -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by investing activities (397) 170 (1,943)
- - -----------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Change in short-term debt (895) (1,503) 616
Long-term borrowings 603 620 406
Payments of long-term debt (47) (82) (71)
Sale of equity securities -- 543 551
Treasury stock 81 111 72
Dividends (190) (271) (433)
Other (22) 8 25
- - -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing activities (470) (574) 1,166
- - -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by Continuing Operations (132) 213 (402)
- - -----------------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Loss from operations, net of income taxes -- (30) (1,421)
Estimated loss on disposal, net of income taxes (95) (1,383) --
Change in net operating assets 140 1,878 1,739
- - -----------------------------------------------------------------------------------------------------------------------
Operating activities 45 465 318
Investing activities 3,065 265 450
Financing activities (3,284) (633) (298)
- - -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by Discontinued Operations (174) 97 470
- - -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (306) 310 68
Cash and cash equivalents at beginning of period (note 1) 1,554 1,244 1,176
- - -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period (note 1) $ 1,248 $ 1,554 $ 1,244
- - -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid--Continuing Operations $ 205 $ 234 $ 248
Interest paid--Discontinued Operations 433 536 858
Income taxes paid 75 53 111
=======================================================================================================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
For a description of noncash transactions, see notes 1, 3, 4, 5 and 7.
31
<PAGE> 32
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Westinghouse
Electric Corporation (Westinghouse) and its subsidiary companies (together, the
Corporation) after elimination of intercompany accounts and transactions.
Investments in joint ventures and in other companies in which the Corporation
does not have control, but has the ability to exercise significant management
influence over operating and financial policies, are accounted for by the
equity method.
Certain previously reported amounts have been reclassified to conform to the
1993 presentation.
DISCONTINUED OPERATIONS
In November 1992, the Corporation's Board of Directors adopted a plan (the
Plan) that included exiting the financial services and other non-strategic
businesses. The Corporation classified the operations of Distribution and
Control Business Unit (DCBU), Westinghouse Electric Supply Company (WESCO)
(collectively, Other Operations) and Financial Services as discontinued
operations in accordance with Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" (APB 30). Under this Plan, the disposition of The
Knoll Group (Knoll) was scheduled to occur by the end of 1994 and WCI
Communities, Inc. (WCI) by the end of 1995. Financial Services was comprised
primarily of Westinghouse Credit Corporation (WCC) and Westinghouse Savings
Corporation (WSAV), each subsidiaries of Westinghouse Financial Services, Inc.
(WFSI) and the Corporation's leasing portfolio. On May 3, 1993, WFSI and WCC
were merged into Westinghouse. See note 20 to the financial statements.
In January 1994, the Corporation announced that the sale of WCI will be
accelerated from 1995 into 1994 and Knoll is no longer for sale. WCI will
continue to be reported as part of Continuing Operations until the requirements
of APB 30 are met. At that time, WCI will be classified as a discontinued
operation and appropriate restatements will be made to the Corporation's
financial statements. See note 2 to the financial statements.
REVENUE RECOGNITION
Sales are recorded primarily as products are shipped and services are rendered.
The percentage-of-completion method of accounting is used for nuclear steam
supply system and related equipment orders with delivery schedules generally in
excess of five years, major power generation systems with a cycle time in
excess of one year, and certain construction projects where this method of
accounting is consistent with industry practice. For certain long-term
contracts in which development and production are combined, revenue is
recognized as development milestones are completed or units are delivered.
AMORTIZATION OF INTANGIBLE ASSETS
Goodwill and other acquired intangible assets are amortized under the
straight-line method over their estimated lives, but not in excess of 40 years.
CASH AND CASH EQUIVALENTS
The Corporation considers all investment securities with a maturity of three
months or less when acquired to be cash equivalents. All cash and temporary
investments are placed with high credit-quality financial institutions and the
amount of credit exposure to any one financial institution is limited. At
December 31, 1993 and 1992, cash and cash equivalents includes restricted funds
of $73 million and $48 million, respectively.
Cash and cash equivalents in the Consolidated Statement of Cash Flows
includes those items from Continuing Operations, Financial Services and Other
Operations. See note 2 to the financial statements.
INVENTORIES
Inventories are stated at the lower of standard cost, which approximates actual
cost on a first-in, first-out (FIFO) basis, or market. The elements of cost
included in inventories are direct labor, direct material and certain
overheads. Prior to 1992, a portion of the value of the Corporation's domestic
inventories were determined using the last-in, first-out (LIFO) method of
inventory valuation. See note 7 to the financial statements. Long-term
contracts in process include costs incurred plus estimated profits on contracts
accounted for according to the percentage-of-completion method.
PLANT AND EQUIPMENT
Plant and equipment assets are recorded at cost and depreciated generally under
the straight-line method over their estimated useful lives. Expenditures for
additions and improvements are capitalized, and costs for repairs and
maintenance are charged to operations as incurred. The Corporation limits
capitalization of newly acquired assets to those assets with cost in excess of
$1,000.
ENVIRONMENTAL COSTS
The Corporation expenses or capitalizes as appropriate environmental
expenditures that relate to current operations. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. The Corporation will record
reserves when environmental assessments or remedial efforts are probable and
the costs can be reasonably estimated. Such reserves are adjusted if necessary
based upon the completion of a formal study or the Corporation's commitment to
a formal plan of action.
The Corporation accrues over their estimated remaining useful lives, the
anticipated future costs of dismantling incinerators, decommissioning nuclear
licensed sites and other such future commitments.
32
<PAGE> 33
CHANGES IN ACCOUNTING PRINCIPLES
In December 1993, the Corporation adopted, retroactive to January 1, 1993,
Statement of Financial Accounting Standards (SFAS) No. 112 "Employers'
Accounting for Postemployment Benefits." This statement requires employers to
adopt accrual accounting for workers' compensation, salary continuation,
medical and life insurance continuation, severance benefits and disability
benefits provided to former or inactive employees after employment but before
retirement. See note 4 to the financial statements.
Effective January 1, 1992, the Corporation adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," on the immediate
recognition basis. This statement requires that the expected costs of providing
postretirement health care and life insurance benefits be accrued during the
employees' service with the Corporation. The Corporation's previous practice
was to expense these costs as incurred. See note 4 to the financial statements.
In the first quarter of 1992, the Corporation adopted the provisions of SFAS
No. 109, "Accounting for Income Taxes." This statement replaced SFAS No. 96,
which the Corporation previously used to account for income taxes. SFAS No. 109
permitted the Corporation to recognize certain deferred tax benefits not
recognized under SFAS No. 96. See note 5 to the financial statements.
In December 1992, the Corporation adopted SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." This statement is an extension of SFAS
No. 105, "Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk," adopted in a prior year, and requires the disclosure of the fair value
of certain financial instruments. See note 22 to the financial statements.
NOTE 2: DISCONTINUED OPERATIONS
In November 1992, the Corporation announced the Plan that included exiting the
financial services business through the disposition of its asset portfolios and
the sale of other non-strategic businesses. The Plan provided for the sale of
real estate and corporate finance portfolios over a three-year period and the
run-off of the leasing portfolio over a longer period of time in accordance
with contractual terms. Also, as part of the Plan, the Corporation was to
divest the following other non-strategic operations: DCBU and WESCO; Knoll; and
WCI. Financial Services and Other Operations have been accounted for as
discontinued operations in accordance with APB 30.
In January 1994, the Corporation announced that the planned sale of WCI will
be accelerated from 1995 into 1994 and Knoll is no longer for sale. With
respect to Knoll, the Corporation's strategy will now be directed to create
shareholder value by continuing to operate this business.
As a result of the adoption of the Plan, the Corporation recorded in
Discontinued Operations, during the fourth quarter of 1992, a pre-tax charge of
$2,201 million. This pre-tax charge consisted of $2,350 million for an addition
to the valuation allowance for Financial Services portfolios, $300 million for
estimated losses from operations for Financial Services during the phase-out
period and $144 million for restructuring charges related to the change in
corporate strategy. These charges were partially offset by an estimated $449
million gain from the disposition of Other Operations and an estimated $144
million of earnings from those operations during the phase-out period. Income
tax benefits totalling $818 million were recorded in connection with the Plan.
The after-tax estimated loss on the disposal of Discontinued Operations was
$1,383 million. A $36 million charge for corporate restructuring was recorded
in Continuing Operations in connection with the Plan.
In November 1992, in determining the valuation provision for Financial
Services real estate portfolio, management used the Derived Investment Value
(DIV) method. DIV is the process developed by the Resolution Trust Corporation
for use in measuring the values of real estate owned and loans secured by
income-producing assets and land. In developing the provision for Financial
Services corporate and leasing portfolios, management used various techniques
which considered a number of factors, including trading desk values with
respect to the corporate portfolio, and information provided by independent
consultants. Trading desk values arise from actual or proposed current trades
of identical or similar assets. These valuation processes provided portfolio
valuations that reflect the strategy of exiting the financial services
business. Under the Corporation's previous strategy of downsizing Financial
Services over a period of up to five years and holding certain assets for the
long term, the methods used to value assets resulted in higher asset values net
of valuation allowances.
The estimated gain from the disposition of Other Operations was determined by
management using various techniques and assumptions which considered, among
other factors, index multiples derived for comparable businesses as
appropriately adjusted to reflect the characteristics of the businesses within
Other Operations.
Variances from estimates which may occur will be considered in determining if
an adjustment of the estimated loss on disposal of Discontinued Operations is
necessary.
Since adoption of the Plan, the Corporation has made significant progress in
disposing of Financial Services assets.
On August 11, 1993, the Corporation announced an agreement to sell the
majority of DCBU to Eaton Corporation for a purchase price of $1.1 billion and
the assumption by the buyer of certain liabilities. The Corporation completed
this sale on January 31, 1994.
On February 16, 1994, the Corporation announced an agreement to sell WESCO to
an affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for
a purchase price of approximately $340 million. The Corporation completed this
sale on February 28, 1994.
33
<PAGE> 34
The reserve for the estimated loss on the disposal of Discontinued Operations
established in November 1992 consisted of an addition to the valuation
allowance for Financial Services portfolios, estimated future results of
operations and sales proceeds to be obtained from Discontinued Operations, as
well as estimates as to the timing of the divestitures and assumptions
regarding other relevant factors.
During 1993, the Corporation reviewed its estimates of proceeds from the
disposal of Discontinued Operations and the operating income or loss that would
be generated by these businesses during their disposal periods. Through the
third quarter of 1993, the Corporation had favorable experience with the sale
of Financial Services assets, selling them at prices in excess of original
estimates and on a more accelerated schedule than was anticipated at the time
the Plan was developed. The more rapid liquidation of the assets had the effect
of reducing the earned income from the Financial Services assets during the
disposal period, which, to a large degree, offset the favorable price
experience from the asset sales. In addition, the marketing process for Other
Operations indicated that expected proceeds would be less than the initial
forecast. Through the third quarter of 1993, all of these factors were reviewed
and considered to be largely offsetting.
In the fourth quarter of 1993, the Corporation recorded an additional
provision for loss on disposal of Discontinued Operations of $148 million,
pre-tax or $95 million, after-tax. This change in the estimated loss resulted
from additional information, obtained through negotiation activity, regarding
the expected selling prices of WESCO and the Australian subsidiary of DCBU.
Also contributing to this provision was a decision to bulk sell a Financial
Services residential development that the Corporation, upon adoption of the
Plan, had intended to transfer to WCI for development. These matters and a
revision to the estimated interest costs expected to be incurred by the
Discontinued Operations during the disposal period resulted in the additional
fourth quarter provision.
The reserve for the estimated loss on the disposal of Discontinued Operations
may require adjustment in future periods to reflect changes in any of the above
constituent elements, which may be affected by adverse economic, market or
other factors beyond what was anticipated at December 31, 1993.
Management has considered all of the above factors and believes that the
reserve for the estimated loss on disposal of Discontinued Operations should be
adequate. The adequacy of this reserve is evaluated each quarter, and the
actual experience and any changes in expectations will be considered in
determining whether adjustment to the reserve is required.
In accordance with APB 30, the consolidated financial statements reflect the
operating results of Discontinued Operations separately from Continuing
Operations. Prior periods have been restated. Summarized operating results of
Discontinued Operations follow:
<TABLE>
<CAPTION>
OPERATING RESULTS OF DISCONTINUED OPERATIONS (in millions)
Financial Other
Services Operations Total
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Sales of products and services $ 305 $2,384 $2,689
Net earnings (losses) (212) 66 (146)
MONTH ENDED DECEMBER 31, 1992
Sales of products and services $ 46 $ 198 $ 244
Net earnings (losses) (13) 11 (2)
ELEVEN MONTHS ENDED NOVEMBER 30, 1992
Sales of products and services $ 699 $2,230 $2,929
Income (loss) before income taxes (181) 101 (80)
Income taxes (benefit) (71) 7 (64)
Minority interest in income 10 4 14
Income (loss) from operations (120) 90 (30)
YEAR ENDED DECEMBER 31, 1991
Sales of products and services $1,064 $2,439 $3,503
Income (loss) before income taxes (1,660) 69 (1,591)
Income taxes (benefit) (172) (12) (184)
Minority interest in income 13 1 14
Income (loss) from operations (1,501) 80 (1,421)
========================================================================================
</TABLE>
The composition of the estimated loss on disposal of Discontinued Operations
recorded in the fourth quarter of 1992 follows:
<TABLE>
<CAPTION>
ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS (in millions)
Financial Other
Services Operations Total
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for losses on portfolio
investments $2,350 $ -- $2,350
Estimated operating expenses
(income) during phase-out period 300 (144) 156
Provision for restructuring -- 144 144
Estimated gain on sale of
Discontinued Operations -- (449) (449)
- - ----------------------------------------------------------------------------------------
Net loss (gain) from Discontinued
Operations 2,650 (449) 2,201
Income taxes (benefit) (901) 83 (818)
- - ----------------------------------------------------------------------------------------
Estimated loss (gain) on Discontinued
Operations, net of taxes $1,749 $(366) $1,383
========================================================================================
</TABLE>
The assets and liabilities of Discontinued Operations have been separately
classified on the balance sheet as net liabilities of Discontinued Operations.
A summary of these assets and liabilities and additional information pertaining
to Financial Services follows:
34
<PAGE> 35
<TABLE>
<CAPTION>
NET LIABILITIES OF DISCONTINUED OPERATIONS (in millions)
At December 31 1993 1992
- - --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Financial Services:
Cash and cash equivalents $ 416 $ 752
Portfolio investments, net 1,127 5,329
Deferred income taxes (note 5) 560 634
Other assets 179 127
- - --------------------------------------------------------------------------------------
Total assets--Financial Services 2,282 6,842
- - --------------------------------------------------------------------------------------
Other Operations:
Cash and cash equivalents 195 33
Customer receivables 356 347
Inventories 373 393
Other current assets 13 --
Plant and equipment, net 360 375
Accrued estimated gain on sale of
Discontinued Operations 441 449
Accrued operating income, net (64) --
Other noncurrent assets 196 186
- - --------------------------------------------------------------------------------------
Total assets--Other Operations 1,870 1,783
- - --------------------------------------------------------------------------------------
Total assets--Discontinued Operations 4,152 8,625
- - --------------------------------------------------------------------------------------
LIABILITIES AND MINORITY INTEREST:
Financial Services:
Thrift deposits -- 693
Other liabilities 54 151
Accrued operating expenses 75 287
Minority interest -- 102
- - --------------------------------------------------------------------------------------
Total liabilities and minority interest
excluding debt--Financial Services 129 1,233
- - --------------------------------------------------------------------------------------
Other Operations:
Accounts payable 182 190
Other current liabilities 102 145
Deferred income taxes (note 5) 145 122
Other noncurrent liabilities 11 13
- - --------------------------------------------------------------------------------------
Total liabilities excluding debt--Other Operations 440 470
- - --------------------------------------------------------------------------------------
Short-term debt (note 11) 2,373 4,559
Current maturities of long-term debt (note 13) 774 877
Long-term debt (note 13) 647 1,602
- - --------------------------------------------------------------------------------------
Total liabilities and minority interest--
Discontinued Operations 4,363 8,741
- - --------------------------------------------------------------------------------------
Net liabilities of Discontinued Operations $ 211 $ 116
======================================================================================
</TABLE>
FINANCIAL SERVICES
Revenue Recognition
Financial Services revenues are recognized generally on the accrual method,
except that revenues for real estate accounts are being recognized only as
payments are received.
When accrual method accounts become delinquent for more than two payment
periods, usually 60 days, income is recognized only as payments are received.
Such delinquent accounts and all real estate accounts for which no payments are
received in the current month, and other accounts on which income is not being
recognized because the receipt of either principal or interest is questionable,
are classified as nonearning receivables.
Investment Tax Credit
The investment tax credit earned prior to its repeal on property leased to
others has been deferred and is recognized as income over the contractual terms
of the respective leases.
Portfolio Investments
Portfolio investments by category of investment and financing at December 31,
1993 and 1992, are summarized in the table below.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENTS (in millions)
Real Cor-
Estate porate Leasing Total
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1993
Receivables $ 46 $ 47 $ 969 $1,062
Real estate properties 141 -- -- 141
Investments in partnerships and
other entities 212 82 39 333
Nonmarketable equity securities -- 15 -- 15
- - -----------------------------------------------------------------------------------------------
Portfolio investments 399 144 1,008 1,551
Valuation allowance (353) (26) (45) (424)
- - -----------------------------------------------------------------------------------------------
Portfolio investments, net $ 46 $ 118 $ 963 $1,127
===============================================================================================
AT DECEMBER 31, 1992
Marketable securities $ 241 $ -- $ -- $ 241
Receivables 3,442 2,140 1,146 6,728
Real estate properties 663 -- -- 663
Investments in partnerships and
other entities 402 457 36 895
Nonmarketable equity securities -- 332 -- 332
Equipment on operating leases -- -- 101 101
Collateral held for resale -- -- 7 7
- - -----------------------------------------------------------------------------------------------
Portfolio investments 4,748 2,929 1,290 8,967
Valuation allowance (2,696) (885) (57) (3,638)
- - -----------------------------------------------------------------------------------------------
Portfolio investments, net $2,052 $2,044 $1,233 $5,329
===============================================================================================
</TABLE>
Real estate receivables consist of loans for commercial and residential real
estate properties. At December 31, 1993, the remaining real estate receivables
were primarily residential loans. Real estate properties were acquired through
foreclosure proceedings or represent "in-substance" foreclosures and are being
operated by Financial Services or contracted professional management until
sold. Real estate investments in partnerships at December 31, 1993 was
comprised primarily of the Corporation's investment in LW Real Estate
Investments, L.P., which totalled $133 million at year-end.
35
<PAGE> 36
At December 31, 1993, there were no significant investment-type, individual
borrower, or geographic concentrations in the remaining real estate
receivables. At December 31, 1992, first mortgages on real estate properties,
the majority of which were income-producing, comprised 84% of real estate
receivables. Hotels and motels secured 29% of the receivables at December 31,
1992, apartments secured 18%, shopping centers and land each secured 8% and
office buildings secured 7%. Of these properties, 18% were located in
California, 12% in Illinois, 9% in Pennsylvania and 8% in Florida. No other
significant geographic concentrations existed. The largest borrower exposure in
the real estate portfolio totalled $299 million at December 31, 1992; average
borrower exposure, excluding small-balance borrowers, was $20 million.
Financial Services entered into participation agreements with lending
institutions which provided for the recourse sale of a senior interest in
certain real estate loans. During 1993, Financial Services sold its
subordinated interest in the remaining loans subject to certain servicing
obligations. At December 31, 1992, the outstanding balance of receivables
previously sold under participation agreements totalled $57 million.
Corporate receivables are generally considered highly leveraged financing
that involves a buyout, acquisition, or recapitalization of an existing
business with a high debt-to-equity ratio. Borrowers in the corporate portfolio
generally are middle market companies and located throughout the U.S.
Manufacturing, retail trade, media and financial services represented the
significant industry concentrations in this portfolio. Corporate investments in
partnerships and other entities represent investments in limited partnerships
engaged in subordinated lending to, and investing in, highly leveraged
borrowers. Nonmarketable equity securities relate to corporate financing
transactions. Originally, corporate investments in partnerships and other
entities and nonmarketable securities generally were acquired with the intent
to realize appreciation upon disposition, reflecting an increase in the value
of the underlying entity. However, many of these investments are now the result
of debtor account restructurings.
At December 31, 1993, there were no significant industry, subordinated or
unsecured positions, or individual borrower exposures in the remaining
corporate receivables. At December 31, 1992, 58% of corporate receivables were
senior obligations of the borrower and 42% were subordinated. Variable-amount
commercial line-of-credit loans secured by the borrowers' inventory or
receivables represented 25% of the corporate receivables at December 31, 1992.
An additional 33% of corporate receivables represented fixed-amount loans
secured by specified assets, general assets, stock or other tangible assets of
the borrower. The remaining corporate receivables were unsecured. Exposure to
the largest borrower totalled $165 million at December 31, 1992; average
borrower exposure was $15 million.
Investments in partnerships or other entities are accounted for by either the
equity or cost methods in those cases where the Corporation gains majority
ownership of entities of a temporary nature or in those cases where the
Corporation is legally prevented from exercising control even though it has
majority ownership. Ownership is considered of a temporary nature if the entity
is acquired through foreclosure and the Corporation expects to maximize its
investment through near-term disposal or liquidation. At December 31, 1993 and
1992, the total carrying value of such non-consolidated entities related to
Financial Services was $73 million and $147 million, respectively.
Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1993 and 1992, 77% and 66%, respectively, related to aircraft and
19% and 22%, respectively, related to cogeneration facilities. Leasing
receivables at December 31, 1992, also included leases for railcars, marine
vessels and trucking equipment. These leasing receivables were sold during
1993.
The components of the Corporation's net investment in leases at December 31,
1993 and 1992 are as follows:
<TABLE>
<CAPTION>
NET INVESTMENT IN LEASES (in millions)
At December 31 1993 1992
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable (net of principal and
interest on nonrecourse loans) $965 $1,232
Estimated residual value of leased assets 411 478
Unearned and deferred income (407) (544)
- - ------------------------------------------------------------------------------------
Investment in leases* 969 1,166
Deferred taxes and deferred investment
tax credits arising from leases (575) (657)
- - ------------------------------------------------------------------------------------
Investment in leases, net $394 $ 509
====================================================================================
</TABLE>
*Investment in leases for 1992 included lease receivables in both the leasing
and real estate categories of financing.
Contractual maturities for the Corporation's leasing receivables at December
31, 1993 are as follows:
<TABLE>
<CAPTION>
CONTRACTUAL MATURITIES FOR LEASING RECEIVABLES (in millions)
At December 31, 1993
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total 1994 1995 1996 1997 1998 After 1998
- - ------------------------------------------------------------------------
Leasing $969 $22 $28 $36 $36 $43 $804
========================================================================
</TABLE>
Nonearning receivables at December 31, 1993 totalled $30 million, a decrease
of $1,893 million from year-end 1992. At December 31, 1993 there were no
reduced earning receivables, compared to $881 million at year-end 1992. These
decreases were primarily the result of dispositions and the write-off of
receivables.
The difference between the income for 1993 that would have been earned under
original contractual terms on nonearning receivables at December 31, 1993 and
the income that was actually earned, was not significant. The income for 1992
that would have been earned under original contractual terms on nonearning and
reduced earning receivables at December 31, 1992 totalled $268 million, and the
income actually earned was $98 million.
