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1994
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, 1994
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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
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COMMISSION FILE NUMBER 1-977
WESTINGHOUSE ELECTRIC CORPORATION
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
WESTINGHOUSE BUILDING,
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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<CAPTION>
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 Philadelphia Stock Exchange
Pacific Stock Exchange Boston Stock Exchange
Chicago 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
</TABLE>
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. X
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Westinghouse Electric Corporation had 357,149,060 shares of common stock
outstanding at January 31, 1995. 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 1995 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 operating in the principal business arenas of television and radio
broadcasting, advanced electronic systems for the defense industry,
environmental services, management services at government-owned facilities,
services and fuel for the nuclear energy market, services and equipment for the
power generation market, transport temperature control equipment, land
development for luxury communities, and office furniture systems.
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 Corporation announced a plan (the Plan) that included
exiting its Financial Services business through the disposition of its asset
portfolios and the sales of the Distribution and Control Business Unit (DCBU)
and Westinghouse Electric Supply Company (WESCO). The disposition of Financial
Services assets involved the sale of real estate and corporate finance
portfolios over a three-year period and the liquidation of the leasing portfolio
over a longer period in accordance with contractual terms. Financial Services,
DCBU and WESCO have been accounted for 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). See note 2 to the financial statements included in Part II, Item 8 of this
report.
In 1994, the Corporation's continuing operations were realigned. As a
result of the realignment, the former Power Systems segment was replaced by
separate segments for Energy Systems and Power Generation and the former
Industries segment was replaced by separate segments for Thermo King and Other
Businesses. Other Businesses include those non-strategic businesses that have
been identified for sale: the Industrial Products and Services businesses,
Resource Energy Systems and Controlmatic. Controlmatic, which was sold in May
1994, and Resource Energy Systems, were formerly part of the Government &
Environmental Services segment. Westinghouse Communications has been transferred
from the former Industries segment to the Broadcasting segment. For financial
reporting purposes, the Corporation's Continuing Operations are aligned into the
following nine segments: Broadcasting, Electronic Systems, Government &
Environmental Services, Thermo King Corporation (Thermo King), Energy Systems,
Power Generation, The Knoll Group (Knoll), WCI Communities, Inc. (WCI) and Other
Businesses.
The financial results of manufacturing and service entities located outside
the United States, export sales and foreign licensee income are included in the
financial information of the segment that has operating responsibility for such
activity. Financial and other information by segment and geographic area is
included in note 20 to the financial statements included in Part II, Item 8 of
this report.
For information about principal acquisitions and divestitures, see notes 2
and 19 to the financial statements included in Part II, Item 8 of this report.
During 1994, the largest single customer of Westinghouse was the United
States Government and its agencies, whose purchases accounted for 26% of 1994
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 (Group W) provides a variety of
communications services consisting primarily of commercial broadcasting, program
production, distribution and telecommunications. It sells advertising time to
radio, television and cable advertisers through national and local sales
organizations. Westinghouse Broadcasting Company, Inc. and a number of its
subsidiaries were merged into the Corporation and, beginning in 1995, Group W is
operated primarily as a division of the Corporation.
Group W currently owns and operates five network affiliated television
broadcasting stations and 16 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, Pittsburgh and San Francisco, which
includes eight 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 in providing
technical services to broadcast and cable television networks. Further, the
Westinghouse Communications division provides a comprehensive range of
telecommunication solutions to business and industry. Its products and services
include wide area and local area voice and data communications services.
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.
In July 1994, Westinghouse Broadcasting Company and CBS, Inc. (CBS)
announced an agreement to enter into a comprehensive strategic alliance that
would establish long-term station affiliations between CBS and all of Group W's
television stations; form new, jointly-held entities that would acquire
additional stations, expand both companies' distribution and programming
capabilities nationwide, and merge their advertising sales representation
operations. The agreement is subject to the execution of definitive
documentation and approval by the Federal Communications Commission.
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 continued strong competition in the future.
Still, after years of such intense competition, these broadcast television
stations remain, by a wide margin, the premier distributors of news and
entertainment programming in their geographic 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, electronic
countermeasures equipment, electro-optical systems, missile launching and
handling systems, marine propulsion and power generation systems, anti-submarine
warfare systems and torpedoes and satellite-based sensors. Products for
government and commercial customers include air traffic control systems,
satellite communications terminals, mail processing systems, and security and
information
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systems. Sales to the DoD accounted for 64% of 1994 Electronic Systems sales.
International sales were 23% of total sales.
In general, sales to the DoD, international, and other government customers
are made through competitive procurements. Contract awards are based primarily
on performance and cost evaluations. Contract types vary from fixed-price on
production programs to cost-type on development activities. Changes in budgetary
plans, procurement policies, and economic and political conditions strongly
influence Electronic Systems business. 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. This segment encounters
significant domestic and foreign competition from large electronic companies, on
the basis of technology, price, service, warranty and product performance. On
any weapon or avionics system procurement, Electronic Systems might be a prime
bidder, competing against or teamed with any one of the major domestic or
international aerospace companies. Electronic Systems' competitors in the
security and information system markets are fewer in number.
GOVERNMENT & ENVIRONMENTAL SERVICES
The Westinghouse Government & Environmental Services Company includes
Environmental Services, the management of certain government-owned facilities
and the United States naval nuclear reactors programs.
Environmental Services provides a variety of toxic, hazardous and
radioactive waste remediation and treatment services. Through Aptus, Inc., the
Corporation offers toxic and hazardous waste incineration, treatment,
transportation, storage and analysis services. These services are performed at
facilities located in Kansas, Utah and Minnesota. Westinghouse is presently
negotiating the sale of Aptus. 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 radioactive contaminated
metals in the United States.
Through the Westinghouse Savannah River Company and other subsidiaries and
divisions, the Corporation manages four government-owned facilities under
contracts with the United States Department of Energy (DOE). The principal
mission at these sites is cleanup, waste management and the safe storage and
handling of the nation's nuclear materials inventory. These businesses are under
contracts with the federal government, which reserves the right to terminate
these contracts for convenience.
The government-funded U.S. naval nuclear reactors programs consist of the
Corporation's nuclear and technical support businesses for the United States
Navy. These businesses include the Bettis Atomic Power Laboratory, the Plant
Apparatus Division, the Machinery Apparatus Operation and the Machinery
Technology Division.
Competition for services provided by businesses in the Government &
Environmental Services segment is based on price, technology preference,
environmental experience, performance reputation and, with respect to certain
businesses, availability of permitted treatment or disposal facilities.
THERMO KING
Thermo King, a 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, Puerto Rico, 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.
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
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end users are concerned about environmental issues, especially
chlorofluorocarbons, noise pollution and engine emissions. Thermo King designs
its products to meet or exceed all current environmental requirements.
ENERGY SYSTEMS
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. 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 for pressurized water reactors. The annual
market for operating plant services and fuel is over $10 billion in the United
States and $30 billion globally. The business unit is actively marketing new
nuclear power plants and components for new plants to the worldwide market. The
business 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.
Energy Systems has 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 and small competitors, particularly in the service area. The principal
vehicles of competition are technology, product development and performance,
customer service, pricing and financing.
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 1994, the business unit was
awarded orders for approximately 5,900 megawatts of new power generating
capacity. The domestic market for new generating equipment over the next ten
years is expected to be nearly 140 gigawatts; the international market is
expected to be over six times the size of the domestic market. The Power
Generation business unit recently entered into a joint venture with Long Yuan
Power Technology Exploitation Corporation (LYPTEC) and is in final contract
negotiations with Shanghai Turbine Works for the sale and joint manufacture of
steam turbines to meet China's rapidly growing energy needs. With more than
2,800 operating units worldwide based on Westinghouse power generation
technology, the business unit has a substantial base for its service business.
The business unit reentered the renewable energy market through a business
alliance. The alliance will develop, manufacture and service power projects
based on renewable sources of generation, such as wind turbines, small hydro
projects and photovoltaics. The Power Generation business unit is a participant
in the development of emerging technologies which could shape the future of
power generation.
Power Generation has 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 and regional competitors, particularly in the service area. The
principal vehicles of competition are technology, product performance, customer
service, pricing and financing.
KNOLL
Knoll consists of the Corporation's office furniture business. 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.
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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, Arizona 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, Redhawk in Tucson, Arizona and
Bighorn in Palm Springs, California.
WCI is subject to a high degree of competition. Competition is based on
reputation, price, quality and service. WCI holds a preeminent position in all
of its markets.
The Corporation is reviewing alternatives for monetizing WCI.
OTHER BUSINESSES
Other Businesses is a diverse group of businesses providing products and
services to commercial, industrial, utility, and government customers. These
products and services include: watches; operations at waste-to-energy plants;
process rectifiers and associated renewal parts; electro-mechanical parts;
copper rod and magnet wire, liquid insulation and resins, and flexible
insulation; decorative and industrial high-pressure laminates; large industrial
motors; and commercial printing.
Other Businesses competes in local geographic markets based on price,
performance reputation, technology preference and experience. These businesses
are deemed non-strategic and are expected to be sold.
DISCONTINUED OPERATIONS
Discontinued Operations consists of Financial Services, DCBU and WESCO.
During 1994, the Corporation continued to liquidate Financial Services,
resulting in a reduction of assets and debt. Financial Services' remaining
portfolio investments consist primarily of the leasing portfolio, the
Corporation's investment in LW Real Estate Investments, L.P. (LW) and other
assets, mostly real estate properties and investments in partnerships. The
leasing portfolio is expected to be liquidated in accordance with contractual
terms. A significant portion of LW and all of the other remaining assets are
expected to be liquidated by the end of 1995.
On January 31, 1994, the Corporation completed the sale of DCBU, excluding
its Australian subsidiary, to Eaton Corporation for a purchase price of $1.1
billion and the assumption by the buyer of certain liabilities. The sale of its
Australian subsidiary was completed in March 1994.
On February 28, 1994, the Corporation completed the sale of WESCO to an
affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a
purchase price of approximately $340 million. The proceeds consisted of
approximately $275 million in cash, approximately $50 million in first mortgage
notes, and the remainder in stock and options of the new company.
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, is covered by exclusive controlling patent rights
that preclude the manufacture of competitive products by others.
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BACKLOG
The backlog of firm orders of the Corporation from Continuing Operations,
excluding amounts associated with uranium supply contract settlements, was
$10,416 million and $9,925 million at December 31, 1994 and 1993, respectively.
Of the 1994 backlog, $6,375 million is expected to be liquidated after 1995. 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 1994 and 1993 was $3,897 million and
$3,835 million. Backlog of $2,276 million is expected to be liquidated after
1995.
Government & Environmental Services backlog at year-end 1994 and 1993 was
$128 million and $87 million. Backlog of $30 million is expected to be
liquidated after 1995.
Thermo King backlog at year-end 1994 and 1993 was $280 million and $159
million. Backlog of $11 million is expected to be liquidated after 1995.
Energy Systems backlog at year-end 1994 and 1993 was $2,623 million and
$2,574 million. Backlog of $1,775 million is expected to be liquidated after
1995.
Power Generation backlog at year-end 1994 and 1993 was $2,682 million and
$2,340 million. Backlog of $1,709 million is expected to be liquidated after
1995.
Knoll backlog at year-end 1994 and 1993 was $100 million and $108 million.
Backlog is expected to be liquidated during 1995.
Other Businesses backlog at year-end 1994 and 1993 was $655 million and
$759 million. Backlog of $564 million is expected to be liquidated after 1995.
Also included in backlog at year-end 1994 and 1993 was $51 million and $63
million attributable to Corporate and Other, of which $10 million is expected to
be liquidated after 1995.
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 in note 16 to the financial statements included
in Part II, Item 8 of this report.
RESEARCH AND DEVELOPMENT
Data with respect to research and development is incorporated herein by
reference to note 20 to the financial statements included in Part II, Item 8 of
this report.
EMPLOYEE RELATIONS
During 1994, Westinghouse employed an average of 84,400 people, with
approximately 74,800 located in the United States. During the same period,
approximately 11,000 domestic employees were represented in collective
bargaining by 20 labor organizations. Of these employees, 48% 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; the International Union of Electronic, Electrical, Salaried, Machine
and Furniture Workers; and the Federation of Westinghouse Independent Salaried
Unions.
In August 1994, the Corporation negotiated four-year agreements with these
unions, representing about 5,300 employees. The basic agreements provide wage
increases of 2.5% in August 1995 and 1996, and 3% in August 1997. They also
provide a one-time salary bonus payment of $1,000 in September 1994 and a $500
bonus in April 1995. In addition, there are seven (7) potential cost-of-living
increases.
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FOREIGN AND DOMESTIC OPERATIONS
Data with respect to foreign and domestic operations and export sales is
incorporated herein by reference to note 20 to the financial statements included
in Part II, Item 8 of this report.
ITEM 2. PROPERTIES.
At December 31, 1994, the Corporation's Continuing Operations owned or
leased 902 locations totalling more than 40 million square feet of floor area in
the United States and 32 foreign countries. Domestic operations of Continuing
Operations comprised approximately 82% of the total space.
Facilities leased in the United States accounted for approximately 25% of
the total space occupied by Continuing Operations and facilities leased in
foreign countries accounted for approximately 8% 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. 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 fraud, and violations of various New Jersey and federal statutes, including
the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) statute.
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.
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 costs against NPC. Arbitration before the ICC was concluded
in October 1994 and the parties await a decision.
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
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interference with a fiduciary relationship. NPC and the Republic have indicated
that they intend to appeal this decision.
(b) 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 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. A trial date is set for the first quarter of
1996.
(c) In October 1990, Houston Lighting and Power Company (HLP) 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. Subsequently, HLP disclosed that it is seeking $780 million
for estimated past and future damages. The petition alleges breach of contract
warranty, misrepresentation, negligent misrepresentation and violation of the
Texas Deceptive Trade Practices Act. In January 1991, the parties reached
agreement to dismiss the individual defendants. The parties are continuing
discovery, and a trial date is set for the second quarter of 1995.
(d) 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 was seeking
approximately $320 million for damages. The claims arose out of the
Corporation's supply of nuclear steam supply systems for the Beaver Valley
plants. Duquesne asserted counts for breach of contract, fraud, negligent
misrepresentation, and violations of the RICO statute. In July 1994, the judge
dismissed the negligent misrepresentation claims and portions of its RICO
claims. The case went to trial on September 12, 1994. At the close of the
evidence, the judge dismissed all remaining counts except common law fraud. On
December 6, 1994, the jury returned a verdict in favor of the Corporation on the
remaining count. On January 5, 1995, Duquesne Light filed an appeal.
(e) 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 federal
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. Also in February 1993,
the Eugene Water & Electric Board (the Board), a 30% owner of the Trojan Nuclear
Plant, filed a suit containing essentially the same allegations and seeking
unspecified damages. A declaratory judgment that the steam generators are
defective and the Corporation is liable to plaintiff for expenses, including
replacement power, incurred as a result of the alleged defects was also sought
in both cases. Although the Board's suit was filed in the USDC for the District
of Oregon, its motion to change the venue to the USDC for the Western District
of Pennsylvania was granted. In April 1993, on Portland's motion, the Board's
case was consolidated with the Portland case. The parties are seeking total
damages of approximately $350 million. In June 1993, the court granted the
Corporation's motion to dismiss plaintiffs' claims for negligence and negligent
misrepresentation. The court also dismissed, in part, the plaintiffs' 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 1995.
(f) 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 the RICO and violations of the Minnesota
Prevention of Consumer Fraud Act. Discovery has commenced.
9
<PAGE> 10
(g) 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.
(h) The Corporation has been defending consolidated class and derivative
actions and an individual lawsuit brought by shareholders of the Corporation
against the Corporation, Westinghouse Financial Services, Inc. (WFSI) and
Westinghouse Credit Corporation (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. The consolidated class and derivative actions are
pending in the USDC for the Western District of Pennsylvania. In July 1993, the
court dismissed in its entirety the derivative claim and dismissed most of the
class action claims, with leave to replead certain claims in both actions. Both
actions were subsequently replead. On September 27, 1994, the court denied
plaintiffs' motion for reinstatement of certain of the dismissed class action
claims against the Corporation. On January 20, 1995, the court again dismissed
the derivative complaint in its entirety with prejudice. On February 8, 1995,
certain of the plaintiffs appealed the dismissal of these claims. Also on
January 20, 1995, the court dismissed the class action claims, but granted
plaintiffs the right to replead certain of the class action claims. Plaintiffs
did not replead the claims and on February 28, 1995, the court dismissed the
class action claims in their entirety. The plaintiffs have notified the
Corporation that they intend to appeal this dismissal. The remaining individual
action was dismissed by the USDC for the Southern District of Texas on December
20, 1994. An appeal was dismissed on February 14, 1995.
(i) 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 (which includes the
aforementioned 108 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. The
parties are currently involved in the discovery process. The court adopted a
case management plan which calls for a series of trials centered on separate
Electronic Systems' divisions. The first trial is scheduled for September 5,
1995. Currently, no other trials are scheduled.
(j) Beginning in early 1990 and continuing into 1994, 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
10
<PAGE> 11
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 judge denied the motions of the Corporation and the other defendants
who were found liable for a judgment notwithstanding the verdict and a new
trial. The Corporation has appealed the verdict.
The Corporation was a direct defendant in approximately 550 of 2,100
consolidated claims, as well as a third party defendant in an additional 2,200
claims, alleging personal injury, wrongful death and loss of consortium claims
arising from alleged exposure to asbestos-containing products manufactured,
supplied or installed by various defendants, including the Corporation.
Westinghouse has removed 508 of the direct claims to Federal Court from the
Baltimore City Circuit Court where they were originally filed, leaving
approximately 50 cases still in the Baltimore City Circuit Court. A common
issues trial commenced in June 1994. The trial focused on five exemplary
plaintiffs, none of whom had claims against Westinghouse. At issue for
Westinghouse, however, were questions of failure to warn and negligence with
respect to two of its products.
In December 1994, the Baltimore jury returned a verdict, finding the two
Westinghouse products defective due to their asbestos content and the
Corporation's alleged failure to warn adequately of the health hazards
associated with those products. The jury also found that Westinghouse can be
held liable for punitive damages in certain cases using a multiplier of two
times the compensatory damages. The jury's findings on product defect and
punitive damages may be binding in future litigation with the plaintiffs
remaining in this consolidation who have claims against Westinghouse. Each of
these plaintiffs, however, will be required to prove at trial that they
developed an asbestos-related disease, that they were exposed to one of the two
Westinghouse products at issue, and that this exposure was a substantial factor
in the development of the disease. Any compensatory awards will be divided among
other defendants also found liable to the plaintiffs, and will be covered in
large part by insurance. The Corporation intends to appeal the common issues
judgment.
In addition to the Mississippi and Baltimore asbestos lawsuits described
herein, the Corporation is a defendant in other asbestos lawsuits which have
been brought in various other jurisdictions.
(k) In August of 1993, the bankruptcy Trustee for the Bonneville Pacific
Corporation (Bonneville) sued over 70 defendants, including Westinghouse, in
federal district court in Salt Lake City, Utah. The Trustee's claims against the
group of defendants, including Westinghouse; Deloitte & Touche; Mayer, Brown &
Platt; Piper Jaffray, Inc.; and Kidder Peabody and Company, are numerous, but
consist primarily of common law fraud and aiding and abetting in breaches of
fiduciary duty on the part of former officers and directors of Bonneville. There
are also claims by the Trustee for the tort of conspiracy and civil RICO
violations. Westinghouse has filed numerous motions seeking dismissal of the
claims and has filed a denial of the allegations. The Corporation's involvement
with Bonneville consisted of four sale/lease back transactions in co-generation
projects through its former subsidiary, WCC.
The case is now entering the deposition phase. On October 6, 1994, the
Trustee filed its preliminary damage calculation which totalled $647 million
against a group of defendants, including Westinghouse, on a theory of joint and
several liability. The Trustee is also seeking treble damages based upon the
Trustee's position that a violation of civil RICO has occurred. Westinghouse
continues to reject the validity of the claims and believes that the preliminary
damage calculations are without merit. In the course of discovery, Westinghouse
will challenge these damage calculations.
(l) On August 16, 1994, the Official Committee of Unsecured Creditors of
Phar-Mor, Inc. filed suit against Westinghouse and others in the United States
Bankruptcy Court for the Northern District of Ohio, alleging that an August 1991
tender offer conducted by Phar-Mor, Inc. (Phar-Mor) was a fraudulent conveyance
and therefore should be rescinded. Westinghouse participated in the tender offer
and received approximately $30 million. The suit also alleges that Westinghouse
must repay approximately $20 million it received in the tender offer as proceeds
from the tender of stock by the DeBartolo Family Limited Partnership
(DeBartolo). Westinghouse received the proceeds from DeBartolo's tender of
Phar-Mor stock pursuant to a pre-existing loan to DeBartolo from Westinghouse
collateralized by DeBartolo's holdings in Phar-Mor. DeBartolo also has been
named as a defendant in this litigation and has separately been sued for the
same $20 million.
11
<PAGE> 12
Counsel for DeBartolo has filed a motion with the Judicial Panel on
Multidistrict Litigation requesting that the fraudulent conveyance action be
transferred to the United States District Court (USDC) for the Western District
of Pennsylvania for consolidation with approximately 40 other Phar-Mor-related
cases currently pending in the USDC. Among these 40 cases is an action filed by
Westinghouse in October 1992 in connection with loans to, and equity investments
in, Phar-Mor. Westinghouse's suit against Phar-Mor asserts, among other things,
federal securities law fraud claims and state law claims for fraud and negligent
misrepresentation against various defendants, including principally Phar-Mor's
independent accountants (Coopers & Lybrand), its Chief Executive Officer and
Treasurer (David S. Shapira), and its controlling shareholder (Giant Eagle,
Inc.). Westinghouse has filed a pretrial statement of damages with the Court
claiming total damages in excess of $162 million.
Among the other Phar-Mor-related cases pending in the USDC are claims by
creditors and investors in Phar-Mor against Coopers & Lybrand and/or David
Shapira and Giant Eagle, and an action by Phar-Mor against Coopers & Lybrand.
Beginning in December 1993 and thereafter, Coopers & Lybrand, David Shapira
and/or Giant Eagle asserted cross-claims or third-party complaints in numerous
of these cases against Westinghouse and others for contribution and
indemnification, alleging, that Westinghouse, by virtue of attendance by its
representatives at meetings of Phar-Mor's Board of Directors, became a "de
facto" member of the board of directors and thus should share jointly and
severally in the payment of damages. Westinghouse has filed an answer denying
the allegations contained in the cross-claims and third-party complaints. Total
damage claims being asserted in cross-claims and third-party complaints amount
to in excess of $1.5 billion.
The parties are currently involved in fact discovery in the litigation
currently pending in the USDC. Pre-trial statements have been submitted by the
parties. This case could go to trial in the second half of 1995.
(m) 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.
(n) On November 4, 1993, the Wisconsin Department of Natural Resources
(DNR) issued a notice of violation to the Corporation alleging that it violated
the Wisconsin Hazardous Waste Management Act by failing, with respect to its
former Milwaukee repair facility, to notify the Department of the presence of
PCBs and for failing to remediate the PCBs at the facility. The matter was
referred to the Wisconsin Department of Justice (DOJ). The case has been
settled, and Westinghouse paid a $150,000 fine pursuant to the Consent Decree.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in the foregoing matters and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect on 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 that the Corporation has
meritorius defenses to the litigation described in items (a) through (m) above,
and management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1994
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, 1995 are listed below.
Officers are elected annually. There are no family relationships among any of
the executive officers of the Corporation.
12
<PAGE> 13
<TABLE>
<CAPTION>
AGE AT
NAME, OFFICES, AND POSITIONS MARCH 1, 1995
---------------------------- -----------------
<S> <C>
Michael H. Jordan -- Chairman and Chief Executive Officer 58
since June 30, 1993; Partner with Clayton, Dublier & Rice,
Inc. from September 1992 to June 1993; Chairman of PepsiCo
International Foods and Beverages Division from December
1990 to August 1992. Prior to December 1990, Mr. Jordan
held numerous other management positions of increasing
responsibility at PepsiCo International.
Gary M. Clark -- President since June 30, 1993; President 59
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 January 1993; Executive Vice President,
Industries from January 1989 to December 1990.
Frank R. Bakos -- President, Power Generation since August 57
1994; Vice President and General Manager, Power Generation
from January 1989 to August 1994.
Louis J. Briskman -- Senior Vice President and General 46
Counsel since January 1994; Senior Vice President,
Secretary and General Counsel from January 1993 to January
1994; Deputy General Counsel from January 1989 to January
1993.
Francis J. Harvey -- President, Electronic Systems since 51
March 1, 1995; President, Westinghouse Government &
Environmental Services Company from January 1994 to March
1, 1995; Vice President, Science and Technology from July
1993 to January 1994; General Manager, Marine Division
from July 1986 to July 1993.
Willard C. Korn -- Chairman and Chief Executive Officer, 52
Westinghouse Broadcasting Company since November 1994;
President, Westinghouse Broadcasting Company from January
1993 to November 1994; President, Group (W) Television
from June 1990 to January 1993.
Richard A. Linder -- Chairman, Electronic Systems since 63
March 1, 1995; President, Electronic Systems from August
1994 to March 1, 1995; Executive Vice President from
October 1993 to August 1994; 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 January 1993.
James S. Moore -- President, Westinghouse Government & 58
Environmental Services Company since March 1, 1995; Senior
Vice President, Corporate Human Resources and Total
Quality from January 1993 to March 1, 1995; Vice President
of Executive Resources and Development from July 1991 to
January 1993; President, Westinghouse Savannah River
Company from September 1988 to July 1991.
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
AGE AT
NAME, OFFICES, AND POSITIONS MARCH 1, 1995
---------------------------- -----------------
<S> <C>
Fredric G. Reynolds -- Executive Vice President and Chief 44
Financial Officer since March 1994; Senior Vice President,
Finance, and Chief Financial Officer, PepsiCo
International Foods from December 1990 to March 1994;
Senior Vice President, Finance, and Chief Financial
Officer, Frito-Lay from May 1989 to December 1990.
Louis J. Valerio -- Vice President and Controller since 45
February 1995; independent consultant from March 1994 to
February 1995; consultant, United Airlines from April 1993
to March 1994; Senior Vice President, Finance, United
Airlines from February 1990 to April 1993; Vice
President-Treasurer, United Airlines from February 1989 to
February 1990; Vice President, Financial Planning and
Analysis, United Airlines from February 1988 to February
1989.
James F. Watson, Jr. -- President, Thermo King since 57
February 1993; Vice President and General Manager, North
American Division of Thermo King from October 1983 to
February 1993.
Nathaniel D. Woodson -- President, Energy Systems since 53
August 1994; Vice President and General Manager, Energy
Systems from November 1990 to August 1994; President,
International from March 1989 to November 1990.
</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 52 of this report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on page 52 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 25 of
this report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item, together with the report of Price
Waterhouse LLP dated January 31, 1995, appears on pages 26 through 51 of this
report and is incorporated herein by reference.
14
<PAGE> 15
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Management 26
Report of Independent Accountants 26
Consolidated Statement of Income for each of the three years in the
period ended December 31, 1994 27
Consolidated Balance Sheet at December 31, 1994 and 1993 28
Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1994 29
Notes to the Financial Statements 30
Quarterly Financial Information (unaudited) 51
Five-Year Summary Selected Financial and Statistical Data (Unaudited) 52
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
15
<PAGE> 16
Management's Discussion and Analysis
OVERVIEW
During 1994, the Corporation benefitted from the results of management's
initiatives to strengthen its financial position and improve its
competitiveness. Evidence of the Corporation's progress includes:
- - Customer orders for 1994 increased 4%. The largest improvement, an increase
of 12%, occurred in the fourth quarter, with the Corporation's Power
Generation and Electronic Systems businesses each receiving awards totalling
approximately $1 billion. Backlog exceeded $10 billion at year-end 1994.
- - Excluding special charges, operating profit for 1994 was $690 million
compared to $701 million in 1993. The 1994 results included a $103 million
increase in pension costs.
- - The Corporation made progress on its restructuring activities. Through
December 31, 1994, involuntary employee separations as a result of
implementing the 1993 restructuring initiative totalled approximately 3,200
compared to a two-year target of 3,400. Nearly 1,100 other employees left
through attrition. New restructuring initiatives identified during 1994 will
result in an additional 1,200 employee separations.
- - The Corporation made additional progress in rebuilding its equity base
through the issuance of preferred stock. In addition, net debt was reduced by
$1.7 billion.
The Corporation reported net income of $77 million, or $.07 per share, for 1994.
Net losses in 1993 and 1992 were $326 million and $1,394 million, or $1.07 and
$4.11 per share, respectively. See note 14 to the financial statements for a
discussion of earnings per share.
Included in 1994 results were pre-tax provisions of $71 million ($51 million
after-tax) for additional restructuring activities and $308 million ($195
million after-tax) for the settlement of a portion of the Corporation's pension
obligation. Included in 1993 results was a pre-tax provision of $750 million
($493 million after-tax) for restructuring, the disposition of certain
non-strategic businesses and certain litigation and environmental contingencies.
The 1993 results also included after-tax charges of $95 million for Discontinued
Operations and $56 million for the adoption of Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits."
Included in 1992 results were after-tax charges of $1,413 million to record the
estimated loss on disposal of Discontinued Operations and $338 million for the
adoption of both SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes."
See the notes to the financial statements for further discussion of these
matters.
Excluding the after-tax effect of the special charges described above, income
from Continuing Operations was $323 million, or $.71 per share, for 1994
compared to $318 million, or $.76 per share, for 1993 and $357 million, or $.95
per share, for 1992. The higher pension costs in 1994 reduced per share earnings
by $.17.
In 1995, the Corporation expects to continue implementation of its programs to
improve both the operating performance and competitive positions of its core
businesses. The focus on customer orientation and international opportunities
will continue. Furthermore, the Corporation will persist in its aggressive drive
to reduce costs and improve competitiveness. Cost reduction initiatives will be
undertaken when the resulting benefits are substantial in relation to the cost
of the programs and are realizable in the near term. Net periodic pension costs
in 1995 are expected to decline by approximately $25 million from the 1994
level. While subject to many variables, management currently believes that
anticipated revenue increases coupled with cost reductions should improve
earnings significantly for the full year 1995. However, the Corporation's first
quarter 1995 earnings are expected to be approximately flat compared to the
prior year period excluding certain 1994 nonrecurring gains.
During 1995, the Corporation also expects to continue the divestitures of
non-strategic businesses and apply the proceeds to further reduce debt.
Alternative strategies for monetizing WCI Communities, Inc. (WCI) continue to be
explored.
RESULTS OF OPERATIONS--CONTINUING OPERATIONS
In 1994, the Corporation expanded the number of reported business segments and
realigned certain businesses to reflect more closely the Corporation's core
businesses. Segment information for 1993 and 1992 has been restated to reflect
these changes.
The Corporation's consolidated revenues from sales of products and services were
essentially flat in 1994 compared to 1993, totalling approximately $8.8 billion.
Operating profit for each of the last three years included special charges
primarily related to the Corporation's restructuring activities. All
restructuring charges, which totalled $71 million in 1994, $350 million in 1993
and $36 million in 1992, were distributed to the applicable segments. Other
special charges included in operating profit in 1993 were $125 million for
litigation costs, $60 million for Corporate environmental costs and $20 million
for asset writeoffs associated with projects that were discontinued. Other
special charges in 1992 also included $35 million related to a workforce
reduction at Electronic Systems.
Also included in 1994 segment operating profit are increases in pension costs
totalling $103 million. The increase is attributable primarily to the effects of
changes in actuarial assumptions and reduced levels of anticipated asset
earnings. See note 3 to the financial statements.
Broadcasting
Revenues for Broadcasting increased 7% to $870 million in 1994 reflecting growth
in advertising revenues, particularly in television. The 1994 Olympics and
political campaigns contributed to the increased advertising revenues. Group W
Satellite Communications (GWSC) also reported higher revenues. Revenues for
Broadcasting were flat in 1993 compared to 1992 as a weak west coast television
market and lower volume at
16
<PAGE> 17
RESULTS OF OPERATIONS--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
Operating Profit (Loss)
Sales of Products and Services Operating Profit (Loss) Excluding Special Charges
- -----------------------------------------------------------------------------------------------------------------------------
Year ended December 31 1994 1993 1992 1994 1993 1992 1994 1993 1992
------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broadcasting $ 870 $ 812 $ 814 $203 $ 145 $165 $201 $157 $165
Electronic Systems 2,467 2,597 2,855 165 83 225 176 220 260
Government &
Environmental Services 389 338 370 58 33 100 62 65 100
Thermo King 877 719 705 130 109 103 130 109 103
Energy Systems 1,235 1,314 1,325 7 (59) 116 33 111 116
Power Generation 1,715 1,787 1,856 110 (23) 121 105 103 121
The Knoll Group 567 510 578 (67) (39) (40) (27) (30) (14)
WCI Communities, Inc. 248 253 235 68 61 87 65 65 97
Other Businesses 497 544 564 (27) (64) (14) (27) (59) (14)
Corporate and Other 148 164 139 (28) (100) (70) (28) (40) (70)
Intersegment Sales (165) (163) (190) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total $8,848 $8,875 $9,251 $619 $ 146 $793 $690 $701 $864
=============================================================================================================================
</TABLE>
Group W Productions were offset by stronger performance in radio and GWSC. In
addition, 1992 benefitted from advertising revenues generated by the 1992
Olympics and political campaigns.
Included in 1993 operating profit was $12 million for restructuring costs, of
which $2 million was subsequently not required and adjusted in 1994. Excluding
restructuring amounts, operating profit increased 28% to $201 million in 1994
compared to $157 million in 1993 due to the increased advertising revenues and
improvements in productivity resulting from cost reduction programs. Excluding
restructuring, operating profit decreased 5% in 1993 compared to 1992 due to an
unfavorable mix of sales.
The strategic alliance between CBS and Westinghouse Broadcasting Company
announced in 1994 is expected to increase the number of television stations
owned by the parties and expand their distribution and programming capabilities
nationwide. See note 19 to the financial statements.
Electronic Systems
Revenues for Electronic Systems decreased 5% to $2,467 million in 1994 compared
to 1993 and 9% in 1993 compared to 1992. Lower revenues from Department of
Defense (DoD) contracts in both years and the 1992 divestitures of the
Electrical Systems and Copper Laminates divisions were the primary causes of the
decreased revenues.
Operating profit reflected restructuring charges of $11 million and $137 million
in 1994 and 1993, respectively, and a $35 million charge in 1992 for a workforce
reduction. Excluding these charges in each of the three years, operating profit
decreased 20% to $176 million in 1994, primarily as a result of higher pension
costs and lower DoD revenues, which were partially offset by savings from cost
reduction programs. Operating profit excluding special charges decreased 15% to
$220 million in 1993 from lower 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 operating results.
The Corporation intends to maintain a strong focus on DoD opportunities and
believes that through continual streamlining of its operations, it is well
positioned over the long term to benefit from the demand for advanced electronic
systems by the U.S. and foreign governments.
Government & Environmental Services
Revenues for Government & Environmental Services increased 15% to $389 million
in 1994 due to increased volume in hazardous waste remediation services and
radioactive waste incineration, increased work scope and fees for the naval
nuclear program, and higher award fees at several Department of Energy (DOE)
sites operated and managed by the Corporation. Revenues decreased 9% in 1993
compared to 1992 due to lower volume and reduced prices in the hazardous waste
remediation and incineration businesses.
Included in 1994 and 1993 operating profits were $4 million and $32 million,
respectively, for restructuring activities and other actions. Excluding the
charges in both years, operating profit decreased 5% to $62 million in 1994
because price compression in the hazardous waste remediation and incineration
markets more than offset the increased award fees in government operations.
Operating profit excluding special charges decreased 35% in 1993 compared to
1992 due to the lower volume and price compression in the hazardous waste
remediation and incineration markets.
The Corporation continues to review its portfolio of environmental businesses to
determine how best to focus its efforts. In 1994, the Corporation signed a
letter of intent to sell Aptus, its hazardous waste incineration business. See
note 19 to the financial statements. The DOE has recently announced its
intention to open for bid certain of its operating and maintenance contracts as
they expire. The Corporation intends to vigorously pursue the retention of its
current contracts and selectively bid on sites not currently managed by the
Corporation.
17
<PAGE> 18
Thermo King
Revenues for Thermo King increased 22% to $877 million in 1994 due to volume
increases in the domestic truck and trailer, service parts, and container
product lines as well as in the international truck and trailer product line.
Revenues for 1993 compared to 1992 increased only 2% because lower European
revenues partially offset strong performance in the domestic truck and trailer
and service parts product lines.
Operating profit increased 19% to $130 million in 1994 compared to 1993 and 6%
in 1993 compared to 1992 primarily as a result of the increased volume.
Energy Systems
Revenues for Energy Systems decreased 6% to $1,235 million in 1994 due to
reduced licensee income and the favorable 1993 effect of a change in accounting
for nuclear fuel revenues. Revenues were flat in 1993 compared to 1992 as the
increase from the change in revenue recognition offset the decrease resulting
from higher 1992 revenues on large nuclear projects.
Included in 1994 operating profit was $26 million for restructuring activities
related to the separation of approximately 400 employees in late 1994. Included
in the 1993 operating loss was $170 million for restructuring, litigation and
other costs. Excluding special charges in both years, operating profit decreased
70% to $33 million in 1994 compared to 1993 and 4% in 1993 compared to 1992. The
decrease in operating profit in 1994 was attributed to lower licensee income,
the change in accounting for nuclear fuel revenue in 1993 and increased pension
costs. Cost savings from restructuring activities were beginning to materialize
in late 1994. The decrease in operating profit from 1992 to 1993 was a result of
an unfavorable mix of sales.
Power Generation
Revenues for Power Generation decreased 4% to $1,715 million in 1994 due to
lower revenues from project purchase-resale items for major projects and steam
operating plant service, largely offset by higher combustion turbine and field
services sales. Revenues also decreased 4% in 1993 compared to 1992 due to a
decrease in purchase-resale items and a depressed power generation field service
market.
Included in the 1993 operating loss was $126 million for restructuring
activities, of which $5 million was redeployed to other businesses in 1994.
Excluding the impact of restructuring in both years, operating profit increased
slightly to $105 million in 1994 compared to $103 million in 1993. Cost
improvements from restructuring activities in 1994 were essentially offset by
higher pension costs. Excluding the 1993 charge for restructuring, operating
profit decreased 15% in 1993 compared to 1992 due to the lower volume and an
unfavorable mix of sales.
Power Generation continues to focus on international opportunities. Of the $2.5
billion of orders received in 1994, more than 60% were from customers outside
the U.S. Particular successes were achieved in China, where Power Generation
received orders for four units, and in South Korea.
The Knoll Group
Revenues for The Knoll Group (Knoll) increased 11% to $567 million in 1994
compared to 1993 due to both market and market share growth in North America.
Revenues decreased 12% in 1993 compared to 1992 due to lower shipments and
reduced prices in the domestic market and poor economic conditions in Europe.
Knoll's operating results for the last three years have included restructuring
charges totalling $40 million in 1994, $9 million in 1993 and $26 million in
1992. A major restructuring program was begun in mid-1994 and will be completed
in the first half of 1995. The results of this program were evident in the North
American results for the fourth quarter of 1994, while European operations are
expected to improve as those restructuring activities are completed. Knoll's
total operating loss, which increased by $16 million in 1993, decreased by 10%
in 1994 reflecting the improvement in North America.
WCI Communities, Inc.
Revenues for WCI decreased slightly to $248 million in 1994 compared to 1993 due
to the continued weak real estate markets in California. These depressed markets
were partially offset by strong land and condominium sales in Coral Springs and
Naples, Florida. Revenues increased 8% in 1993 compared to 1992 as strong sales
in South Florida were partially offset by the weak Southern California market.
Included in 1994 operating profit was a $3 million reduction of the $10 million
restructuring charge in 1992. Excluding the impact of restructuring, operating
profit was flat at $65 million in 1994 compared to 1993 after decreasing 33%
from 1992 due to an unfavorable mix of sales. The Corporation continues to
explore alternatives for monetizing WCI.
Other Businesses
The Other Businesses segment is a diverse group of businesses that the
Corporation views as non-strategic. During 1994, the Corporation completed the
sales of Controlmatic and Gladwin Corporation. See note 19 to the financial
statements. The Corporation continues to pursue the disposition of the remaining
businesses in this segment.
Revenues of Other Businesses decreased 9% to $497 million in 1994 due to the May
1994 sale of Controlmatic. Revenues decreased 4% in 1993 compared to 1992 due to
lower production and delayed deliveries at Westinghouse Motor Company and the
weak economic conditions in Controlmatic's European market.
18
<PAGE> 19
Included in the 1993 operating loss was $5 million for restructuring. Excluding
restructuring costs, the operating loss decreased 54% to $27 million in 1994
after increasing $45 million in 1993. The significant loss in 1993 reflected
project cost overruns at Controlmatic and lower volume at Westinghouse Motor
Company.
RESTRUCTURING OF OPERATIONS
The Corporation is committed to strengthening its core businesses and improving
its profitability through certain restructuring actions including changes in
business and product line strategies, as well as downsizing for process
reengineering and productivity improvements. The Corporation expects to continue
to implement restructuring initiatives as competitive conditions dictate in an
ongoing effort to reduce its overall cost structure and improve its
competitiveness. An overview of the Corporation's recent restructuring actions
follows. See note 19 to the financial statements.
Restructuring of Operations--1993 Initiative
Shortly after joining the Corporation in June 1993, Chairman and Chief Executive
Officer Michael Jordan initiated an extensive review by management of all of the
Corporation's businesses. As a result of this review, management developed a
plan to restructure its continuing businesses to improve productivity and
operating performance. This plan was expected to result in the reduction of
approximately 6,000 employees during the subsequent two years; approximately
2,600 through normal attrition and 3,400 through involuntary separations.
As part of its extensive review, management identified the individual projects
to be included in the restructuring plan and identified the affected employee
groups. Generally, separated employees receive benefits under the Corporation's
Employee Security and Protection (ES&P) Plan, including permanent job separation
benefits, retraining and outplacement assistance. The amount included for these
benefits in the restructuring charge represents the incremental cost of such
benefits over those amounts previously accrued under SFAS No. 112.
Although the 1993 restructuring initiative involved substantially all of the
Corporation's continuing businesses, particular focus was placed on Corporate
overhead functions and on the Electronic Systems and Power Generation business
units. The current estimated cost of the Corporation's 1993 restructuring
initiative totalled $350 million, consisting of $206 million for employee
separation costs, $22 million for a noncash pension curtailment charge, $68
million for asset writedowns and $54 million for facility closure and
rationalization costs.
Through December 31, 1994, employee reductions as a result of implementing the
1993 restructuring initiative totalled 3,181. In addition, nearly 1,100
employees left through attrition. Completion of the remaining involuntary
separations under the 1993 initiative is expected in 1995. The 3,400 employee
separations that were included as part of the 1993 restructuring provision are
expected to result in annual pre-tax savings of approximately $100 million,
primarily through reduced employment costs. Approximately 75% of this annual
savings was realized in 1994.
The total cash expenditures related to the 1993 restructuring initiative are
expected to approximate $260 million with the remaining noncash charges
consisting primarily of asset writedowns and the pension curtailment charge.
Cash expenditures through year-end 1994 totalled almost $200 million. Beginning
in 1995, cash savings from these initiatives are expected to exceed remaining
cash expenditures.