36
<PAGE> 37
The following table is a reconciliation of the valuation allowance for
portfolio investments for the years ended December 31, 1993, 1992, and 1991.
<TABLE>
<CAPTION>
VALUATION ALLOWANCE FOR PORTFOLIO INVESTMENTS (in millions)
Category of Financing Beginning Portfolio Investments Provisions Added Ending Percent of
Balance Written Off Transfers During Year Balance Investments
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Real estate $2,696 $2,351 $ (30) $ 38 $ 353 88.5%
Corporate 885 889 30 -- 26 17.6
Leasing 57 12 -- -- 45 4.5
- - ------------------------------------------------------------------------------------------------------------------------------------
Total 1993 $3,638 $3,252 $ -- $ 38 $ 424 27.4%
====================================================================================================================================
Year Ended December 31, 1992:
Real estate $1,792 $ 973 $ (30) $1,907 $2,696 56.8%
Corporate 520 264 33 596 885 30.2
Leasing 18 9 (12) 60 57 4.4
- - ------------------------------------------------------------------------------------------------------------------------------------
Total 1992 $2,330 $1,246 $ (9) $2,563 $3,638 40.6%
====================================================================================================================================
Year Ended December 31, 1991:
Real estate $ 686 $ 400 $ 51 $1,455 $1,792 34.1%
Corporate 612 406 (15) 329 520 13.1
Leasing 35 26 (21) 30 18 1.4
- - ------------------------------------------------------------------------------------------------------------------------------------
Total 1991 $1,333 $ 832 $ 15 $1,814 $2,330 22.0%
====================================================================================================================================
</TABLE>
During 1993, portfolio investments written off represented 71.4% of average
outstanding portfolio investments. The comparable percentages for 1992 and 1991
were 12.7% and 7.1%, respectively. Portfolio investments written off during
1993 reflects management's strategy to liquidate portfolios and exit the
financial services business. Portfolio investments written off during 1992 and
1991 reflect management's strategy to liquidate or downsize portfolios.
Marketable and nonmarketable securities written off usually resulted from the
disposition of the securities for cash. Receivables and real estate properties
written off generally resulted from the disposition of the investments for cash
or management's determination of the recoverability of the receivable balance
or property value in accordance with management's disposition strategy.
The provision added during 1993 represents an allocation of the $148 million
pre-tax charge recorded in the fourth quarter of 1993 and relates to a
residential development that the Corporation had previously intended to
transfer to WCI for development. During December 1993, the Corporation's
intent regarding this asset changed to one of bulk sale out of the Financial
Services real estate portfolio. The $38 million provision reduces the carrying
value of the asset to its DIV.
The increase in the provision added during 1992 compared to 1991 reflects
management's current strategy to exit the financial services business, compared
to management's prior strategy to downsize portfolios over a period of up to
five years.
The valuation allowance at December 31, 1992, adjusted by adding back amounts
written off since January 1, 1991, totalling $988 million related to
investments remaining in the portfolio at year-end 1992, represented 46.4% of
the value of portfolio investments, with such investments similarly adjusted.
The valuation allowance at December 31, 1991, comparably adjusted for amounts
written off since January 1, 1991, totalling $375 million, represented 24.7% of
the value of portfolio investments. Due to the significantly reduced levels of
portfolio investments and the valuation allowance at December 31, 1993,
management believes that this calculation would produce results of limited
usefulness and, therefore, is not presented at December 31, 1993.
Management believes under current economic conditions, the valuation
allowance at Financial Services at December 31, 1993 should be adequate to
cover losses that are expected from the disposal of the remaining portfolios.
At December 31, 1992, the marketable securities of $241 million were assets
of WSAV's Illinois-based thrift, Westinghouse Federal Bank, and thrift deposits
of $693 million were obligations of the thrift. On January 4, 1993,
Westinghouse Federal Bank was sold to First Financial Bank, F.S.B., and the
thrift's assets and obligations were transferred.
Marketable securities at December 31, 1992 were primarily comprised of U.S.
and other government obligations, and mortgage-backed securities. At December
31, 1992, these marketable securities had gross unrealized gains of $8 million
and no gross unrealized losses. During 1992, proceeds from sales of investments
in debt securities totalled $367 million. Gross gains on such sales were $7
million and gross losses were $19 million.
37
<PAGE> 38
NOTE 3: PENSIONS
The Corporation has various pension arrangements covering substantially all
employees. Most plan benefits are based on either years of service and
compensation levels at the time of retirement or a formula based on career
earnings. Pension benefits are paid from trusts funded by contributions from
employees and the Corporation. The pension funding policy for qualified plans
is consistent with the funding requirements of U.S. federal and other
government laws and regulations. Plan assets consist primarily of listed
stocks, fixed income securities and real estate investments.
The projected benefit obligation is the actuarial present value of that
portion of the projected benefits attributable to employee service rendered to
date. Service cost is the actuarial present value of that portion of the
projected benefits attributable to employee service rendered during the year.
<TABLE>
<CAPTION>
NET PERIODIC PENSION COSTS (in millions)
Year ended December 31 1993 1992 1991
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 65 $ 68 $ 65
Interest cost on projected benefit obligation 426 432 436
Amortization of unrecognized net obligation 41 44 48
Amortization of unrecognized prior
service cost 5 5 8
Amortization of unrecognized net loss 48 20 3
- - -----------------------------------------------------------------------------------------
585 569 560
- - -----------------------------------------------------------------------------------------
Return on plan assets:
Actual return on plan assets (414) (107) (699)
Deferred gains (losses) (40) (376) 216
- - -----------------------------------------------------------------------------------------
Recognized return on plan assets (454) (483) (483)
- - -----------------------------------------------------------------------------------------
Net periodic pension cost $ 131 $ 86 $ 77
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
SIGNIFICANT PENSION PLAN ASSUMPTIONS
December 31, June 30, December 31,
1993 1993 1992
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8% 9%
Compensation increase rate 4% 5% 6%
Long-term rate of return
on plan assets 9.75% 10.5% 11%
========================================================================================
</TABLE>
As a result of the trend of declining long-term interest rates, the
Corporation remeasured its pension obligation as of June 30, 1993 and December
31, 1993.
The requirement of SFAS No. 87 to adjust the discount rate to reflect current
and expected to be available interest rates on high quality fixed-income
investments resulted in a decision by the Corporation to reduce its assumed
discount rate from 9%, which was used at December 31, 1992, to 8% at June 30,
1993 and 7.25% at December 31, 1993. In addition, the Corporation has reduced
its expected long-term rate of return on plan assets from 11% at December 31,
1992, to 10.5% at June 30, 1993, and 9.75% at December 31, 1993. The expected
rate of increase in future compensation levels was also adjusted from 6% at
December 31, 1992, to 5% at June 30, 1993, and 4% at December 31, 1993. The
expected long-term rate of return on pension plan assets has been reduced to
more closely reflect the plan's recent performance. The five-year average
increase in compensation levels at the Corporation has, in recent years,
approximated 5%; however, wage trends indicate that a 4% rate is more
indicative of future compensation levels.
<TABLE>
<CAPTION>
FUNDING STATUS--PENSIONS (in millions)
At December 31 1993 1992
- - -----------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $(5,068) $(4,192)
Nonvested (440) (376)
- - -----------------------------------------------------------------------------------
Accumulated benefit obligation (5,508) (4,568)
Effect of projected future compensation levels (333) (389)
- - -----------------------------------------------------------------------------------
Projected benefit obligation for service
rendered to date (5,841) (4,957)
Plan assets at fair value 4,226 4,265
- - -----------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (1,615) (692)
Unrecognized net loss 2,181 1,140
Prior service cost not yet recognized in
net periodic pension cost 14 7
Unrecognized transition obligation at
January 1, net of amortization 281 341
- - -----------------------------------------------------------------------------------
Prepaid pension contribution 861 796
Minimum pension liability (2,143) (1,099)
- - -----------------------------------------------------------------------------------
Underfunded accumulated benefit obligation $(1,282) $ (303)
===================================================================================
</TABLE>
38
<PAGE> 39
For financial reporting purposes, a pension plan is considered underfunded
when the fair value of plan assets is less than the accumulated benefit
obligation. When that is the case, a minimum pension liability must be
recognized for the sum of the underfunded amount plus any prepaid pension
contributions. In recognizing such a liability, an intangible asset is usually
recorded. However, the amount of the intangible asset may not be greater than
the sum of the prior service cost not yet recognized and the unrecognized
transition obligation as shown in the Funding Status table. When the liability
to be recognized is greater than the intangible asset limit, a charge must be
made to shareholders' equity for the difference, net of any tax effects which
could be recognized in the future.
At December 31, 1992, a minimum pension liability of $1,099 million was
recognized for the sum of the underfunded amount of $303 million plus the
prepaid pension contribution of $796 million. An intangible asset of $348
million and a charge to shareholders' equity of $751 million, which was reduced
to $496 million due to tax deferrals of $255 million, offset the pension
liability.
At June 30, 1993, a minimum pension liability of $1,771 million was
recognized for the sum of the underfunded amount of $940 million plus the
prepaid pension contribution of $831 million. An intangible asset of $325
million and a charge to shareholders' equity of $1,446 million, which was
reduced to $955 million due to tax deferrals of $491 million, offset the
pension liability. As a result of this remeasurement, shareholders' equity was
reduced by an additional $459 million from December 31, 1992.
At December 31, 1993, a minimum pension liability of $2,143 million was
recognized for the sum of the underfunded amount of $1,282 million plus the
prepaid pension contribution of $861 million. An intangible asset of $295
million and a charge to shareholders' equity of $1,848 million, which was
reduced to $1,215 million due to tax deferrals of $633 million, offset the
pension liability. As a result of this remeasurement, shareholders' equity was
reduced by an additional $260 million from June 30, 1993.
During 1993, the Corporation contributed $273 million to its pension plans.
As a result of the restructuring actions announced in January 1994 and the
Plan announced in November 1992 (see notes 2 and 20 to the financial
statements), a curtailment charge of $22 million was included in the loss from
Continuing Operations for the year ended December 31, 1993, and $54 million was
included in the estimated loss on disposal of Discontinued Operations for the
year ended December 31, 1992 in accordance with the provisions of SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits." These curtailment charges have
reduced, by the same amount, the total of the unrecognized transition
obligation and prior service costs not yet recognized in net periodic pension
costs.
NOTE 4: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
The Corporation has defined benefit postretirement plans that provide medical,
dental and life insurance for eligible retirees and dependents.
The components of net periodic postretirement benefit cost follow.
<TABLE>
<CAPTION>
NET PERIODIC POSTRETIREMENT BENEFIT COST (in millions)
Year ended December 31 1993 1992
- - ------------------------------------------------------------------------------------------
<S> <C> <C>
Immediate recognition of transition obligation $ -- $1,173
Service cost, benefits attributed to employee
service during the year 15 15
Interest cost on accumulated postretirement
benefit obligation 96 95
- - ------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $111 $1,283
==========================================================================================
</TABLE>
The adoption of SFAS No. 106 on the immediate recognition basis, concurrent
with the adoption of SFAS No. 109, as of January 1, 1992, resulted in a net
charge to first quarter 1992 earnings of $742 million, or $2.14 per share, net
of $431 million of deferred income tax effects.
<TABLE>
<CAPTION>
SIGNIFICANT POSTRETIREMENT BENEFIT PLAN ASSUMPTIONS
December 31, June 30, December 31,
1993 1993 1992
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8% 9%
Health care cost trend rates 12%* 12%* 13%*
Compensation increase rate 4% 5% 6%
Long-term rate of return
on plan assets 9.75% 10.5% 11%
=================================================================================
</TABLE>
*Decreasing 1/2% annually to 7.0% each year thereafter
The Corporation's accumulated postretirement benefit obligation consists of
the following:
<TABLE>
<CAPTION>
FUNDING STATUS--POSTRETIREMENT BENEFITS (in millions)
At December 31 1993 1992
- - --------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (912) $ (778)
Fully eligible, active plan participants (50) (75)
Other active plan participants (398) (335)
- - --------------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation (1,360) (1,188)
Deferred (gains) losses 171 --
- - --------------------------------------------------------------------------------------
Recorded liability $(1,189) $(1,188)
======================================================================================
</TABLE>
39
<PAGE> 40
The accumulated postretirement benefit obligation was calculated using the
terms of medical, dental, and life insurance plans, including the effects of
established maximums on covered costs. SFAS No. 106 requires the discount rate
used to measure the accumulated postretirement benefit obligation to be
determined in a manner consistent with the method previously described for SFAS
No. 87 in note 3 to the financial statements.
As a result of the decline in long-term interest rates, the Corporation
reduced its discount rate from 9%, which was used at December 31, 1992, to 8%
at June 30, 1993 and 7.25% at December 31, 1993. These discount rates are
consistent with the discount rate assumptions applied for measurement of the
Corporation's pension obligation, since the duration of pension and
postretirement benefit expected payments are both approximately 11 years. The
actuarial loss resulting from the discount rate reduction will be considered in
the determination of postretirement benefit costs in future periods.
The effect of a 1% annual increase in the assumed cost trend rates would
increase the accumulated postretirement benefit obligation by approximately $63
million and would increase net periodic postretirement benefit costs by
approximately $8 million.
Certain of the Corporation's non-U.S. subsidiaries have private and
government-sponsored plans for retirees. The cost of these plans is not
significant to the Corporation.
The Corporation provides certain postemployment benefits to former or
inactive employees and their dependents during the time period following
employment but before retirement. In December 1993, the Corporation adopted,
retroactive to January 1, 1993, SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." Prior to 1993, postemployment benefit expenses were
recognized primarily as they were paid. The Corporation's charge for
postemployment benefits at January 1, 1993 was $56 million, net of $30 million
of deferred taxes, and was immediately recognized as the cumulative effect of a
change in accounting for postemployment benefits. The effect of this change on
1993 operating results was an increase in pre-tax postemployment benefit
expense of $5 million.
At December 31, 1993, the Corporation's liability for postemployment benefits
totalled $91 million and is included in other noncurrent liabilities. See note
14 to the financial statements.
NOTE 5: INCOME TAXES
<TABLE>
<CAPTION>
INCOME TAXES FROM CONTINUING OPERATIONS (in millions)
Year ended December 31 1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 138 $ 150 $ 66
State 19 28 (1)
Foreign 23 45 39
- - --------------------------------------------------------------------------------
Total income taxes current 180 223 104
- - --------------------------------------------------------------------------------
Deferred:
Federal (211) (27) 46
State 14 -- 16
Foreign (53) (9) (7)
- - --------------------------------------------------------------------------------
Total income taxes deferred (250) (36) 55
- - --------------------------------------------------------------------------------
Income taxes (benefit) $ (70) $ 187 $159
================================================================================
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED INCOME TAXES (in millions)
Year ended December 31 1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 138 $ (19) $(30)
State 19 28 (2)
Foreign 23 60 43
- - --------------------------------------------------------------------------------
Total income taxes current 180 69 11
- - --------------------------------------------------------------------------------
Deferred:
Federal (294) (1,208) (77)
State 14 (138) 47
Foreign (53) 37 (6)
- - --------------------------------------------------------------------------------
Total income taxes deferred (333) (1,309) (36)
Operating loss carryforward--Federal -- (290) --
- - --------------------------------------------------------------------------------
Income taxes (benefit) $ (153) $(1,530) $(25)
================================================================================
</TABLE>
Deferred federal income taxes for 1993 include a benefit of $62 million
resulting from the enactment of an increase in the statutory federal income tax
rate from 34% to 35%.
Income tax expense (benefit) included in the consolidated financial
statements follows:
<TABLE>
<CAPTION>
COMPONENTS OF CONSOLIDATED INCOME TAXES (in millions)
Year ended December 31 1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing Operations $ (70) $ 187 $159
Discontinued Operations -- (64) (184)
Estimated loss on disposal of
Discontinued Operations (53) (818) --
Cumulative effect of change in accounting
principle for postemployment benefits (30) -- --
Cumulative effect of change in accounting
principle for postretirement
benefits other than pensions -- (431) --
Cumulative effect of change in
accounting principle for income taxes -- (404) --
- - --------------------------------------------------------------------------------
Income taxes (benefit) $ (153) $(1,530) $(25)
================================================================================
</TABLE>
40
<PAGE> 41
In addition to the amounts in the table above, during 1993, 1992 and 1991,
$378 million of income tax benefit, $255 million of income tax benefit and $71
million of income tax expense, respectively, were recorded against
shareholders' equity as a result of the pension liability adjustment. See note
3 to the financial statements.
In January 1992, the Corporation adopted SFAS No. 109. This statement
replaced SFAS No. 96 which the Corporation had used to account for income taxes
since 1988. The effect of adopting SFAS No. 109 on the Corporation was to
permit the recognition of deferred tax benefits as shown in the following
table.
<TABLE>
<CAPTION>
DEFERRED TAX BENEFITS RECOGNIZED UPON ADOPTION OF SFAS NO. 109 (in millions)
At January 1 1992
- - ------------------------------------------------------------------------------
<S> <C>
Change related to application of financial basis
net operating loss and credit carryforwards $496
State income tax, net of federal effect 12
Valuation allowance (104)
- - ------------------------------------------------------------------------------
Deferred tax benefit $404
==============================================================================
</TABLE>
The foreign portion of income or loss before income taxes and minority
interest in income of consolidated subsidiaries in the consolidated statement
of income consisted of a loss of $6 million in 1993 and income of $61 million
in 1992 and $32 million in 1991. Such income or loss consists of profits and
losses generated from foreign operations and can be subject to both U.S. and
foreign income taxes.
Deferred federal income taxes have not been provided on cumulative
undistributed earnings from foreign subsidiaries, totalling $474 million at
December 31, 1993, in which the earnings have been reinvested for an indefinite
time. It is not practicable to determine the income tax liability that would
result had such earnings been repatriated. The amount of withholding taxes that
would be payable upon such repatriation is estimated to be $30 million.
Income from Continuing Operations includes income of certain manufacturing
operations in Puerto Rico which are exempt from U.S. federal income tax and
partially exempt from Puerto Rican income tax under grants of industrial tax
exemptions. These tax exemptions provided net tax benefits of $21 million or
$.06 per share in 1993, $21 million or $.06 per share in 1992, and $22 million
or $.07 per share in 1991. The exemptions will expire at various dates from
2002 through 2007.
Deferred income taxes result from temporary differences in the financial
bases and tax bases of assets and liabilities. The type of differences that
give rise to significant portions of deferred income tax liabilities or assets
are shown in the accompanying table.
<TABLE>
<CAPTION>
CONSOLIDATED DEFERRED INCOME TAX SOURCES (in millions)
At December 31 1993 1992*
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Provisions for expenses and losses $ 867 $1,688
Accumulated depreciation (215) (223)
Long-term contracts in process 96 112
Leasing activities (622) (670)
Minimum pension liabilities 387 (8)
Operating losses and credit carryforwards 1,505 559
Postretirement and postemployment benefits 476 431
Other deferred tax assets 216 89
Other deferred tax liabilities (115) (111)
Valuation allowance for deferred taxes (90) (94)
- - -----------------------------------------------------------------------------------------
Deferred income taxes, net asset $2,505 $1,773
=========================================================================================
</TABLE>
*Certain amounts have been reclassified for comparative purposes.
The valuation allowance for deferred taxes represents foreign tax credits not
anticipated to be utilized and operating loss carryforwards of certain foreign
subsidiaries. The net balance of deferred income taxes is intended to offset
income taxes on future taxable income expected to be earned by the
Corporation's continuing businesses. See Management's Discussion and
Analysis--Income Taxes.
During 1992, federal income tax assessments were settled which reduced
deferred income taxes by $70 million.
At December 31, 1993, for federal income tax purposes, there were regular tax
net operating loss carryforwards of $922 million which expire by the year 2007,
$2,515 million which expire by the year 2008, alternative minimum tax operating
loss carryforwards of $565 million which expire by the year 2007, $2,444
million which expire by the year 2008 and alternative minimum tax credit
carryforwards of $257 million which have no expiration date.
At December 31, 1993, there were $100 million of net operating loss
carryforwards attributable to foreign subsidiaries. Of this total,
approximately $35 million has no expiration date. The remaining amount will
expire not later than 2000. A valuation allowance for the $38 million of
deferred tax benefit related to these losses has been established since it is
considered more likely than not that the benefit will not be realized.
41
<PAGE> 42
<TABLE>
<CAPTION>
EFFECTIVE TAX (BENEFIT) RATE FOR CONTINUING OPERATIONS
Year ended December 31 1993 1992* 1991*
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax (benefit) rate (35.0)% 34.0% 34.0%
Increase (decrease) in the tax (benefit) rate
resulting from:
Adjustment of deferred tax asset for
increase in federal income tax rate (23.2) -- --
Income taxes of prior years 21.2 -- --
Write off of intangible assets 5.8 1.4 1.4
Interest on prior years' federal
income tax net of federal effect 6.4 -- --
State income tax, net of federal effect 9.2 3.4 2.0
Lower tax rate on income of foreign
sales corporations (6.7) (.6) (2.1)
Lower tax rate on net income of Puerto
Rican operations (8.7) (3.9) (4.4)
Valuation allowance (1.3) 1.1 --
Adjustment of deferred tax asset included
in equity in June 1993 for change in
federal income tax rate (3.0) -- --
Loss of foreign tax credit 4.7 -- --
Other .9 (1.5) 1.1
- - -------------------------------------------------------------------------------------------
Effective tax (benefit) rate for
Continuing Operations (29.7)% 33.9% 32.0%
===========================================================================================
</TABLE>
*Certain amounts have been reclassified for comparative purposes.
<TABLE>
<CAPTION>
EFFECTIVE TAX (BENEFIT) RATE FOR CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Year ended December 31 1993 1992
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Federal statutory income tax (benefit) rate (35.0)% (34.0)%
Increase in the benefit rate resulting from:
State income tax, net of federal effect -- (2.8)
- - -------------------------------------------------------------------------------------
Effective tax (benefit) rate for cumulative effect
of changes in accounting principles (35.0)% (36.8)%
=====================================================================================
</TABLE>
The federal income tax returns of the Corporation and its wholly-owned
subsidiaries are settled through the year ended December 31, 1986. The
Corporation has reached a tentative agreement with the Internal Revenue Service
regarding intercompany pricing adjustments applicable to operations in Puerto
Rico for the years 1987 through 1992. Management believes that adequate
provisions for taxes have been made through December 31, 1993.
NOTE 6: CUSTOMER RECEIVABLES
Customer receivables at December 31, 1993 included $273 million which
represented the sales value of material shipped under long-term contracts but
not billed to the customer. Billing will occur upon shipment of major
components of the contract, and collection of these receivables is expected to
be substantially completed within one year.
Allowance for doubtful accounts of $54 million and $50 million at December
31, 1993 and 1992, respectively, were deducted from customer receivables.
At December 31, 1993 and 1992, approximately 8% and 15%, respectively, of the
Corporation's customer receivables were from sales on open account with various
agencies of the U.S. government, which is the Corporation's largest single
customer. The Corporation performs ongoing credit evaluations of its customers
and generally does not require collateral.
NOTE 7: INVENTORIES AND COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
During the fourth quarter of 1992, the Corporation changed its method of
determining the cost of a portion of its inventories from the LIFO method to
the FIFO method.