Restructuring of Operations--1994 Initiative
During the fourth quarter of 1994, management approved additional restructuring
projects totalling $113 million primarily for costs associated with
approximately 1,200 additional employee separations. Certain amounts accrued for
restructuring in 1992 and miscellaneous adjustments were applied to these
program costs to reduce the required restructuring charge to $71 million.
Separated employees generally receive benefits under the Corporation's ES&P
Plan. The new restructuring initiative primarily relates to Knoll and involves
major cost reduction efforts in both its North American and European operations.
The 1994 initiative also includes further employee reductions at Energy Systems
and certain other business units.
The restructuring activities included in the 1994 restructuring provision are
expected to result in annual pre-tax savings of approximately $70 million,
primarily from reduced employment costs.
Total cash expenditures, which approximate $82 million, are expected to be
funded in 1995 through operating cash flows of Continuing Operations. These
expenditures, however, are expected to be largely offset by savings, resulting
in a net cash outflow of approximately $12 million in 1995.
1994 PENSION SETTLEMENT
The Corporation's restructuring activities contributed to a high level of lump
sum cash distributions from the Corporation's pension fund during 1994. The
magnitude of these cash distributions required that the Corporation apply the
provisions of SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and
recognize a settlement loss of $308 million during the fourth quarter of 1994.
This noncash charge to income represents the pro-rata portion of unrecognized
losses associated with the pension obligation that was settled.
The settlement loss did not impact shareholders' equity because the decrease
resulting from the income statement provision was fully offset by a reduction in
the charge to shareholders' equity related to the minimum pension liability. See
note 3 to the financial statements.
19
<PAGE> 20
DISPOSITION OF NON-STRATEGIC BUSINESSES
During the fourth quarter of 1993, the Corporation recorded a $215 million
charge to dispose of certain non-strategic businesses. Of this amount, $20
million related to asset writedowns was charged to operating profit.
Non-strategic businesses included parts of the former Environmental Services
business unit and all of the businesses in the Industrial Products and Services
business unit. During 1994, the Corporation completed the sales of Controlmatic
and Gladwin Corporation. The Corporation continues to pursue the disposition of
the remaining non-strategic businesses.
Activity relating to the liability for disposition of non-strategic businesses
for the year ended December 31, 1994 is summarized below:
<TABLE>
<CAPTION>
LIABILITY FOR DISPOSITION OF NON-STRATEGIC BUSINESSES (in millions)
- -------------------------------------------------------------------
<S> <C>
Balance at December 31, 1993 $215
Asset writedowns (20)
Disposal of businesses (25)
Additional provision 17
- -------------------------------------------------------------------
Balance at December 31, 1994 $187
===================================================================
</TABLE>
The asset writedowns primarily consisted of permitting and site preparation
costs for two projects that the Corporation no longer intends to pursue.
OTHER INCOME AND EXPENSES
For the year ended December 31, 1994, other income and expense, which was a net
expense of $285 million, consisted primarily of the $308 million charge for the
settlement of a portion of the Corporation's pension obligation. The Corporation
recorded an additional $17 million provision for the estimated loss on
disposition of non-strategic businesses to reflect actual sales experience and
revised estimates of proceeds and selling costs for the remaining businesses to
be sold. These charges were partially offset by gains totalling $42 million from
the sale of two radio stations and a shopping center development. See notes 18
and 19 to the financial statements for additional discussion of these matters.
For the year ended December 31, 1993, other income and expense, which was a net
expense of $165 million, consisted primarily of a $195 million provision for the
estimated loss on disposition of non-strategic businesses. This charge was
offset by a gain on the sale of an equity participation in a production company.
No significant other income or expense items were recorded in 1992.
INTEREST EXPENSE
Interest expense decreased $40 million to $177 million in 1994 compared to 1993
primarily due to lower average outstanding short-term debt. Average outstanding
short-term debt of Continuing Operations decreased $772 million in 1994 compared
to 1993. Average short-term debt of Continuing Operations is expected to
increase in 1995 because of the fourth quarter 1994 transfer of debt from
Discontinued Operations. See note 10 to the financial statements.
Interest expense decreased $8 million to $217 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 and the
replacement of short-term floating-rate debt with higher coupon long-term
fixed-rate debt.
INCOME TAXES
The Corporation's 1994 provision for income taxes of $71 million was 45.2% of
income before taxes and minority interest.
The Corporation's 1993 benefit for income taxes was 32.6% of the losses from all
sources. The 1993 benefit totalled $153 million consisting of $70 million from
Continuing Operations, $53 million from Discontinued Operations and $30 million
from the cumulative effect of the change in accounting principle.
The 1992 benefit was 52.7% of the losses from all sources. The 1992 benefit
totalled $1,530 million and consisted of $187 million tax expense on income from
Continuing Operations, offset by benefits of $882 million from Discontinued
Operations and $835 million from the cumulative effect of changes in accounting
principles.
Numerous items have caused these effective tax rates to differ from the U.S.
statutory income tax rates of 35% for 1994 and 1993 and 34% for 1992. The
Corporation's effective tax rate varies depending on the specific dollar amounts
of permanent tax differences and the relationship of those differences to income
before income taxes and minority interest. An analysis of these items is set
forth in the Effective Tax (Benefit) Rate for Continuing Operations table
included in note 5 to the financial statements.
The net deferred tax asset at December 31, 1994 was $2,380 million as shown in
the Consolidated Deferred Income Tax Sources table in note 5 to the financial
statements.
The three significant components of the deferred tax asset balance are: (i) the
tax effect of net operating loss carryforwards of $2,944 million, $472 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 $2,736 million that represents future net income tax
deductions. Of this net temporary difference, approximately $1,200 million
represents a net pension obligation and approximately $1,270 million represents
an obligation for postretirement and postemployment benefits, and (iii)
alternative minimum tax credit carryforwards of $261 million which have no
expiration date.
20
<PAGE> 21
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 1992 and 1993 as aberrations caused in part by the liquidation of a
substantial portion of Financial Services assets and not recurring conditions.
Further, the Corporation's Continuing Operations have been consistently
profitable and the loss from Continuing Operations in 1993 was due to
restructuring and other actions. Management also considered the actual historic
operating performance and taxable income generated by Continuing Operations.
Certain of the tax losses will not occur until future years. Each tax loss year
would receive a new 15-year carryforward period. Under a conservative
assumption, however, that all net cumulative temporary differences other than
net operating loss carryforwards reversed in 1994, the Corporation would have
through the year 2009 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,
change in the method of tax deductible depreciation, purchase of leases that
would generate taxable income, and capitalization of research and development
expense for tax purposes.
The following table shows a reconciliation of income or loss from Continuing
Operations before income taxes to taxable income from Continuing Operations:
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
TO TAXABLE INCOME (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993* 1992*
- -------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from Continuing Operations
before income taxes $ 157 $(236) $ 550
- -------------------------------------------------------------------
Permanent increases (decreases):
Income earned in foreign activities
and Puerto Rico (77) (108) (162)
State income taxes (11) (33) (29)
Goodwill amortization 24 40 22
Other 1 55 (15)
- -------------------------------------------------------------------
Net permanent decrease (63) (46) (184)
- -------------------------------------------------------------------
Temporary increases (decreases):
Pension expense greater (less) than
amount deducted for tax purposes 291 24 (29)
Long-term contract adjustment 12 (84) (38)
Depreciation 23 35 38
Provisions for restructuring
and other actions (136) 713 --
Other 21 149 114
- -------------------------------------------------------------------
Net temporary increase 211 837 85
- -------------------------------------------------------------------
Taxable income from
Continuing Operations $ 305 $ 555 $ 451
===================================================================
<FN>
*Certain amounts have been adjusted to reflect income tax returns as filed.
</TABLE>
DISCONTINUED OPERATIONS
In November 1992, the Corporation announced a plan (the Plan) that included
exiting its Financial Services business through the disposition of its asset
portfolios and the sales of the Distribution and Control Business Unit (DCBU)
and Westinghouse Electric Supply Company (WESCO). See notes 1 and 2 to the
financial statements for a discussion of the Plan. The disposition of Financial
Services assets involved the sale of real estate and corporate finance
portfolios over a three-year period and the liquidation of the leasing portfolio
over a longer period in accordance with contractual terms. Financial Services,
DCBU and WESCO have been accounted for 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).
Upon adoption of the Plan, the Corporation recorded a pre-tax charge of $2,201
million consisting of $2,350 million for an addition to the valuation allowance
for Financial Services portfolios, $300 million for estimated losses from
operations of 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
dispositions of DCBU and WESCO and an estimated $144 million of earnings from
those operations during their phase-out periods. The after-tax charge for the
estimated loss on the disposal of Discontinued Operations was $1,383 million.
Based on its quarterly review of the assumptions used in determining the
estimated loss from Discontinued Operations, the Corporation recorded an
additional pre-tax provision for loss on disposal of Discontinued Operations of
$148 million in 1993. This change in the estimated loss resulted from a
reduction of the expected selling prices of WESCO and the Australian subsidiary
of DCBU; a decision to sell in bulk a Financial Services residential development
that the Corporation, upon adoption of the Plan, had intended to develop; and
revision to the estimated interest costs expected to be incurred by Discontinued
Operations during the disposal period.
On January 31, 1994, the Corporation completed the sale of DCBU, excluding its
Australian subsidiary, to Eaton Corporation for a purchase price of $1.1 billion
and the assumption by the buyer of certain liabilities. The sale of the
Australian subsidiary was completed in March 1994.
On February 28, 1994, the Corporation completed the sale of WESCO to an
affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a
purchase price of approximately $340 million. The proceeds consisted of
approximately $275 million in cash, approximately $50 million in first mortgage
notes, and the remainder in stock and options of the new company.
21
<PAGE> 22
The portfolio investments of Financial Services have been reduced from $8,967
million at year-end 1992 to $1,230 million at December 31, 1994. Substantially
all of the remaining real estate assets of $297 million at December 31, 1994 are
expected to be liquidated in 1995. The corporate portfolio essentially has been
liquidated. The leasing portfolio, which totalled $924 million at December 31,
1994, is expected to continue to liquidate through 2015 in accordance with
contractual terms.
The remaining liability for the estimated loss on disposal of Discontinued
Operations at December 31, 1994 of $145 million is expected to be utilized in
the following manner:
ESTIMATED REQUIREMENT--LIABILITY FOR THE ESTIMATED LOSS ON DISPOSAL OF
DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 1994
- -----------------------------------------------------------
<S> <C>
Financial Services $ 80
Disposition costs--DCBU and WESCO 65
- -----------------------------------------------------------
Total $145
===========================================================
</TABLE>
The estimated reserve requirement for Financial Services includes future
operating losses and estimated credit losses, primarily related to the leasing
portfolio. Partially offsetting the operating and credit losses are estimated
future gains from sales of the remaining real estate assets.
Future disposition costs relating to the sales of DCBU and WESCO include product
warranty claims, medical claims, employee separation costs and potential
environmental remediation costs.
Management believes that the liability for the estimated loss on disposal of
Discontinued Operations is adequate. The adequacy of this liability is evaluated
each quarter.
The following table presents sales and operating profit (loss) for Discontinued
Operations for each of the three years in the period ended December 31, 1994:
RESULTS OF OPERATIONS (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -----------------------------------------------------------
<S> <C> <C> <C>
Sales of products and services:
DCBU and WESCO $ 319 $2,384 $2,428
Financial Services 41 305 745
Operating profit (loss):
DCBU and WESCO 4 68 104
Financial Services (204) (212) (194)
===========================================================
</TABLE>
DCBU and WESCO
Operating results for the year ended December 31, 1994 include the operating
results of DCBU for the month ended January 31, 1994 and of WESCO for the two
months ended February 28, 1994, their respective dates of sale.
Operating profit decreased 35% in 1993 compared to 1992 due primarily to a 2%
decline in revenues, an unfavorable mix of sales and non-recurring costs for
strategic initiatives at WESCO.
Financial Services
During 1994, the Corporation continued to liquidate Financial Services,
resulting in a reduction in assets and debt. Financial Services revenues of $41
million for 1994 decreased $264 million compared to 1993, reflecting the
significant reduction in assets through dispositions during 1993 and 1994.
Revenues of $305 million for 1993 decreased 59% compared to 1992 due primarily
to a reduction in assets through dispositions.
At December 31, 1994, Financial Services portfolio investments totalled $1,230
million, a decrease of $321 million from $1,551 million at year-end 1993.
Portfolio investments at December 31, 1994 and 1993 included $913 million and
$1,062 million, respectively, of receivables, and $317 million and $489 million,
respectively, of other portfolio investments. Of the receivables at December 31,
1994 and 1993, $886 million and $969 million, respectively, were leasing
receivables, and the remainder consisted primarily of residential real estate
loans and corporate receivables from highly leveraged transactions. Other
portfolio investments at December 31, 1994 and 1993 included the Corporation's
investment in LW Real Estate Investments, L.P. (LW) of $133 million in both
periods, real estate properties of $88 million and $141 million, respectively,
and other investments of $96 million and $215 million, respectively, consisting
primarily of investments in real estate and leasing partnerships. The leasing
portfolio is expected to liquidate in accordance with contractual terms.
Management expects substantially all of the Corporation's investment in LW and
the remaining real estate assets to be liquidated by the end of 1995.
Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1994 and 1993, 81% and 77%, respectively, related to aircraft and
18% and 19%, respectively, related to cogeneration facilities. Certain leasing
receivables classified as performing and totalling approximately $139 million at
December 31, 1994 have been identified by management as potential problem
receivables. This amount consists primarily of leveraged leases related to
aircraft leased by major U.S. airlines. Such leasing receivables were current as
to payments and performing in accordance with contractual terms at December 31,
1994.
Net Debt of Discontinued Operations
A summary of changes in net debt of Discontinued Operations for the year ended
December 31, 1994 is presented in the table below:
<TABLE>
<CAPTION>
CHANGES IN NET DEBT OF DISCONTINUED OPERATIONS (in millions)
- -------------------------------------------------------------------------------
<S> <C>
Net debt at December 31, 1993 $ 3,183
Proceeds from sales of DCBU and WESCO (1,374)
Liquidations of Financial Services assets (323)
Cash used in operating activities of Financial Services 187
Asset fundings of Financial Services 86
Cash used in operating activities related to
DCBU and WESCO and restructuring 170
Net cash provided by Continuing Operations (120)
Debt transferred to Continuing Operations (625)
Debt assumed by buyers of Discontinued Operations (18)
- -------------------------------------------------------------------------------
Net debt at December 31, 1994 $ 1,166
===============================================================================
</TABLE>
22
<PAGE> 23
Of the remaining $1.2 billion of net debt of Discontinued Operations,
approximately $700 million is expected to be repaid in 1995. Approximately $300
million is expected to be repaid through the liquidation of portfolio
investments of Financial Services. The remaining 1995 debt repayment of $400
million will occur as cash is received from Continuing Operations, the timing of
which is expected to coincide with sales of non-strategic businesses. The
Corporation expects to reduce the debt of Discontinued Operations to that amount
which is supportable by the leasing portfolio and can be repaid as that
portfolio liquidates over its contractual terms. As a result, additional cash
may be required from Continuing Operations.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Corporation manages its liquidity as a consolidated enterprise without
regard to whether assets or debt are classified for balance sheet purposes as
part of Continuing Operations or Discontinued Operations. As a result, the
discussion below focuses on the Corporation's consolidated cash flows and
capital structure.
The Corporation seeks to ensure that it has adequate resources for reinvestment
in its core businesses and for strategic acquisitions. Based on its ongoing
review of the Corporation's capital structure and associated interest costs,
management believes that the Corporation's operating and financial flexibility
will benefit from lower leverage.
During 1994, the Corporation took several actions to reduce its leverage and
rebuild its capital structure, including the continued liquidations of assets of
Discontinued Operations, the issuance of preferred stock and the reduction of
the common stock dividend. As a result, net debt (total debt less cash and cash
equivalents) was reduced by $1.7 billion. The Corporation intends to continue to
reduce its consolidated net debt by up to an additional $1 billion in 1995. This
reduction will be achieved principally by the sale of portfolio investments of
Discontinued Operations and the disposition of other non-strategic businesses of
Continuing Operations.
Management expects that cash from Continuing Operations and availability under
its revolving credit facilities will continue to be sufficient to meet future
business needs. Other sources of liquidity generally available to the
Corporation include cash and cash equivalents, proceeds from sales of
non-strategic assets and borrowings from other sources, including funds from the
capital markets.
Operating Activities
The operating activities of Continuing Operations provided $303 million of cash
during the year ended December 31, 1994, a decrease of $432 million from the
amount provided in 1993. The two major factors contributing to this decrease
were pension contributions and restructuring costs.
Cash contributions of approximately $300 million were made to the Corporation's
pension plans in 1994, whereas the 1993 contribution consisted primarily of
assets of Discontinued Operations. During 1995, management expects to contribute
approximately $300 million in cash to the Corporation's pension plans.
During 1994, the Corporation expended approximately $200 million for
expenditures related to its 1993 restructuring initiative. Savings from the
Corporation's restructuring activities are expected to essentially offset
related cash expenditures in 1995.
A significant use of operating cash in 1994 involved an increase in working
capital related to uncompleted contracts with progress billing terms. Customers
are exerting increasingly greater pressure to delay payments under major
contracts for as long as possible. The Corporation will focus significant effort
in 1995 on reducing long-term contract and inventory investments in an overall
effort to improve working capital turnover.
The operating activities of Discontinued Operations used $357 million of cash
during 1994 compared to cash provided of $45 million during 1993. The primary
operating cash requirements of Discontinued Operations for 1994 were interest
and operating costs of Financial Services and divestiture costs of DCBU and
WESCO. Operating activities for 1993 included cash generated by the operations
of DCBU and WESCO, both of which were sold in early 1994. The future operating
cash requirements of Discontinued Operations are primarily attributable to
interest costs on debt, operating costs and disposition costs related to DCBU
and WESCO.
Investing Activities
Investing activities provided $1,353 million of cash during 1994 compared to
$2,668 million of cash provided in 1993. During 1994, the Corporation sold two
radio stations, an investment in a joint venture and two non-strategic
businesses (Gladwin Corporation and Controlmatic), generating cash totalling $88
million. The Corporation purchased the Norden Unit of United Technologies
Corporation, the KPIX-AM and FM radio stations in San Francisco and a minority
interest in Group W Radio for total cash expenditures of $109 million. Proceeds
from the first quarter 1994 sales of DCBU and WESCO generated $1.4 billion of
cash, while liquidations of Financial Services portfolio investments generated
additional cash of $323 million. Cash generated by the liquidations of Financial
Services portfolio investments was significantly greater in 1993 because of the
early success of the liquidation plan.
23
<PAGE> 24
Capital expenditures were $259 million for 1994, a decrease of $13 million from
1993. Capital expenditures in 1995 are expected to approximate the 1994 level.
In 1995, the Corporation expects to generate approximately $300 million of cash
through the continued liquidation of portfolio investments of Discontinued
Operations. In addition, sales of non-strategic businesses, as well as the
potential monetization of WCI, are expected to generate cash proceeds to the
Corporation.
Financing Activities
Cash used by financing activities during 1994 totalled $2,203 million compared
to cash used of $3,754 million during 1993.
Net debt was reduced by $1,709 million during 1994 to $3,393 million at year-end
reflecting lower borrowings under the revolving credit facilities. As the
Corporation's financial condition improved in 1994, a significant level of its
cash and cash equivalents were used to repay debt. As a result, total debt of
the Corporation was $3,737 million at December 31, 1994, a decrease of $2,613
million from $6,350 million at December 31, 1993. Further debt reductions of
$750 million to $1 billion are expected in 1995.
Two new revolving credit agreements with more favorable terms and conditions
than the previous facility were executed in August 1994 (see Revolving Credit
Facilities). Total borrowings under the revolvers were $919 million at December
31, 1994. These borrowings carried a composite interest rate of 6.7% at year-end
1994 and were based on the London Interbank Offer Rate (LIBOR).
In March 1994, the Corporation sold in a private placement depositary shares
representing 3,600,000 shares of Series C preferred stock for net proceeds of
$505 million. These shares will convert to common shares in June 1997.
At the beginning of 1994, the Corporation reduced its common stock dividend from
$.40 per share to $.20 per share. This reduction resulted in annual cash savings
to the Corporation of approximately $70 million. Dividends paid in 1994 also
included dividends for the Series C preferred stock issued in March 1994.
As a result of the financing activities described above, the Corporation's net
debt at December 31, 1993 fell from 83% of consolidated net capitalization to
65% at December 31, 1994. As net debt declines further during 1995 and equity
grows through consistent earnings of Continuing Operations, this percentage is
expected to continue to improve.
On August 26, 1992, the Corporation filed a registration statement on Form S-3
for the issuance of up to $1 billion of debt securities. At December 31, 1994,
$400 million of this shelf registration remained unused.
Revolving Credit Facilities
On August 5, 1994, the Corporation replaced its December 1991 revolver with two
revolving credit agreements (revolvers). These facilities have a combined
commitment level of $2.5 billion, with $2.0 billion maturing on August 4, 1997
(three-year revolver) and $500 million maturing on August 4, 1995 (364-day
revolver). Borrowings under the revolvers are used for general corporate
purposes, including the repayment of maturing long-term debt. The interest rates
for borrowings under the revolvers are determined at the time of each borrowing
and are based on one of a variety of floating rate indices plus a margin based
on the Corporation's long-term debt ratings.
Unused capacity under the revolvers equalled $1,581 million and $996 million at
December 31, 1994 and 1993, respectively. Borrowing availability is subject to
compliance with certain covenants, representations and warranties. At December
31, 1994, the Corporation was in compliance with these covenants.
Hedging Activities
Prior to the adoption of the Plan, Financial Services entered into interest rate
and currency exchange agreements to manage the interest rate and currency risk
associated with various debt instruments. No transactions were speculative or
leveraged. Given their nature, these agreements have been accounted for as
hedging transactions.
The Corporation's credit exposure under interest rate and currency exchange
agreements is limited to the cost of replacing an agreement in the event of
non-performance by its counterparty. To minimize this risk, Financial Services
selected high credit quality counterparties. At December 31, 1994, the aggregate
credit exposure to counterparties totalled approximately $78 million. This
exposure resulted primarily from an interest rate and currency swap with an
A-rated counterparty. The contract matures in February 1996.
In 1994, outstanding interest rate exchange agreements resulted in a net
increase in the average borrowing rate for Discontinued Operations of
approximately 0.6% and a net increase in the corresponding interest expense of
approximately $12 million. The hedging policy followed by Financial Services
targeted a mix of fixed and floating rate debt that was attainable through the
issuance of debt instruments with particular rate reset characteristics and/or
the use of interest rate exchange agreements. Therefore, interest expense would
not have been materially different had the fixed/floating target been attained
without the use of interest rate exchange agreements.
The Corporation continually monitors its economic exposure to changes in foreign
exchange rates and enters into foreign exchange forward or option contracts to
hedge its transaction exposure when appropriate. As a result, the Corporation's
unhedged foreign exchange exposure is not significant. Furthermore, changes in
foreign exchange rates whether favorable or unfavorable are not expected to have
a significant impact on the Corporation's financial results or operating
activities.
24
<PAGE> 25
With respect to the Corporation's operations in highly inflationary and unstable
economies that are accounted for in accordance with SFAS No. 52, "Foreign
Currency Translation," the combined total sales for those operations were less
than 0.5% of the Corporation's sales for 1994. 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.
Securities Ratings
The Corporation's debt and preferred stock are currently rated by Moody's
Investor Service (Moody's), Standard and Poor's Corporation (S&P) and Fitch
Investor's Service, Inc. (Fitch). The following table summarizes the agencies'
ratings for outstanding securities at December 31, 1994 and 1993.
SECURITIES RATINGS
<TABLE>
<CAPTION>
Moody's S&P Fitch
- -------------------------------------------------------------------
<S> <C> <C> <C>
At December 31, 1994
Senior long-term debt Ba1 BBB- BBB
Preferred stock--depositary shares ba3 BB+ Not rated
- -------------------------------------------------------------------
At December 31, 1993
Senior long-term debt Baa3 BBB BBB+
Preferred stock--depositary shares ba1 BBB- Not rated
- -------------------------------------------------------------------
</TABLE>
Management believes that the Corporation made significant progress during 1994
in strengthening its financial position by rebuilding its equity base and
substantially reducing its debt. Further debt reductions in 1995, accompanied by
continued improvement in operating results, should facilitate improvement in the
Corporation's financial ratings over time.
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 has estimated the total probable and reasonably possible
remediation costs that could be incurred by the Corporation based on the facts
and circumstances currently known. See note 16 to the financial statements.
At December 31, 1994, the Corporation had accrued liabilities totalling $73
million for sites where it has been either named a potentially responsible party
(PRP) or has other remedial responsibilities, $70 million for the Bloomington
sites and $40 million for decommissioning costs at facilities where the
Corporation has ongoing operations. In conjunction with the sales of certain of
its businesses, the Corporation has also provided for remediation costs related
to past operations of such sites. Annual environmental costs include
approximately $5 million for estimated future environmental closure costs at
operating sites and approximately $25 million related to current management of
hazardous substances and pollution. Capital expenditures for environmental
controls, which totalled $12 million in 1994, may vary from year to year.
Management believes that the Corporation has adequately provided for its present
environmental obligations and that complying with existing government
regulations will not materially impact the Corporation's financial position,
liquidity or results of operations.
LEGAL MATTERS
The Corporation is defending a number of lawsuits on various matters. See note
16 to the financial statements. Costs to defend these lawsuits are charged to
operations in the period in which the services are rendered.
In the last two years, the Corporation has entered into agreements to resolve
six litigation claims in connection with alleged tube degradation in steam
generators sold by the Corporation as components for nuclear steam supply
systems. These agreements generally require the Corporation to provide certain
products and services at prices discounted at varying rates. The future impact
of these discounts on operating results will be incurred over the next 15 years
with the greatest impact occurring during the next nine years.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of these cases and, although management believes a
significant adverse judgment is unlikely, any such judgment could have a
material adverse effect on 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 that the Corporation has
meritorious defenses to the litigation referenced above, and management believes
that the litigation should not have a material adverse effect on the financial
condition of the Corporation.
INSURANCE RECOVERIES
The Corporation has filed actions against more than 100 of its insurance
carriers seeking recovery for environmental, product and property damage
liabilities, and certain other matters. The Corporation has settled with several
of these carriers and has received recoveries related to these actions. Amounts
received to date generally have been applied to cover obligations assumed
through the settlements or litigation costs. The Corporation has not accrued for
any future insurance recoveries.
25
<PAGE> 26
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 on 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 27 through 51 of this Form 10-K present fairly, in all material
respects, the financial position of Westinghouse Electric Corporation and its
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, 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.
[GRAPHIC OMITTED]
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
January 31, 1995
26
<PAGE> 27
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions except per share amounts)
Product sales $ 5,782 $ 5,771 $ 6,222
Service sales 3,066 3,104 3,029
----------------------------------------
Sales of products and services 8,848 8,875 9,251
----------------------------------------
Cost of products sold (4,322) (4,634) (4,751)
Cost of services sold (2,307) (2,096) (2,271)
----------------------------------------
Costs of products and services sold (6,629) (6,730) (7,022)
Provision for restructuring (note 19) (71) (350) (36)
Marketing, administration and general expenses (1,529) (1,649) (1,400)
Other income and expenses, net (note 18) (285) (165) (18)
Interest expense (177) (217) (225)
----------------------------------------
Income (loss) from Continuing Operations before income taxes
and minority interest in income of consolidated subsidiaries 157 (236) 550
Income taxes (notes 1 and 5) (71) 70 (187)
Minority interest in income of consolidated subsidiaries (9) (9) (6)
----------------------------------------
Income (loss) from Continuing Operations 77 (175) 357
Discontinued Operations, net of income taxes (note 2):
Loss from operations -- -- (30)
Estimated loss on disposal of Discontinued Operations -- (95) (1,383)
----------------------------------------
Loss from Discontinued Operations -- (95) (1,413)
----------------------------------------
Income (loss) before cumulative effects of
changes in accounting principles 77 (270) (1,056)
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 income (loss) $ 77 $ (326) $(1,394)
========================================
Earnings (loss) per common share (note 14):
From Continuing Operations $ .07 $ (.64) $ .95
From Discontinued Operations -- (.27) (4.08)
From cumulative effect of changes in accounting principles -- (.16) (.98)
----------------------------------------
Earnings (loss) per common share $ .07 $ (1.07) $ (4.11)
========================================
Cash dividends per common share $ .20 $ .40 $ .72
========================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
27
<PAGE> 28
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
At December 31 1994 1993
- --------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C>
ASSETS:
Cash and cash equivalents (note 1) $ 338 $ 637
Customer receivables (note 6) 1,553 1,381
Inventories (note 7) 1,541 1,549
Uncompleted contracts costs over related billings (note 7) 555 371
Deferred income taxes (note 5) 524 588
Prepaid and other current assets 209 248
-----------------------
Total current assets 4,720 4,774
Plant and equipment, net (note 8) 1,898 1,964
Intangible and other noncurrent assets (note 9) 3,572 3,815
Net assets of Discontinued Operations (note 2) 434 --
-----------------------
Total assets $10,624 $10,553
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Revolving credit borrowings and other short-term debt (note 10) $ 662 $ 662
Current maturities of long-term debt (note 12) 17 9
Accounts payable 831 656
Uncompleted contracts billings over related costs (note 7) 473 672
Other current liabilities (note 11) 1,726 1,926
-----------------------
Total current liabilities 3,709 3,925
Long-term debt (note 12) 1,886 1,885
Net liabilities of Discontinued Operations (note 2) -- 211
Other noncurrent liabilities (note 13) 3,207 3,453
-----------------------
Total liabilities 8,802 9,474
-----------------------
Contingent liabilities and commitments (note 16)
Minority interest in equity of consolidated subsidiaries 30 34
Shareholders' equity (note 14):
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
Series C conversion preferred (4 million shares issued) 4 --
Common stock, $1.00 par value (480 million shares authorized,
393 million shares issued) 393 393
Capital in excess of par value 1,932 1,475
Common stock held in treasury (870) (972)
Minimum pension liability adjustment (note 3) (962) (1,215)
Cumulative foreign currency translation adjustments (38) (45)
Retained earnings 1,325 1,401
-----------------------
Total shareholders' equity 1,792 1,045
-----------------------
Total liabilities and shareholders' equity $10,624 $10,553
=======================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
28
<PAGE> 29
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Cash flows from operating activities of Continuing Operations:
Net income (loss) from Continuing Operations $ 77 $ (175) $ 357
Noncash items included in income:
Depreciation and amortization 320 311 301
Pension settlement loss 308 -- --
Noncash restructuring charges 31 90 --
Losses (gains) on asset dispositions (8) 180 17
Change in assets and liabilities, net of effects of acquisitions
and divestitures of businesses:
Receivables, current and noncurrent (77) (56) (61)
Inventories 52 (157) (222)
Progress payments net of costs on uncompleted contracts (394) (25) 160
Accounts payable 167 47 (40)
Deferred and current income taxes (124) (300) (60)
Accrued restructuring costs (124) 260 36
Other assets and liabilities 75 560 129
----------------------------------------
Cash provided by operating activities of Continuing Operations 303 735 617
----------------------------------------
Cash provided (used) by operating activities of
Discontinued Operations (357) 45 465
----------------------------------------
Cash flows from investing activities:
Business divestitures 88 -- 238
Business acquisitions (109) -- --
Liquidation of assets of Discontinued Operations 1,697 4,882 5,029
Asset fundings of Discontinued Operations (86) (2,015) (4,718)
Capital expenditures (259) (272) (305)
Other 22 73 (48)
----------------------------------------
Cash provided by investing activities 1,353 2,668 196
----------------------------------------
Cash flows from financing activities:
Bank revolver borrowings 9,143 12,935 12,875
Bank revolver repayments (11,079) (15,575) (9,370)
Net reduction in other short-term debt (599) (532) (3,937)
Repayments of long-term debt (81) (1,037) (1,421)
Long-term borrowings 16 603 675
Sale of equity securities 505 -- 543
Treasury stock reissued 58 81 111
Dividends paid (153) (190) (271)
Other (13) (39) (173)
----------------------------------------
Cash used by financing activities (2,203) (3,754) (968)
----------------------------------------
Increase (decrease) in cash and cash equivalents (904) (306) 310
Cash and cash equivalents at beginning of period (note 1) 1,248 1,554 1,244
----------------------------------------
Cash and cash equivalents at end of period (note 1) $ 344 $ 1,248 $ 1,554
========================================
Supplemental disclosure of cash flow information:
Interest paid--Continuing Operations $ 177 $ 205 $ 234
Interest paid--Discontinued Operations 216 433 536
Income taxes paid 123 75 53
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements and include descriptions of noncash transactions.
29
<PAGE> 30
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 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
1994 presentation.
Discontinued Operations
In November 1992, the Corporation's Board of Directors adopted a plan (the Plan)
that included exiting Financial Services and other non-strategic businesses. The
Corporation classified the operations of Distribution and Control Business Unit
(DCBU), Westinghouse Electric Supply Company (WESCO) 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).
Revenue Recognition
Sales are recorded primarily as products are shipped and services are rendered.
The percentage-of-completion method of accounting is used for major power
generation systems with a cycle time in excess of one year, major nuclear fuel
and related equipment orders, and certain projects where this method of
accounting is consistent with industry practice. For certain long-term contracts
in which development and production are combined and cycle times are in excess
of two years, revenue is recognized as development milestones are completed or
units are delivered.
Amortization of Intangible Assets
Goodwill and other acquired intangible assets are amortized using the
straight-line method over their estimated lives, but not in excess of 40 years
for assets acquired prior to January 1, 1994 and not in excess of 15 years for
assets acquired after December 31, 1993.
Subsequent to the acquisition of an intangible asset, the Corporation
continually evaluates whether later events and circumstances have occurred that
indicate the remaining estimated useful life of an intangible asset may warrant
revision or that the remaining balance of such an asset may not be recoverable.
When factors indicate that an intangible asset should be evaluated for possible
impairment, the Corporation uses an estimate of the related business'
undiscounted future cash flows over the remaining life of the asset in measuring
whether the intangible asset is recoverable. If such an analysis indicates that
impairment has in fact occurred, the Corporation writes down the book value of
the intangible asset to its fair market value.
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, 1994 and 1993, cash and cash equivalents included restricted funds
of $61 million and $73 million, respectively.
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
including factory depreciation. Long-term contracts in process include costs
incurred plus estimated profits on contracts accounted for using the
percentage-of-completion method.
Plant and Equipment
Plant and equipment assets are recorded at cost and depreciated generally using
the straight-line method over their estimated useful lives. Leasehold
improvements are amortized over the terms of the respective leases. 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
$1,500.
Environmental Costs
The Corporation expenses or capitalizes, if appropriate under the Corporation's
capitalization policy, 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 records liabilities when environmental assessments
or remedial efforts are probable and the costs can be reasonably estimated. Such
estimates are adjusted if necessary based on 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 and decommissioning nuclear
licensed sites.
Off-Balance-Sheet Hedging
Debt Instruments
The Corporation has entered into interest rate and currency exchange agreements
to manage exposure to fluctuations in interest and foreign exchange rates.
Interest rate exchange agreements generally involve the exchange of interest
payments without exchange of the underlying principal amounts. The Corporation
does not enter into speculative or leveraged derivative transactions.
30
<PAGE> 31
The differentials paid or received on interest rate swap agreements are accrued
and recognized as adjustments to interest expense; gains and losses realized
upon settlement of these agreements are deferred and amortized to interest
expense over the term of the original agreement if the underlying hedged
instrument remains outstanding or immediately if the underlying hedged
instrument is settled. At December 31, 1994 and 1993, the Corporation had no
deferred gains or losses from terminated interest rate swaps recorded on its
balance sheet.
Foreign Exchange
The Corporation's foreign exchange policy includes matching purchases and sales
in national currencies when possible and hedging unmatched transactions in
excess of $250,000. In accordance with this policy, the Corporation has entered
into various foreign exchange agreements in which it sells a currency forward to
hedge a receivable or purchases a currency forward to hedge a payable.
Gains and losses on foreign currency contracts offset gains and losses resulting
from currency fluctuations inherent in the underlying transactions. Gains and
losses on contracts that hedge specific foreign currency commitments are
deferred and recognized in net income in the period in which the transaction is
consummated.
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.
The Corporation's previous practice was to expense these costs as incurred. 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 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.
NOTE 2: DISCONTINUED OPERATIONS
In November 1992, the Corporation announced the Plan that included exiting
Financial Services through the disposition of its asset portfolios and the sales
of DCBU and WESCO. The disposition of Financial Services assets involved the
sale of the real estate and corporate finance portfolios over a three-year
period and the liquidation of the leasing portfolio over a longer period of time
in accordance with contractual terms. Financial Services, DCBU and WESCO have
been accounted for as discontinued operations in accordance with APB 30.
Upon adoption of the Plan, the Corporation recorded a pre-tax charge of $2,201
million in Discontinued Operations consisting 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 dispositions of DCBU and WESCO and an estimated $144
million of earnings from those operations during their phase-out periods. The
after-tax charge for the estimated loss on the disposal of Discontinued
Operations was $1,383 million.
Based on its quarterly review of the assumptions used in determining the
estimated loss from Discontinued Operations, the Corporation recorded in the
fourth quarter of 1993 an additional pre-tax provision for loss on disposal of
Discontinued Operations of $148 million. This change in the estimated loss
resulted from a reduction of the expected selling prices of WESCO and the
Australian subsidiary of DCBU; a decision to sell in bulk a Financial Services
residential development that the Corporation, upon adoption of the Plan, had
intended to develop; and a revision to the estimated interest costs expected to
be incurred by the Discontinued Operations during the disposal period.
On January 31, 1994, the Corporation completed the sale of DCBU, excluding its
Australian subsidiary, to Eaton Corporation for a purchase price of $1.1 billion
and the assumption by the buyer of certain liabilities. The sale of the
Australian subsidiary was completed in March 1994.
On February 28, 1994, the Corporation completed the sale of WESCO to an
affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a
purchase price of approximately $340 million. The proceeds consisted of
approximately $275 million in cash, approximately $50 million in first mortgage
notes, and the remainder in stock and options of the new company.
The portfolio investments of Financial Services have been reduced from $8,967
million at year-end 1992 to $1,230 million at December 31, 1994. Substantially
all of the remaining real estate assets of $297 million at December 31, 1994 are
expected to be liquidated in 1995. The Financial Services corporate portfolio
essentially has been liquidated. The leasing portfolio, which totalled $924
million at December 31, 1994, is expected to continue to liquidate through 2015
in accordance with contractual terms.
31
<PAGE> 32
The assets and liabilities of Discontinued Operations have been separately
classified on the balance sheet as net assets (liabilities) of Discontinued
Operations. A summary of these assets and liabilities follows:
NET ASSETS (LIABILITIES) OF DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993*
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 6 $ 611
Other current assets 1 742
Portfolio investments 1,230 1,551
Deferred income taxes (note 5) 340 415
Accrued estimated gain on sale of
DCBU & WESCO -- 441
Other noncurrent assets 220 735
- -----------------------------------------------------------------------------
Total assets--Discontinued Operations 1,797 4,495
- -----------------------------------------------------------------------------
Liabilities:
Accounts payable 12 182
Other current liabilities 34 231
Short-term debt (note 10) 374 2,373
Current maturities of long-term debt (note 12) 230 774
Liability for estimated loss on disposal 145 488
Other noncurrent liabilities -- 11
Long-term debt (note 12) 568 647
- -----------------------------------------------------------------------------
Total liabilities--Discontinued Operations 1,363 4,706
- -----------------------------------------------------------------------------
Net assets (liabilities) of Discontinued Operations $ 434 $ (211)
=============================================================================
<FN>
*Certain amounts have been reclassified for comparative purposes.
</TABLE>
Of the remaining $1.2 billion of net debt of Discontinued Operations,
approximately $700 million is expected to be repaid in 1995. Approximately $300
million is expected to be repaid through the liquidation of portfolio
investments of Financial Services. The remaining 1995 debt repayment of $400
million will occur as cash is received from Continuing Operations, the timing of
which is expected to coincide with sales of non-strategic businesses. The
Corporation expects to reduce the debt of Discontinued Operations to that amount
which is supportable by the leasing portfolio and can be repaid as that
portfolio liquidates over its contractual term. As a result, additional cash may
be required from Continuing Operations.
The cash receipts from Continuing Operations represent reimbursements for
deferred income tax benefits related to the prior losses of Discontinued
Operations that have been or are expected to be utilized by the Corporation to
offset tax obligations of Continuing Operations.
Management believes that the combination of the net proceeds anticipated from
the continued liquidation of assets of Discontinued Operations and from the
ultimate realization of deferred income tax benefits will be sufficient to fund
Discontinued Operations. Management further believes that the liability for the
estimated loss on disposal of Discontinued Operations is adequate. The adequacy
of this liability is evaluated each quarter.
Portfolio Investments
Portfolio investments by category of investment and financing at December 31,
1994 and 1993 are summarized in the table below:
PORTFOLIO INVESTMENTS (in millions)
<TABLE>
<CAPTION>
Real
Leasing Estate Corporate Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1994
Receivables $ 886 $ 18 $ 9 $ 913
Other portfolio investments 38 279 -- 317
- -------------------------------------------------------------------------------
Portfolio investments $ 924 $297 $ 9 $1,230
===============================================================================
At December 31, 1993
Receivables $ 969 $ 46 $ 47 $1,062
Other portfolio investments 39 353 97 489
- -------------------------------------------------------------------------------
Portfolio investments $1,008 $399 $144 $1,551
===============================================================================
</TABLE>
Other portfolio investments at December 31, 1994 and 1993 included the
Corporation's investment in LW Real Estate Investments, L.P. (LW) of $133
million in both periods, real estate properties of $88 million and $141 million,
respectively, and other investments of $96 million and $215 million,
respectively, primarily consisting of investments in real estate and leasing
partnerships. The remaining portfolio investments, other than the leasing
assets, are expected to be substantially liquidated by the end of 1995.
Non-earning receivables at December 31, 1994 and 1993 totalled $30 million.
There were no reduced earning receivables at December 31, 1994 and 1993.
Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1994 and 1993, 81% and 77%, respectively, related to aircraft and
18% and 19%, respectively, related to cogeneration facilities. Certain leasing
receivables classified as performing and totalling $139 million at December 31,
1994 have been identified by management as potential problem receivables. This
amount consists primarily of leveraged leases related to aircraft leased by
major U.S. airlines. Such leasing receivables were current as to payments and
performing in accordance with contractual terms at December 31, 1994.
The components of the Corporation's net investment in leases at December 31,
1994 and 1993 are as follows:
NET INVESTMENT IN LEASES (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable (net of principal and
interest on nonrecourse loans) $ 864 $ 965
Estimated residual value of leased assets 389 411
Unearned and deferred income (367) (407)
- ------------------------------------------------------------------------
Investment in leases 886 969
Deferred taxes and deferred investment
tax credits arising from leases (610) (575)
- ------------------------------------------------------------------------
Investment in leases, net $ 276 $ 394
========================================================================
</TABLE>
32
<PAGE> 33
At December 31, 1994 and 1993, deferred investment tax credits totalled $25
million and $34 million, respectively. These deferred investment tax credits are
recognized as income over the contractual terms of the respective leases.