Previously, a substantial portion of the inventories of Continuing Operations
had been valued using the FIFO method. The change to the FIFO method for all of
Continuing Operations' inventories conforms such inventories to the same method
of valuation. The Corporation believes that the FIFO method of inventory
valuation provides a more meaningful presentation of the financial position of
the Corporation since it reflects more recent inventory acquisition costs in
the balance sheet. Under the current economic environment of low inflation, the
Corporation believes that the FIFO method also results in a better matching of
current costs with current revenues.
The change in the method of valuing inventories was not applied retroactively
to prior periods as the effect on the Corporation's financial position and its
results of operations was not material.
<TABLE>
<CAPTION>
INVENTORIES (in millions)
At December 31 1993 1992
- - ---------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 137 $ 104
Work in process 989 1,035
Finished goods 104 135
- - ---------------------------------------------------------------------------
1,230 1,274
Long-term contracts in process 678 650
Progress payments to subcontractors 124 169
Recoverable engineering and development costs 442 489
- - ---------------------------------------------------------------------------
2,474 2,582
Inventoried costs related to contracts
with progress billing terms (925) (1,190)
- - ---------------------------------------------------------------------------
Inventories $1,549 $1,392
===========================================================================
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
At December 31 1993 1992
- - ----------------------------------------------------------------------------------
<S> <C> <C>
Costs included in inventories $ 968 $1,185
Progress billings on contracts (597) (854)
- - ----------------------------------------------------------------------------------
Uncompleted contracts costs over related billings $ 371 $ 331
- - ----------------------------------------------------------------------------------
Progress billings on contracts $ 630 $ 661
Costs included in inventories 42 (4)
- - ----------------------------------------------------------------------------------
Uncompleted contracts over related costs $ 672 $ 657
==================================================================================
</TABLE>
Raw materials, work in process and finished goods included contract-related
costs of approximately $770 million at December 31, 1993, and $866 million at
December 31, 1992. All costs in long-term contracts in process, progress
payments to subcontractors, and recoverable engineering and development costs
were contract-related.
Inventories other than those related to long-term contracts are generally
realized within one year. Inventoried costs do not exceed realizable values.
NOTE 8: PREPAID AND OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
PREPAID AND OTHER CURRENT ASSETS (in millions)
At December 31 1993 1992
- - ---------------------------------------------------------------------
<S> <C> <C>
Deferred income taxes (note 5) $588 $375
Other 248 326
- - ---------------------------------------------------------------------
Prepaid and other current assets $836 $701
=====================================================================
</TABLE>
NOTE 9: PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
PLANT AND EQUIPMENT (in millions)
At December 31 1993 1992
- - ---------------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 815 $ 786
Machinery and equipment 3,275 3,225
Construction in progress 225 278
- - ---------------------------------------------------------------------
Plant and equipment, at cost 4,315 4,289
Accumulated depreciation (2,351) (2,261)
- - ---------------------------------------------------------------------
Plant and equipment, net $1,964 $2,028
=====================================================================
</TABLE>
NOTE 10: INTANGIBLE AND OTHER NONCURRENT ASSETS
<TABLE>
<CAPTION>
INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
At December 31 1993 1992
- - ---------------------------------------------------------------------
<S> <C> <C>
Deferred income taxes (note 5) $1,502 $ 886
Goodwill and other acquired intangible assets 1,131 1,082
Unrecognized pension costs (note 3) 295 348
Undeveloped land 247 261
Joint ventures and other affiliates 122 195
Noncurrent receivables 206 210
Uranium settlement assets (note 17) 19 46
Other 293 275
- - ---------------------------------------------------------------------
Intangible and other noncurrent assets $3,815 $3,303
=====================================================================
</TABLE>
Goodwill and other acquired intangible assets are shown net of accumulated
amortization of $139 million and $102 million at December 31, 1993 and 1992,
respectively.
Joint ventures and other affiliates include investments in companies where
the Corporation does not have the ability to exercise control.
Uranium settlement assets relate to uranium inventory awaiting delivery and
settlement items being produced under uranium supply contract settlement
agreements. Inventory and other settlement items expected to be delivered
within one year are included in other current assets.
NOTE 11: SHORT-TERM DEBT
In December 1991, the Corporation entered into a three-year $6 billion
revolving credit facility agreement (revolver) with a syndicate of domestic and
international banks. By December 31, 1993, the commitment level of the revolver
had been reduced to $4 billion. The largest commitment from any one bank is
less than 5% of the total facility. The revolver is available for use by the
Corporation subject to the maintenance of certain ratios and compliance with
other covenants and subject to there being no material adverse change with
respect to the Corporation taken as a whole. Among other things, these
covenants place restrictions on the incurrence of liens, the amount of debt on
a consolidated basis and at the subsidiary level, and the amount of contingent
liabilities. The covenants also require the maintenance of a maximum leverage
ratio, minimum interest coverage ratios, and minimum consolidated net worth.
Certain of the covenants become more restrictive over the term of the revolver.
The interest rate for revolver borrowings is determined at the time of each
borrowing and may be based on one of a variety of indices plus a margin based
on the Corporation's debt ratings and interest coverage ratio, and utilization
of the facility. The indices include the following: London Interbank Offer Rate
(LIBOR), certificate of deposit, prime, and federal funds. A fee is also paid
on letters of credit.
43
<PAGE> 44
The interest rates for the borrowings under the revolver at December 31, 1993
and 1992, were based on LIBOR. The utilization fee has decreased from .25% to
.125% as a result of a lower average revolver balance outstanding during the
second half of 1993. A utilization fee is charged if average revolver
borrowings and outstanding letters of credit are $2,000 million or more. At
December 31, 1993, consolidated borrowings under the revolver totalled $2,855
million, of which $500 million was attributed to Continuing Operations and
$2,355 million was attributed to Discontinued Operations.
There are no compensating balance requirements under the revolver.
Origination fees of $91 million are being amortized and charged to Discontinued
Operations over the term of the revolver. Facility fees averaged approximately
.50% of the commitment level during 1993 and were charged to Continuing and
Discontinued Operations on a pro-rata basis.
As a result of rating agency actions and management's assessment of the
capital markets, in October 1992, the Corporation discontinued the sale of
commercial paper and replaced this debt with borrowings under the revolver.
<TABLE>
<CAPTION>
SHORT-TERM DEBT--CONTINUING OPERATIONS (in millions)
At December 31 During the Year
- - ---------------------------------------------------------------------------------------------------
Com- Wtd.
posite Max. Out- Avg. Out- Avg.
Balance Rate standing standing Rate
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Commercial paper $ -- -- $ 78 $ 6 3.9%
Revolving credit
facility 500 4.0% 1,100 909 4.3%
Short-term foreign
bank loans 158 7.4% 277 134 8.6%
Other 4
- - ---------------------------------------------------------------------------------------------------
Short-term debt $ 662
===================================================================================================
1992
Commercial paper $ 78 3.6% $1,890 $1,077 4.5%
Revolving credit
facility 1,100 4.4% 1,100 646 5.0%
Short-term foreign
bank loans 61 12.0% 158 122 12.1%
Other 20
- - ---------------------------------------------------------------------------------------------------
Short-term debt $1,259
===================================================================================================
1991
Commercial paper $1,442 5.9% $2,435 $1,897 6.3%
Revolving credit
facility 985 5.7% 985 22 6.4%
Short-term foreign
bank loans 89 13.7% 171 104 13.7%
Other 13
- - ---------------------------------------------------------------------------------------------------
Short-term debt $2,529
===================================================================================================
</TABLE>
Average outstanding borrowings for Continuing Operations were determined
based on daily amounts outstanding for commercial paper and the revolver, and
on monthly balances outstanding for short-term foreign bank loans. The average
rates for those bank loans compared to commercial paper reflect the impact of
higher interest costs on local currency borrowings of subsidiaries.
<TABLE>
<CAPTION>
SHORT-TERM DEBT--DISCONTINUED OPERATIONS (in millions)
At December 31 During the Year
- - ---------------------------------------------------------------------------------------------------
Com- Wtd.
posite Max. Out- Avg. Out- Avg.
Balance Rate standing standing Rate
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Commercial paper $ -- -- $ 131 $ 9 3.7%
Revolving credit
facility 2,355 4.1% 4,395 3,424 4.2%
Other 18
- - ---------------------------------------------------------------------------------------------------
Short-term debt $2,373
===================================================================================================
1992
Commercial paper $ 131 3.6% $3,178 $2,066 4.2%
Revolving credit
facility 4,395 4.1% 4,395 1,747 4.5%
Other revolving credit
facilities -- -- 50 1 3.8%
Other 33
- - ---------------------------------------------------------------------------------------------------
Short-term debt $4,559
===================================================================================================
1991
Commercial paper $2,202 5.3% $4,384 $3,325 6.5%
Revolving credit
facility 1,005 5.7% 1,005 25 6.4%
Other revolving credit
facilities -- -- 1,470 282 5.8%
Sterling commercial
paper -- -- 109 30 12.9%
Variable-rate trust
master notes -- -- 207 39 6.3%
Other 85
- - ---------------------------------------------------------------------------------------------------
Short-term debt $3,292
===================================================================================================
</TABLE>
Average outstanding borrowings for Discontinued Operations were determined
based on daily amounts outstanding for commercial paper and revolving credit
facilities, and on monthly balances outstanding for variable-rate trust master
notes.
To manage interest costs on its debt, Financial Services has entered into
various types of interest rate and currency exchange agreements. Interest rate
exchange agreements generally involve the exchange of interest payments without
the exchange of the underlying principal amounts. The notional amounts of the
interest rate and currency exchange agreements totalled $1,326 million and
$2,218 million at December 31, 1993 and 1992, respectively. The $892 million
decrease in the notional amount during 1993 was due to the maturity of certain
of the agreements.
44
<PAGE> 45
At December 31, 1993, interest rate swap agreements in which Financial
Services paid a fixed interest rate totalled $575 million and had a weighted
average rate of 8.7% with an average maturity of 1.31 years. In addition, those
interest rate swap agreements in which Financial Services received a fixed
interest rate totalled $430 million and had a weighted average rate of 8.1%
with an average maturity of approximately 10 months. The remaining notional
amount of $321 million at December 31, 1993 included forward interest rate
exchange agreements, interest rate floor agreements, currency exchange
agreements and basis swap agreements. Certain of these agreements are
associated with long-term debt of Discontinued Operations. See note 13 to the
financial statements.
NOTE 12: OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
OTHER CURRENT LIABILITIES (in millions)
At December 31 1993 1992
- - -----------------------------------------------------------------------------
<S> <C> <C>
Accrued employee compensation $ 262 $ 308
Income taxes currently payable 292 172
Accrued product warranty 83 101
Restructuring costs (note 20) 230 --
Reserve for disposition loss (note 19) 195 --
Other 864 734
- - -----------------------------------------------------------------------------
Other current liabilities $1,926 $1,315
=============================================================================
</TABLE>
NOTE 13: LONG-TERM DEBT
<TABLE>
<CAPTION>
LONG-TERM DEBT--CONTINUING OPERATIONS (in millions)
At December 31 1992 1992
- - ------------------------------------------------------------------------------
<S> <C> <C>
8.60% notes due 1993 $ -- $ 250
Medium-term notes due through 2001 95 124
7 3/4% notes due 1996 300 300
8 7/8% notes due 2001 250 250
8 3/8% notes due 2002 348 348
8 5/8% debentures due 2012 273 273
6 7/8% notes due 2003 275 --
7 7/8% debentures due 2023 325 --
Other 28 91
- - ------------------------------------------------------------------------------
1,894 1,636
Current maturities (9) (295)
- - ------------------------------------------------------------------------------
Long-term debt $1,885 $1,341
==============================================================================
</TABLE>
During 1993, the 8.60% notes due 1993 and $29 million of medium-term notes
were paid at maturity.
Medium-term notes carry interest rates ranging from 7.5% to 9.4%.
At December 31, 1992, $25 million of the medium-term notes and all of the
8 7/8% notes were subject to interest rate swap agreements. These agreements
have effectively changed the fixed interest rate for the first two years of the
notes' terms to a variable rate based on the 30-day commercial paper rate. At
December 31, 1992, the effective interest rate on all of the medium-term notes
was 7.8% and the effective interest rate on the 8 7/8% notes was 5.1%. Both
interest rate swap agreements matured in June 1993.
In June 1992, the Corporation issued $350 million of 8 3/8% notes due June 15,
2002. These notes were offered at a discount.
In August 1992, the Corporation issued $275 million of 8 5/8% debentures due
August 1, 2012. These debentures were offered at a discount.
The 8 3/8% notes due 2002 and the 8 5/8% debentures due 2012 were issued
under a shelf registration statement filed in 1991. In August 1992, the
Corporation filed an additional debt shelf registration statement for
$1 billion.
In September 1993, the Corporation issued $275 million of 6 7/8% notes due
September 1, 2003 and $325 million of 7 7/8% debentures due September 1, 2023.
These notes and debentures were offered at a discount and were issued under the
$1 billion shelf registration, of which $400 million was unused as of December
31, 1993.
The 6 7/8% notes, the medium-term notes, the 7 3/4% notes, the 8 7/8% notes,
the 8 3/8% notes, the 8 5/8% debentures, and the 7 7/8% debentures may not be
redeemed prior to maturity.
At December 31, 1993, Continuing Operations long-term debt maturing in each
of the following years is: 1994--$9 million, 1995--$9 million, 1996--$322
million, 1997--$2 million, and 1998--$58 million.
<TABLE>
<CAPTION>
LONG-TERM DEBT--DISCONTINUED OPERATIONS (in millions)
At December 31 1993 1992
- - ----------------------------------------------------------------------------
<S> <C> <C>
Medium-term notes due through 2001 $1,047 $1,826
8 7/8% senior notes due 1995 150 150
8 7/8% senior notes due 2014 150 150
Variable-rate bank loan due through 1993 -- 65
6.9% to 8.6% Federal Home Loan Bank
advances due through 1996 -- 61
8 3/8% senior notes due 1996 -- 100
Other 74 127
- - ----------------------------------------------------------------------------
1,421 2,479
Current maturities (774) (877)
- - ----------------------------------------------------------------------------
Long-term debt $ 647 $1,602
============================================================================
</TABLE>
During 1993, $779 million of medium-term notes were paid at maturity. During
1992, $1,313 million of medium-term notes were paid at maturity and $55 million
of new notes were issued.
At December 31, 1993 and 1992, $291 million and $565 million, respectively,
of medium-term notes had been issued either on a variable-rate basis or swapped
to a variable-rate through interest rate swap agreements. After the effects of
any interest rate swap agreements, the average interest rates on variable-rate
medium-term notes outstanding at December 31, 1993 and 1992 were 3.7% and 4.4%,
respectively.
45
<PAGE> 46
At December 31, 1993 and 1992, $756 million and $1,261 million, respectively,
of medium-term notes had been issued either on a fixed-rate basis or swapped to
a fixed rate through interest rate swap agreements. After the effects of any
interest rate swap agreements, the average interest rate on fixed-rate
medium-term notes outstanding at December 31, 1993 and 1992 was 8.6%.
At December 31, 1993, the average interest rate, after the effects of the
interest rate swap agreements, and average remaining maturity for all
medium-term notes were 7.2% and 1.58 years, compared to 7.3% and 1.65 years at
year-end 1992.
At December 31, 1993, all of the 8-7/8% notes due 1995 were subject to an
interest rate swap agreement as well as an interest rate floor agreement. The
net effect of these agreements reduced the effective interest rate on these
notes to 7.4% at December 31, 1993.
In October 1993, the Corporation redeemed at par value $100 million of
outstanding 8 3/8% senior notes due March 1, 1996.
At December 31, 1993, Discontinued Operations long-term debt maturing in each
of the following years is: 1994--$774 million, 1995--$230 million, 1996--$262
million, 1997--$2 million, and 1998--$96 million. Current maturities of $774
million at December 31, 1993 include the $150 million of 8 7/8% senior notes due
2014 as the noteholders have the right, during the sixty-day period ending June
14, 1994, to request that their notes be redeemed. These notes will be included
in current maturities of long-term debt until such time as the request is made
and the notes are redeemed, or the right to request redemption period expires.
Management does not anticipate that the noteholders will exercise their right
to redemption during the 1994 request period. The next right to request
redemption period is the sixty days ending June 14, 1999.
NOTE 14: OTHER NONCURRENT LIABILITIES
<TABLE>
<CAPTION>
OTHER NONCURRENT LIABILITIES (in millions)
At December 31 1993 1992
- - ------------------------------------------------------------------------
<S> <C> <C>
Postretirement benefits (note 4) $1,189 $1,188
Postemployment benefits (note 4) 91 --
Pension liability (note 3) 1,282 303
Restructuring costs (note 20) 120 --
Other 771 506
- - ------------------------------------------------------------------------
Other noncurrent liabilities $3,453 $1,997
========================================================================
</TABLE>
NOTE 15: SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY (in millions)
1993 1992 1991
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred stock:
Balance at January 1 $ 8 $ -- $ --
Series B preferred shares issued -- 8 --
- - --------------------------------------------------------------------------------------------
Balance at December 31 $ 8 $ 8 $ --
- - --------------------------------------------------------------------------------------------
Common stock:
Balance at January 1 $ 393 $ 393 $ 370
Shares issued -- -- 23
- - --------------------------------------------------------------------------------------------
Balance at December 31 $ 393 $ 393 $ 393
- - --------------------------------------------------------------------------------------------
Capital in excess of par value:
Balance at January 1 $ 1,523 $ 1,039 $ 659
Redemption of common shares "rights" -- (2) --
Common shares issued -- -- 548
Series B preferred shares issued -- 535 --
Shares issued under various compensation
and benefit plans (37) (42) (169)
Shares issued under dividend
reinvestment plan (11) (7) (2)
Other -- -- 3
- - --------------------------------------------------------------------------------------------
Balance at December 31 $ 1,475 $ 1,523 $ 1,039
- - --------------------------------------------------------------------------------------------
Common stock held in treasury:
Balance at January 1 $(1,102) $(1,264) $(1,887)
Shares purchased by the Corporation -- -- (15)
Shares issued under various compensation
and benefit plans 104 136 631
Shares issued under dividend
reinvestment plan 26 26 7
- - --------------------------------------------------------------------------------------------
Balance at December 31 $ (972) $(1,102) $(1,264)
- - --------------------------------------------------------------------------------------------
Other:
Balance at January 1 $ (516) $ -- $ (348)
Foreign currency translation adjustments (25) (20) (4)
Pension liability adjustments, net of
deferred taxes (719) (496) 352
- - --------------------------------------------------------------------------------------------
Balance at December 31 $(1,260) $ (516) $ --
- - --------------------------------------------------------------------------------------------
Retained earnings:
Balance at January 1 $ 1,917 $ 3,582 $ 5,101
Net loss (326) (1,394) (1,086)
Cash dividends (190) (271) (433)
- - --------------------------------------------------------------------------------------------
Balance at December 31 $ 1,401 $ 1,917 $ 3,582
- - --------------------------------------------------------------------------------------------
Shareholders' equity $ 1,045 $ 2,223 $ 3,750
============================================================================================
</TABLE>
In June 1992, Westinghouse sold 32,890,000 Depositary Shares at $17 per
share. Each of the Depositary Shares represents ownership of one quarter of a
share of Westinghouse's $1 par value Series B Conversion Preferred Stock (B
Preferred) deposited with Mellon Bank, N.A., as Depositary, and entitles the
owner to all of the proportionate rights, preferences and privileges of the B
Preferred. A total of 8,222,500 B Preferred shares were deposited. The
Depositary Shares are listed on the New York Stock Exchange (NYSE) under the
symbol "WXPrP."
46
<PAGE> 47
Since the Depositary Shares are claims against the Depositary which in turn
holds all the shares of B Preferred in trust, only the B Preferred are shown as
equity on the Corporation's balance sheet. Holders of Depositary Shares may
redeem them for the B Preferred shares at the Depositary; however, only the
Depositary Shares are listed for trading on the NYSE.
The net proceeds to the Corporation from the sale of the Depositary Shares,
after commissions, fees and out-of-pocket expenses, totalled $543 million which
was used to reduce short-term debt of Continuing Operations. As a result of the
transaction, par value of B Preferred was established for $8 million, and
capital in excess of par value was increased by $535 million.
Annual dividends are $1.53 per Depositary Share (equivalent to $6.12 for each
B Preferred) and are payable quarterly in arrears on the first day of March,
June, September and December. Dividends are cumulative and must be declared by
the Board of Directors to be payable. Payments commenced September 1, 1992.
On September 1, 1995 (the Mandatory Conversion Date), each of the outstanding
Depositary Shares will automatically convert into (i) one share of common stock
(equivalent to four shares for each B Preferred) subject to adjustment if
certain events occur, and (ii) the right to receive on such date an amount in
cash equal to all accrued and unpaid dividends thereon, or, in certain
circumstances, a number of shares of common stock equal to 110% of such cash
amount divided by the market value of the common stock. Conversion of the
outstanding Depositary Shares (and the B Preferred) will also occur upon
certain mergers, consolidations or similar extraordinary transactions involving
the Corporation or in connection with certain other events, as described in the
prospectus.
At any time and from time to time prior to the Mandatory Conversion Date,
Westinghouse may call the outstanding B Preferred (and thereby the Depositary
Shares), in whole or in part, for redemption. Upon any such redemption, each
owner of Depositary Shares will receive, in exchange for each Depositary Share
so called, shares of common stock having a market value initially equal to
$26.23 (equivalent to $104.92 for each B Preferred), declining by $0.002095
(equivalent to $0.008380 for each B Preferred) on each day following the date
of issue of the B Preferred to $23.93 (equivalent to $95.72 for each B
Preferred) on July 1, 1995, and equal to $23.80 (equivalent to $95.20 for each
B Preferred) thereafter (the Call Price), plus an amount in cash equal to all
proportionate accrued and unpaid dividends thereon. On September 1, 1995, the
outstanding B Preferred shares mandatorily convert to one share of common stock
at the then existing market price.
The B Preferred shares are considered common stock equivalents, at a rate of
four to one, for the calculation of primary and fully diluted earnings per
share, unless such treatment would result in a lower net loss per share or
higher net income per share. If common stock equivalency is not appropriate,
the B Preferred shares are considered preferred stock for earnings per share
purposes.
At December 31, 1993 and 1992, 8,222,500 shares of B Preferred stock were
issued and outstanding.
During May 1991, Westinghouse issued 21,500,000 shares of its common stock
in a public offering, the net proceeds of which totalled $551 million. The
proceeds of the offering were used to reduce the Corporation's short-term debt.
Beginning in the third quarter of 1991, the Corporation offered a Dividend
Reinvestment and Common Stock Purchase Plan whereby shareholders may elect to
reinvest cash dividends, and may optionally invest additional cash, in shares
of Westinghouse common stock without paying commissions or service charges.
Proceeds received from participants in this plan are used for general corporate
purposes.
During October 1991, the Corporation contributed 22,645,000 shares of common
stock held in treasury to the Westinghouse Pension Plan. The contribution at
that time was valued at $375 million by the pension plan trustee. See note 3 to
the financial statements.
At December 31, 1993, common shares outstanding totalled 352,175,746.