Contractual maturities for the Corporation's leasing receivables at December 31,
1994 are as follows:
CONTRACTUAL MATURITIES FOR LEASING RECEIVABLES (in millions)
<TABLE>
<CAPTION>
At December 31, 1994 Year of Maturity
- -----------------------------------------------------------
After
Total 1995 1996 1997 1998 1999 1999
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leasing $886 $23 $32 $30 $29 $34 $738
===========================================================
</TABLE>
Liability for Estimated Loss on Disposal
At the beginning of 1992, the Financial Services valuation allowance totalled
$2,330 million. During the first eleven months of 1992, Financial Services wrote
off portfolio investments totalling $1,126 million and made additional
provisions totalling $205 million. Upon adoption of the Plan in November 1992,
the balance of $1,409 million became part of the liability for estimated loss on
disposal of Discontinued Operations.
The following table is a reconciliation of the liability for the estimated loss
on disposal of Discontinued Operations from the adoption of the Plan through
December 31, 1994:
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL OF
DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
Financial DCBU & Restruc- Plan-to-
Services WESCO turing Date
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1, 1992 $ 1,409 $ -- $ -- $ 1,409
Adoption of the 1992 Plan 2,650 (593) 144 2,201
1993 Provision 86 62 -- 148
Plan-to-Date Activity (3,902) 415 (126) (3,613)
Transfers (163) 176 (13) --
- -----------------------------------------------------------------------------
December 31, 1994 $ 80 $ 60 $ 5 $ 145
=============================================================================
</TABLE>
Transfers among Plan components have been made to better reflect estimated
reserve requirements until completion of the Plan. The ending balance of $145
million is reflected on the summary of net assets (liabilities) of Discontinued
Operations as one amount. Any variances from estimates which may occur for one
Plan component will be considered in conjunction with those for other components
in determining whether an adjustment of the total liability is necessary.
In accordance with APB 30, the consolidated financial statements reflect the
operating results of Discontinued Operations separately from Continuing
Operations. Summarized operating results of Discontinued Operations follow:
OPERATING RESULTS OF DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
Financial DCBU &
Services WESCO Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1994
Sales of products and services $ 41 $ 319 $ 360
Net earnings (losses) (204) 4 (200)
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)
===========================================================================
</TABLE>
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. Included in plan assets at
December 31, 1994 are 5,612,600 shares of the Corporation's common stock having
a market value of approximately $69 million. Dividends paid by the Corporation
during 1994 on shares held by the pension fund totalled approximately $2
million.
NET PERIODIC PENSION COSTS (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 79 $ 65 $ 68
Interest cost on projected benefit obligation 404 426 432
Amortization of unrecognized net obligation 36 41 44
Amortization of unrecognized prior
service cost 6 5 5
Amortization of unrecognized net loss 112 48 20
- -------------------------------------------------------------------------
637 585 569
- -------------------------------------------------------------------------
Return on plan assets:
Actual return on plan assets (18) (414) (107)
Deferred losses (385) (40) (376)
- -------------------------------------------------------------------------
Recognized return on plan assets (403) (454) (483)
- -------------------------------------------------------------------------
Net periodic pension cost $ 234 $ 131 $ 86
=========================================================================
</TABLE>
33
<PAGE> 34
Net periodic pension cost increased $103 million in 1994 compared to 1993, due
primarily to changes in pension plan assumptions and reduced levels of
anticipated asset earnings.
1994 Pension Settlement
The Corporation's restructuring activities contributed to a high level of lump
sum cash distributions from the Corporation's pension fund during 1994. The
magnitude of these cash distributions required that the Corporation apply the
provisions of SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and
recognize a settlement loss of $308 million during the fourth quarter of 1994.
This noncash charge to income represents the pro-rata portion of unrecognized
losses associated with the pension obligation that was settled.
A curtailment charge of $22 million related to the 1993 restructuring initiative
was included in the loss from Continuing Operations for the year ended December
31, 1993. See note 19 to the financial statements. In addition, $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.
SIGNIFICANT PENSION PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
At December 31 1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Discount rate 8.5% 7.25%
Compensation increase rate 4% 4%
Long-term rate of return on plan assets 9.75% 9.75%
===========================================================
</TABLE>
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 the increase in the Corporation's assumed discount rate
from 7.25%, which was used at December 31, 1993, to 8.5% at December 31, 1994.
FUNDING STATUS--PENSIONS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $(4,412) $(5,068)
Nonvested (319) (440)
- ------------------------------------------------------------------------------
Accumulated benefit obligation (4,731) (5,508)
Effect of projected future compensation levels (273) (333)
- ------------------------------------------------------------------------------
Projected benefit obligation for service
rendered to date (5,004) (5,841)
Plan assets at fair value 3,557 4,226
- ------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (1,447) (1,615)
Unrecognized net loss 1,736 2,181
Prior service cost (benefit) not yet recognized in
net periodic pension cost (136) 14
Unrecognized net transition obligation 250 281
- ------------------------------------------------------------------------------
Prepaid pension cost 403 861
Minimum pension liability (1,577) (2,143)
- ------------------------------------------------------------------------------
Unfunded accumulated benefit obligation $(1,174) $(1,282)
==============================================================================
</TABLE>
During 1994, the Corporation contributed $310 million to its pension plans. The
1993 pension contribution, which totalled $273 million, consisted primarily of
assets of Discontinued Operations.
The unfunded accumulated benefit obligation at December 31, 1994 decreased by
$108 million compared to December 31, 1993. This decrease resulted from the net
effect of numerous factors including 1994 employer contributions, negotiated
pension plan changes, the discount rate assumption change, current year service
and interest costs, and 1994 actuarial losses.
For financial reporting purposes, a pension plan is considered unfunded 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 unfunded amount plus any prepaid pension cost. 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, 1994, a minimum pension liability of $1,577 million was
recognized for the sum of the unfunded amount of $1,174 million plus the prepaid
pension cost of $403 million. An intangible asset of $114 million and a charge
to shareholders' equity of $1,463 million, which was reduced to $962 million due
to tax deferrals of $501 million, offset the pension liability. As a result of
this remeasurement, year-end 1994 shareholders' equity was increased by $253
million from December 31, 1993.
At December 31, 1993, a minimum pension liability of $2,143 million was
recognized for the sum of the unfunded amount of $1,282 million plus the prepaid
pension cost 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.
34
<PAGE> 35
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:
NET PERIODIC POSTRETIREMENT BENEFIT COST (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Service cost, benefits attributed to employee
service during the year $ 20 $ 15
Interest cost on accumulated postretirement
benefit obligation 93 96
Amortization of unrecognized net loss 4 --
Recognized return on plan assets (1) --
- ---------------------------------------------------------------
Net periodic postretirement benefit cost $116 $111
===============================================================
</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, net of $431 million of deferred
income tax benefits.
SIGNIFICANT POSTRETIREMENT BENEFIT PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
At December 31 1994 1993
- ----------------------------------------------------------
<S> <C> <C>
Discount rate 8.5% 7.25%
Health care cost trend rates 11%* 12%*
Compensation increase rate 4% 4%
Long-term rate of return on plan assets 7% 9.75%
==========================================================
<FN>
*Decreasing 1/2% annually from December 31, 1994 and December 31, 1993, to the
ultimate rate of 6.5% and 7%, respectively.
</TABLE>
The Corporation's accumulated postretirement benefit obligation consists of the
following:
FUNDING STATUS--POSTRETIREMENT BENEFITS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (893) $ (912)
Fully eligible, active plan participants (32) (50)
Other active plan participants (253) (398)
- -------------------------------------------------------------------------
Total accumulated postretirement benefit obligation (1,178) (1,360)
Unrecognized net loss 36 171
Unrecognized prior service benefit (58) --
Plan assets at fair value 12 --
- -------------------------------------------------------------------------
Recorded liability $(1,188) $(1,189)
=========================================================================
</TABLE>
The accumulated postretirement benefit obligation was calculated using the terms
of the Corporation's medical, dental and life insurance plans, including the
effects of established maximums on covered costs.
The effect of a 1% annual increase in the assumed health care cost trend rates
would increase the accumulated postretirement benefit obligation by
approximately $67 million and would increase net periodic postretirement
benefit cost by approximately $7 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 benefits were recognized primarily as
they were paid. The Corporation's charge for adoption of SFAS No. 112 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.
At December 31, 1994 and 1993, the Corporation's liability for postemployment
benefits totalled $77 million and $91 million, respectively.
NOTE 5: INCOME TAXES
INCOME TAXES FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $18 $ 138 $150
State 24 19 28
Foreign 28 23 45
- -----------------------------------------------------------------
Total income taxes current 70 180 223
- -----------------------------------------------------------------
Deferred:
Federal 28 (211) (27)
State (13) 14 --
Foreign (14) (53) (9)
- -----------------------------------------------------------------
Total income taxes deferred 1 (250) (36)
- -----------------------------------------------------------------
Income taxes (benefit) $71 $ (70) $187
=================================================================
</TABLE>
CONSOLIDATED INCOME TAXES (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $18 $ 138 $ (19)
State 24 19 28
Foreign 28 23 60
- -----------------------------------------------------------------
Total income taxes current 70 180 69
- -----------------------------------------------------------------
Deferred:
Federal 28 (294) (1,208)
State (13) 14 (138)
Foreign (14) (53) 37
- -----------------------------------------------------------------
Total income taxes deferred 1 (333) (1,309)
Operating loss carryforward--Federal -- -- (290)
- -----------------------------------------------------------------
Income taxes (benefit) $71 $(153) $(1,530)
=================================================================
</TABLE>
35
<PAGE> 36
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:
COMPONENTS OF CONSOLIDATED INCOME TAXES (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing Operations $71 $ (70) $ 187
Discontinued Operations -- -- (64)
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) $71 $(153) $(1,530)
===============================================================================
</TABLE>
In addition to the amounts in the table above, during 1994, 1993 and 1992, $132
million of income tax expense, $378 million of income tax benefit and $255
million of income tax benefit, 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:
DEFERRED TAX BENEFITS RECOGNIZED UPON ADOPTION OF SFAS NO. 109
(in millions)
<TABLE>
<CAPTION>
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 for deferred taxes (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 losses of $34 million in 1994 and $6 million in 1993 and income of
$61 million in 1992. Such income or loss consisted 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 $383 million at December 31, 1994,
in which the earnings have been reinvested for an indefinite time. It is not
practicable to determine the income tax liability that would result were such
earnings repatriated. The amount of withholding taxes that would be payable upon
such repatriation is estimated to be $24 million.
Income from Continuing Operations includes income of certain manufacturing
operations in Puerto Rico which are eligible for tax credits against 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 $17 million in 1994, $21 million in 1993 and $21 million in 1992.
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 types of differences that give rise
to significant portions of deferred income tax liabilities or assets are shown
in the accompanying table:
CONSOLIDATED DEFERRED INCOME TAX SOURCES (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C>
Provisions for expenses and losses $ 812 $ 867
Accumulated depreciation (163) (215)
Long-term contracts in process 81 96
Leasing activities (583) (622)
Minimum pension liabilities 403 387
Operating losses and credit carryforwards 1,360 1,505
Postretirement and postemployment benefits 477 476
Other deferred tax assets 184 216
Other deferred tax liabilities (90) (115)
Valuation allowance for deferred taxes (101) (90)
- ----------------------------------------------------------------------
Deferred income taxes, net asset $2,380 $2,505
======================================================================
</TABLE>
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.
At December 31, 1994, for federal income tax purposes, there were regular tax
net operating loss carryforwards of $472 million which expire by the year 2007,
$2,472 million which expire by the year 2008, alternative minimum tax operating
loss carryforwards of $123 million which expire by the year 2007 and $2,462
million which expire by the year 2008 and alternative minimum tax credit
carryforwards of $261 million which have no expiration date. At December 31,
1994, there were $183 million of net operating loss carryforwards attributable
to foreign subsidiaries. Of this total, approximately $28 million has no
expiration date. The remaining amount will expire not later than 2001. A
valuation allowance has been established for $58 million of the deferred tax
benefit related to those loss carryforwards for which it is considered likely
that the benefit will not be realized.
36
<PAGE> 37
EFFECTIVE TAX (BENEFIT) RATE FOR CONTINUING OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31 1994 1993* 1992*
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax (benefit) rate 35.0% (35.0)% 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 5.3 5.8 1.4
Interest on prior years' federal
income tax, net of federal effect (7.4) 6.4 --
State income tax, net of federal effect 4.4 9.2 3.4
Lower tax rate on income of foreign
sales corporations (4.1) (6.7) (.6)
Lower tax rate on net income of
Puerto Rican operations (10.5) (8.7) (3.9)
Valuation allowance for deferred taxes 6.9 (1.3) 1.1
Adjustment of deferred tax asset
included in equity in June 1993 for
change in federal income tax rate 1.0 (3.0) --
Loss of foreign tax credit 5.1 4.7 --
Nondeductible expenses 4.5 .9 .4
Other 5.0 -- (1.9)
- ---------------------------------------------------------------------
Effective tax (benefit) rate for
Continuing Operations 45.2% (29.7)% 33.9%
=====================================================================
<FN>
*Certain amounts have been reclassified for comparative purposes.
</TABLE>
EFFECTIVE TAX (BENEFIT) RATE FOR CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <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, 1994.
NOTE 6: CUSTOMER RECEIVABLES
Customer receivables at December 31, 1994 included $197 million which
represented the sales value of material shipped under long-term contracts but
not billed to the customer and $72 million which represented claims receivable
on terminated or nondefinitized government contracts. Such claims are recorded
only when collectibility is assured. Billings will occur upon shipment of major
components of the contract or upon definitive resolution of the outstanding
claims, respectively. Collection of these receivables is expected to be
substantially completed within one year.
Allowances for doubtful accounts of $59 million and $54 million at December 31,
1994 and 1993, respectively, were deducted from customer receivables.
At December 31, 1994 and 1993, approximately 10% and 8%, 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
INVENTORIES (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Raw materials $ 158 $ 137
Work in process 1,065 989
Finished goods 156 104
- ---------------------------------------------------------------
1,379 1,230
Long-term contracts in process 877 678
Progress payments to subcontractors 97 124
Recoverable engineering
and development costs 437 442
- ---------------------------------------------------------------
2,790 2,474
Inventoried costs related to contracts
with progress billing terms (1,249) (925)
- ---------------------------------------------------------------
Inventories $ 1,541 $1,549
===============================================================
</TABLE>
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Costs included in inventories $1,143 $ 968
Progress billings on contracts (588) (597)
- -----------------------------------------------------------
Uncompleted contracts costs over
related billings $ 555 $ 371
===========================================================
Progress billings on contracts $ 579 $ 629
Costs included in inventories (106) 43
- -----------------------------------------------------------
Uncompleted contracts billings over
related costs $ 473 $ 672
===========================================================
</TABLE>
Raw materials, work in process and finished goods included contract-related
costs of approximately $811 million at December 31, 1994, and $770 million at
December 31, 1993. Substantially 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.
37
<PAGE> 38
NOTE 8: PLANT AND EQUIPMENT
PLANT AND EQUIPMENT (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 818 $ 815
Machinery and equipment 3,321 3,275
Construction in progress 196 225
- ------------------------------------------------------------
Plant and equipment, at cost 4,335 4,315
Accumulated depreciation (2,437) (2,351)
- ------------------------------------------------------------
Plant and equipment, net $ 1,898 $ 1,964
============================================================
</TABLE>
For the years ended December 31, 1994 and 1993, depreciation expense totalled
$275 million and $272 million, respectively. Of these amounts, $252 million and
$253 million, respectively, is included in costs of products and services, and
$23 million and $19 million, respectively, is included in marketing,
administrative and general expenses.
NOTE 9: INTANGIBLE AND OTHER NONCURRENT ASSETS
INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Deferred income taxes (note 5) $1,516 $1,502
Goodwill and other acquired
intangible assets 1,119 1,131
Intangible pension asset (note 3) 114 295
Undeveloped land 244 247
Joint ventures and other affiliates 100 122
Noncurrent receivables 147 206
Other 332 312
- -----------------------------------------------------------
Intangible and other noncurrent assets $3,572 $3,815
===========================================================
</TABLE>
Goodwill and other acquired intangible assets are shown net of accumulated
amortization of $162 million and $139 million at December 31, 1994 and 1993,
respectively.
Joint ventures and other affiliates include investments in companies over which
the Corporation exercises significant influence but does not control.
NOTE 10: SHORT-TERM DEBT
On August 5, 1994, the Corporation replaced its December 1991 revolver with two
revolving credit agreements (revolvers). The facilities have a combined
commitment level of $2.5 billion, with $2.0 billion maturing on August 4, 1997
(three-year revolver) and $500 million maturing on August 4, 1995 (364-day
revolver). Contemporaneous with entering into the revolvers, outstanding
borrowings under the December 1991 revolver were repaid with borrowings from the
three-year revolver.
Availability under the revolvers is subject to compliance with certain
covenants, representations and warranties, including a no material adverse
change provision with respect to the Corporation taken as a whole, restrictions
on the incurrence of liens, a maximum leverage ratio, minimum interest coverage
ratio and minimum consolidated net worth. Certain of these covenants become more
restrictive over the terms of the revolvers. At December 31, 1994, the
Corporation was in compliance with these covenants.
Interest rates for borrowings under the revolvers are determined at the time of
each borrowing and are based on one of a variety of floating rate indices plus a
margin based on the Corporation's debt ratings. The indices include the
following: London Interbank Offer Rate (LIBOR), certificate of deposit rate and
prime rate. The cost of the revolvers includes facility fees which are based on
the Corporation's debt ratings and are assessed on the revolver commitment
level.
The interest rates for the borrowings under the revolvers at December 31, 1994
and 1993 were based on LIBOR. There are no compensating balance requirements
under the revolvers.
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 December 1991 revolver.
SHORT-TERM DEBT--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 During the Year
- -----------------------------------------------------------------------------
Composite Max. Out- Avg. Out- Wtd. Avg.
Balance Rate standing standing Rate
------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1994
Revolving credit
facilities $545 6.7% $ 545 $113 4.3%
Short-term foreign
bank loans 115 6.7% 313 164 5.7%
Other 2
- -----------------------------------------------------------------------------
Short-term debt $662
=============================================================================
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
=============================================================================
</TABLE>
Average outstanding borrowings for Continuing Operations were determined based
on daily amounts outstanding for the revolving credit facilities and commercial
paper, and on monthly balances outstanding for short-term foreign bank loans.
During the fourth quarter of 1994, $625 million of revolving credit borrowings
were transferred from Discontinued Operations to Continuing Operations.
38
<PAGE> 39
SHORT-TERM DEBT--DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 During the Year
- ----------------------------------------------------------------------
Composite Max. Out- Avg. Out- Wtd. Avg.
Balance Rate standing standing Rate
------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1994
Revolving credit
facilities $ 374 6.7% $2,355 $ 955 4.8%
- ----------------------------------------------------------------------
Short-term debt $ 374
======================================================================
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
======================================================================
</TABLE>
Average outstanding borrowings for Discontinued Operations were determined based
on daily amounts outstanding for revolving credit facilities and commercial
paper.
To manage interest costs on its short-term and long-term debt, Financial
Services entered into various types of interest rate and currency exchange
agreements. In connection with the fourth quarter 1994 transfer of revolving
credit borrowings, $272 million of related fixed rate interest rate swaps were
transferred to Continuing Operations. A summary of notional amounts outstanding
at December 31, 1994 and 1993 is presented in the table below:
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS NOTIONAL AMOUNTS OUTSTANDING
(in millions)
<TABLE>
<CAPTION>
Short-Term Long-Term
Debt Debt Total
- -------------------------------------------------------------
<S> <C> <C> <C>
At December 31, 1994
Continuing Operations $272 $ -- $ 272
Discontinued Operations 25 374 399
- -------------------------------------------------------------
Notional amounts $297 $374 $ 671
=============================================================
At December 31, 1993
Continuing Operations $ -- $ -- $ --
Discontinued Operations 614 712 1,326
- -------------------------------------------------------------
Notional amounts $614 $712 $1,326
=============================================================
</TABLE>
The $655 million decrease during 1994 in the total notional amount outstanding
was due to the maturity of several agreements. The average remaining maturity of
interest rate and currency exchange agreements was 1.5 years and 1.6 years at
December 31, 1994 and 1993, respectively.
Of the total notional amount outstanding at year-end 1994, $422 million relates
to interest rate swaps with rate and maturity characteristics set forth in the
table below:
CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS (in millions)
<TABLE>
<CAPTION>
At December 31, 1994 Total 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed rate swaps
(pay fixed):
Notional amount $272 $ 87 $80 -- $50 $55
Wtd. avg. fixed
rate paid 8.83% 8.98% 8.73% -- 8.73% 8.87%
Floating rate swaps
(pay floating):
Notional amount $150 $150 -- -- -- --
Wtd. avg. fixed
rate received 8.74% 8.74% -- -- -- --
======================================================================
</TABLE>
Under the majority of the swap agreements, the floating rate received or paid is
based on the average 30-day commercial paper rate for the relevant period. This
rate was 6.0% on December 31, 1994. The floating rate received or paid on the
remaining agreements is based on six month LIBOR and is set on dates specified
in the agreements. This rate was 7.0% on December 31, 1994.
The remaining $249 million notional amount outstanding at December 31, 1994
consists of a $25 million forward interest rate swap agreement, which is
exercisable at the option of a counterparty, a $150 million interest rate floor
agreement and a $74 million interest rate and currency swap.
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 remaining maturity of 1.3 years. In addition, those
interest rate swap agreements in which Financial Services received a fixed
interest rate totalled $430 million at December 31, 1993 and had a weighted
average rate of 8.1% with an average remaining maturity of approximately 10
months.
The remaining $321 million notional amount outstanding at December 31, 1993
includes $80 million of forward interest rate exchange agreements, a $150
million interest rate floor agreement, $83 million of interest rate and currency
exchange agreements and an $8 million basis swap agreement.