On January 11, 1994, the Corporation announced its intention to take actions
to rebuild its equity base. These actions include a reduction in the annual
dividend on the Corporation's common stock from $.40 per share to $.20 per
share and the issuance during 1994 of $700 million of new equity securities.
Approximately $200 million of the equity securities, proceeds from the sale of
such securities or a combination thereof, will be contributed to the
Corporation's pension plans during 1994. The reduction in the common stock
dividend became effective with the quarterly dividend declared by the Board of
Directors in January 1994, which is to be payable on March 1, 1994.
47
<PAGE> 48
<TABLE>
<CAPTION>
COMMON SHARES (shares in thousands)
In
Issued Treasury Outstanding
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1991 370,216 80,108 290,108
Public stock offering 21,500 -- 21,500
Shares purchased for treasury -- 542 (542)
Shares issued for dividend
reinvestment plan -- (289) 289
Shares issued for employee plans -- (26,616) 26,616
Shares issued on conversion of 9%
convertible debentures 1,282 -- 1,282
Other -- 17 (17)
- - -------------------------------------------------------------------------------------
Balance at December 31, 1991 392,998 53,762 339,236
Shares issued for dividend
reinvestment plan -- (1,113) 1,113
Shares issued for employee plans -- (6,046) 6,046
Other -- (47) 47
- - -------------------------------------------------------------------------------------
Balance at December 31, 1992 392,998 46,556 346,442
Shares issued for dividend
reinvestment plan -- (1,112) 1,112
Shares issued for employee plans -- (4,540) 4,540
Other 82 -- 82
- - -------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 393,080 40,904 352,176
=====================================================================================
</TABLE>
Earnings (loss) per common share is computed by dividing income, after
deducting the preferred dividend requirements, by the weighted average number
of common shares outstanding during the year plus the weighted average common
stock equivalents. Common stock equivalents consist of shares subject to stock
options and shares potentially issuable under deferred compensation programs.
For this computation, net income or loss was adjusted for the after-tax
interest expense applicable to the deferred compensation programs. The B
Preferred shares may be treated as common stock equivalents or preferred stock
depending on the effect as previously discussed. When treated as preferred
stock, the B Preferred dividends are deducted for computing earnings available
to common shareholders. During 1993, the B Preferred shares for earnings per
share calculations were treated as preferred stock. During 1992, the B
Preferred shares for earnings per share calculations were treated as common
stock equivalents in the first and second quarters, and as preferred stock for
the third and fourth quarters and the total year. No preferred shares were
outstanding in 1991. The weighted average number of common shares used for
computing earnings or loss per share was 352,902,000 in 1993, 346,103,000 in
1992 and 313,984,000 in 1991.
In 1988, the Board of Directors adopted a shareholder rights plan pursuant to
which one right was attached to each share of common stock outstanding on
December 17, 1988, and to each share issued thereafter. In accordance with plan
provisions, in December 1992, the Board of Directors elected to redeem the
rights at a redemption price of $0.005 per share. The Corporation paid
approximately $2 million to shareholders of record as of December 2, 1992, as
the total redemption price for the rights.
NOTE 16: STOCK OPTIONS AND OTHER LONG-TERM INCENTIVE COMPENSATION AWARDS
The 1993, 1991 and 1984 Long-Term Incentive Plans provide for the granting of
stock options and other performance awards to employees of the Corporation. The
1993 and 1991 Plans are similar in all material respects to the 1984 Plan.
At December 31, 1993, four million shares have been authorized, subject to
shareholder approval, for awards under the 1993 Plan. Unoptioned shares
available under the 1993 Plan at December 31, 1993 totalled 1,787,500. At
December 31, 1993 and 1992, an aggregate of 19.2 million and 16 million shares,
respectively, have been authorized for awarding under the 1991 and 1984 Plans.
Unoptioned shares available under the 1991 and 1984 Plans at December 31, 1993
and 1992, totalled 2,141,708 and 1,371,292, respectively.
The option price under the Plans may not be less than the fair market value
of the shares on the date the option is granted. The options were granted for
terms of 10 years and generally become exercisable in whole or in part after
the commencement of the second year of the term.
All options outstanding under the 1984 and 1991 Plans, except those granted
during 1993, were exercisable at December 31, 1993. Options outstanding under
the 1993 Plan will not be exercisable until 1994. Outstanding options have
expiration dates ranging from 1994 through 2003.
<TABLE>
<CAPTION>
STOCK OPTION INFORMATION (shares in thousands)
1993 1992 1991
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares subject to option:
Balance at January 1 11,675 10,227 3,737
Options granted 5,230 1,821 6,715
Options exercised (67) (262) (178)
Options terminated (756) (111) (47)
- - -------------------------------------------------------------------------------------
Balance at December 31 16,082 11,675 10,227
- - -------------------------------------------------------------------------------------
Weighted average option price in dollars:
At January 1 $22.81 $23.56 $28.67
Options granted 15.90 17.45 20.62
Options exercised 12.37 14.94 17.18
Options terminated 20.84 22.59 34.08
At December 31 20.70 22.81 23.56
=====================================================================================
</TABLE>
48
<PAGE> 49
During 1992 and 1993, Equity Plus dollar grants totalling approximately $17
million for the 1992-94 measurement period were granted to employees of the
Corporation. Equity Plus dollar grants have the potential to increase in value
through both financial performance and stock price appreciation. Payment of
these grants is approved by a committee of the Board of Directors and is
contingent upon achieving performance targets over the measurement period. If
minimum levels of financial performance are not achieved, the grants will not
be paid. Certain of these grants have been or will be prorated or terminated
upon termination of employment. Payments are generally made in stock.
In February 1994, 244,747 shares of Westinghouse common stock were issued to
employees for Equity Plus grants made in 1991.
NOTE 17: CONTINGENT LIABILITIES AND COMMITMENTS
URANIUM SETTLEMENTS
The Corporation had previously provided for all estimated future costs
associated with the resolution of all uranium supply contract suits and related
litigation. The remaining uranium reserve balance includes uranium settlement
assets (see note 10 to the financial statements) and reserves for estimated
future costs. The remaining balance at December 31, 1993, is deemed adequate
considering all facts and circumstances known to management. The future
obligations require providing specific quantities of uranium and products and
services over a period extending beyond the year 2010. Variances from estimates
which may occur will be considered in determining if an adjustment of the
liability is necessary.
LITIGATION
Republic of the Philippines and National Power Corporation
In December 1988, the Republic of the Philippines (Philippines) and National
Power Corporation of the Philippines (NPC) (collectively, the Republic) filed a
15 count lawsuit against the Corporation in connection with the construction of
a nuclear power plant in the Philippines. In 1989, the U.S. District Court
(USDC) for the District of New Jersey stayed substantially all of the complaint
pending arbitration by the International Chamber of Commerce (ICC) in Geneva,
Switzerland. The USDC did not grant a stay with respect to the one count in the
complaint alleging intentional interference with a fiduciary relationship. A
jury verdict with respect to this count was rendered in favor of the
Corporation on May 18, 1993. The Republic has stated its intention to appeal
this verdict.
In December 1991, the ICC arbitration panel issued an award finding that the
NPC had failed to carry its burden of proving an alleged bribery by the
Corporation. The panel thereby concluded that the arbitration clauses and the
contracts were valid and the panel had jurisdiction over the disputes remaining
before it with respect to NPC; the panel also concluded that it did not have
jurisdiction over the Philippines. The NPC, in an attempt to attack the ICC
decision regarding jurisdiction and contract validity, filed an action for
annulment with the Swiss Federal Supreme Court which was not successful.
Arbitration with respect to the remaining disputes before the ICC is ongoing.
An evidentiary hearing is scheduled to begin during the first quarter of 1994,
and a final award is anticipated before the end of 1994.
Steam Generators
At present, there are seven pending actions brought by utilities claiming a
substantial amount of damages in connection with alleged tube degradation in
steam generators sold by the Corporation as components for nuclear steam supply
systems. One previous action, which was pending in 1991 and was resolved in
1992 after a full arbitration hearing before the ICC, found that no damages
were warranted on any of the steam generator claims against the Corporation.
Two other previous actions which were pending in 1992 were resolved, one in
1993 and the other in January 1994, through settlements with the respective
utilities. The Corporation is also a party to six agreements with utilities or
utility plant owners' groups which toll the statute of limitations regarding
their steam generator tube degradation claims and permit the parties time to
engage in discussions. The parties have agreed that no litigation will be
initiated for agreed upon periods of time as set forth in the respective
tolling agreements. The term of each tolling agreement varies. The Corporation
has notified its insurance carriers of the pending steam generator actions and
claims. While some of the carriers have denied coverage in whole or in part,
most have reserved their rights with respect to obligations to defend and
indemnify the Corporation. The coverage is the subject of litigation between
the Corporation and these carriers.
Securities Class Actions--Financial Services
The Corporation has been defending a consolidated class action, a consolidated
derivative action and certain individual lawsuits brought against the
Corporation, WFSI and WCC, both previously subsidiaries of the Corporation,
and/or certain present and former directors and officers of the Corporation, as
well as other unrelated parties. Together, these actions allege various federal
securities law and common law violations arising out of alleged misstatements
or omissions contained in the Corporation's public filings concerning the
financial condition of the Corporation, WFSI and WCC in connection with a $975
million charge to earnings announced on February 27, 1991, a public offering of
Westinghouse common stock in May 1991, a $1,680 million charge to earnings
announced on October 7, 1991, and alleged misrepresentations regarding the
adequacy of internal controls at the Corporation, WFSI and WCC.
49
<PAGE> 50
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in each of the foregoing cases and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect upon the Corporation's results of operations for
a quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes the Corporation has
meritorious defenses to the litigation described above and management believes
that the litigation should not have a material adverse effect on the financial
condition of the Corporation.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local regulations relating to the discharge
of substances into the environment, the disposal of hazardous wastes and other
related activities affecting the environment have had and will continue to have
an impact on the Corporation. While it is difficult to estimate the timing and
ultimate costs to be incurred in the future due to uncertainties about the
status of laws, regulations, technology and information available for
individual sites, management estimates the total probable and reasonably
possible remediation costs that could be incurred by the Corporation based on
the facts and circumstances currently known. Such estimates include the
Corporation's experience to date with investigating and evaluating site cleanup
costs, the professional judgment of the Corporation's environmental experts,
outside environmental specialists and other experts and, when necessary,
counsel. In addition, the likelihood that other parties which have been named
as potentially responsible parties (PRPs) will have the financial resources to
fulfill their obligations at Superfund sites where they and the Corporation may
be jointly and severally liable has been considered. These estimates have been
used to assess materiality for financial statement disclosure purposes as
follows.
PRP Sites
With regard to remedial actions under federal and state superfund laws, the
Corporation has been named as a PRP at numerous sites located throughout the
country. At many of these sites, the Corporation is either not a responsible
party or its site involvement is very limited or de minimus. However, the
Corporation may have varying degrees of cleanup responsibilities at 52 of these
sites, excluding those discussed in the preceding sentence. With regard to
cleanup costs at these sites, in many cases the Corporation will share these
costs with other responsible parties and the Corporation believes that any
liability incurred will be satisfied over a number of years. Management
believes the total remaining probable costs which the Corporation could incur
for remediation of these sites as of December 31, 1993 are approximately $69
million, all of which has been accrued. These remediation actions are expected
to occur over a period of several years. As the remediation activities
progress, additional information may be obtained which may require additional
investigations or an expansion of the remediation activities. This may result
in an increase in site remediation costs; however, until such time as
additional requirements are identified during the remediation process, the
Corporation is unable to reasonably estimate what those costs might be.
Bloomington Consent Decree
The Corporation is a party to a 1985 Consent Decree relating to remediation of
six sites in Bloomington, Indiana. The Corporation has additional
responsibility for two other sites in Bloomington not included as part of the
Consent Decree. In the Consent Decree, the Corporation agreed to construct and
operate an incinerator, which would be permitted under federal and state law to
burn excavated materials. The incinerator would also burn municipal solid waste
provided by the City of Bloomington (City) and Monroe County. Applications for
permits to build an incinerator are pending with the United States
Environmental Protection Agency, the State of Indiana and other local
permitting agencies. There is continuing community opposition to the
construction of the incinerator and the State of Indiana has enacted
legislation that has resulted in indefinite delays in granting permits. As a
result, the parties to the Consent Decree have met several times on a
cooperative basis and have decided to explore whether alternative remedial
measures should be used to replace the incineration remedy set forth in the
Consent Decree. On February 8, 1994 the parties filed a status report with the
United States District Court for the Southern District of Indiana, which is
responsible for overseeing the implementation of the Consent Decree. This
report advised the court of the parties' intention to investigate alternatives
and provided the court with operating principles for this process. It is the
goal of the parties to reach a consensus on an alternative which is acceptable
to all parties and to the Bloomington public. However, the parties recognize
that at the end of the process they may conclude that the remedy currently
provided in the Consent Decree is the most appropriate. The parties also
recognize that the Consent Decree shall remain in full force during this
process. These actions have resulted in the Corporation's belief that it no
longer is probable that the Consent Decree will be implemented under its
present terms. The Corporation and the other parties may have claims against
each other under the Consent Decree if a mutually agreeable alternative is not
reached. The Corporation may be required to post security for 125% of the net
cost to complete remediation in the event certain requirements of the Consent
Decree are not met. The Corporation believes it has met all of these
requirements.
If necessary permits were to be granted and the Consent Decree fully
implemented in its present form, the Corporation estimates that its total
remaining cost would be approximately $300 million at December 31, 1993. As
part of the Consent Decree, and in addition to burning contaminated materials,
the incinerator would also be used to burn municipal solid waste and generate
electricity which would be purchased by various public utilities. The
Corporation would receive revenues from
50
<PAGE> 51
tipping fees and sale of electricity which are estimated to be
approximately $210 million. The Consent Decree also provides the City with an
option to purchase the incinerator after the remediation is completed. The
Corporation has assumed that proceeds from the sale of the incinerator would be
in the range of $100 million to $160 million. Based on the above estimates, the
Corporation continues to believe that the ultimate net cost of the
environmental remediation under the present terms of the Consent Decree would
not result in a material adverse effect on its future financial condition or
results of operations.
However, because the Corporation believes it is probable the Consent Decree
will be modified to an alternate remediation action, the Corporation estimates
that its cost to implement the most reasonable and likely alternative would be
approximately $60 million, all of which has been accrued. Approximately $16
million of this estimate represents operating and maintenance costs which will
be incurred over an approximate 30 year period. These costs are expected to be
distributed equally over this period and, based on the Corporation's experience
with similar operating and maintenance costs, have been determined to be
reliably determinable on a year-to-year basis. Accordingly, the estimated $44
million gross cost of operating and maintenance has been discounted at a rate
of 5% per year which results in the above described $16 million charge. The
remaining portion of the $60 million charge represents site construction and
other related costs and is valued as of the year of expenditure. Analyses of
internal experts and outside consultants have been used in forecasting
construction and other related costs. The estimates of future period costs
include an assumed inflation rate of 5% per year. This estimate of $60 million
is within a range of reasonably possible alternatives and one which the
Corporation believes to be the most likely outcome. This alternative includes a
combination of containment, treatment, remediation and monitoring. Other
alternatives, while considered less likely, could cause such costs to be as
much as $100 million.
Other Sites
The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters the Corporation has estimated that its potential total remaining
reasonably possible costs are insignificant.
The Corporation currently manages under contract several government-owned
facilities, which among other things are engaged in the remediation of
hazardous and nuclear wastes. To date, under the terms of the contracts, the
Corporation is not responsible for costs associated with environmental
liabilities, including environmental cleanup costs, except under certain
circumstances associated with negligence and willful misconduct. There are
currently no known claims for which the Corporation believes it is responsible.
In 1994, the U.S. Department of Energy (DoE) announced its intention to
renegotiate its existing contracts for maintenance and operation of DoE
facilities to address environmental issues.
The Corporation has or will have responsibilities for environmental
remediation such as dismantling incinerators, decommissioning nuclear licensed
sites, and other similar commitments at various sites. The Corporation has
estimated total potential cost to be incurred for these actions to be
approximately $133 million, of which $35 million had been accrued at December
31, 1993. The Corporation's policy is to accrue these costs over the estimated
lives of the individual facilities which in most cases is approximately 20
years. The anticipated annual costs currently being accrued are $6 million.
As part of the agreement for the sale of DCBU to Eaton Corporation, the
Corporation agreed to a cost sharing arrangement if future, but as yet
unidentified, remediation is required as a result of any contamination caused
during the Corporation's operation of DCBU prior to its sale. Under the terms
of the agreement, the Corporation's share of any such environmental remediation
costs, on an annual basis, will be at the rate of $2.5 million of the first $6
million expended, and 100% of such costs in excess of $6 million. The
Corporation has provided for all known environmental liabilities related to
DCBU. These estimated costs and related reserves are included in the discussion
above of PRP sites. Environmental liabilities related to the sale of WESCO are
insignificant.
Capital Expenditures
Capital expenditures related to environmental remediation activities in 1993
totalled $5 million. Management believes that the total estimated capital
expenditures related to current operations necessary to comply with present
governmental regulations will not have a material adverse effect on capital
resources, liquidity, financial condition and results of operations.
Insurance Recoveries
In 1987, the Corporation filed an action in New Jersey against over 100
insurance companies seeking recovery for these and other environmental
liabilities and litigation involving personal injury and property damage. The
Corporation has received certain recoveries from insurance companies related to
environmental costs. The Corporation has not accrued for any future insurance
recoveries.
Based on the above discussion and including all information presently known to
the Corporation, management believes that the environmental matters described
above will not have a material adverse effect on the Corporation's capital
resources, liquidity, financial condition and results of operations.
FINANCING COMMITMENTS
Discontinued Operations
Financial Services commitments with off-balance-sheet credit risk represent
financing commitments to provide funds, including loan or investment
commitments, guarantees, standby letters of credit and standby commitments,
generally in exchange for fees. The remaining commitments have fixed expiration
dates from 1994 through 2002.
51
<PAGE> 52
At December 31, 1993, Financial Services commitments with off-balance-sheet
credit risk totalled $111 million, compared to $1,418 million at year-end 1992.
Of the $111 million of commitments at December 31, 1993, $90 million were
guarantees, credit enhancements and other standby agreements, and $21 million
were commitments to extend credit. Of the $1,418 million of commitments at
year-end 1992, $619 million were guarantees, credit enhancements and other
standby agreements, $575 million were commitments to extend credit, and $224
million were partnership calls and other investment commitments. Management
expects the remaining commitments to either expire unfunded, be assumed by the
purchaser in asset dispositions or be funded with the resulting assets being
sold shortly after funding.
The primary reasons for the $1,307 million reduction in commitments during
1993 were that Financial Services was released from $959 million of commitments
through asset sales, restructurings and commitment expirations, funded $340
million of commitments and transferred $76 million of guarantees to Continuing
Operations. These decreases were partially offset by $68 million of new
commitments.
Continuing Operations
As discussed above, during 1993, $76 million of guarantees were transferred
from Financial Services to Continuing Operations. These guarantees were issued
primarily to improve the salability of securities of Financial Services
corporate customers and are collateralized by the assets of the customer.
Management does not expect the Corporation to be required to fund these
guarantees.
WCI was contingently liable at December 31, 1993 under guarantees for $54
million of sewer and water district borrowings. The proceeds of the borrowings
were used for sewer and water improvements on residential and commercial real
estate projects of WCI. Management expects these borrowings to be repaid as
the projects are completed and sold, and the guarantees for such borrowings to
expire unfunded.
OTHER COMMITMENTS
The Corporation's other commitments consisting primarily of those for the
purchase of plant and equipment are not material.
NOTE 18: LEASES
The Corporation has commitments under operating leases for certain machinery
and equipment and facilities used in various operations. Rental expense for
Continuing Operations in 1993, 1992 and 1991 was $220 million, $225 million and
$183 million, respectively. These amounts include immaterial amounts for
contingent rentals and sublease income.
<TABLE>
<CAPTION>
MINIMUM RENTAL PAYMENTS--CONTINUING OPERATIONS (in millions)
At December 31 1993
- - ---------------------------------------------------------------
<S> <C>
1994 $ 123
1995 105
1996 92
1997 74
1998 68
Subsequent years 842
- - ---------------------------------------------------------------
Minimum rental payments $1,304
===============================================================
</TABLE>
NOTE 19: OTHER INCOME AND EXPENSES, NET
<TABLE>
<CAPTION>
OTHER INCOME AND EXPENSES, NET (in millions)
Year ended December 31 1993 1992 1991
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on securities $ 17 $ 18 $ 40
Miscellaneous interest income 7 10 16
Gain (loss) on disposition of other assets 15 (17) (11)
Operating results--nonconsolidated
affiliates (7) (2) (19)
Foreign currency transaction and
high-inflation translation effect 5 (6) (8)
Expected loss on disposition of
non-strategic businesses (195) -- --
Other (7) (21) (37)
- - -----------------------------------------------------------------------------------------
Other income and expenses, net $(165) $(18) $(19)
=========================================================================================
</TABLE>
The expected losses on disposition of non-strategic businesses of $195
million were recorded to reflect the Corporation's announced plan to dispose of
certain of these businesses. Gain on disposition of other assets in 1993
includes a gain of $21 million on the sale of an equity participation in a
production company. Loss on disposition of other assets in 1991 includes a $17
million provision for the loss on investment in an affiliate. All items in the
other category are less than $10 million each.
52
<PAGE> 53
NOTE 20: RESTRUCTURING, MERGERS, ACQUISITIONS
AND DIVESTITURES
On January 11, 1994, the Corporation announced a restructuring of its
continuing businesses resulting in a one-time charge of $350 million. The
Corporation anticipates that actions resulting from its restructuring plan,
directed to improving productivity and operating performance, will result in a
reduction of approximately 6,000 employees, comprised of approximately 3,400
employee separations and expected reductions of 2,600 employees through normal
attrition. These employment reductions will cause the Corporation to incur
various other costs related to the rationalization and closedown of facilities
which are included in the charge. The restructuring actions are expected to
occur over a two to three year period.
On May 3, 1993, WFSI and WCC were merged into Westinghouse and, as a
consequence, WFSI and WCC ceased to exist as separate legal entities and their
debt was assumed by the Corporation. This merger gave management greater
flexibility to execute its liquidation of all assets of Financial Services and
implement the strategy of exiting the financial services business.
During 1992, WSAV executed a definitive agreement with First Financial Bank,
F.S.B., to sell its Illinois-based thrift, Westinghouse Federal Bank. The sale
was completed in January 1993.
In August 1992, the Corporation sold the Copper Laminates Division (formerly
part of the Electronic Systems segment) for $97 million in cash.
In May 1992, the Corporation sold the Electrical Systems Division (formerly
part of the Electronic Systems segment) for $125 million in cash.
During 1991, there were no significant acquisitions or divestitures.
NOTE 21: SEGMENT INFORMATION
Westinghouse is a diversified, global, technology-based corporation operating
in the principal business arenas of television and radio broadcasting, defense
electronics, environmental services, transport refrigeration and the electric
utility markets. The Corporation's continuing businesses are aligned for
reporting purposes into the following segments: Broadcasting, Electronic
Systems, Environmental, Industries, Power Systems, Knoll and WCI. Engineering
and repair services, previously included in the Industries segment, have been
transferred to the Power Systems segment where these businesses have been
consolidated with the power generation service organization. The Environmental
segment now includes the U.S. naval nuclear reactors programs previously
reported in Power Systems. The Longines-Wittnauer Watch Company and
Westinghouse Communications have been transferred from the Broadcasting segment
to the Industries segment as part of the Industrial Products and Services
business unit. Segment information for 1992 and 1991 has been restated to
reflect these changes. Results of international manufacturing entities, export
sales and foreign licensee income are included in the financial information of
the segment that has operating responsibility.
Broadcasting provides a variety of communications services consisting
primarily of commercial broadcasting, program production and distribution. It
sells advertising time to radio, television and cable advertisers through
national and local sales organizations. Within Broadcasting, Group W currently
owns and operates five network affiliated television broadcasting stations and
14 radio stations. Group W also provides programming and distribution services
to the cable television industry. Group W Satellite Communications provides
sports programming and the marketing and advertising sales for two country
music entertainment channels.
The Electronic Systems segment is a world leader in the research,
development, production and support of advanced electronic systems for the
Department of Defense (DoD), Federal Aviation Administration, National
Aeronautics and Space Administration, other government agencies and U.S.
allies. Products include surveillance and fire control radars, command and
control systems, electronic countermeasures equipment, electro-optical systems,
spaceborne sensors, missile launching and handling equipment, torpedoes, sonar
and communications equipment. The group also engages in technologically
complementary non-DoD markets such as air traffic control, security systems and
drug traffic interdiction.
The Environmental segment combines the Corporation's environmental
businesses: toxic, hazardous and radioactive waste services, waste-to-energy
plants and management and operation of several government-owned facilities and
the U.S. naval nuclear reactors program.
The Industries segment is comprised of a leading supplier of transport
temperature control equipment for trucks, trailers, ships, fishing vessels and
railway cars. The segment also includes the Industrial Products and Services
business unit which is a diverse group of businesses providing a wide range of
goods and services to consumer, industrial, utility and governmental customers.
The Power Systems segment designs, develops, manufactures and services
nuclear and fossil-fueled power generation systems and is a leading supplier of
reload nuclear fuel to the global electric utility market.
Knoll designs, manufactures and distributes office furniture to an expanding
global market.
WCI develops land into master planned luxury communities primarily in Florida
and California.
53
<PAGE> 54
SALES OF PRODUCTS AND SERVICES AND SEGMENT OPERATING PROFIT FROM CONTINUING
OPERATIONS (in millions)
<TABLE>
<CAPTION>
Sales of Products and Services Segment Operating Profit (Loss)
- - -------------------------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Broadcasting $ 705 $ 719 $ 707 $ 136 $ 159 $ 137
Electronic Systems 2,623 2,874 3,245 81 221 207
Environmental 542 605 561 (25) 93 13
Industries 1,153 1,122 1,054 114 108 99
Power Systems 3,177 3,218 3,046 (79) 237 218
Knoll 510 578 673 (39) (40) 26
WCI 253 235 258 61 87 122
Other 59 70 61 (103) (72) (76)
Intersegment Sales (147) (170) (196) -- -- --
- - -------------------------------------------------------------------------------------------------------------
Total $8,875 $9,251 $9,409 $ 146 $ 793 $ 746
=============================================================================================================
</TABLE>
Segment sales of products and services include products that are transferred
between segments generally at inventory cost plus a margin. Segment operating
profit or loss consists of sales of products and services less segment
operating expenses that include costs of products and services, marketing,
administrative and general expenses, depreciation and amortization, and
restructuring provisions.
A provision for costs associated with the Corporation's 1991 workforce
reduction was recorded in the third quarter of 1991 and totalled $138 million
for Continuing Operations. Prior to that provision, operating profit totalled
$145 million for Broadcasting, $276 million for Electronic Systems, $22 million
for Environmental, $107 million for Industries, and $247 million for Power
Systems.
In 1992, a $36 million charge was recorded in Continuing Operations for
corporate restructuring related to the previous strategy to sell Knoll and WCI.
Prior to that charge, the operating loss for Knoll was $14 million and the
operating profit for WCI was $97 million.
In 1993, a $750 million charge was recorded in the fourth quarter for
restructuring and other actions of which $555 million was charged to operating
profit. Prior to that provision operating profit totalled $148 million for
Broadcasting, $217 million for Electronic Systems, $7 million for
Environmental, $120 million for Industries, $217 million for Power Systems, $65
million for WCI and a loss of $30 million for Knoll.
Identifiable assets, depreciation and amortization, and capital expenditures
are presented below. Assets not identified to segments principally include cash
and marketable securities, deferred income taxes, prepaid pension contributions
and unrecognized pension costs.
OTHER FINANCIAL INFORMATION (in millions)
<TABLE>
<CAPTION>
Identifiable Assets Depreciation and Amortization Capital Expenditures
- - -----------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broadcasting $ 789 $ 848 $ 859 $ 32 $ 30 $ 30 $ 23 $ 20 $ 28
Electronic Systems 1,616 1,592 1,646 76 79 93 44 67 65
Environmental 551 514 474 21 16 16 35 32 50
Industries 513 472 468 27 25 24 31 22 26
Power Systems 1,850 1,737 1,608 97 95 91 81 81 113
Knoll 552 587 669 30 30 29 19 28 31
WCI 761 725 669 1 1 3 1 2 2
Other 3,921 3,370 3,021 27 25 30 3 7 11
- - -----------------------------------------------------------------------------------------------------------------------------
Continuing Operations 10,553 9,845 9,414 $ 311 $ 301 $ 316 $ 237 $ 259 $ 326
- - -----------------------------------------------------------------------------------------------------------------------------
Discontinued Operations 4,152 8,625 10,403
- - -------------------------------------------------------------
Total $14,705 $18,470 $19,817
=============================================================
</TABLE>
Included in income from Continuing Operations is income of subsidiaries
located outside the U.S. These subsidiaries reported a loss of $21 million in
1993, and income of $32 million and $48 million in 1992 and 1991, respectively.
Subsidiaries located outside the U.S. comprised 6% of total assets of
Continuing Operations in 1993, 5% in 1992 and 6% in 1991. Subsidiaries located
outside the U.S. comprised 2% of total liabilities of Continuing Operations in
1993, 1992 and 1991.
54
<PAGE> 55
FINANCIAL INFORMATION BY GEOGRAPHIC AREA (in millions)
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales of products and services
from Continuing Operations:
U.S. $ 7,928 $ 8,218 $ 8,310
Outside the U.S. 947 1,033 1,099
- - -----------------------------------------------------------------------------------------
Sales of products and services $ 8,875 $ 9,251 $ 9,409
- - -----------------------------------------------------------------------------------------
Operating profit from
Continuing Operations:
U.S. $ 154 $ 719 $ 659
Outside the U.S. (8) 74 87
- - -----------------------------------------------------------------------------------------
Operating Profit $ 146 $ 793 $ 746
- - -----------------------------------------------------------------------------------------
Segment identifiable assets of
Continuing Operations:
U.S. $ 9,969 $ 9,354 $ 8,895
Outside the U.S. 584 491 519
- - -----------------------------------------------------------------------------------------
Segment identifiable assets $10,553 $ 9,845 $ 9,414
=========================================================================================
</TABLE>
The Corporation sells products manufactured domestically to customers
throughout the world using domestic divisions and subsidiaries doing business
primarily outside the U.S. Generally, products manufactured outside the U.S.
are sold outside the U.S.
SALES FROM PRODUCTS AND SERVICES SOLD OUTSIDE THE U.S.
FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
1993 1992 1991
- - ----------------------------------------------------------------------------------------------------
% OF % OF % of
AMOUNT SALES AMOUNT SALES Amount Sales
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Subsidiaries outside
the U.S.:
Europe, Africa,
Middle East $ 618 7.0% $ 685 7.4% $ 659 7.0%
Canada 261 2.9% 281 3.0% 373 4.0%
All other 68 0.8% 67 0.7% 67 0.7%
- - -----------------------------------------------------------------------------------------------------
Total $ 947 10.7% $1,033 11.1% $1,099 11.7%
=====================================================================================================
U.S. exports:
Europe, Africa,
Middle East $ 538 6.1% $ 667 7.2% $ 566 6.0%
Asia-Pacific 429 4.8% 525 5.7% 325 3.5%
All other 371 4.2% 175 1.9% 127 1.3%
- - -----------------------------------------------------------------------------------------------------
Total $1,338 15.1% $1,367 14.8% $1,018 10.8%
=====================================================================================================
</TABLE>
The largest single customer of the Corporation is the U.S. government and its
agencies, whose purchases accounted for 30% of sales of products and services
from Continuing Operations in 1993 and 1992 and 32% in 1991. Of the 1993
purchases, 82% were from the Electronic Systems segment. No other customer
made purchases totalling 10% or more of sales of products and services.
RESEARCH AND DEVELOPMENT FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Westinghouse sponsored:
Electronic Systems $100 $ 96 $ 90
Power Systems 59 58 73
Other 14 8 12
Customer sponsored:
Electronic Systems 494 501 524
Power Systems 52 70 77
Other 50 45 39
- - -----------------------------------------------------------------------------------------
Total research and development
expenditures $769 $778 $815
=========================================================================================
</TABLE>
Note 22: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by the
Corporation using the best available market information and appropriate
valuation methodologies. However, considerable judgment was necessary in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amounts that the
Corporation could realize in a current market exchange or the value that
ultimately will be realized by the Corporation upon maturity or disposition.
Additionally, because of the variety of valuation techniques permitted under
SFAS No. 107, comparability of fair values between entities may not be
meaningful. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
At December 31 1993 1992
- - ----------------------------------------------------------------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 637 $ 637 $ 769 $ 769
Noncurrent customer and
other receivables 206 183 210 184
- - ----------------------------------------------------------------------------------------
LIABILITIES:
Short-term debt 662 662 1,259 1,259
Current maturities of
long-term debt 9 9 295 299
Long-term debt 1,885 1,888 1,341 1,286
- - ----------------------------------------------------------------------------------------
OFF-BALANCE-SHEET
FINANCIAL INSTRUMENTS--
GAINS (LOSSES):
Interest rate and currency
exchange agreements -- -- -- 11
Financial guarantees -- (2) -- --
========================================================================================
</TABLE>
55
<PAGE> 56
FAIR VALUE OF FINANCIAL INSTRUMENTS--DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
At December 31 1993 1992(a)
- - ---------------------------------------------------------------------------------------------------
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
AMOUNT* VALUE Amount* Value
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 611 $ 611 $ 785 $ 785
Portfolio investments:
Real estate 235 235 1,962 1,970
Corporate 118 118 2,047 2,047
- - ---------------------------------------------------------------------------------------------------
LIABILITIES:
Short-term debt 2,373 2,373 4,559 4,559
Current maturities of
long-term debt 774 789 877 870
Long-term debt 647 753 1,602 1,625
Thrift deposits -- -- 693 693
- - ---------------------------------------------------------------------------------------------------
OFF-BALANCE-SHEET
FINANCIAL INSTRUMENTS--
GAINS (losses):
Interest rate and currency
exchange agreements -- 32 -- 14
Financing commitments -- -- -- --
===================================================================================================
</TABLE>
*Carrying amount refers to the amount included in net liabilities of
Discontinued Operations at December 31, 1993 and 1992, after giving effect to
the valuation allowances associated with each portfolio, exclusive of any
recoveries or proceeds from the sale of assets that exceeded their initial
reserved values.
(a)Certain amounts have been reclassified for comparative purposes.
The following methods and assumptions were used to estimate the fair value of
financial instruments for which it was practicable to estimate that value.
CASH AND CASH EQUIVALENTS
The carrying amount for cash and cash equivalents approximates fair value.
NONCURRENT CUSTOMER AND OTHER RECEIVABLES
The fair value of noncurrent customer and other receivables is estimated by
discounting the expected future cash flows at interest rates commensurate with
the creditworthiness of the customers and other third parties.
PORTFOLIO INVESTMENTS
The carrying amount of financial instruments included in portfolio investments
at Financial Services approximates their fair value.
The fair value for marketable securities is determined by quoted market
prices, if available, or estimated using quoted market prices for similar
securities.
Except for the Corporation's investment in LW Real Estate Investments, L.P.,
which is valued at cost, the real estate portfolio, including receivables, real
estate properties and real estate investments in partnerships and other
entities, was valued using the Resolution Trust Corporation's DIV method.
The corporate portfolio, including receivables, investments in partnerships
and other entities and nonmarketable equity securities, was valued using
various valuation techniques, including trading desk values, which arise from
actual or proposed current trades of identical or similar assets, plus other
factors.
SHORT-TERM DEBT
The carrying amount of the Corporation's borrowings under the revolving credit
facility and other arrangements approximate fair value.
LONG-TERM DEBT
The fair value of long-term debt has been estimated using quoted market prices
or discounted cash flow analyses based on the Corporation's incremental
borrowing rates for similar types of borrowing arrangements with comparable
terms and maturities.
THRIFT DEPOSITS
The thrift deposits were assumed by the purchaser of Westinghouse Federal Bank
on January 4, 1993, at their carrying amount.
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS
The fair value of interest rate and currency exchange agreements (used for
hedging purposes) is the amount that the Corporation would receive or pay to
terminate the exchange agreements, considering interest rates, currency
exchange rates and remaining maturities.
FINANCIAL GUARANTEES
The fair value of guarantees is based on the estimated cost
to terminate or otherwise settle the obligations with the counterparties.
FINANCING COMMITMENTS
Most of the unfunded commitments relate to, and are inseparable from, specific
portfolio investments. When establishing the fair value for those portfolio
investments, consideration was given to the related financing commitments.
56
<PAGE> 57
REPORT OF MANAGEMENT
The Corporation has prepared the consolidated financial statements and related
financial information included in this report. Management has the primary
responsibility for the financial statements and other financial information and
for ascertaining that the data fairly reflect the financial position, results
of operations and cash flows of the Corporation. The financial statements were
prepared in accordance with generally accepted accounting principles
appropriate in the circumstances, and necessarily include amounts that are
based on best estimates and judgments with appropriate consideration given to
materiality. Financial information included elsewhere in this report is
presented on a basis consistent with the financial statements.
The Corporation maintains a system of internal accounting controls, supported
by adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Corporation. Limitations exist in any system of internal accounting
controls based upon the recognition that the cost of the system should not
exceed the benefits derived. Westinghouse believes its system of internal
accounting controls, augmented by its corporate auditing function,
appropriately balances the cost/benefit relationship.
The independent accountants provide an objective assessment of the degree to
which management meets its responsibility for fair financial reporting. They
regularly evaluate the system of internal accounting controls and perform such
tests and procedures as they deem necessary to express an opinion on the
fairness of the financial statements.
The Board of Directors pursues its responsibility for the Corporation's
financial statements through its Audit Review Committee composed of directors
who are not officers or employees of the Corporation. The Audit Review
Committee meets regularly with the independent accountants, management and the
corporate auditors. The independent accountants and the corporate auditors have
direct access to the Audit Review Committee, with and without the presence of
management representatives, to discuss the scope and results of their audit
work and their comments on the adequacy of internal accounting controls and the
quality of financial reporting.
We believe that the Corporation's policies and procedures, including its
system of internal accounting controls, provide reasonable assurance that the
financial statements are prepared in accordance with the applicable securities
laws and with a corresponding standard of business conduct.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Westinghouse Electric Corporation
In our opinion, the accompanying consolidated financial statements appearing on
pages 29 through 56 of this Form 10-K present fairly, in all material
respects, the financial position of Westinghouse Electric Corporation and its
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Corporation's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in note 1 to these financial statements, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits," in 1993 and SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes," in 1992.
/s/ Price Waterhouse
Price Waterhouse
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
January 26, 1994, except as to
the matter discussed in
paragraph 9 of note 2,
which is as of February 28, 1994
57
<PAGE> 58
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY
SELECTED FINANCIAL AND STATISTICAL DATA (UNAUDITED) (in millions except per share amounts)
1993 1992 1991 1990 1989
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales of products and services $ 8,875 $ 9,251 $ 9,409 $ 9,198 $ 9,217
Other income and expenses, net (165) (18) (19) 157 511
Interest expense (217) (225) (231) (221) (208)
Income from Continuing Operations before income taxes (236) 550 496 1,114 1,000
Income taxes 70 (187) (159) (307) (257)
Income (loss) from Continuing Operations (175) 357 335 804 732
Income (loss) from Discontinued Operations (95) (1,413) (1,421) (536) 190
Cumulative effect of changes in accounting principles (1) (56) (338) -- -- --
Net income (loss) (326) (1,394) (1,086) 268 922
- - -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing
Operations as a percentage of sales (2.0)% 3.9% 3.6% 8.7% 7.9%
- - -----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Continuing Operations $(.64) $ .95 $ 1.07 $ 2.74 $ 2.50
Discontinued Operations (.27) (4.08) (4.53) (1.83) .65
Cumulative effect of changes in
accounting principles (1) (.16) (.98) -- -- --
Earnings (loss) per share (1.07) (4.11) (3.46) .91 3.15
Dividends per share .40 .72 1.40 1.35 1.15
- - -----------------------------------------------------------------------------------------------------------------------------------
Total assets--Continuing Operations $10,553 $ 9,845 $ 9,414 $ 9,321 $ 9,183
Total assets--Discontinued Operations 4,152 8,625 10,403 12,268 10,859
Total assets 14,705 18,470 19,817 21,589 20,042
Long-term debt--Continuing Operations 1,885 1,341 1,275 916 741
Long-term debt--Discontinued Operations 647 1,602 2,459 5,116 3,621
Shareholders' equity 1,045 2,223 3,750 3,895 4,389
- - -----------------------------------------------------------------------------------------------------------------------------------
Average common and common equivalent
shares outstanding 352,901,670 346,103,408 313,984,242 293,591,984 292,465,132
Market price range per share $17 1/8-12 3/4 $20 7/8-9 3/4 $31-13 3/4 $39 3/8-24 1/4 $38 1/8-25 5/8
Common shareholders at year end 125,806 127,559 120,833 101,157 106,770
Average number of employees 103,063 109,050 113,664 115,774 121,963
====================================================================================================================================
<FN>
Previously reported amounts have been restated to segregate the results of Discontinued Operations from Continuing Operations.
(1) See notes 1, 4 and 5 to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (in millions except per share amounts)
1993 QUARTER ENDED 1992 Quarter Ended
DEC. 31 SEPT. 30 JUNE 30 MARCH 31 Dec. 31 Sept. 30 June 30 March 31
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of products and services $2,641 $2,060 $2,154 $2,020 $2,558 $2,268 $2,371 $2,054
Operating profit (loss) (328) 143 185 146 180 213 221 179
Income (loss) from Continuing Operations (383) 65 84 59 79 91 103 84
Income (loss) from Discontinued Operations (95) -- -- -- (1,363) (77) 19 8
Cumulative effect of changes in
accounting principles -- -- -- (56) -- -- -- (338)
Net income (loss) (478) 65 84 3 (1,284) 14 122 (246)
Per share of common stock:
Income (loss) from Continuing Operations (1.11) .15 .20 .14 .18 .22 .30 .25
Income (loss) from
Discontinued Operations (.27) -- -- -- (3.92) (.22) .05 .02
Cumulative effect of changes in
accounting principles -- -- -- (.16) -- -- -- (.98)
Net income (loss) (1.38) .15 .20 (.02) (3.74) -- .35 (.71)
Dividends paid .10 .10 .10 .10 .18 .18 .18 .18
New York Stock Exchange market
price per share:
High 14 5/8 17 1/8 16 3/8 15 3/4 16 1/8 18 1/4 18 7/8 20 7/8
Low 12 7/8 12 3/4 14 13 9 3/4 15 7/8 16 3/4 18 1/8
============================================================================================================================
<FN>
Financial information for the quarter ended March 31, 1993 was restated to recognize the adoption of SFAS No. 112.
The effect of the adoption of SFAS No. 112 on previously reported results for the quarters ended June 30 and September 30, 1993 was
not significant.
</TABLE>
58
<PAGE> 59
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Part of the information concerning executive officers required by this item
is set forth in Part I pursuant to General Instruction G to Form 10-K and part
is incorporated herein by reference to "Security Ownership" in the Proxy
Statement.
The information as to directors is incorporated herein by reference to
"Election of Directors" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference
to "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by reference
to "Security Ownership" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference
to "Transactions Involving Directors and Executive Officers" in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS
The financial statements required by this item are listed under Item 8,
which list is incorporated herein by reference.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules for Westinghouse Electric
Corporation are included in Part IV of this report:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Reports of Independent Accountants on Financial
Statement Schedules 62
For the three years ended December 31, 1993:
Schedule VIII -- Valuation and Qualifying Accounts 63
Schedule X -- Supplementary Income Statement
Information 63
</TABLE>
Other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
59
<PAGE> 60
(A) EXHIBITS
<TABLE>
<S> <C> <C>
(3) Articles of Incorporation and Bylaws
(a) The Restated Articles of the Corporation, as amended are incorporated herein
by reference to Exhibit 4(d) to Form 8-K, dated August 11, 1992.
(b) The Bylaws of the Corporation, as amended are incorporated herein by
reference to Exhibit 3(c) to Form 10-K/A for the year ended December 31,
1992.
(4) Rights of Security Holders
Except as set forth below, there are no instruments with respect to
long-term debt of the Corporation that involve securities authorized
thereunder exceeding 10% of the total assets of the Corporation and its
subsidiaries on a consolidated basis. The Corporation agrees to provide to
the Securities and Exchange Commission, upon request, a copy of instruments
defining the rights of holders of long-term debt of the Corporation and its
subsidiaries.
(a) Form of Senior Indenture, dated as of November 1, 1990, between the
Corporation and Citibank, N.A. is incorporated herein by reference to
Exhibit 4.1 to the Corporation's Registration Statement No. 33-41417.
(10) Material Contracts
(a*) The Annual Performance Plan is incorporated herein by reference to Exhibit
10(a) to Form 10-K/A for the year ended December 31, 1992.
(b*) The 1993 Long-Term Incentive Plan.
(c*) The 1984 Long-Term Incentive Plan as amended is incorporated herein by
reference to Exhibit 10(b) to Form 10-Q for the quarter ended June 30, 1993.
(d*) The 1979 Stock Option and Long-Term Incentive Plan is incorporated herein by
reference to Exhibit 10(c) to Form 10-K/A for the year ended December 31,
1992.
(e*) The Westinghouse Employee Stock Purchase Plan is incorporated herein by
reference to Exhibit 10(d) to Form 10-K, as amended, for the year ended
December 31, 1991.
(f*) The Westinghouse Personal Investment Plan is incorporated herein by
reference to Exhibit 10(e) to Form 10-K/A for the year ended December 31,
1992.
(g*) The Westinghouse Executive Pension Plan, as amended is incorporated herein
by reference to Exhibit 10(f) to Form 10-Q for the quarter ended June 30,
1993.
(h*) The Deferred Stock and Compensation Plan for Directors is incorporated
herein by reference to Exhibit 10(i) to Form 10-K/A for the year ended
December 31, 1992.
(i*) The Advisory Director's Plan is incorporated herein by reference to Exhibit
10(k) to Form 10-K for the year ended December 31, 1989.
(j) Competitive Advance and Revolving Credit Facility dated as of December 23,
1991, among the Corporation and WCC as borrowers, the Co-Agents and Lenders
named therein and Chemical Bank as Administrative Agent, is incorporated
herein by reference to Exhibit 10 to the Corporation's Form 8-K dated
January 31, 1992.