39
<PAGE> 40
NOTE 11: OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Accrued employee compensation $ 198 $ 262
Income taxes currently payable 241 292
Accrued product warranty 82 83
Accrued restructuring costs 180 230
Liability for business dispositions 112 215
Accrued taxes, interest and insurance 270 257
Other 643 587
- -----------------------------------------------------------
Other current liabilities $1,726 $1,926
===========================================================
</TABLE>
NOTE 12: LONG-TERM DEBT
LONG-TERM DEBT--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Medium-term notes due through 2001 $ 95 $ 95
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 275 275
7-7/8% debentures due 2023 325 325
Other 37 28
- -----------------------------------------------------------
1,903 1,894
Current maturities (17) (9)
- -----------------------------------------------------------
Long-term debt $1,886 $1,885
===========================================================
</TABLE>
At December 31, 1994, medium-term notes of Continuing Operations had interest
rates ranging from 8.5% to 9.4%, with an average interest rate of 8.91% and an
average remaining maturity of 3.5 years.
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
Corporation's $1 billion shelf registration, of which $400 million was unused as
of December 31, 1994.
LONG-TERM DEBT--DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Medium-term notes due through 2001 $ 424 $1,047
8-7/8% senior notes due 1995 150 150
8-7/8% senior notes due 2014 150 150
Other 74 74
- -----------------------------------------------------------
798 1,421
Current maturities (230) (774)
- -----------------------------------------------------------
Long-term debt $ 568 $ 647
===========================================================
</TABLE>
At December 31, 1994, medium-term notes of Discontinued Operations had interest
rates ranging from 5.9% to 9.4%, with an average interest rate of 8.88% and an
average remaining maturity of 2.4 years.
During 1994, $623 million of medium-term notes were repaid at maturity. In
addition, all of the interest rate swaps associated with the Corporation's
medium-term notes matured.
At December 31, 1994, $4 million of medium-term notes issued on a variable-rate
basis had an interest rate of 7.08%, while $420 million of medium-term notes
issued on a fixed-rate basis had a weighted average interest rate of 8.89%.
At December 31, 1993, $291 million of medium-term notes had been issued either
on a variable-rate basis or swapped to a variable-rate basis. A total of $11
million of these notes were issued on a variable-rate basis with an interest
rate of 3.85% on December 31, 1993. The remaining $280 million were issued on a
fixed-rate basis with a weighted average interest rate of 7.71% and, through
interest rate swap agreements, were converted to a floating-rate basis with a
weighted average interest rate of 3.69% on December 31, 1993.
At December 31, 1993, $756 million of medium-term notes had been issued either
on a fixed-rate basis or swapped to a fixed-rate basis. Approximately $706
million of these notes were issued on a fixed-rate basis with a weighted average
interest rate of 8.86% on December 31, 1993. The remaining $50 million of these
notes had been issued on a floating-rate basis with an interest rate of 4.3%
and, through an interest rate swap agreement, were converted to a fixed-rate
basis with an interest rate of 5.3% on December 31, 1993.
At December 31, 1993, the average interest rate, after the effects of the
interest rate swap agreements, was 7.2%, and the average remaining maturity for
all medium-term notes was 1.6 years.
At December 31, 1994 and 1993, all of the 8-7/8% senior 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% for both years.
None of the Corporation's long-term debt outstanding at December 31, 1994 or
1993 may be redeemed prior to maturity.
The scheduled maturities of the Corporation's total long-term debt outstanding
at December 31, 1994 for each of the next five years are as follows: 1995--$247
million; 1996--$588 million; 1997--$5 million; 1998--$156 million; and 1999--$47
million.
40
<PAGE> 41
NOTE 13: OTHER NONCURRENT LIABILITIES
OTHER NONCURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Postretirement benefits (note 4) $1,188 $1,189
Postemployment benefits (note 4) 77 91
Pension liability (note 3) 1,174 1,282
Accrued restructuring costs 8 156
Liability for business dispositions 75 --
Other 685 735
- ---------------------------------------------------------------------
Other noncurrent liabilities $3,207 $3,453
=====================================================================
</TABLE>
NOTE 14: SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY (in millions)
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Preferred stock:
Balance at January 1 $ 8 $ 8 $ --
Series B preferred shares issued -- -- 8
Series C preferred shares issued 4 -- --
- ----------------------------------------------------------------------
Balance at December 31 $ 12 $ 8 $ 8
- ----------------------------------------------------------------------
Common stock:
Balance at December 31 $ 393 $ 393 $ 393
- ----------------------------------------------------------------------
Capital in excess of par value:
Balance at January 1 $ 1,475 $ 1,523 $ 1,039
Redemption of common shares "rights" -- -- (2)
Series B preferred shares issued -- -- 535
Series C preferred shares issued 501 -- --
Shares issued under various compensation
and benefit plans (37) (37) (42)
Shares issued under dividend
reinvestment plan (7) (11) (7)
- ----------------------------------------------------------------------
Balance at December 31 $ 1,932 $ 1,475 $ 1,523
- ----------------------------------------------------------------------
Common stock held in treasury:
Balance at January 1 $ (972) $(1,102) $(1,264)
Shares issued under various compensation
and benefit plans 87 104 136
Shares issued under dividend
reinvestment plan 15 26 26
- ----------------------------------------------------------------------
Balance at December 31 $ (870) $ (972) $(1,102)
- ----------------------------------------------------------------------
Minimum pension liability adjustment:
Balance at January 1 $(1,215) $ (496) $ --
Pension liability adjustments,
net of deferred taxes (note 3) 253 (719) (496)
- ----------------------------------------------------------------------
Balance at December 31 $ (962) $(1,215) $ (496)
- ----------------------------------------------------------------------
Cumulative foreign currency
translation adjustments:
Balance at January 1 $ (45) $ (20) $ --
Currency translation activity 7 (25) (20)
- ----------------------------------------------------------------------
Balance at December 31 $ (38) $ (45) $ (20)
- ----------------------------------------------------------------------
Retained earnings:
Balance at January 1 $ 1,401 $ 1,917 $ 3,582
Net income (loss) 77 (326) (1,394)
Dividends paid (153) (190) (271)
- ----------------------------------------------------------------------
Balance at December 31 $ 1,325 $ 1,401 $ 1,917
- ----------------------------------------------------------------------
Shareholders' equity $ 1,792 $ 1,045 $ 2,223
======================================================================
</TABLE>
In March 1994, the Corporation sold, in a private placement, 36,000,000
depositary shares (the $1.30 Depositary Shares) at $14.44 per share. Each of the
$1.30 Depositary Shares represents ownership of one-tenth of a share of the
Corporation's $1.00 par value Series C Conversion Preferred Stock (Series C
Preferred) and entitles the owner to all of the proportionate rights,
preferences and privileges of the Series C Preferred. A total of 3,600,000
Series C Preferred shares were deposited.
The net proceeds to the Corporation, after commissions, fees and out-of-pocket
expenses, totalled $505 million. As a result, the par value of Series C
Preferred was established for $4 million, and capital in excess of par was
increased by $501 million.
The annual dividend rate for each $1.30 Depositary Share is $1.30 (equivalent to
$13.00 for each Series C Preferred), 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 on June 1,
1994.
Each $1.30 Depositary Share will automatically convert into one share of common
stock on June 1, 1997 unless called on May 30, 1997 by the Corporation or
redeemed at any time prior to June 1 by the holder. If called by the
Corporation, each $1.30 Depositary Share will convert into common stock at a
rate between .885 and 1 share. If redeemed by the holder, each $1.30 Depositary
Share will convert into .885 of a share of common stock. Conversion of the
outstanding $1.30 Depositary Shares (and the Series C Preferred) will also occur
upon certain mergers, consolidations or similar extraordinary transactions
involving the Corporation or in connection with certain events, as described in
the Offering Memorandum.
In June 1992, the Corporation sold 32,890,000 depositary shares (the $1.53
Depositary Shares) at $17.00 per share. Each of the $1.53 Depositary Shares
represents ownership of one-quarter of a share of the Corporation's $1.00 par
value Series B Conversion Preferred Stock (Series B Preferred) and entitles the
owner to all of the proportionate rights, preferences and privileges of the
Series B Preferred. A total of 8,222,500 Series B Preferred shares were
deposited.
The net proceeds to the Corporation from the sale of the $1.53 Depositary
Shares, after commissions, fees and out-of-pocket expenses, totalled $543
million. As a result, the par value of Series B Preferred was established for $8
million, and capital in excess of par value was increased by $535 million.
The annual dividend rate for each $1.53 Depositary Share is $1.53 (equivalent to
$6.12 for each Series B Preferred), 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 on
September 1, 1992.
41
<PAGE> 42
On September 1, 1995, each of the outstanding $1.53 Depositary Shares will
automatically convert into (i) one share of common stock (equivalent to four
shares for each Series B Preferred) subject to adjustment if certain events
occur, and (ii) the right to receive in cash 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 $1.53 Depositary Shares (and the Series 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.
Prior to September 1, 1995, the Corporation may call the outstanding Series B
Preferred (and thereby the $1.53 Depositary Shares) for redemption. Upon any
such redemption, each owner of $1.53 Depositary Shares will receive, in exchange
for each $1.53 Depositary Share, shares of common stock having a market value
initially equal to $26.23 (equivalent to $104.92 for each Series B Preferred),
declining by $.002095 (equivalent to $.008380 for each Series B Preferred) on
each day following the date of issue of the Series B Preferred to $23.93
(equivalent to $95.72 for each Series B Preferred) on July 1, 1995, and equal to
$23.80 (equivalent to $95.20 for each Series B Preferred) thereafter (the Call
Price), plus an amount in cash equal to all proportionate accrued and unpaid
dividends thereon.
At December 31, 1994 and 1993, 8,222,500 shares of Series B Preferred were
issued and outstanding. At December 31, 1994, 3,600,000 shares of Series C
Preferred were issued and outstanding.
COMMON SHARES (shares in thousands)
<TABLE>
<CAPTION>
Issued In Treasury Outstanding
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1992 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
Shares issued for dividend
reinvestment plan -- (621) 621
Shares issued for employee plans -- (3,975) 3,975
Other -- (20) 20
- -----------------------------------------------------------------------
Balance at December 31, 1994 393,080 36,288 356,792
=======================================================================
</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, shares potentially issuable under deferred compensation programs and
the Series B Preferred. For this computation, net income or loss was adjusted
for the after-tax interest expense applicable to the deferred compensation
programs.
For the calculation of primary and fully diluted earnings per share, the Series
B Preferred are considered common stock equivalents at a rate of four Series B
Preferred to one common share. The Series C Preferred are considered outstanding
common stock at a rate of ten Series C Preferred to one common share.
When the Series B Preferred have an anti-dilutive effect on earnings per share,
the related common stock equivalent shares are excluded from weighted average
shares outstanding and the dividend requirement is deducted from net income in
computing earnings available to common shareholders. During 1994 and 1993, the
Series B Preferred shares were anti-dilutive for earnings per share
calculations. During 1992, the Series B Preferred shares were dilutive for the
earnings per share calculation in the second quarter, and anti-dilutive for the
third and fourth quarters and for the full year.
In accordance with prevalent practice at the time of issuance, the Series C
Preferred were treated as outstanding common stock for the calculation of
earnings per share during 1994. If the Series C Preferred had been treated as
common stock equivalents for the calculation of earnings per share, the
Corporation's 1994 per share results would have been a loss of $.02.
The weighted average number of common shares used for computing earnings or loss
per share was 383,736,000 in 1994, 352,902,000 in 1993 and 346,103,000 in 1992.
NOTE 15: 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.
At December 31, 1994 and 1993, approximately 7.5 million and 4 million shares,
respectively, had been authorized for awards under the 1993 Plan. Shares
available for stock options and other awards under the 1993 Plan at December 31,
1994 and 1993 totalled 3,435,107 and 1,787,500, respectively. At December 31,
1994 and 1993, an aggregate of 22.2 million and 19.2 million shares,
respectively, had been authorized for awarding under the 1991 and 1984 Plans.
Shares available for stock options and other awards under the 1991 and 1984
Plans at December 31, 1994 and 1993 totalled 1,815,457 and 2,141,708,
respectively.
42
<PAGE> 43
The option price under the Plans may not be less than the fair market value of
the shares on the grant date. 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.
Generally, options outstanding under the 1984, 1991 and 1993 Plans, except those
granted during 1994, were exercisable at December 31, 1994. Options granted
during 1994 under the 1993 Plan will not be exercisable until 1995. Outstanding
options have expiration dates ranging from 1995 through 2004.
STOCK OPTION INFORMATION (shares in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------
<S> <C> <C> <C>
Shares subject to option:
Balance at January 1 16,082 11,675 10,227
Options granted 5,079 5,230 1,821
Options exercised (24) (67) (262)
Options terminated (633) (756) (111)
- --------------------------------------------------------------
Balance at December 31 20,504 16,082 11,675
- --------------------------------------------------------------
Weighted average option price
in dollars:
At January 1 $20.70 $22.81 $23.56
Options granted 11.89 15.90 17.45
Options exercised 10.40 12.37 14.94
Options terminated 16.59 20.84 22.59
At December 31 18.66 20.70 22.81
==============================================================
</TABLE>
During 1994, 1993 and 1992, Equity Plus dollar grants totalling approximately
$17 million for the 1992 to 1994 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 on achieving performance targets over the measurement period. Certain
of these grants were prorated or cancelled upon termination of employment. In
February 1995, 154,300 shares of Westinghouse common stock and cash payments
totalling $81,000 were issued to employees, and deferrals with future principal
payments of $1,761,000 or 127,500 shares of Westinghouse common stock were made
for these Equity Plus grants.
NOTE 16: CONTINGENT LIABILITIES AND COMMITMENTS
Uranium Settlements
The Corporation had previously provided for the estimated future costs for the
resolution of all uranium supply contract suits and related litigation. The
remaining uranium reserve balance includes assets required for certain
settlement obligations and reserves for estimated future costs. The reserve
balance at December 31, 1994, is deemed adequate considering all facts and
circumstances known to management. The future obligations require providing the
remainder of the fuel deliveries running through 2013 and the supply of
equipment and services through approximately 1995. Variances from estimates
which may occur are considered in determining if an adjustment of the liability
is necessary.
Litigation
Philippines
In December 1988, a 15-count lawsuit was filed against the Corporation alleging
bribery and other fraudulent conduct in connection with the construction of a
nuclear power plant in the Philippines. Of the 15 claims, 14 were stayed pending
arbitration before the International Chamber of Commerce (ICC). With respect to
the remaining count alleging bribery, a jury verdict was rendered in favor of
the Corporation on May 18, 1993, but is expected to be appealed. A similar
finding was made by the ICC in 1991. Arbitration proceedings before the ICC on
issues relating to the construction of the plant were concluded in October 1994,
and the parties await a decision.
Steam Generators
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Corporation as components of nuclear
steam supply systems. Settlement agreements have been entered resolving six
litigation claims. These agreements generally require the Corporation to provide
certain products and services at prices discounted at varying rates. Two cases
were resolved in favor of the Corporation after trial or arbitration, although
an appeal has been filed in one of the cases. Four lawsuits are pending.
The Corporation is also a party to six tolling agreements with utilities or
utility plant owners' groups. The tolling agreements delay initiation of any
litigation for various specified periods of time and permit the parties time to
engage in discussions.
Securities Class Actions--Financial Services
The Corporation is defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of Westinghouse common stock in
1991.
43
<PAGE> 44
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 on 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 that 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 has estimated the total probable and reasonably possible
remediation costs that could be incurred by the Corporation based on the facts
and circumstances currently known.
PRP Sites
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named as a potentially responsible party (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
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at 54 sites. 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 that the Corporation's total remaining
probable costs for remediation of these sites as of December 31, 1994 are
approximately $73 million, all of which has been accrued.
Bloomington Sites
The Corporation is a party to a 1985 Consent Decree relating to remediation of
six sites in Bloomington, Indiana and has additional responsibility for two
other sites in Bloomington. 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 material.
On February 8, 1994, the Consent Decree parties filed with the court a status
report advising of the parties' intention to investigate alternatives. The
Corporation believes it is probable that the Consent Decree will be modified to
an alternate remedial action, which could include a combination of containment,
treatment, remediation and monitoring. As a result, the Corporation estimates
that its cost to implement the most reasonable and likely alternative would
total approximately $70 million for the eight sites, all of which has been
accrued. Approximately $18 million of this estimate represents the present
value, assuming a 5% discount rate, of operating and maintenance costs which
will be incurred over an approximate 30-year period. The undiscounted cost of
operating and maintenance expenditures approximates $46 million. The remaining
portion of the $70 million estimate represents site construction and other
related costs and is valued as of the year of expenditure. Other alternatives,
while considered less likely, could cause such costs to be as much as $125
million.
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.
Other
The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters the Corporation has estimated its remaining reasonably possible costs
and determined them to be 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 further address
environmental issues.
The Corporation has or will have responsibilities for environmental closure
activities, such as dismantling incinerators or decommissioning nuclear licensed
sites. The Corporation has estimated the total potential cost to be incurred for
these actions to be approximately $112 million, of which $40 million had been
accrued at December 31, 1994. The Corporation's policy is to accrue these costs
over the estimated life of the individual facilities, which in most cases is
approximately 20 years. The anticipated annual costs currently being accrued are
$5 million.
As part of the agreements for the sales of certain of its businesses or sites,
the Corporation has agreed to assume obligations for remediation as a result of
contamination caused during the Corporation's operation of the sites. The
Corporation has provided for all known environmental liabilities related to
these agreements.
44
<PAGE> 45
Capital expenditures related to environmental remediation activities in 1994 and
1993 totalled $12 million and $5 million, respectively. Operating expenses which
are recurring and associated with managing hazardous substances and pollution in
ongoing operations in 1994 and 1993 totalled $25 million and $17 million,
respectively.
Management believes that the Corporation has adequately provided for its present
environmental obligations and that complying with existing government
regulations will not materially impact the Corporation's financial position,
liquidity or results of operations.
Insurance Recoveries
The Corporation has filed actions against over 100 of its insurance carriers
seeking recovery for environmental, product and property damage liabilities, and
certain other matters. The Corporation has settled with several of these
carriers and has received recoveries related to these actions. Amounts received
to date generally have been applied to cover obligations assumed through the
settlements or litigation costs. The Corporation has not accrued for any future
insurance recoveries.
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 1995 through 2002.
At December 31, 1994, Financial Services commitments with off-balance-sheet
credit risk totalled $80 million, compared to $111 million at year-end 1993. Of
the $80 million of commitments at December 31, 1994, $71 million were
guarantees, credit enhancements and other standby agreements and $9 million were
commitments to extend credit. Of the $111 million of commitments at year-end
1993, $90 million were guarantees, credit enhancements and other standby
agreements and $21 million were commitments to extend credit. 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.
Continuing Operations
WCI Communities, Inc. (WCI) was contingently liable at December 31, 1994 under
guarantees for $55 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.
In the ordinary course of business, standby letters of credit are issued by
commercial banks on behalf of the Corporation related to performance obligations
primarily under contracts with customers.
Other Commitments
The Corporation's other commitments consisting primarily of those for the
purchase of plant and equipment totalled approximately $46 million at December
31, 1994.
NOTE 17: 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 1994, 1993 and 1992 was $182 million, $220 million and
$225 million, respectively. These amounts include immaterial amounts for
contingent rentals. Rental expense for 1994 included $18 million of sublease
income, which was not material in 1993 or 1992.
MINIMUM RENTAL PAYMENTS--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
At December 31 1994
- -----------------------------------------------------------
<S> <C>
1995 $ 148
1996 130
1997 116
1998 104
1999 95
Subsequent years 797
- -----------------------------------------------------------
Minimum rental payments $1,390
===========================================================
</TABLE>
NOTE 18: OTHER INCOME AND EXPENSES, NET
OTHER INCOME AND EXPENSES, NET (in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Interest on securities $ 15 $ 17 $ 18
Miscellaneous interest income 2 7 10
Gain (loss) on disposition of other assets 25 15 (17)
Operating results--nonconsolidated
affiliates (5) (7) (2)
Foreign currency transaction and
high-inflation translation effect (5) 5 (6)
Estimated loss on disposition of
non-strategic businesses (17) (195) --
Pension settlement loss (308) -- --
Other 8 (7) (21)
- -------------------------------------------------------------------
Other income and expenses, net $(285) $(165) $(18)
===================================================================
</TABLE>
The Corporation recognized a pension settlement loss of $308 million during the
fourth quarter of 1994. This noncash charge to income represents the pro-rata
portion of unrecognized losses associated with the pension obligation that was
settled. See note 3 to the financial statements.
The gain on disposition of other assets for the year ended December 31, 1994
includes a gain of $32 million from the sale of two Sacramento radio stations
and a gain of $10 million from the sale of an investment in a shopping center
development joint venture at WCI. The 1993 gain on disposition of other assets
includes a gain of $21 million on the sale of an equity participation in a
production company. See note 19 to the financial statements.
45
<PAGE> 46
The expected losses on disposition of non-strategic businesses of $17 million
and $195 million were recorded for the years ended December 31, 1994 and 1993,
respectively, to reflect the Corporation's announced plan to dispose of these
businesses. All items in the other category are less than $10 million each.
NOTE 19: RESTRUCTURING, MERGERS, ACQUISITIONS AND DIVESTITURES
Restructuring of Operations
An overview of the Corporation's recent restructuring actions follows:
Restructuring of Operations--1993 Initiative
Shortly after joining the Corporation in June 1993, Chairman and Chief Executive
Officer Michael Jordan initiated an extensive review by management of all of the
Corporation's businesses. As a result of this review, management developed a
plan to restructure its continuing businesses to improve productivity and
operating performance. This plan was expected to result in the reduction of
approximately 6,000 employees over the subsequent two years; approximately 2,600
through normal attrition and 3,400 through involuntary separations.