(k) First Amendment dated as of September 30, 1992 to the Competitive Advance
and Revolving Credit Facility is incorporated herein by reference to Exhibit
10(1) to Form 10-K/A for the year ended December 31, 1992.
(l) Second Amendment dated as of April 2, 1993 to the Competitive Advance and
Revolving Credit Facility is incorporated herein by reference to Exhibit
10(m) to Form 10-Q/A for the quarter ended March 31, 1993.
(m*) Employment Agreement dated June 9, 1992, between the Corporation and Robert
A. Watson, is incorporated herein by reference to Exhibit 10 to the
Corporation's Form 8-K dated August 11, 1992.
</TABLE>
60
<PAGE> 61
<TABLE>
<S> <C> <C>
(n) Merger Agreement dated as of April 7, 1993 among the Corporation,
Westinghouse Credit Corporation (WCC) and Westinghouse Financial Services,
Inc. (WFSI) is incorporated herein by reference to Exhibit 10(r) to Form
10-Q/A for the quarter ended March 31, 1993.
(o*) The 1991 Long-Term Incentive Plan, as amended effective December 1, 1993.
(p) Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement effective as of May 3, 1993 among the Corporation as borrower, the
Co-Agents and Lenders named therein, and Chemical Bank as Administrative
Agent is incorporated herein by reference to Exhibit 10(t) to Form 10-Q for
the quarter ended June 30, 1993.
(q) First Amendment to the Amended and Restated Competitive Advance and
Revolving Credit Facility Agreement dated as of June 9, 1993 among the
Corporation as borrower, the Co-Agents and Lenders named therein, and
Chemical Bank as Administrative Agent is incorporated herein by reference to
Exhibit 10(u) to Form 10-Q for the quarter ended June 30, 1993.
(r) DCBU Purchase Agreement between the Corporation and Eaton Corporation dated
as of August 10, 1993 is incorporated herein by reference to Exhibit 10(v)
to Form 10-Q for the quarter ended June 30, 1993.
(s*) Employment Agreement between the Corporation and Michael H. Jordan is hereby
incorporated by reference to Exhibit 10 to the Corporation's Form 8-K, dated
September 1, 1993.
(t) Second Amendment to the Amended and Restated Competitive Advance and
Revolving Credit Facility Agreement dated as of December 1, 1993 among the
Corporation as borrower, and Chemical Bank as Administrative Agent.
(u*) Letter Amendment dated December 30, 1993 to the Employment Agreement between
the Corporation and Robert A. Watson.
</TABLE>
* Identifies management contract or compensatory plan or arrangement.
<TABLE>
<S> <C> <C>
(11) Computation of Per Share Earnings
(12)(a) Computation of Ratio of Earnings to Fixed Charges
(12)(b) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends
(21) Subsidiaries of the Registrant
(23) Consent of Independent Accountants
(24) Powers of Attorney and Extract of Resolution of Board of Directors
</TABLE>
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1993.
61
<PAGE> 62
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Westinghouse Electric Corporation
Our audits of the consolidated financial statements referred to in our
report dated January 26, 1994, except as to the matter discussed in paragraph 9
of note 2, which is as of February 28, 1994, appearing on page 57 of this Form
10-K of Westinghouse Electric Corporation (which report and consolidated
financial statements are included in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedules listed in Item 14(a)(2)
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
Price Waterhouse
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
January 26, 1994, except as to the
matter discussed in paragraph 9
of note 2, which is as of
February 28, 1994
62
<PAGE> 63
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1993 1992 1991
------- ------- ------
(IN MILLIONS)
<S> <C> <C> <C>
Customer receivables from Continuing Operations--
allowance for doubtful accounts--
Balance at beginning of year.............................. $ 50 $ 58 $ 42
Charged to costs and expenses............................. 14 20 21
Charged to the allowance.................................. (11) (20) (12)
Charged to other accounts................................. 1 (8) 7
------- ------- ------
Balance at end of year(a)............................ $ 54 $ 50 $ 58
------- ------- ------
------- ------- ------
Portfolio investments--Financial Services--
valuation allowance:
Balance at beginning of year.............................. $ 3,638 $ 2,330 $1,333
Charged to costs and expenses............................. 38 2,563 1,814
Charged to the allowance.................................. (3,252) (1,246) (832)
Charged to other accounts................................. -- (9) 15
------- ------- ------
Balance at end of year............................... $ 424 $ 3,638 $2,330
------- ------- ------
------- ------- ------
</TABLE>
- - ---------
(a) at December 31, 1993, 1992 and 1991, all amounts were classified as current.
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
CHARGED TO COSTS
AND EXPENSES
--------------------------
1993 1992 1991
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Maintenance and repairs.......................................... $110 $106 $123
Royalties........................................................ 65 75 96
</TABLE>
63
<PAGE> 64
SIGNATURE
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, on the 4th day of
March, 1994.
WESTINGHOUSE ELECTRIC CORPORATION
/s/ Robert E. Faust
By: --------------------------------
Robert E. Faust
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature and Title
Frank C. Carlucci, Director
Gary M. Clark, President and Director
George H. Conrades, Director
William H. Gray, III, Director
Michael H. Jordan, Chairman and Chief
Executive Officer (principal executive officer)
and Director /s/ Robert E. Faust
David T. McLaughlin, Director By --------------------------
Rene C. McPherson, Director Robert E. Faust
Richard M. Morrow, Director Attorney-In-Fact
Richard R. Pivirotto, Director
Paula Stern, Director March 4, 1994
Fredric G. Reynolds, Executive Vice President,
Finance (principal financial officer)
Robert E. Faust, Vice President and Controller
(principal accounting officer)
Original powers of attorney authorizing Michael H. Jordan, Fredric G.
Reynolds and Robert E. Faust, individually, to sign this report on behalf of the
listed directors and officers of the Corporation and a certified copy of a
resolution of the Board of Directors of the Corporation authorizing each of said
persons to sign on behalf of the Corporation have been filed with the Securities
and Exchange Commission and are included as Exhibit 24 to this report.
64
<PAGE> 65
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NO.
----------
<S> <C> <C> <C>
Exhibits
(3) Articles of Incorporation and Bylaws
(a) The Restated Articles of the Corporation, as amended..................... *
(b) The Bylaws of the Corporation, as amended................................ *
(4) Riqhts of Security Holders
(a) Form of Senior Indenture................................................. *
(10) Material Contracts
(a) The Annual Performance Plan.............................................. *
(b) The 1993 Long-Term Incentive Plan........................................
(c) The 1984 Long-Term Incentive Plan........................................ *
(d) The 1979 Stock Option and Long-Term Incentive Plan....................... *
(e) The Westinghouse Employee Stock Purchase Plan............................ *
(f) The Westinghouse Personal Investment Plan................................ *
(g) The Westinghouse Executive Pension Plan.................................. *
(h) The Deferred Stock and Compensation Plan for Directors................... *
(i) The Advisory Director's Plan............................................. *
(j) Competitive Advance and Revolving Credit Facility........................ *
(k) Amendment to the Competitive Advance and Revolving Credit Facility....... *
(l) Second Amendment to the Competitive Advance and Revolving Credit
Facility................................................................. *
(m) Employment Agreement with Robert A. Watson............................... *
(n) Merger Agreement......................................................... *
(o) The 1991 Long-Term Incentive Plan, as amended............................ 66
(p) Amended and Restated Competitive Advance and Revolving Credit Facility... *
(q) First Amendment to the Amended and Restated Competitive Advance and
Revolving Credit Facility................................................ *
(r) DCBU Purchase Agreement.................................................. *
(s) Employment Agreement with Michael H. Jordan.............................. *
(t) Second Amendment to the Amended and Restated Competitive Advance and
Revolving Credit Facility................................................ 98
(u) Letter Amendment to Robert A. Watson Employment Agreement................ 121
(11) Computation of Per Share Earnings............................................... 122
(12) Computation of Ratios
(a) Ratio of Earnings to Fixed Charges....................................... 123
(b) Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends................................................................ 124
(21) Subsidiaries of the Registrant.................................................. 125
(23) Consent of Independent Accountants.............................................. 126
(24) Powers of Attorney and Extract of Resolution of Board of Directors.............. 127
</TABLE>
- - --------------------------------------------------------------------------------
* Incorporated by reference
65
<PAGE> 1
EXHIBIT 10(o)
WESTINGHOUSE ELECTRIC CORPORATION
1991 LONG-TERM INCENTIVE PLAN
66
<PAGE> 2
1991 LONG-TERM INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purposes of the 1991 Long-Term Incentive Plan ("Plan") for
eligible employees of Westinghouse Electric Corporation ("Corporation") and its
Subsidiaries (the Corporation and its Subsidiaries severally and collectively
referred to in the Plan as the "Company") are to foster and promote the
long-term financial success of the Company and materially increase stockholder
value by (i) attracting and retaining employees of outstanding ability, (ii)
strengthening the Company's capability to develop, maintain and direct a high
performance team, (iii) motivating employees, by means of performance-related
incentives, to achieve long-range performance goals, (iv) providing incentive
compensation opportunities competitive with those of other major companies and
(v) enabling employees to participate in the long-term growth and financial
success of the Company.
1.2 Administration
(a) The Plan shall be administered by a committee of the Board of
Directors of the Corporation ("Committee") which shall consist of three or more
members. The members shall be appointed by the
- 1 -
<PAGE> 3
Board of Directors, and any vacancy on the Committee shall be filled by the
Board of Directors.
The Committee shall keep minutes of its meetings and of any action
taken by it without a meeting. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present shall be the acts of the Committee. Any action that
may be taken at a meeting of the Committee may be taken without a meeting if a
consent or consents in writing setting forth the action so taken shall be
signed by all of the members of the Committee. The Committee shall make
appropriate reports to the Board of Directors concerning the operations of the
Plan.
(b) Subject to the limitations of the Plan, the Committee shall have the
sole and complete authority: (i) to select in accordance with Section 1.3
persons who shall participate in the Plan ("Participant" or "Participants"),
including the right to delegate authority to select Participants, (ii) to make
Awards and payments in such forms and amounts as it shall determine, (iii) to
impose such limitations, restrictions, terms and conditions upon such Awards as
it shall deem appropriate, (iv) to interpret the Plan and the terms of any
document relating to the Plan and to adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) to amend
or cancel an existing Award in whole or in part, except that the Committee may
not, unless otherwise provided in the
- 2 -
<PAGE> 4
Plan, or unless the Participant affected thereby consents, take any action
under this clause that would adversely affect the rights of such Participant
with respect to the Award and except that the Committee may not take any action
to amend any outstanding Option under the Plan in order to decrease the Option
Price under such Option or to cancel and replace any such Option with an Option
with a lower Option Price and (vi) to make all other determinations and to take
all other actions necessary or advisable for the interpretation, implementation
and administration of the Plan. The Committee's determinations on matters
within its authority shall be conclusive and binding upon the company and all
other persons.
(c) The Committee shall act with respect to the Plan on behalf of the
Corporation and on behalf of any subsidiary issuing stock under the Plan,
subject to appropriate action by the board of directors of any such Subsidiary.
All expenses associated with the Plan shall be borne by the Corporation subject
to such allocation to its Subsidiaries and operating units as it deems
appropriate.
1.3 Selection for Participation
Participants selected by the Committee or its delegatees shall be
Eligible Persons (as defined below). "Eligible Persons" are persons who are
employees of the Company ("Employee" or "Employees"). In making this selection
and in determining the
- 3 -
<PAGE> 5
form and amount of Awards, the Committee may give consideration to the
functions and responsibilities of the Eligible Person, his or her past, present
and potential contributions to the Company and other factors deemed relevant by
the Committee.
1.4 Types of Awards under Plan
Awards ("Awards") under the Plan may be in the form of any one or more
of the following: (i) Non-statutory Stock Options ("NSOs" or "Options"), as
described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited
Stock Appreciation Rights ("Limited Rights"), as described in Article III,
(iii) Performance Awards ("Performance Awards") as described in Article IV, and
(iv) Restricted Stock ("Restricted Stock") as described in Article V.
1.5 Shares Subject to the Plan
Shares of stock issued under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in
Section 8.12(d) (Common Stock and Formula Value Stock severally and
collectively referred to in the Plan as "Stock").
The maximum number of shares of Stock which may be issued for all
purposes under the Plan shall be 6,000,000.
- 4 -
<PAGE> 6
Except as otherwise provided below, any shares of Stock subject to an
Option or other Award which is canceled or terminates without having been
exercised shall again be available for Awards under the Plan. Shares subject
to an option canceled upon the exercise of an SAR shall not again be available
for Awards under the Plan except to the extent the SAR is settled in cash. To
the extent that an Award is settled in cash, shares of Stock subject to that
Award shall again be available for Awards. Shares of Stock tendered by a
Participant or withheld by the Company to pay the exercise price of an Option
or to satisfy the tax withholding obligations of the exercise or vesting of an
Award shall be available again for Awards under the Plan. Shares of Restricted
Stock forfeited to the Company in accordance with the Plan and the terms of the
particular Award shall be available again for Awards under the Plan.
No fractional shares shall be issued, and the Committee shall
determine the manner in which fractional share value shall be treated.
- 5 -
<PAGE> 7
ARTICLE II
STOCK OPTIONS
2.1 Award of Stock Options
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, award
to any Participant Options to purchase Stock.
The Committee may provide with respect to any option to purchase Stock
that, if the Participant, while an Eligible Person, exercises the option in
whole or in part using already-owned Stock, the Participant will, subject to
this Section 2.1 and such other terms and conditions as may be imposed by the
Committee, receive an additional option ("Reload Option"). The Reload Option
will be to purchase, at Fair Market Value as of the date the original option
was exercised, a number of shares of Stock equal to the number of whole shares
used by the Participant to exercise the original option. The Reload Option
will be exercisable only between the date of its grant and the date of
expiration of the original option.
A Reload Option shall be subject to such additional terms and
conditions as the Committee shall approve, which terms may provide that the
Committee may cancel the Participant's right to receive the Reload Option and
that the Reload Option will be
- 6 -
<PAGE> 8
granted only if the Committee has not canceled such right prior to the exercise
of the original option. Such terms may also provide that, upon the exercise by
a Participant of a Reload Option while an Eligible Person, an additional Reload
Option will be granted with respect to the number of whole shares used to
exercise the first Reload Option.
2.2 Stock Option Agreements
The award of an option shall be evidenced by a written agreement
("Stock Option Agreement") in such form and containing such terms and
conditions as the Committee may from time to time determine.
2.3 Option Price
The purchase price of Stock under each Option ("Option Price") shall
be not less than the Fair Market Value of such Stock on the date the Option is
awarded.
2.4 Exercise and Term of Options
(a) Except as otherwise provided in the Plan, Options shall become
exercisable at such time or times as the Committee may specify. The Committee
may at any time and from time to time accelerate the time at which all or any
part of the Option may be exercised.
- 7 -
<PAGE> 9
(b) The Committee shall establish procedures governing the exercise of
options and shall require that written notice of exercise be given. Stock
purchased on exercise of an option must be paid for as follows: (1) in cash or
by check (acceptable to the Company in accordance with guidelines established
for this purpose), bank draft or money order payable to the order of the
Company or (2) if so provided by the Committee (i) through the delivery of
shares of Stock which are then outstanding and which have a Fair Market Value
on the last business day preceding the date of exercise equal to the exercise
price, (ii) by delivery of an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or (iii) by any combination of the permissible forms of payment.
2.5 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and
ceased to be such as a result of termination of service to the Company with the
consent of the Committee or as a result of his or her death, retirement or
disability, each of his or her outstanding Options shall be exercisable by the
Participant (or his or her legal representative or designated beneficiary), to
the extent that such Option was then exercisable, at any time prior to an
expiration date established by the Committee at the time of award, but in no
event after such expiration date. If the Participant ceases to be an Eligible
Person for any other
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reason, all of the Participant's then outstanding Options shall terminate
immediately.
ARTICLE III
STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS
3.1 Award of Stock Appreciation Right
(a) An SAR is an Award entitling the recipient on exercise to receive an
amount, in cash or Stock or a combination thereof (such form to be determined
by the Committee), determined in whole or in part by reference to appreciation
in Stock value.
(b) In general, an SAR entitles the Participant to receive, with respect
to each share of Stock as to which the SAR is exercised, the excess of the
share's Fair Market Value on the date of exercise over its Fair Market Value on
the date the SAR was granted.
(c) SARs may be granted in tandem with options granted under the Plan
("Tandem SARS") or independently of Options ("Independent SARs"). An SAR
granted in tandem with an NSO may be granted either at or after the time the
option is granted.
(d) SARs awarded under the Plan shall be evidenced by either a Stock
Option Agreement (when SARs are granted in tandem with an
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<PAGE> 11
Option) or a separate agreement between the Company and the Participant.
(e) Except as otherwise provided herein, a Tandem SAR shall be exercisable
only at the same time and to the same extent and subject to the same conditions
as the option related thereto is exercisable, and the Committee may prescribe
additional conditions and limitations on the exercise of the SAR. The exercise
of a Tandem SAR shall cancel the related Option. Tandem SARs may be exercised
only when the Fair Market Value of Stock to which it relates exceeds the Option
Price.
(f) Except as otherwise provided herein, an Independent SAR will become
exercisable at such time or times, and on such conditions, as the Committee may
specify, and the Committee may at any time accelerate the time at which all or
any part of the SAR may be exercised.
The Committee may provide, under such terms and conditions as it may
deem appropriate, for the automatic grant of additional SARs upon the full or
partial exercise of an Independent SAR.
Any exercise of an Independent SAR must be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.
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<PAGE> 12
(g) Except as otherwise provided herein, all SARs shall automatically be
exercised on the last trading day prior to the expiration date established by
the Committee at the time of the award for the SAR, or, in the case of a Tandem
SAR, for the related Option, so long as exercise on such date will result in a
payment to the Participant.
(h) Unless otherwise provided by the Committee, no SAR shall become
exercisable or shall be automatically exercised for six months following the
date on which it was granted.
(i) At the time of award of an SAR, the Committee may limit the amount of
the payment that may be made to a Participant upon the exercise of the SAR.
The Committee may further determine that, if the amount to be received by a
Participant in any year is limited pursuant to this provision, payment of all
or a portion of the amount that is unpaid as a result of the limitation may be
made to the Participant at a subsequent time. No such limitation shall require
a Participant to return to the Company any amount theretofore received by him
or her upon the exercise of an SAR.
(j) Payment of the amount to which a Participant is entitled upon the
exercise of an SAR shall be made in cash, Stock, or partly in cash and partly
in Stock, as the Committee shall determine. To the extent that payment is made
in Stock, the
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<PAGE> 13
shares shall be valued at their Fair Market Value on the date of exercise of
the SAR.
(k) Each SAR shall expire on a date determined by the Committee or earlier
upon the occurrence of the first of the following: (i) in the case of a Tandem
SAR, termination of the related option, (ii) expiration of a period of six
months after the Participant's ceasing to be an Eligible Person as a result of
termination of service to the Company with the consent of the Committee or as a
result of his or her death, retirement or disability, or (iii) the Participant
ceasing to be an Eligible Person for any other reason.
3.2 Limited Rights
(a) The Committee may award Limited Rights pursuant to the provisions of
this Section 3.2 to the holder of an Option to purchase Common Stock granted
under the Plan (a "Related Option") with respect to all or a portion of the
shares subject to the Related Option. A Limited Right may be exercised only
during the period beginning on the first day following a Change in Control, as
defined in Section 7.2 of the Plan, and ending on the thirtieth day following
such date. Each Limited Right shall be exercisable only to the same extent
that the Related Option is exercisable, and in no event after the termination
of the Related Option. In no event shall a Limited Right be exercised during
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<PAGE> 14
the first six months after the date of grant of the Limited Right. Limited
Rights shall be exercisable only when the Fair Market Value (determined as of
the date of exercise of the Limited Rights) of each share of Common Stock with
respect to which the Limited Rights are to be exercised shall exceed the Option
Price per share of Common Stock subject to the Related option.
(b) Upon the exercise of Limited Rights, the Related Option shall be
considered to have been exercised to the extent of the number of shares of
Common Stock with respect to which such Limited Rights are exercised. Upon the
exercise or termination of the Related Option, the Limited Rights with respect
to such Related Option shall be considered to have been exercised or terminated
to the extent of the number of shares of Common Stock with respect to which the
Related Option was so exercised or terminated.
(c) The effective date of the grant of a Limited Right shall be the date
on which the Committee approves the grant of such Limited Right. Each grantee
of a Limited Right shall be notified promptly of the grant of the Limited Right
in such manner as the Committee shall prescribe.
(d) Upon the exercise of Limited Rights, the holder thereof shall receive
in cash an amount equal to the product computed by
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<PAGE> 15
multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per Share
(as hereinafter defined), or (y) the highest reported closing sales price of a
share of Common Stock on the New York Stock Exchange at any time during the
period beginning on the sixtieth day prior to the date on which such Limited
Rights are exercised and ending on the date on which such Limited Rights are
exercised, over (b) the Option Price per share of Common Stock subject to the
Related Option, by (ii) the number of shares of Common Stock with respect to
which such Limited Rights are being exercised.
(e) For purposes of this Section 3.2, the term "Minimum Price Per Share"
shall mean the highest gross price (before brokerage commissions and soliciting
dealers' fees) paid or to be paid for a share of Common Stock (whether by way
of exchange, conversion, distribution upon liquidation or otherwise) in any
Change in Control which is in effect at any time during the period beginning on
the sixtieth day prior to the date on which such Limited Rights are exercised
and ending on the date on which such Limited Rights are exercised. For
purposes of this definition, if the consideration paid or to be paid in any
such Change in Control shall consist, in whole or in part, of consideration
other than cash, the Board shall take such action, as in its judgement it deems
appropriate, to establish the cash value of such consideration.
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<PAGE> 16
ARTICLE IV
PERFORMANCE AWARDS
4.1 Nature of Performance Awards
A Performance Award provides for the recipient to receive an amount in
cash or Stock or a combination thereof (such form to be determined by the
Committee) following the attainment of Performance Goals. Performance Goals
may be related to personal performance, corporate performance (including
corporate stock performance), departmental performance or any other category of
performance deemed by the Committee to be important to the success of the
Company. The Committee shall determine the Performance Goals, the period or
periods during which performance is to be measured and all other terms and
conditions applicable to the Award. Regardless of the degree to which
Performance Goals are attained, a Performance Award shall be paid only when, if
and to the extent that the Committee determines to make such payment.
4.2 Other Awards Subject to Performance Condition
The Committee may, at the time any Award described in this Plan is
granted, impose the condition (in addition to any conditions specified or
authorized in the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
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<PAGE> 17
ARTICLE V
RESTRICTED STOCK
5.1 Award of Restricted Stock
The Committee may award to any Participant shares of Stock subject to
this Article V and such other terms and conditions as the Committee may
prescribe, such Stock referred to herein as "Restricted Stock."
Each certificate for Restricted Stock shall be registered in the name
of the Participant and deposited by him or her, together with a stock power
endorsed in blank, with the Corporation.
5.2 Restricted Stock Agreement
Shares of Restricted Stock awarded under the Plan shall be evidenced
by a written agreement in such form and containing such terms and conditions as
the Committee may determine.
5.3 Restriction Period
At the time of award, there shall be established for each Participant
a "Restriction Period" of such length as shall be determined by the Committee.
The Restriction Period may be waived by the Committee. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered,
except as hereinafter provided, during the Restriction Period. Subject to such
restriction on transfer, the Participant as owner
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<PAGE> 18
of such shares of Restricted Stock shall have the rights of the holder of such
Restricted Stock, except that the Committee may provide at the time of the
Award that any dividends or other distributions paid on such Stock during the
Restriction Period shall be accumulated and held by the Company and shall be
subject to forfeiture under Section 5.4.
Upon the expiration or waiver by the Committee of the Restriction
Period, the Corporation shall redeliver to the Participant (or his or her legal
representative or designated beneficiary) the shares deposited pursuant to
Section 5.1.
5.4 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and
ceased to be such as a result of termination of service to the Company with the
consent of the Committee, or as a result of his or her death, retirement or
disability, the restrictions imposed under this Article V shall lapse with
respect to such number of shares theretofore awarded to him or her as shall be
determined by the Committee. All other shares of Restricted Stock theretofore
awarded to him or her which are still subject to restrictions, along with any
dividends or other distributions thereon that have been accumulated and held by
the Company, shall be forfeited, and the Corporation shall have the right to
complete the blank stock power.
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<PAGE> 19
In the event the Participant ceases to be an Eligible Person for any
other reason, all shares of Restricted Stock theretofore awarded to him or her
which are still subject to restrictions, along with any dividend or other
distributions thereon that have been accumulated and held by the Company, shall
be forfeited, and the Corporation shall have the right to complete the blank
stock power.
ARTICLE VI
DEFERRAL OF PAYMENTS
6.1 Deferral of Amounts
If the Committee makes a determination to designate Awards or, from
time to time, groups or types of Awards, eligible for deferral hereunder, a
Participant may, subject to such terms and conditions and within such limits as
the Committee may from time to time establish, elect to defer the receipt of
amounts due to him or her under the Plan. Amounts so deferred are referred to
herein as "Deferred Amounts." The Committee may also permit amounts now or
hereafter deferred or available for deferral under any present or future
incentive compensation program or deferral arrangement of the Company to be
deemed Deferred Amounts and to become subject to the provisions of this
Article. Awards which are so deferred will be deemed to have been awarded in
cash and the cash deferred as Deferred Amounts.
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<PAGE> 20
The period between the date on which the Participant's Deferred Amount
would have been payable absent deferral and the final payment of such Deferred
Amount shall be referred to herein as the "Deferral Period."
6.2 Investment During Deferral Period
Unless otherwise determined by the Committee, and subject to such
changes as the Committee may determine, the Deferred Amount will be treated
during the Deferral Period as if it were invested in putative convertible
debentures with a fixed interest rate, compounded annually, for the entire
Deferral Period. For purposes of determining the value of the Deferred Amount
at the time of payment, each putative debenture will be deemed to be
convertible into Common Stock at a conversion rate computed by reference to the
Fair Market Value of the Common Stock on the last trading day prior to the
regular January meeting of the Board of Directors preceding the date of
deferral. Payment of Deferred Amounts may be made in cash, Stock, or partly in
cash and partly in Stock, in the committee's sole discretion.
6.3 Participant Reports
Annually, each Participant who has a Deferred Amount will receive a
report setting forth all of his or her then Deferred Amounts and the yield
thereon to date.
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<PAGE> 21
6.4 Payment of Deferred Amounts
Payment of Deferred Amounts will be made at such time or times, and
may be in cash, Stock, or partly in cash and partly in Stock, as the Committee
shall from time to time determine. The limitations respecting the issuance of
Stock or other limitations on aggregate awards payable contained in the Annual
Performance Plan of the Corporation, Article XVI of the by-laws of the
Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term
Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan
hereafter adopted by the stockholders shall be limitations applicable to the
payment of any Deferred Amounts under this Article VI.
6.5 Alternative Valuation Election
Unless otherwise determined by the Committee, a Participant may, at a
time established by the committee, but prior to such Participant's ceasing to
be an Eligible Person, elect to establish the ultimate payable value of each
Deferred Amount by reference to the Fair Market Value of the Common Stock as of
the day on which an alternate valuation election is received by the corporation
in accordance with procedures established by the Committee.
Notwithstanding the establishment of the ultimate payable value
resulting from the alternate valuation election by the Participant, the yield
will continue as though no such election
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<PAGE> 22
had been made and will continue to be subject to the limitations set forth in
Section 6.2, and Deferred Amounts and the yield thereon will be paid as
otherwise provided in this Article.
ARTICLE VII
CHANGES IN CONTROL
7.1 Effect of Change in Control
Notwithstanding any other provision of the Plan, upon the occurrence
of a Change in Control, as defined in Section 7.2: (i) all Options and Limited
Rights, but not SARS, outstanding and unexercised on the date of the Change in
Control shall become immediately exercisable; (ii) all Performance Awards shall
be deemed to have been earned on such basis as the Committee may prescribe and
then paid on such basis, at such time and in such form as the Committee may
prescribe, or deferred in accordance with the elections of Participants; (iii)
all Restricted Stock shall be deemed to be earned and the Restriction Period
shall be deemed expired on such terms and conditions as the Committee may
determine; and (iv) all amounts deferred under this Plan shall be paid to a
trustee or otherwise on such terms as the Committee may prescribe or permit.
7.2 Definition of Change in Control
The term "Change in Control" means the occurrence of one or more of
the following events: (a) there shall be consummated (i)
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<PAGE> 23
any consolidation or merger of the Corporation in which the Corporation is not
the continuing or surviving corporation or pursuant to which shares of the
Common Stock would be converted into cash, securities or other property, other
than a merger of the Corporation in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (ii) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Corporation, or (b) the stockholders of the Corporation shall approve any plan
or proposal for the liquidation or dissolution of the Corporation, or (c) (i)
any person (as such term is defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), corporation or other entity
shall purchase any Common Stock of the Corporation (or securities convertible
into Common Stock) for cash, securities or any other consideration pursuant to
a tender offer or exchange offer, unless, prior to the making of such purchase
of Common Stock (or securities convertible into Common Stock), the Board shall
determine that the making of such purchase shall not constitute a Change in
Control, or (ii) any person (as such term is defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation
or other entity (other than the Corporation or any benefit plan sponsored by
the Corporation or any of its subsidiaries) shall be the "beneficial owner" (as
such term is
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<PAGE> 24
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing twenty percent or more of the
combined voting power of the Corporation's then outstanding securities
ordinarily (and apart from any rights accruing under special circumstances)
having the right to vote in the election of directors (calculated as provided
in Rule 13d-3(d) in the case of rights to acquire any such securities), unless,
prior to such person so becoming such beneficial owner, the Board shall
determine that such person so becoming such beneficial owner shall not
constitute a Change in Control, or (d) at any time during any period of two
consecutive years, individuals who at the beginning of such period constituted
the entire Board shall cease for any reason to constitute at least a majority
thereof, unless the election or nomination for election of each new director
during such two-year period was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of such
two-year period.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Transferability
No Option, SAR, Performance Award or share of Restricted Stock or
Deferred Amount under the Plan shall be transferable by the Participant other
than by will or the applicable laws of
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<PAGE> 25
descent and distribution. All Awards and Deferred Amounts shall be exercisable
or received during the Participant's lifetime only by such Participant or his
or her legal representative. Any transfer contrary to this Section 8.1 will
nullify the option, SAR, Performance Award or share of Restricted Stock, and
any attempted transfer of a Deferred Amount contrary to this Section 8.1 will
be void and of no effect.
8.2 Beneficiaries
The Committee may establish procedures not inconsistent with Section
8.1 under which a Participant may designate a beneficiary or beneficiaries to
receive amounts due under an Award or with respect to Deferred Amounts in the
event of the Participant's death.
8.3 Adjustments Upon Changes in Stock
If there shall be any change in the Stock of the Company, through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split up, dividend in kind or other change in the corporate structure or
distribution to the stockholders, appropriate adjustments may be made by the
Board of Directors of the Company (or if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation) in the aggregate number and kind of shares subject to the Plan,
and the number and kind of shares and the price per share subject to
outstanding Options or which may
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<PAGE> 26
be issued under outstanding Performance Awards or Awards of Restricted Stock.
Appropriate adjustments may also be made by the Board of Directors or the
Committee in the terms of any Awards under the Plan to reflect such changes and
to modify any other terms of outstanding Awards on an equitable basis,
including modifications of performance targets and changes in the length of
Performance Periods.
8.4 Conditions of Awards
(a) The rights of a Participant with respect to any Award received
under this Plan shall be subject to the conditions that, until the Participant
has fully received all payments, transfers and other benefits under the Award,
he or she shall (i) not engage, either directly or indirectly, in any manner or
capacity as advisor, principal, agent, partner, officer, director, employee,
member of any association or otherwise, in any business or activity which is at
the time competitive with any business or activity conducted by the Company and
(ii) be available, unless he or she shall have died, at reasonable times for
consultations at the request of the Company's management with respect to phases
of the business with which he or she is or was actively connected during his or
her employment, but such consultations shall not (except in the case of a
Participant whose active service was outside the United States) be required to
be performed at any place or places outside of the United States of America or
during usual vacation periods or periods of illness or other incapacity.
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<PAGE> 27
In the event that either of the above conditions is not fulfilled, the
Participant shall forfeit all rights to any unexercised option or SAR, or any
Performance Award or Stock held which has not yet been determined by the
Committee to be payable or unrestricted (and any unpaid amounts equivalent to
dividends or other distributions or amounts equivalent to interest relating
thereto) as of the date of the breach of condition. Any determination by the
Board of Directors of the Corporation, which shall act upon the recommendation
of the Chief Executive Officer, that the Participant is, or has, engaged in a
competitive business or activity as aforesaid or has not been available for
consultations as aforesaid shall be conclusive.
(b) This Section 8.4 shall not apply to Limited Rights.
8.5 Use of Proceeds
All cash proceeds from the exercise of options shall constitute
general funds of the Company.
8.6 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
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<PAGE> 28
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may
permit the Participant or such other person to elect at such time and in such
manner as the Committee provides to have the Company hold back from the shares
to be delivered, or to deliver to the Company, Stock having a value calculated
to satisfy the withholding requirement. In the alternative, the Committee may,
at the time of grant of any such Award, require that the Company withhold from
any shares to be delivered Stock with a value calculated to satisfy applicable
tax withholding requirements.
8.7 Non-Uniform Determinations
The Committee's determinations under the Plan, including without
limitation, (i) the determination of the Participants to receive Awards, (ii)
the form, amount, timing and payment of such Awards, (iii) the terms and
provisions of such Awards and (iv) the agreements evidencing the same, need not
be uniform and may be made by it selectively among Participants who receive, or
who are eligible to receive, Awards under the Plan, whether or not such
Participants are similarly situated.
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<PAGE> 29
8.8 Leaves of Absence; Transfers
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect to any leave
of absence from the Company granted to a Participant. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine (i)
whether or not any such leave of absence shall be treated as if the Participant
ceased to be an employee and (ii) the impact, if any, of any such leave of
absence on Awards under the Plan. In the event a Participant transfers within
the Company, such Participant shall not be deemed to have ceased to be an
employee for purposes of the Plan.
8.9 General Restriction
(a) Each Award under the Plan shall be subject to the condition that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of shares of Stock upon any securities exchange or under any
state or federal law, (ii) the consent or approval of any government or
regulatory body or (iii) an agreement by the Participant with respect thereto,
is necessary or desirable, then such Award shall not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free from any conditions not
acceptable to the Committee.
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<PAGE> 30
(b) Shares of Common Stock for use under the provisions of this Plan shall
not be issued until they have been duly listed, upon official notice of
issuance, upon the New York Stock Exchange and such other exchanges, if any, as
the Board of Directors of the Corporation shall determine, and a registration
statement under the Securities Act of 1933 with respect to such shares shall
have become, and be, effective.
8.10 Effective Date
The Plan shall be deemed effective as of December 4, 1991.
No Award may be granted under the Plan after the Plan is terminated
pursuant to Section 8.12, but Awards previously made may extend beyond that
date and Reload Options and additional Reload Options provided for with respect
to original options outstanding prior to that date may continue unless the
Committee otherwise provides and subject to such additional terms and
conditions as the Committee may provide, and the provisions of Article VI of
the Plan shall survive and remain effective as to all present and future
Deferred Amounts until such later date as the Committee or the Board of
Directors shall determine.
The adoption of the Plan shall not preclude the adoption by
appropriate means of any other stock option or other incentive plan for
employees.
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<PAGE> 31
8.11 Amendment, Suspension and Termination of Plan
The Board of Directors may at any time or times amend the Plan for any
purpose which may at the time be permitted by law, or may at any time suspend
or terminate the Plan as to any further grants of Awards.
8.12 Certain Definitions
(a) Unless otherwise determined by the Committee, the terms "retirement"
and "disability" as used under the Plan shall be construed by reference to the
provisions of the Westinghouse Pension Plan or other similar plan or program of
the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock means the
mean of the high and low prices of the Common Stock as reported by the
Composite Tape of the New York Stock Exchange (or such successor reporting
system as shall be selected by the Committee) on the relevant date or, if no
sale of the Common Stock shall have been reported for that day, the average of
such prices on the next preceding day and the next following day for which
there were reported sales. The term "Fair Market Value" as it relates to
Formula Value Stock shall mean the value determined by the Committee.
(c) The term "Subsidiary" shall mean, unless the context otherwise
requires, any corporation (other than the Corporation)
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<PAGE> 32
in an unbroken chain of corporations beginning with the corporation if each of
the corporations other than the last corporation in such chain owns stock
possessing at least 50% of the voting power in one of the other corporations in
such chain.
(d) "Formula Value Stock" means shares of a class or classes of stock the
value of which is derived from a formula established by the Committee which
reflects such financial measures as the Committee shall determine. Such shares
shall have such other characteristics as shall be determined at time of their
authorization.
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<PAGE> 1
EXHIBIT 10(t)
CONFORMED COPY
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
SECOND AMENDMENT dated as of December 1, 1993 (this
"Amendment") to the Amended and Restated Competitive Advance
and Revolving Credit Facility Agreement entered into as of
December 23, 1991, as amended as of September 30, 1992, as
amended and restated in its entirety as of May 3, 1993 and as
amended as of June 9, 1993 (the "Restated and Amended
Agreement") among WESTINGHOUSE ELECTRIC CORPORATION, a
Pennsylvania corporation ("WEC" or the "Borrower"); the lenders
executing this Amendment and the other lender parties hereto
pursuant to the Restated and Amended Agreement (the "Lenders");
ABN AMRO BANK N.V., THE BANK OF NOVA SCOTIA, CITIBANK, N.A.,
CREDIT LYONNAIS, CREDIT SUISSE, DRESDNER BANK AG, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, LTCB TRUST COMPANY, NATIONS
BANK OF NORTH CAROLINA, N.A. (formerly known as NCNB National
Bank of North Carolina), THE TORONTO-DOMINION BANK, UNION BANK
OF SWITZERLAND, THE FIRST NATIONAL BANK OF CHICAGO, MELLON
BANK, N.A., BARCLAYS BANK PLC, DEUTSCHE BANK AG, THE FUJI BANK,
LIMITED, PNC BANK, NATIONAL ASSOCIATION (formerly known as
Pittsburgh National Bank), THE SANWA BANK LTD. and THE SUMITOMO
BANK, LIMITED (collectively, the "Co-Agents"); and CHEMICAL
BANK, a New York banking corporation, as administrative agent
for the Lenders (in such capacity, the "Administrative Agent;"
the Administrative Agent and the Co-Agents being collectively
called the "Agents").
A. The Borrower has requested that the Lenders amend certain
provisions of the Restated and Amended Agreement. The Lenders and the Agents
are willing to enter into this Agreement, subject to the terms and conditions
of this Amendment.
98
<PAGE> 2
2
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
B. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in the Restated and Amended Agreement.
Accordingly, in consideration of the mutual agreements contained in
this Amendment and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Amendment to Certain Definitions. (a) Clause (iii) of
the definition of "Applicable Margin" in Article I of the Restated and Amended
Agreement is amended to read as follows:
"(iii) if Moody's, S&P or Fitch shall not have in effect a rating for
Index Debt (other than because such rating agency shall no longer be
in the business of rating corporate debt obligations), then such
rating agency will be deemed to have established a rating for Index
Debt of Ba2, BB or BB, respectively;"
(b) The following new sentence is inserted immediately after the
first sentence following the chart in the definition of "Applicable Margin":
"Notwithstanding the foregoing, the Applicable Margin that would
otherwise be in effect will be increased (i) by .125% if one of
Moody's, S&P and Fitch shall have in effect a rating for Index Debt
below Baa3, BBB- or BBB-, respectively; (ii) by an additional .125%
if more than one of such rating agencies shall have in effect a
rating for Index Debt below Baa3, BBB- or BBB-; and (iii) by .50%
(less any increase already in effect pursuant to (i) and (ii) above)
if one or more of Moody's, S&P and Fitch shall have in effect a
rating for Index Debt at or below Ba2, BB or BB, respectively."
<PAGE> 3
3
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
(c) The definition of "Consolidated EBITDA" in Article I of the
Restated and Amended Agreement is amended to read as follows:
""Consolidated EBITDA" shall mean, with respect to WEC and its
Consolidated Subsidiaries for any period, (a) the sum for such period
of (i) Consolidated Net Income (less (A) any items of payment-in-kind
or similar income of Financial Services and (B) any items of non-cash
income of WEC and its Consolidated Subsidiaries other than Financial
Services which individually exceed $50,000,000 and are not in the
aggregate material in the context of Consolidated EBITDA), (ii)
Consolidated Interest Expense, (iii) provision for Federal, state and
local taxes, (iv) depreciation expense, (v) amortization expense and
(vi) other non-cash items (including those non-cash charges related
to the adoption of SFAS 112 (Employers' Accounting for Postemployment
Benefits) and provisions for losses and additions to valuation
allowances), the items referred to in clauses (iii) through (vi) with
respect to Discontinued Operations and the Excluded Charge (provided
that amounts shall only be added purusant to clauses (ii) through
(vi) above to the extent such amounts were deducted in computing
Consolidated Net Income for such period), minus (b) cash payments
made during each period in respect of the Excluded Charge."
(d) The definition of "Consolidated Net Worth" in Article I of the
Restated and Amended Agreement is hereby amended to read in its entirety as
follows:
""Consolidated Net Worth" shall mean, at any time, (a) the total
shareholders' equity of WEC and its Consolidated Subsidiaries plus (b) the
sum of (i) the amount of any liability or reserve related to the adoption
of SFAS 106 which is reflected in such total shareholders' equity, (ii)
the amount of any liability or reserve related to the adoption of SFAS 112
which is reflected in such total shareholders' equity, (iii) the amount of
any reduction in such total shareholders' equity to reflect unrecognized
pension costs pursuant to SFAS 87, (iv) the amount of non-cash provisions
for losses and additions to valuation allowances to the
<PAGE> 4
4
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
extent of $500,000,000 made by WFSI and its Subsidiaries after the Closing
Date, and (v) the Excluded Charge, all net of tax effect and computed and
consolidated in accordance with GAAP."
(e) The following definition of "Excluded Charge" is hereby added,
in its appropriate alphabetical order, to Article I of the Restated and Amended
Agreement:
""Excluded Charge" shall mean fourth fiscal quarter 1993 charges to
earnings substantially similar to those as to the possibility of which the
Borrower advised the Agents and Lenders in connection with the negotiation
of the Second Amendment hereto, but in no event in excess of $1,000,000,000
(without giving effect to any tax benefits in respect of such charges)."
(f) The following definition of "Second Amendment Approval Date" is
hereby added, in its appropriate alphabetical order, to Article I of the
Restated and Amended Agreement:
""Second Amendment Approval Date" shall mean the date on which the
Administrative Agent shall have received counterparts of the Second
Amendment hereto which, when taken together, bear the signatures of
the Borrower and the Required Lenders."
SECTION 2. Reduction of Commitments. (a) WEC hereby agrees that on
or before the Second Amendment Approval Date it will, pursuant to Section 2.11
of the Restated and Amended Agreement, reduce the Total Commitment by
$1,000,000,000. WEC also hereby agrees that at or before the Second Amendment
Approval Date, it will pay or prepay as much of the Standby Borrowings as shall
be necessary in order that the sum of the aggregate principal amount of the
<PAGE> 5
5
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
Competitive Loans and Standby Loans outstanding and the aggregate LC Exposures
of the Lenders will not exceed $4,000,000,000.
(b) WEC hereby further agrees that as soon as practicable but not
later than 45 days after the receipt of cash proceeds from consummation of a
sale of all or substantially all of the Borrower's distribution and control
business unit to Eaton Corporation, WEC will reduce the Total Commitment by an
additional $500,000,000 pursuant to Section 2.11 of the Restated and Amended
Agreement. WEC also hereby agrees that at or before the effectiveness of such
reduction of the Total Commitment it will pay or prepay as much of the Standby
Borrowings as shall be necessary in order that the sum of the aggregate
principal amount of the Competitive Loans and Standby Loans outstanding and the
aggregate LC Exposures of the Lenders will not exceed the reduced Total
Commitment.
(c) The failure of WEC to perform any of its agreements contained in
this Section 2 of the Amendment shall constitute an Event of Default under
Article VI of the Restated and Amended Agreement.
SECTION 3. Amendment to Section 3.02(b). Section 3.02(b) of the
Restated and Amended Agreement is
<PAGE> 6
6
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
hereby amended to insert the following subsection in its appropriate numerical
order:
"(iv) the Excluded Charge and the amount of any fourth quarter 1993
charges pursuant to SFAS 87 or SFAS 112."
SECTION 4. Representations and Warranties. The Borrower represents
and warrants to each of the Lenders that:
(a) this Amendment has been duly authorized, executed and delivered
by the Borrower and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms except as such enforceability may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws of general applicability affecting the
enforcement of creditors' rights and (ii) the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and
(b) on the date of this Amendment and after giving effect hereto, no
Default has occurred and is continuing.
SECTION 5. Conditions to Effectiveness. The amendments to the
Restated and Amended Agreement set forth in this Amendment shall be effective
as of December 1, 1993 (the "Effective Date"), provided that the reduction of
the Total Commitment required by Section 2 (a) shall have
<PAGE> 7
7
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
occurred and the Administrative Agent shall have received (i) counterparts of
this Amendment which, when taken together, bear the signatures of the Borrower
and the Required Lenders and (ii) a written opinion of Louis J. Briskman, Esq.,
Senior Vice President, General Counsel and Secretary of WEC, to the effect set
forth in Exhibit A hereto, dated the date hereof and addressed to the
Administrative Agent and the Lenders. On the Second Amendment Approval Date,
WEC shall be deemed to have complied with the notice requirements of Section
2.11(b) of the Restated and Amended Agreement in connection with reduction of
commitments pursuant to Section 2(a).
SECTION 6. Agreement. Except as specifically amended hereby, the
Restated and Amended Agreement shall continue in full force and effect in
accordance with the provisions thereof as in existence on the date hereof.
Upon the effectiveness of this Agreement, any reference in the Restated and
Amended Agreement or any other Loan Document to the "Restated Agreement" shall
mean the Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement entered into as of December 23, 1991, as amended as of September 30,
1992, as amended and restated in its entirety as of May 3, 1993, as amended as
of June 9, 1993 and as amended hereby.