Generally, separated employees receive benefits under the Corporation's Employee
Security and Protection (ES&P) Plan, including permanent job separation
benefits, retraining and outplacement assistance. The amount included for these
benefits in the restructuring charge represents the incremental cost of such
benefits over those amounts previously accrued under SFAS No. 112.
The 1993 restructuring initiative involved substantially all of the
Corporation's continuing businesses. For segment reporting purposes, a $104
million charge for corporate restructuring was allocated to the operating
business segments. See note 20 to the financial statements. A summary of
restructuring charges by business segment follows:
RESTRUCTURING COSTS--1993 INITIATIVE (dollars in millions)
<TABLE>
<CAPTION>
No. of Involuntary Business
Business Segment Separations Segment Charge
- -----------------------------------------------------------------
<S> <C> <C>
Broadcasting 68 $ 12
Electronic Systems 971 137
Government &
Environmental Services 76 12
Energy Systems 483 45
Power Generation 1,312 126
The Knoll Group 27 9
WCI Communities, Inc. 56 4
Other Businesses 76 5
Corporate and Other 284 --
- -----------------------------------------------------------------
Total 3,353 $350
=================================================================
</TABLE>
Expenditures based on the Corporation's current estimates are expected to total
$228 million for incremental employee separation and related costs, $68 million
for asset writedowns and $54 million for facility closure and rationalization
costs.
Employee costs primarily include severance, outplacement services and pension
curtailment costs. The workforce reductions result primarily from the closing or
consolidation of certain production facilities and the consolidation,
centralization or redesign of administrative support functions.
Asset writedowns are also attributable to management's plans to exit certain
projects or to reengineer processes. Certain assets that are considered to be
redundant or no longer required due to a process change or exit strategy have
been written down to their net realizable value.
Facility closure and rationalization costs include costs expected to be incurred
from the consolidation of manufacturing facilities or product lines and closing
of support offices.
Through December 31, 1994, employee reductions as a result of implementing the
1993 restructuring initiative totalled 3,181. Completion of the remaining
involuntary separations is expected in 1995.
The following table is a reconciliation of accrued restructuring costs related
to the 1993 initiative for the year ended December 31, 1994:
<TABLE>
<CAPTION>
ACCRUED RESTRUCTURING COSTS--1993 INITIATIVE (in millions)
- -----------------------------------------------------------
<S> <C>
Balance at December 31, 1993 $350
Separation costs (171)
Pension curtailment costs (22)
Asset writedowns (58)
Facility closure/rationalization (18)
- -----------------------------------------------------------
Balance at December 31, 1994 $ 81
===========================================================
</TABLE>
Restructuring of Operations--1994 Initiative
During the fourth quarter of 1994, management approved additional restructuring
projects totalling $113 million primarily for costs associated with
approximately 1,200 additional employee separations. Certain amounts accrued for
restructuring in 1992 and miscellaneous adjustments were applied to these
program costs to reduce the required restructuring charge to $71 million. At
December 31, 1994, 534 employee separations were completed. While the remainder
of the employees generally were notified of the pending actions, completion of
the separations is not expected until the first half of 1995. Separated
employees generally receive benefits under the Corporation's ES&P Plan. The
following table presents the restructuring charges related to each business
segment:
46
<PAGE> 47
RESTRUCTURING COSTS--1994 INITIATIVE (dollars in millions)
<TABLE>
<CAPTION>
No. of Involuntary Employee Asset Facility Closure &
Business Segment Separations Separation Costs Writedowns Rationalization Costs Adjustments Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Broadcasting -- $-- $-- $-- $ (2) $ (2)
Electronic Systems 65 6 -- -- 5 11
Government & Environmental Services 57 2 2 -- -- 4
Energy Systems 400 26 -- -- -- 26
Power Generation -- -- -- -- (5) (5)
The Knoll Group 595 25 30 11 (26) 40
WCI Communities, Inc. -- -- -- -- (3) (3)
Corporate and Other 77 11 -- -- (11) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,194 $70 $32 $11 $(42) $71
===================================================================================================================================
</TABLE>
The asset writedowns and facility closure costs related to the 1994 initiative
are specifically associated with exiting certain product lines and facilities.
Adjustments in the table above include amounts that were redeployed from the
1992 restructuring program and minor modifications of the 1993 restructuring
costs based on actual spending to date and estimated remaining costs under those
programs.
Mergers, Acquisitions and Divestitures
In December 1994, the Corporation filed a Schedule 13D with the Securities and
Exchange Commission wherein it announced its intention to consider the sale of
the Corporation's 62% ownership interest in MICROS Systems, Inc. (MICROS), which
is included in the Corporation's Electronic Systems segment. MICROS had sales
for the year ended December 31, 1994 of approximately $100 million.
In August 1994, the Corporation signed a letter of intent to sell Aptus, Inc.,
an environmental services subsidiary, for a combination of cash and securities.
In July 1994, Westinghouse Broadcasting Company (Group W) and CBS, Inc. (CBS)
announced an agreement to enter into a comprehensive strategic alliance that
would establish long-term station affiliations between CBS and all of Group W's
television stations; form new, jointly held entities that would expand both
companies' distribution and programming capabilities nationwide; and merge their
advertising sales representation operations. The agreement is subject to the
execution of definitive documentation and approval by the Federal Communications
Commission.
In June 1994, the Corporation sold its 40% interest in a shopping center
development joint venture for net proceeds of $13 million, resulting in a gain
of $10 million.
In May 1994, the Corporation acquired the Norden Unit of United Technologies
Corporation. Norden manufactures airborne and shipboard radar systems, air
traffic control systems, and surveillance and intelligence management systems
for underseas applications.
In connection with its announced plan to dispose of certain non-strategic
businesses, during 1994 the Corporation completed the sales of Gladwin
Corporation and Controlmatic.
In January 1994, the Corporation sold its KFBK-AM and KGBY-FM radio stations
located in Sacramento, California, for net proceeds of $48 million, resulting in
a gain of $32 million.
NOTE 20: 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 eight segments: Broadcasting, Electronic
Systems, Government & Environmental Services, Thermo King, Energy Systems, Power
Generation, Knoll and WCI. 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. Broadcasting currently owns and operates five network
affiliated television broadcasting stations and 16 radio stations. Broadcasting
also provides programming and distribution services to the cable television
industry. Group W Satellite Communications (GWSC) provides sports programming
and the marketing and advertising for two country music entertainment channels.
Westinghouse Communications, which is included in GWSC, provides a comprehensive
range of telecommunications services to business and industry.
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, 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
47
<PAGE> 48
handling equipment, anti-submarine warfare and communications equipment. The
group also engages in related non-DoD markets such as air traffic control,
security and information systems.
The Government & Environmental Services segment combines the Corporation's
toxic, hazardous and radioactive waste services, the management and operation of
several government-owned facilities and the U.S. naval nuclear reactors program.
Thermo King is a leading supplier of mobile temperature control equipment for
trucks, trailers and seagoing containers, as well as air conditioning for buses
and rail cars.
The Energy Systems segment serves the worldwide nuclear energy market and is a
leader in designing, manufacturing and servicing nuclear power plants. Energy
Systems is also a leading supplier of reload nuclear fuel and distributed
control systems.
The Power Generation segment designs, manufactures and services steam and
combustion turbine generators. In addition to serving the regulated electric
utility industry, Power Generation also supplies, services and operates power
plants for independent power producers and other non-utility customers
worldwide.
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.
Other Businesses segment is a diverse group of businesses providing a wide range
of goods and services to wholesale, industrial, utility and governmental
customers. These businesses are deemed to be non-strategic and are expected to
be sold.
The Corporate and Other segment includes corporate activities that are managed
for the benefit of the entire Corporation.
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 which include costs of products and services, marketing, administrative
and general expenses, depreciation and amortization, and restructuring costs.
In 1994, a $71 million charge, net of adjustments, was recorded in the fourth
quarter for restructuring. Prior to this provision, operating profit totalled
$201 million for Broadcasting, $176 million for Electronic Systems, $62 million
for Government & Environmental Services, $33 million for Energy Systems, $105
million for Power Generation, $65 million for WCI and a loss of $27 million for
Knoll.
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 $157 million for
Broadcasting, $220 million for Electronic Systems, $65 million for Government &
Environmental Services, $111 million for Energy Systems, $103 million for Power
Generation, $65 million for WCI and losses of $30 million for Knoll, $59 million
for Other Businesses and $40 million for Corporate and Other.
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.
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)
- -----------------------------------------------------------------------------------------------------------------------------
Year ended December 31 1994 1993 1992 1994 1993 1992
---------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Broadcasting $ 870 $ 812 $ 814 $203 $ 145 $165
Electronic Systems 2,467 2,597 2,855 165 83 225
Government & Environmental Services 389 338 370 58 33 100
Thermo King 877 719 705 130 109 103
Energy Systems 1,235 1,314 1,325 7 (59) 116
Power Generation 1,715 1,787 1,856 110 (23) 121
The Knoll Group 567 510 578 (67) (39) (40)
WCI Communities, Inc. 248 253 235 68 61 87
Other Businesses 497 544 564 (27) (64) (14)
Corporate and Other 148 164 139 (28) (100) (70)
Intersegment Sales (165) (163) (190) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total $8,848 $8,875 $9,251 $619 $ 146 $793
=============================================================================================================================
</TABLE>
48
<PAGE> 49
OTHER FINANCIAL INFORMATION (in millions)
<TABLE>
<CAPTION>
Identifiable Assets Depreciation and Amortization Capital Expenditures
- --------------------------------------------------------------------------------------------------------------------------------
At and for the year ended December 31 1994 1993 1992 1994 1993 1992 1994 1993 1992
------------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Broadcasting $ 811 $ 808 $ 865 $ 35 $ 35 $ 34 $ 38 $ 25 $ 24
Electronic Systems 1,323 1,405 1,355 84 76 79 56 44 67
Government & Environmental Services 472 456 433 23 18 12 23 24 27
Thermo King 351 297 281 13 12 12 19 15 10
Energy Systems 884 821 924 49 50 51 42 44 40
Power Generation 1,258 1,168 985 46 46 43 51 37 41
The Knoll Group 639 630 656 28 30 30 21 19 28
WCI Communities, Inc. 718 761 725 2 1 1 2 1 2
Other Businesses 282 391 385 11 16 14 4 25 13
Corporate and Other 3,886 3,816 3,236 29 27 25 3 3 7
- --------------------------------------------------------------------------------------------------------------------------------
Continuing Operations 10,624 10,553 9,845 $320 $311 $301 $259 $237 $259
- --------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations 1,797 4,495 8,625
- -----------------------------------------------------------------
Total $12,421 $15,048 $18,470
=================================================================
</TABLE>
Assets not identified to segments in the table above principally include cash
and marketable securities, deferred income taxes, prepaid pension cost and the
intangible pension asset.
Included in income from Continuing Operations is income of subsidiaries located
outside the U.S. These subsidiaries reported losses of $10 million in 1994, $21
million in 1993 and income of $32 million in 1992. Subsidiaries located outside
the U.S. comprised 5% of total assets of Continuing Operations in 1994, 6% in
1993 and 5% in 1992. Subsidiaries located outside the U.S. comprised 4% of total
liabilities of Continuing Operations in 1994 and 2% in 1993 and 1992.
FINANCIAL INFORMATION BY GEOGRAPHIC AREA (in millions)
<TABLE>
<CAPTION>
At and for the year ended December 31 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales of products and services from
Continuing Operations:
U.S. $ 7,875 $ 7,928 $8,218
Outside the U.S. 973 947 1,033
- ------------------------------------------------------------------------------
Sales of products and services $ 8,848 $ 8,875 $9,251
- ------------------------------------------------------------------------------
Operating profit (loss) from
Continuing Operations:
U.S. $ 590 $ 154 $ 719
Outside the U.S. 29 (8) 74
- ------------------------------------------------------------------------------
Operating profit $ 619 $ 146 $ 793
- ------------------------------------------------------------------------------
Segment identifiable assets of
Continuing Operations:
U.S. $10,040 $ 9,969 $9,354
Outside the U.S. 584 584 491
- ------------------------------------------------------------------------------
Segment identifiable assets $10,624 $10,553 $9,845
==============================================================================
</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>
Year ended December 31 1994 1993 1992
- ----------------------------------------------------------------------
% of % of % of
Amount Sales Amount Sales Amount Sales
-------------- ------------- -------------
Subsidiaries outside the U.S.:
<S> <C> <C> <C> <C> <C> <C>
Europe, Africa,
Middle East $ 564 6.4% $ 618 7.0% $ 685 7.4%
Canada 300 3.4% 261 2.9% 281 3.0%
All other 109 1.2% 68 0.8% 67 0.7%
- ----------------------------------------------------------------------
Total $ 973 11.0% $ 947 10.7% $1,033 11.1%
======================================================================
U.S. exports:
Europe, Africa,
Middle East $ 646 7.3% $ 538 6.1% $ 667 7.2%
Asia-Pacific 732 8.3% 429 4.8% 525 5.7%
All other 235 2.6% 371 4.2% 175 1.9%
- ----------------------------------------------------------------------
Total $1,613 18.2% $1,338 15.1% $1,367 14.8%
======================================================================
</TABLE>
The largest single customer of the Corporation is the U.S. government and its
agencies, whose purchases accounted for 26% of sales of products and services
from Continuing Operations during 1994 and 30% in 1993 and 1992. Of the 1994
purchases, 81% were from the Electronic Systems segment. No other customer made
purchases totalling 10% or more of sales of products and services.
49
<PAGE> 50
RESEARCH AND DEVELOPMENT FROM CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
Year ended December 31 1994 1993 1992
- -----------------------------------------------------------
<S> <C> <C> <C>
Westinghouse-sponsored:
Electronic Systems $ 80 $100 $ 96
Energy Systems 21 19 25
Power Generation 45 40 33
Other 16 14 8
Customer-sponsored:
Electronic Systems 481 494 501
Energy Systems 41 47 68
Power Generation 6 5 2
Other 52 50 45
- -----------------------------------------------------------
Total research and development
expenditures $742 $769 $778
===========================================================
</TABLE>
NOTE 21: 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, "Disclosures about Fair Values of Financial Instruments,"
comparability of fair values among 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 1994 1993
- ------------------------------------------------------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------- ------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 338 $ 338 $ 637 $ 637
Noncurrent customer and
other receivables 147 132 206 183
- -----------------------------------------------------------------------
Liabilities:
Short-term debt 662 662 662 662
Current maturities of
long-term debt 17 17 9 9
Long-term debt 1,886 1,721 1,885 1,888
- -----------------------------------------------------------------------
Off-balance-sheet financial
instruments--gains (losses):
Interest rate swap
agreements -- (4) -- --
Financial guarantees -- -- -- (2)
Foreign currency
exchange contracts -- (6) -- --
========================================================================
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS--DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
At December 31 1994 1993
- ------------------------------------------------------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------ --------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 6 $ 6 $ 611 $ 611
Portfolio investments:
Real estate 297 326 235 235
Corporate 9 1 118 118
- ---------------------------------------------------------------------
Liabilities:
Short-term debt 374 374 2,373 2,373
Current maturities of
long-term debt 230 228 774 789
Long-term debt 568 649 647 753
- ---------------------------------------------------------------------
Off-balance-sheet financial
instruments--gains (losses):
Interest rate and currency
exchange agreements :
Unrealized gains -- 82 -- 82
Unrealized losses -- (5) -- (50)
Financing commitments -- -- -- --
=====================================================================
</TABLE>
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.
50
<PAGE> 51
Portfolio Investments
At December 31, 1994, the fair value of portfolio investments, which are
primarily real estate investments, was determined using financial information
prepared by independent third parties, discounted cash flow projections,
financial statements for investee companies and letters of intent or other asset
sale agreements.
At December 31, 1993, the fair value of portfolio investments was determined as
follows:
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
facilities 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 methods based on the Corporation's current borrowing
rates for similar types of borrowing arrangements with comparable terms and
maturities.
Interest Rate and Currency Exchange Agreements
The fair value of interest rate and currency exchange agreements is the amount
that the Corporation would receive or pay to terminate the agreements, based on
quoted market prices or discounted cash flow methods, considering current
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.
Foreign Currency Exchange Contracts
The fair value of foreign exchange contracts is based on quoted market prices to
terminate the contracts.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1994 Quarter Ended 1993 Quarter Ended
- ------------------------------------------------------------------------------------------------------------------------------------
(in millions except per share amounts) 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 $2,768 $2,229 $2,108 $1,743 $2,641 $2,060 $2,154 $2,020
Gross profit 760 525 540 394 644 481 552 468
Income (loss) from Continuing Operations (107) 73 75 36 (383) 65 84 59
Income (loss) from Discontinued Operations -- -- -- -- (95) -- -- --
Cumulative effect of changes in
accounting principles -- -- -- -- -- -- -- (56)
Net income (loss) (107) 73 75 36 (478) 65 84 3
Per share of common stock:
Income (loss) from Continuing Operations (.30) .15 .16 .07 (1.11) .15 .20 .14
Income (loss) from
Discontinued Operations -- -- -- -- (.27) -- -- --
Cumulative effect of changes in
accounting principles -- -- -- -- -- -- -- (.16)
Net income (loss) (.30) .15 .16 .07 (1.38) .15 .20 (.02)
Dividends paid .05 .05 .05 .05 .10 .10 .10 .10
New York Stock Exchange market
price per share:
High 14-5/8 14-3/8 13-1/4 15-1/4 14-5/8 17-1/8 16-3/8 15-3/4
Low 11-3/4 11-1/2 10-7/8 11-1/2 12-7/8 12-3/4 14 13
====================================================================================================================================
</TABLE>
51
<PAGE> 52
FIVE-YEAR SUMMARY
SELECTED FINANCIAL AND STATISTICAL DATA (UNAUDITED) (in millions except per
share amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales of products and services $ 8,848 $ 8,875 $ 9,251 $ 9,409 $ 9,198
Other income and expenses, net (285) (165) (18) (19) 157
Interest expense (177) (217) (225) (231) (221)
Income (loss) from Continuing Operations
before income taxes 157 (236) 550 496 1,114
Income taxes (71) 70 (187) (159) (307)
Income (loss) from Continuing Operations 77 (175) 357 335 804
Income (loss) from Discontinued Operations -- (95) (1,413) (1,421) (536)
Cumulative effect of changes in
accounting principles (1) -- (56) (338) -- --
Net income (loss) 77 (326) (1,394) (1,086) 268
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing
Operations as a percentage of sales .9% (2.0)% 3.9% 3.6% 8.7%
- -------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
Continuing Operations $ .07 $ (.64) $ .95 $ 1.07 $ 2.74
Discontinued Operations -- (.27) (4.08) (4.53) (1.83)
Cumulative effect of changes in
accounting principles (1) -- (.16) (.98) -- --
Earnings (loss) per common share .07 (1.07) (4.11) (3.46) .91
Dividends per common share .20 .40 .72 1.40 1.35
- -------------------------------------------------------------------------------------------------------------------------------
Total assets--Continuing Operations $10,624 $10,553 $ 9,845 $ 9,414 $ 9,321
Total assets--Discontinued Operations 1,797 4,495 8,625 10,403 12,268
Total assets 12,421 15,048 18,470 19,817 21,589
Long-term debt--Continuing Operations 1,886 1,885 1,341 1,275 916
Long-term debt--Discontinued Operations 568 647 1,602 2,459 5,116
Shareholders' equity 1,792 1,045 2,223 3,750 3,895
- -------------------------------------------------------------------------------------------------------------------------------
Average common and common equivalent
shares outstanding 383,736,249 352,901,670 346,103,408 313,984,242 293,591,984
Market price range per share $15-1/4--10-7/8 $17-1/8--12-3/4 $20-7/8--9-3/4 $31--13-3/4 $39-3/8--24-1/4
Common shareholders at year end 125,376 125,806 127,559 120,833 101,157
Average number of employees 84,399 103,063 109,050 113,664 115,774
===============================================================================================================================
</TABLE>
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.
52
<PAGE> 53
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 schedule for Westinghouse Electric
Corporation and the Report of Independent Accountants thereon are included in
Part IV of this report:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Reports of Independent Accountants on Financial Statement Schedules 55
For the three years ended December 31, 1994:
Schedule VIII -- Valuation and Qualifying Accounts 56
</TABLE>
Other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
(A) EXHIBITS
<TABLE>
<S> <C> <C>
(3) Articles of Incorporation and Bylaws
(a) The Restated Articles of the Corporation are incorporated herein by
reference to Exhibit 3(b) to Form 10-Q for the quarter ended March 31, 1994.
(b) Amendments to the Bylaws of the Corporation.
(c) The Bylaws of the Corporation, as amended to January 25, 1995.
</TABLE>
53
<PAGE> 54
<TABLE>
<S> <C> <C>
(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 is incorporated herein by reference to
Exhibit 10(b) to Form 10-K for the year ended December 31, 1993.
(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 Westinghouse Executive Pension Plan, as amended.
(e*) 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.
(f*) 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.
(g) The Directors Charitable Giving Program.
(h*) The 1991 Long-Term Incentive Plan, as amended.
(i*) 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.
(j*) Employment Agreement between the Corporation and Fredric G. Reynolds.
(k) 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as
of August 5, 1994 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(r) to Form 10-Q for the
quarter ended June 30, 1994.
(l) Three Year Competitive Advance and Revolving Credit Facility Agreement dated
as of August 5, 1994 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(s) to Form 10-Q for the
quarter ended June 30, 1994.
</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
(27) Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
1994.