SECTION 7. Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
<PAGE> 8
8
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE WITHIN SUCH STATE, WITHOUT
REGARD TO CONFLICTS OF LAW PROVISIONS AND PRINCIPLES OF SUCH STATE.
SECTION 8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one instrument.
SECTION 9. Documentation Fee and Expenses. The Borrower agrees:
(a) to pay to each Lender, on the Second Amendment Approval Date, an
amendment fee in an amount equal to .025% of such Lender's Commitment on
said date (after giving effect to the reduction of the Total Commitment
provided for in Section 2(a)), if (i) an executed counterpart of this
Amendment is received by the Administrative Agent from such Lender on or
prior to December 22, 1993 and (ii) the Administrative Agent receives
counterparts of this Amendment which, when taken together, bear the
signatures of the Required Lenders; and
(b) to reimburse the Administrative Agent for its reasonable
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees and expenses of Cravath, Swaine & Moore, counsel for the
Agents.
<PAGE> 9
9
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as
of the day and year first written above.
WESTINGHOUSE ELECTRIC CORPORATION
by
Laurence A. Chapman
--------------------------------------
Name: Laurence A. Chapman
Title: Vice President & Treasure
CHEMICAL BANK, individually and as
Administrative Agent,
by
James B. Treger
-------------------------------------
Name: James B. Treger
Title: Vice President
<PAGE> 10
10
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
CHEMICAL BANK DELAWARE, an Issuing
Bank,
by
Michael P. Handago
-------------------------------------
Name: Michael P. Handago
Title: Vice President
ABN AMRO BANK N.V., individually
and as Co-Agent,
by
Lee D. Cutrone, Jr.
-------------------------------------
Name: Lee D. Cutrone, Jr.
Title: Sr. Vice President and Manager
by
James M. Janovsky
-------------------------------------
Name: James M. Janovsky
Title: Group Vice President
THE BANK OF NOVA SCOTIA,
individually and as Co-Agent,
by
F. C. H. Ashby
-------------------------------------
Name: F. C. H. Ashby
Title: Senior Manager, Loan Operations
CITIBANK, N.A., individually and as
Co-Agent,
by
Jolie Eisner
-------------------------------------
Name: Jolie Eisner
Title: Attorney-in-Fact
<PAGE> 11
11
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
CREDIT LYONNAIS New York Branch,
individually and as Co-Agent,
by
R. Ivosevich
-------------------------------------
Name: R. Ivosevich
Title: Senior Vice President
CREDIT LYONNAIS Cayman Island
Branch, individually and as Co-
Agent,
by
R. Ivosevich
-------------------------------------
Name: R. Ivosevich
Title: Authorized Signature
CREDIT SUISSE, individually and as
Co-Agent,
by
Jay Chall
-------------------------------------
Name: Jay Chall
Title: Member of Senior Management
by
Christopher Eldin
-------------------------------------
Name: Christopher Eldin
Title: Member of Senior Management
DRESDNER BANK AG, individually and as
Co-Agent,
by
A. R. Morris
-------------------------------------
Name: A. R. Morris
Title: Vice President
by
Rainer Nink
-------------------------------------
Name: Rainer Nink
Title: Vice President
<PAGE> 12
12
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
LTCB TRUST COMPANY, individually
and as Co-Agent,
by
Fumihiko Kamoshida
-----------------------------------------
Name: Fumihiko Kamoshida
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
individually and as Co-Agent,
by
Laura E. Reim
-----------------------------------------
Name: Laura E. Reim
Title: Vice President
NATIONSBANK OF NORTH CAROLINA,
N.A., individually and as Co-Agent,
by
Charles P. Welch
-----------------------------------------
Name: Charles P. Welch
Title: Senior Vice President
THE TORONTO-DOMINION BANK,
individually and as Co-Agent,
by
Peter Foley
-----------------------------------------
Name: Peter Foley
Title: Vice President
<PAGE> 13
13
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
UNION BANK OF SWITZERLAND,
individually, as Co-Agent and as
Issuing Bank
by
Robert W. Casey, Jr.
-----------------------------------------
Name: Robert W. Casey, Jr.
Title: Vice President
by
Bruce T. Richards
-----------------------------------------
Name: Bruce T. Richards
Title: First Vice President
FIRST NATIONAL BANK OF CHICAGO,
individually and as Co-Agent,
by
Kenneth A. Hirsch
-----------------------------------------
Name: Kenneth A. Hirsch
Title: Vice President
MELLON BANK, N.A., individually and
as Co-Agent,
by
James W. Emison
-----------------------------------------
Name: James W. Emison
Title: Senior Vice President
BARCLAYS BANK PLC, individually and
as Co-Agent,
by
Richard J. Lane
-----------------------------------------
Name: Richard J. Lane
Title: Associate Director
<PAGE> 14
14
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
DEUTSCHE BANK AG, New York and
Cayman Islands branches,
individually and as Co-Agent,
by
Ross A. Howard
-----------------------------------------
Name: Ross A. Howard
Title: Assistant Vice President
by
Jeffrey N. Wieser
-----------------------------------------
Name: Jeffrey N. Wieser
Title: Director
THE FUJI BANK, LIMITED,
individually and as Co-Agent,
by
Yoshihiko Shiotsugu
-----------------------------------------
Name: Yoshihiko Shiotsugu
Title: Vice President & Manager
PNC BANK, NATIONAL ASSOCIATION
(formerly known as Pittsburgh
National Bank), individually and as
Co-Agent,
by
Peter M. Hilton
-----------------------------------------
Name: Peter M. Hilton
Title: Vice President
THE SANWA BANK, LTD., individually
and as Co-Agent,
by
Stephen C. Small
-----------------------------------------
Name: Stephen C. Small
Title: Vice President & Area Manager
<PAGE> 15
15
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
THE SUMITOMO BANK, LIMITED,
individually and as Co-Agent,
by
Yoshinori Kawamura
-----------------------------------------
Name: Yoshinori Kawamura
Title: Joint General Manager
ALLSTATE LIFE INSURANCE COMPANY,
by
Patricia W. Wilson
-----------------------------------------
Name: Patricia W. Wilson
Title: Assistant Vice President
by
Gary Fridley
-----------------------------------------
Name: Gary Fridley
Title: Vice President
ANCHOR NATIONAL LIFE INSURANCE
COMPANY,
by
Yvonne Stevens
-----------------------------------------
Name: Yvonne Stevens
Title: Portfolio Officer
SunAmerica Investments, Inc.
ARAB BANKING CORPORATION,
by
Louise Bilbro
-----------------------------------------
Name: Louise Bilbro
Title: Vice President
<PAGE> 16
16
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
BBL BANK BRUSSELS LAMBERT, New York branch,
by
Eric Hollanders
-----------------------------------------
Name: Eric Hollanders
Title: Senior Vice President
by
Eileen Stekeur
-----------------------------------------
Name: Eileen Stekeur
Title: Assistant Vice President
BANK OF HAWAII,
by
Elizabeth O. MacLean
-----------------------------------------
Name: Elizabeth O. MacLean
Title: Assistant Vice President
BANK OF IRELAND,
by
Augustine Okwu, Jr.
-----------------------------------------
Name: Augustine Okwu, Jr.
Title: Assistant Vice President
BANK OF MONTREAL,
by
Kanu Modi
-----------------------------------------
Name: Kanu Modi
Title: Director
THE BANK OF TOKYO TRUST COMPANY,
by
John R. Jeffers
-----------------------------------------
Name: John R. Jeffers
Title: Vice President
<PAGE> 17
17
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
BANK POLSKA KASA OPIEKI,
by
William A. Shea
-----------------------------------------
Name: William A. Shea
Title: Vice President and Senior
Lending Officer
BANQUE NATIONALE DE PARIS, New York
and Cayman Islands branches,
by
-----------------------------------------
Name:
Title:
by
-----------------------------------------
Name:
Title:
BANQUE PARIBAS
by
Stanley P. Berkman
-----------------------------------------
Name: Stanley P. Berkman
Title: Senior Vice President
by
Mary T. Finnegan
-----------------------------------------
Name: Mary T. Finnegan
Title: Vice President
BAYERISCHE LANDESBANK GIROZENTRALE,
by
Wilfried Freudenberger
-----------------------------------------
Name: Wilfried Freudenberger
Title: Executive Vice President
and General Manager
by
Peter Oberman
-----------------------------------------
Name: Peter Oberman
Title: First Vice President
Manager Corporate Finance
<PAGE> 18
18
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
BAYERISCHE VEREINSBANK AG,
by
Ed C. Bennett
-----------------------------------------
Name: Ed C. Bennett
Title: Vice President
by
Theodore F. Ceglia
-----------------------------------------
Name: Theodore F. Ceglia
Title: Assistant Vice President
CARIPLO-CASSA DI RISPARMIO DELLE
PROVINCIE LOMBARDE,
by
Giuseppe Zanotti-Fregonara
------------------------------------------
Name: Giuseppe Zanotti-Fregonara
Title: Senior Vice President
by
Charles W. Kennedy
-----------------------------------------
Name: Charles W. Kennedy
Title: Vice President
CONTINENTAL BANK N.A.,
by
Richard A. Broeren, Jr.
-----------------------------------------
Name: Richard A. Broeren, Jr.
Title: Managing Director
CREDITO ITALIANO,
by
Harmon P. Butler
-----------------------------------------
Name: Harmon P. Butler
Title: First Vice President
by
Saiyed A. Abbas
-----------------------------------------
Name: Saiyed A. Abbas
Title: Assistant Vice President
<PAGE> 19
19
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
THE DAI-ICHI KANGYO BANK, LTD., New
York branch,
by
Andreas Panteli
-----------------------------------------
Name: Andreas Panteli
Title: Vice President
FIRST FIDELITY BANK, N.A., NEW
JERSEY,
by
Robert K. Strunk, II
-----------------------------------------
Name: Robert K. Strunk, II
Title: Vice President
FIRST INTERSTATE BANK OF
CALIFORNIA,
by
Clark R. Wilcox
-----------------------------------------
Name: Clark R. Wilcox
Title: Vice President
THE FIRST NATIONAL BANK OF
MARYLAND,
by
Brooks W. Thropp
-----------------------------------------
Name: Brooks W. Thropp
Title: Vice President
GIRO CREDIT BANK,
by
-----------------------------------------
Name:
Title:
<PAGE> 20
20
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
THE HOKURIKU BANK, LTD.,
by
Yutaka Okugawa
-----------------------------------------
Name: Yutaka Okugawa
Title: Manager
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, New York branch,
by
Takeshi Kawano
-----------------------------------------
Name: Takeshi Kawano
Title: Senior Vice President and Senior
Manager
ISTITUTO BANCARIO SAN PAOLO DI
TORINO,
by
William J. DeAngelo
-----------------------------------------
Name: William J. DeAngelo
Title: First Vice President
KREDIETBANK,
by
-----------------------------------------
Name:
Title:
THE MITSUBISHI BANK, LIMITED,
acting through its New York branch,
by
Robert J. Dilloff
-----------------------------------------
Name: Robert J. Dilloff
Title: Vice President
<PAGE> 21
21
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
THE MITSUBISHI TRUST & BANKING CORPORATION,
by
Masataka Ushio
-----------------------------------------
Name: Masataka Ushio
Title: Senior Vice President
MITSUI TRUST BANK (U.S.A.),
by
Kazuyuki Muto
-----------------------------------------
Name: Kazuyuki Muto
Title: Executive Vice President
ROYAL BANK OF CANADA,
by
Shelley Browne
-----------------------------------------
Name: Shelley Browne
Title: Senior Manager
SHAWMUT BANK,
by
Jeffrey C. Lynch
-----------------------------------------
Name: Jeffrey C. Lynch
Title: Vice President
SOCIETE GENERALE,
by
Bruce H. Drossman
-----------------------------------------
Name: Bruce H. Drossman
Title: Vice President
<PAGE> 22
22
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
THE SUMITOMO TRUST & BANKING CO., LIMITED,
by
Yoshifumi Miyagi
-----------------------------------------
Name: Yoshifumi Miyagi
Title: Vice President and Manager
SUN LIFE INSURANCE COMPANY OF
AMERICA,
by
Yvonne Stevens
-----------------------------------------
Name: Yvonne Stevens
Title: Portfolio Officer
THE TOKAI BANK, LIMITED, New York
branch,
by
Masaharu Muto
-----------------------------------------
Name: Masaharu Muto
Title: Deputy General Manager
THE TOYO TRUST AND BANKING COMPANY, LIMITED,
by
Tomoshige Kimura
-----------------------------------------
Name: Tomoshige Kimura
Title: Vice President
VIA BANQUE,
by
F. Fournier
-----------------------------------------
Name: F. Fournier
Title: Directeur Central
<PAGE> 23
23
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, New York branch,
by
Michael F. McWalters
-----------------------------------------
Name: Michael F. McWalters
Title: Managing Director
by
Stewart L. Whitman
----------------------------------------
Name: Stewart L. Whitman
Title: Vice President
WESTPAC BANKING CORPORATION,
by
Robert Jozkowski
-----------------------------------------
Name: Robert Jozkowski
Title: Vice President
YASUDA BANK AND TRUST COMPANY
(U.S.A.),
by
Rohn M. Laudenschlager
-----------------------------------------
Name: Rohn M. Laudenschlager
Title: First Vice President
<PAGE> 1
EXHIBIT 10(u)
December 30, 1993
Dear Bob:
This letter confirms our agreement that you have left your position
with Westinghouse effective December 17, 1993 and will, through December 31,
1997, be on a paid leave of absence pursuant to the terms of the employment
agreement dated June 9, 1992 (the "Agreement") between you and Westinghouse,
other than as amended herein.
The cash payments you will receive will include amounts equal to (i) an
annual incentive award of $630,000 for calendar year 1993, an annual incentive
award of $570,000 for calendar year 1994 and the target annual incentive award
of $500,000 for calendar years 1995 through 1997 (in each case less applicable
taxes and unreduced to reflect immediate payment), and (ii) an award of
$4,000,000 for your outstanding 1992-94 Equity Plus Grant (less applicable
taxes and reduced to reflect immediate payment) in lieu of all amounts set
forth in clauses (a)(ii) and (iii) of the last paragraph beginning on page 5 of
the Agreement.
The non-vested portions of your grant equivalent in value to 164,000
shares of Westinghouse common stock vested on December 17, 1993.
Sincerely,
/s/ Michael H. Jordan
Accepted and agreed to:
/s/ Robert A. Watson
- - -----------------------
Robert A. Watson
121
<PAGE> 1
EXHIBIT 11
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
EQUIVALENT SHARES:
Average shares outstanding................. 349,416,570 342,637,241 310,905,616
Additional shares due to: Stock options.... 3,485,100 3,466,167 3,078,626
------------ ------------ ------------
Total equivalent shares............... 352,901,670 346,103,408 313,984,242
------------ ------------ ------------
------------ ------------ ------------
ADJUSTED EARNINGS (IN MILLIONS):
Income (loss) from Continuing Operations... $ (175) $ 357 $ 335
Less: Preferred stock dividends............ 50 28 --
------------ ------------ ------------
Adjusted income (loss) from Continuing
Operations............................... (225) 329 335
Loss from Discontinued Operations.......... (95) (1,413) (1,421)
Cumulative effect of changes in accounting
principles............................... (56) (338) --
------------ ------------ ------------
Adjusted net income (loss) after cumulative
effect of changes in accounting
principles............................... $ (376) $ (1,422) $ (1,086)
------------ ------------ ------------
------------ ------------ ------------
EARNINGS (LOSS) PER SHARE:
From Continuing Operations................. $ (.64) $ .95 $ 1.07
From Discontinued Operations............... (.27) (4.08) (4.53)
From cumulative effect of changes in
accounting principles.................... (.16) (.98) --
------------ ------------ ------------
Earnings per share on net income (loss)......... $ (1.07) $ (4.11) $ (3.46)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
122
<PAGE> 1
EXHIBIT 12(a)
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and minority
interest...................................... $(236) $ 550 $ 496 $1,106 $1,013
Less: Equity in income (loss) of 50 percent or
less owned affiliates......................... (7) (2) (19) (4) (18)
Add: Dividends from affiliates.................. -- -- 2 -- 1
Fixed charges excluding capitalized
interest...................................... 253 270 271 283 273
----- ----- ----- ------ ------
Earnings as adjusted............................ $ 24 $ 822 $ 788 $1,393 $1,305
----- ----- ----- ------ ------
----- ----- ----- ------ ------
Fixed charges:
Interest expense........................... $ 217 $ 225 $ 231 $ 221 $ 208
Rental expense............................. 36 45 40 62 65
Capitalized interest....................... 3 15 23 -- --
----- ----- ----- ------ ------
Total fixed charges............................. $ 256 $ 285 $ 294 $ 283 $ 273
----- ----- ----- ------ ------
----- ----- ----- ------ ------
Ratio of earnings to fixed charges.............. (a) 2.88x 2.68x 4.92x 4.78x
----- ----- ----- ------ ------
----- ----- ----- ------ ------
</TABLE>
- - ---------
(a) Additional income before income taxes and minority interest of $232 million
would be necessary to attain a ratio of earnings to fixed charges of 1.00x
for the year ended December 31, 1993.
123
<PAGE> 1
EXHIBIT 12(b)
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED DIVIDENDS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and minority
interest...................................... $(236) $ 550 $ 496 $1,106 $1,013
Less: Equity in income (loss) of 50 percent or
less owned affiliates......................... (7) (2) (19) (4) (18)
Add: Dividends from affiliates.................. -- -- 2 -- 1
Fixed charges excluding capitalized
interest...................................... 325 313 271 283 273
----- ----- ----- ------ ------
Earnings as adjusted............................ $ 96 $ 865 $ 788 $1,393 $1,305
----- ----- ----- ------ ------
----- ----- ----- ------ ------
Fixed charges:
Interest expense........................... $ 217 $ 225 $ 231 $ 221 $ 208
Rental expense............................. 36 45 40 62 65
Capitalized interest....................... 3 15 23 -- --
Pre-tax earnings required to cover
preferred dividend requirements(a)....... 72 43 -- -- --
----- ----- ----- ------ ------
Total fixed charges............................. $ 328 $ 328 $ 294 $ 283 $ 273
----- ----- ----- ------ ------
----- ----- ----- ------ ------
Ratio of earnings to fixed charges.............. (b) 2.64x 2.68x 4.92x 4.78x
----- ----- ----- ------ ------
----- ----- ----- ------ ------
</TABLE>
- - ---------
(a) Dividend requirement divided by 100% minus effective income tax rate.
(b) Additional income before income taxes and minority interest of $232 million
would be necessary to attain a ratio of earnings to combined fixed charges
and preferred dividends of 1.00x for the year ended December 31, 1993.
124
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Included in the financial statements of the Corporation are consolidated
subsidiaries owned, directly or indirectly, more than 50% by the Corporation.
Equity in undistributed earnings of nonconsolidated subsidiaries and affiliated
companies, 20% to 50% owned, is also included in the results of operations of
the Corporation. Listed below are certain subsidiaries of the Corporation. The
remaining subsidiaries and affiliated companies not listed below, when
considered in the aggregate, would not constitute a significant subsidiary.
<TABLE>
<CAPTION>
VOTING POWER
INCORPORATED UNDER OWNED BY
NAME THE LAWS OF IMMEDIATE PARENT
- - ----------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Aptus, Inc. Delaware 100%
The Knoll Group, Inc. Delaware 100%
Knoll North America, Inc. Delaware 100%
Knoll Overseas, Inc. Delaware 100%
Spinneybeck Enterprises, Inc. New York 100%
Thermo King Corporation Delaware 100%
Westinghouse Broadcasting Company, Inc. Indiana 100%
Westinghouse Canada, Inc. Canada 100%
Westinghouse Energy Systems, Inc. Delaware 100%
WCI Communities, Inc. Delaware 100%
Westinghouse Hanford Company Delaware 100%
Westinghouse Holdings Corporation Delaware 100%
Westinghouse de Puerto Rico, Inc. Delaware 100%
Westinghouse Electric S.A. Switzerland 100%
Westinghouse International Technology Corporation Delaware 100%
Westinghouse World Investment Corporation Delaware 100%
Westinghouse Foreign Sales Corporation Barbados 100%
Westinghouse Savannah River Company, Inc. Delaware 100%
</TABLE>
125
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-41475,
33-45586, 33-51298 and 33-59272), and Form S-8 (Nos. 2-92085, 33-44044,
33-45365, 33-46051, 33-46779, 33-51445 and 33-51579) of Westinghouse Electric
Corporation of our report dated January 26, 1994, except as to the matter
discussed in paragraph 9 of note 2, which is as of February 28, 1994, appearing
on page 57 of this Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedules, which appears on page 62 of
this Form 10-K.
Price Waterhouse
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
March 1, 1994
126
<PAGE> 1
EXHIBIT 24
EXTRACT FROM MINUTES OF MEETING OF THE
BOARD OF DIRECTORS OF
WESTINGHOUSE ELECTRIC CORPORATION
HELD ON JANUARY 26, 1994
--------------------------------------
RESOLVED, that the Chief Executive Officer of the Corporation, its
Executive Vice President, Finance, and its Vice President & Controller, be, and
each of them with full power to act without the others, hereby is, authorized
to prepare and execute the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993 and the Corporation's Quarterly Reports on Form
10-Q for 1994, as well as all other reports specified under the regulations of
the Securities and Exchange Commission, and any and all amendments thereto, and
to file said Forms 10-K and 10-Q and other reports, and any and all amendments
thereto, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission on behalf of,
and as attorneys for, the Corporation.
-----------------------
I, C. L. McADAMS, Assistant Secretary of Westinghouse Electric
Corporation, DO HEREBY CERTIFY that the foregoing is a true and correct copy of
a resolution adopted at a meeting of the Board of Directors of said Corporation
held on January 26, 1994, at which meeting a quorum was present.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said Corporation.
Dated: March 1, 1994
/s/ C. L. McAdams
--------------------------
Assistant Secretary
127
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 26th day of February, 1994.
/s/ Frank C. Carlucci
---------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 2nd day of March, 1994.
/s/ Gary M. Clark
-----------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 1st day of March, 1994.
/s/ George H. Conrades
----------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 3rd day of March, 1994.
/s/ William H. Gray
-------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 28th day of February, 1994.
/s/ Michael H. Jordan
---------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 2nd day of March, 1994.
/s/ David T. McLaughlin
-----------------------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 25th day of February, 1994.
/s/ Rene C. McPherson
---------------------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 1st day of March, 1994.
/s/ Richard M. Morrow
---------------------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 1st day of March, 1994.
/s/ Richard R. Pivirotto
------------------------
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 28th day of February, 1994.
/s/ Paula Stern
---------------
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 2nd day of March, 1994.
/s/ Fredric G. Reynolds
-----------------------
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1993, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Robert E. Faust his/her true and lawful attorneys-in-fact and
agents, and each of them, with full power to act without the others, for
him/her and in his/her name, place and stead, in any and all capacities, to
sign the Annual Report on Form 10-K and any and all amendments thereto, with
power where appropriate to affix the corporate seal of said Corporation thereto
and to attest said seal, and to file said Form 10-K and any and all other
documents in connection therewith, with the Securities Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 4th day of March, 1994.
/s/ Robert E. Faust
-------------------