54
<PAGE> 55
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 31, 1995 appearing on page 26 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 Schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
January 31, 1995
55
<PAGE> 56
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993 1992
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Customer receivables from Continuing Operations--allowance for
doubtful accounts--
Balance at beginning of year.................................... $ 54 $ 50 $ 58
Charged to costs and expenses................................... 13 14 20
Charged to the allowance........................................ (10) (11) (20)
Other........................................................... 2 1 (8)
---- ---- ----
Balance at end of year(a).................................. $ 59 $ 54 $ 50
==== ==== ====
Deferred income taxes -- valuation allowance:
Balance at beginning of year.................................... $ 90 $ 94 $104
Charged (credited) to costs and expenses........................ 11 (4) (10)
---- ---- ----
Balance at end of year..................................... $101 $ 90 $ 94
==== ==== ====
<FN>
- ---------
(a) at December 31, 1994, 1993 and 1992, all amounts were classified as current.
</TABLE>
56
<PAGE> 57
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 7th day of
March, 1995.
WESTINGHOUSE ELECTRIC CORPORATION
By: /s/ Fredric G. Reynolds
--------------------------------
Fredric G. Reynolds
Executive Vice President and
Chief Financial Officer
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
David T. McLaughlin, Director By: /s/ Fredric G. Reynolds
Rene C. McPherson, Director ---------------------------
Richard M. Morrow, Director Fredric G. Reynolds
Paula Stern, Director Attorney-In-Fact
Richard R. Pivirotto, Director March 7, 1995
Fredric G. Reynolds, Executive Vice
President and Chief Financial
Officer (principal financial
officer)
Robert D. Walter, Director
Louis J. Valerio, Vice President and
Controller (principal accounting
officer)
Original powers of attorney authorizing Michael H. Jordan, Fredric G.
Reynolds, and Louis J. Valerio, 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.
57
<PAGE> 58
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) Amendments to the Bylaws of the Corporation ............................. 59
(c) The Bylaws of the Corporation, as amended................................ 60
(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 Westinghouse Executive Pension Plan, as amended...................... 99
(e) The Deferred Stock and Compensation Plan for Directors................... *
(f) The Advisory Director's Plan............................................. *
(g) The Directors Charitable Giving Program.................................. 117
(h) The 1991 Long-term Incentive Plan, as amended............................ 122
(i) Employment Agreement with Michael H. Jordan.............................. *
(j) Employment Agreement with Fredric G. Reynolds............................ 153
(k) 364-Day Competitive Advance and Revolving Credit Facility Agreement...... *
(l) Three Year Competitive Advance and Revolving Credit Facility Agreement... *
(11) Computation of Per Share Earnings............................................... 155
(12) Computation of Ratios
(a) Ratio of Earnings to Fixed Charges....................................... 156
(b) Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends................................................................ 157
(21) Subsidiaries of the Registrant.................................................. 158
(23) Consent of Independent Accountants.............................................. 159
(24) Powers of Attorney and Extract of Resolution of Board of Directors.............. 160
(27) Financial Data Schedule......................................................... 172
</TABLE>
- --------------------------------------------------------------------------------
* Incorporated by reference
58
<PAGE> 1
ARTICLE II Exhibit 3(b)
Paragraph 7
"There shall be a Compensation Committee, an Audit Review Committee, a Committee
on Environment and Health, and a Nominating and Governance Committee. The
Compensation Committee may determine to retain an independent compensation
consultant to assist it in carrying out its duties. Each of these committees
shall consist of not less than three members of the Board of Directors, at least
three of whom, on the date of their appointment to the committee, are
Independent Directors. All members of the Compensation Committee and the
Nominating and Governance Committee must, on the date of their appointment to
said committee, be Independent Directors. With respect to each such committee,
the Board of Directors shall, by one or more resolutions adopted by a majority
of the whole Board, determine the duties and responsibilities, determine the
number of members, appoint the members and the committee chair and fill each
vacancy occurring in the membership."
59
<PAGE> 1
Exhibit 3(c)
BY-LAWS
OF
WESTINGHOUSE
ELECTRIC CORPORATION
----------------
AS AMENDED TO
JANUARY 25, 1995
----------------
60
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Article I Meetings of Stockholders............................... 1
Article II Board of Directors - Committees -
Their Powers and Duties................................ 7
Article III Contributions.......................................... 11
Article IV Election and Term of Chairman of
the Board and Officers................................. 11
Article V Meetings of Directors.................................. 12
Article VI Chairman of the Board.................................. 15
Article VII President; Chief Executive Officer..................... 15
Article VIII Secretary.............................................. 16
Article IX Treasurer.............................................. 17
Article X Controller............................................. 18
Article XI Assistant Secretary, Assistant Treasurer,
Assistant Controller and Other Officers................ 19
Article XII Corporate Seal......................................... 20
Article XIII Certificates of Stock.................................. 20
Article XIV Transfers of Stock..................................... 21
Article XV Fiscal Year............................................ 22
Article XVI Employees' Stock Purchases and Stock
Option Plans........................................... 22
Article XVII Indemnification........................................ 25
Article XVIII Director Liability..................................... 35
Article XIX Pennsylvania Opt Out................................... 35
Article XX Amendments............................................. 36
Article XXI Confidentiality in Voting.............................. 37
</TABLE>
-i-
<PAGE> 3
BY-LAWS
OF
WESTINGHOUSE ELECTRIC CORPORATION
---------------
ARTICLE I.
Meetings of Stockholders
The annual meeting of the stockholders of the Corporation shall be held on
such date and at such hour as the Board of Directors may designate and on any
subsequent day or days to which such meeting may be adjourned, for the purpose
of electing directors and for the transaction of such other business as may
lawfully come before the meeting. If for any reason the annual meeting shall not
have been held on the day designated by the Board or on the day specified above,
the Board of Directors shall cause the annual meeting to be called and held as
soon thereafter as may be convenient.
Special meetings of the stockholders of the Corporation may be called by
the Board of Directors or by the Chairman to be held on such date as the Board
or the Chairman shall determine.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (i) specified in the notice
of the meeting (or any supplement thereto) given by or at the direction of the
Board of Directors, (ii) otherwise brought before the meeting by
-1-
<PAGE> 4
or at the direction of the Board of Directors or (iii) brought before
the meeting by a stockholder in accordance with the procedure set forth below.
For business to be properly brought before an annual meeting by a stockholder,
the stockholder must be entitled by Pennsylvania law to present such business
and must have given written notice of such business, either by personal delivery
or by United States mail, postage prepaid, to the Secretary of the Corporation,
not later than 90 days in advance of such meeting; provided, however, that if
such annual meeting of stockholders is held on a date other than the last
Wednesday of April, such written notice must be given within ten days after the
first public disclosure, which may include any public filing by the Corporation
with the Securities and Exchange Commission, of the date of the annual meeting.
Any such notice shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the meeting and the reasons for conducting such business at
the meeting, and in the event that such business includes a proposal to amend
the By-laws of the Corporation, the language of the proposed amendment, (b) the
name and address of the stockholder proposing such business, (c) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to propose such business and (d) any material interest
of any stockholder in such business. No
-2-
<PAGE> 5
business shall be conducted at an annual meeting except in accordance with this
paragraph, and the chairman of any annual meeting of stockholders may refuse to
permit any business to be brought before such annual meeting without compliance
with the foregoing procedures.
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock of the Corporation as to dividends or upon
liquidation, nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Any stockholder entitled to vote for the election of directors may
nominate at a meeting persons for election as directors only if written notice
of such stockholder's intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders, 90 days in advance of such meeting (provided
that if such annual meeting of stockholders is held on a date other than the
last Wednesday of April, such written notice must be given within ten days after
the first public disclosure, which may include any public filing by the
Corporation with the Securities and Exchange Commission, of the date of the
annual meeting), and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, the close of business on
the seventh day following the date on which notice of such meeting is first
-3-
<PAGE> 6
given to stockholders. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of each
person to be nominated; (b) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice as directors; (c) a description of all
arrangements or understandings between the stockholder and each proposed nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder; (d) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission were such nominee to be
nominated by the Board of Directors; and (e) the consent of each proposed
nominee to serve as a director of the Corporation if so elected. The chairman of
any meeting of stockholders to elect directors may refuse to permit the
nomination of any person to be made without compliance with the foregoing
procedure.
Every meeting of the stockholders, annual or special, shall be held at such
place within or without the Commonwealth of Pennsylvania as the Board of
Directors may designate or, in the absence of such designation, at the
registered office of the Corporation in the Commonwealth of Pennsylvania.
-4-
<PAGE> 7
Written notice of every meeting of the stockholders shall be given by, or
at the direction of, the person authorized to call the meeting, to each
stockholder of record entitled to vote at the meeting, at his address appearing
on the books of the Corporation. The notice of every meeting of the stockholders
shall specify the place, day and hour of the meeting and, in the case of a
special meeting, the matter or matters to be acted upon at such meeting. Only
the matter or matters specified in the notice of a special meeting shall be
acted upon thereat. All notices of meetings of the stockholders shall be
provided in accordance with Pennsylvania law.
The notice of every meeting of the stockholders may be accompanied by a
form of proxy approved by the Board of Directors in favor of such person or
persons as the Board of Directors may select.
Except as otherwise provided by law or by the Restated Articles of the
Corporation, as from time to time amended, (hereinafter called the Articles of
the Corporation) or by these By-laws, the presence in person or by proxy of
stockholders entitled to cast at least a majority of the votes that all
stockholders are entitled to cast on a particular matter shall constitute a
quorum at the meeting of stockholders, and all questions shall be decided by a
majority of the votes cast, in person or by proxy, at a duly organized meeting
by the holders of shares entitled to vote thereon. The stockholders present at
any duly organized meeting may continue to do business until
-5-
<PAGE> 8
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Any meeting of the stockholders may be adjourned from time to time, without
notice other than by announcement at the meeting at which such adjournment is
taken, and at any such adjourned meeting at which a quorum shall be present any
action may be taken that could have been taken at the meeting originally called;
provided that any meeting at which directors are to be elected shall be
adjourned only from day to day, or for such longer periods, not exceeding
fifteen days each, as the holders of a majority of the shares present in person
or by proxy shall direct, until such directors have been elected.
If a meeting cannot be organized because of lack of a quorum, those present
may, except as otherwise provided by law, adjourn the meeting to such time and
place as they may determine, but in the case of any meeting called for the
election of directors those who attend the second of such adjourned meetings,
although less than a quorum, shall nevertheless constitute a quorum for the
purpose of electing directors.
At each meeting, each stockholder entitled to vote may vote in person or by
proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact and filed with the Secretary of the Corporation. Except as
otherwise provided by law or the Articles of the Corporation or these By-laws,
each holder of record of shares of any class of the Corporation shall
-6-
<PAGE> 9
be entitled to one vote, on each matter submitted to a vote at a meeting of
the stockholders, and in respect of which shares of such class shall be entitled
to be voted, for every share of such class standing in his name on the books of
the Corporation.
ARTICLE II.
Board of Directors - Committees -
Their Powers and Duties
The business, affairs and property of the Corporation shall be managed and
controlled by a Board of Directors, which, except as otherwise provided by law
or the Articles of the Corporation, shall exercise all the powers of the
Corporation. The number, qualifications, manner of election, time and place of
meeting, compensation and powers and duties of the directors of the Corporation
shall be fixed from time to time by or pursuant to these By-laws. Nominees for
election to the Board of Directors who qualify as Independent Directors on the
date of their nomination shall be such that the majority of all directors
holding office immediately after such nomination, assuming the election of such
nominees, shall be Independent Directors.
The number of directors which shall constitute the Board of Directors shall
be fixed from time to time by a vote of a majority of the Board of Directors,
provided, however, that the number of directors of the Corporation shall be not
less than three nor more than twenty-four. The stockholders shall, at
-7-
<PAGE> 10
each annual meeting, elect directors, each of whom shall serve until the annual
meeting of stockholders next following his election and until his successor is
elected and shall qualify; provided, however, that directors with terms expiring
at the annual meetings of stockholders to be held in 1994 and 1995 shall serve
until the expiration of their respective terms.
Each election of directors by the stockholders shall be conducted by one or
three judges of election appointed by the Board of Directors in advance of the
meeting to act at that meeting and at any adjournment thereof. If any or all of
such appointees shall fail to appear or fail or refuse to act, the vacancy or
vacancies shall be filled by the Board of Directors or the presiding officer of
the meeting. No person who is a candidate for office to be filled at the meeting
shall act as a judge.
Except as the law may otherwise provide, the stockholders shall not remove
any director from office without assigning any cause (as such term is defined in
the Articles of Incorporation) prior to the expiration of the term of office
unless holders of at least 80% of the shares of capital stock of the Corporation
entitled to vote thereon, vote to remove the director from office.
In case of any vacancy in the Board of Directors through death,
resignation, disqualification, removal, increase in the number of directors or
other cause, the remaining directors, though less than a quorum, by affirmative
vote of a majority
-8-
<PAGE> 11
thereof or by a sole remaining director, may fill such vacancy to serve for
the balance of the unexpired term and until his successor shall have been
elected and qualified; provided, however, that any director elected to fill a
vacancy for a director having a term expiring at the annual meeting of
stockholders to be held in 1994 or 1995 shall serve only until the annual
election of stockholders next following his election.
There shall be a Compensation Committee, an Audit Review Committee, a
Committee on Environment and Health, and a Nominating and Governance Committee.
The Compensation Committee may determine to retain an independent compensation
consultant to assist it in carrying out its duties. Each of these committees
shall consist of not less than three members of the Board of Directors, at least
three of whom, on the date of their appointment to the committee, are
Independent Directors. All members of the Compensation Committee and the
Nominating and Governance Committee must, on the date of their appointment to
said committee, be Independent Directors. With respect to each such committee,
the Board of Directors shall, by one or more resolutions adopted by a majority
of the whole Board, determine the duties and responsibilities, determine the
number of members, appoint the members and the committee chair and fill each
vacancy occurring in the membership.
The Board of Directors may from time to time appoint such further standing
or special committees as it may deem in the best interest of the Corporation,
but no such committee shall
-9-
<PAGE> 12
have any powers, except such as are expressly conferred upon it by the Board.
Each committee referred to in this Article II shall act only as a committee and
the individual members shall have no power as such.
Each director shall be entitled to receive from the Corporation such annual
and meeting fees as the Board of Directors shall from time to time determine and
to be reimbursed for his reasonable expenses in connection with attendance at
meetings. Nothing herein contained shall preclude any director from serving the
Corporation or its subsidiaries in any other capacity and receiving compensation
therefor.
For purposes of this Article II, the term "Independent Director" shall mean
a director who: (a) is not and has not been employed by the Corporation or a
subsidiary in an executive capacity within the five years immediately prior to
the annual meeting at which he will be voted upon; (b) is not an employee or
five percent or more owner of an entity that is a regular advisor or consultant
to the Corporation or its subsidiaries; (c) is not an employee or five percent
or more owner of a significant customer or supplier of the Corporation or its
subsidiaries; (d) does not have a personal services contract with the
Corporation or its subsidiaries; (e) is not employed by a tax-exempt
organization that receives significant contributions from the Corporation or its
subsidiaries; and (f) is not a spouse, parent, sibling, child, parent-in-law,
brother
-10-
<PAGE> 13
or sister-in-law or son or daughter-in-law of an officer of the
Corporation.
The Board of Directors shall have the exclusive right and power to
interpret and apply the provisions of this Article II, including, without
limitation, the adoption of written definitions of terms used in and guidelines
for its application (any such definitions and guidelines shall be filed with the
Secretary, and such definitions and guidelines as may prevail shall be made
available to any stockholder upon written request). Any such definitions or
guidelines and any other interpretation or application of the provisions of this
Article II made in good faith shall be binding and conclusive.
ARTICLE III.
Contributions
The Board of Directors shall have the power, at any time and from time to
time, to make contributions and donations for the public welfare or for
religious, charitable, scientific or educational purposes.
ARTICLE IV.
Election and Term of
Chairman of the Board and Officers
The Board of Directors shall elect a Chairman of the Board, who may be
designated an officer of the Corporation, a President or a Chief Executive
Officer or both, such Vice Presidents as
-11-
<PAGE> 14
may from time to time be necessary or desirable, a Secretary, a Treasurer
and a Controller. There shall also be one or more assistant secretaries,
treasurers and controllers and such other officers and assistant officers as the
Board may deem appropriate. The Board of Directors shall elect and fix the
compensation of all officers, except assistant officers.
The term of office for all officers shall be until the organization meeting
of the Board of Directors following the next annual meeting of shareholders and
until their respective successors are elected or appointed and shall qualify, or
until their earlier death, resignation or removal. The Chairman of the Board or
any officer may be removed from office, either with or without cause, at any
time by the affirmative vote of the majority of the members of the Board then in
office. A vacancy in any office arising from any cause may be filled for the
unexpired term by the Board.
ARTICLE V.
Meetings of Directors
Regular meetings of the Board of Directors shall be held without notice at
such place or places either within or without the Commonwealth of Pennsylvania,
at such hour and on such day as may be fixed by resolution of the Board of
Directors.
The Board of Directors shall meet for organization at its first regular
meeting after the annual meeting of stockholders or at a special meeting of the
Board of Directors called after
-12-
<PAGE> 15
the annual meeting of stockholders and prior to said first regular meeting.
If no special meeting of the Board of Directors for organization shall be
called, all provisions of these By-laws in respect of notice of special meetings
of the Board of Directors shall apply to the first regular meeting of the Board
of Directors held after the annual meeting of stockholders.
Special meetings of the Board of Directors shall be held, whenever called
by the Chairman or by four directors or by resolution adopted by the Board of
Directors, at such place or places either within or without the Commonwealth of
Pennsylvania as may be stated in the notice of the meeting.
Written notice of the time and place of, and general nature of the business
to be transacted at, all special meetings of the Board of Directors, and written
notice of any change in the time or place of holding the regular meetings of the
Board of Directors, shall be given to each director either personally or by
mail, telegraph or any type of electronic communication at least two days before
the day of the meeting; provided, however, that notice of any meeting need not
be given to any director if waived by him in writing, or if he shall be present
at such meeting.
Except as otherwise provided in these By-laws, a majority of the directors
in office shall constitute a quorum of the Board competent to transact business;
but a lesser number may adjourn from day to day until a quorum is present.
Except as otherwise
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provided in these By-laws, all questions shall be decided by a vote of a
majority of the directors present.
All or any number less than all of the directors may participate in a
meeting of the Board of Directors or of a committee of the Board of Directors by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Each committee referred to or provided for in these By-laws shall have
authority, except as may otherwise be required by law or by resolution of the
Board of Directors, to fix its own rules of procedure and to meet where and as
provided by such rules. The presence at any meeting of any such committee of a
majority of the members, including alternate members thereof, shall be necessary
to constitute a quorum for the transaction of business and in every case the
affirmative vote of a majority of such members present at any meeting shall be
necessary for the adoption of any resolution of such committee. In the absence
or disqualification of any member of such committee or committees, the member or
members thereof, including alternate members, present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another director to act at the meeting in the place of any
such absent or disqualified member.
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ARTICLE VI.
Chairman of the Board
The Chairman of the Board shall preside at all meetings of the Board of
Directors at which he is present and shall call meetings of the Board and Board
Committees when he deems them necessary. Unless otherwise precluded from doing
so by these By-laws, he may be a member of the committees of the Board. He shall
act as chairman at all meetings of the shareholders at which he is present
unless he elects that the Chief Executive Officer shall so preside. The Chairman
of the Board may be designated by the Board as an officer of the Corporation and
may be elected by the Board as the Chief Executive Officer. The Chairman of the
Board shall perform all duties as may be assigned to him by the Board of
Directors.
ARTICLE VII.
President; Chief Executive Officer
The President shall have such powers and duties as may, from time to time,
be prescribed by the Board of Directors or the Chairman of the Board. Unless the
Board of Directors shall otherwise direct, the President shall be the Chief
Executive Officer of the Corporation. In the absence of the Chairman of the
Board, the President or, if none, the Chief Executive Officer shall perform the
duties and have the powers of the Chairman of the Board, as determined by the
Board of Directors.
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The Chief Executive Officer shall have general charge of the affairs of the
Corporation, subject to the control of the Board of Directors. He may appoint
all officers and employees of the Corporation for whose election no other
provision is made in these By-laws, and may discharge or remove any officer or
employee, subject to action thereon by the Board of Directors as required by
these By-laws. He shall be the officer through whom the Board delegates
authority to corporate management, and shall be responsible to see that all
orders and resolutions of the Board are carried into effect by the proper
officers or other persons. He shall also perform all duties as may be assigned
to him by the Board of Directors.
ARTICLE VIII.
Secretary
The Secretary shall attend meetings of the shareholders and the Board of
Directors, shall keep minutes thereof in suitable books, and shall send out all
notices of meetings as required by law or by these By-Laws. He shall, in
general, perform all duties incident to the office of the Secretary and perform
such other duties as may be assigned to him by the Board, the Chairman of the
Board or the President.
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ARTICLE IX.
Treasurer
The Treasurer shall have custody of, and shall manage and invest, all
moneys and securities of the Corporation, and shall have such powers and duties
as generally pertain to the office of Treasurer.
To the extent not invested, the Treasurer shall deposit all moneys in such
banks or other places of deposit as the Board of Directors may from time to time
designate or as may be designated by any officer or officers of the Corporation
so authorized by resolution of the Board of Directors. Unless otherwise provided
by the Board of Directors, all checks, drafts, notes and other orders for the
payment of money from a disbursing account shall be signed by the Treasurer or
such person or persons as may be designated by name by the Treasurer in writing.
The Treasurer's signature and, if authorized by the Treasurer in writing, the
signature of such person or persons as may be designated by the Treasurer as
provided above, to a check, draft, note or other order for the payment of money
from a disbursing account may be by facsimile or other means. Procedures for
withdrawal of moneys from accounts other than disbursing accounts shall require
the approval and signature of the Treasurer, an assistant treasurer or such
person or persons as may be designated by name by the Treasurer in writing and
also of the Controller, an assistant controller or such person
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or persons as may be designated by name by the Controller in writing.
The Treasurer shall have such other powers and perform such other duties as
may be assigned by the Board of Directors. The Chief Financial Officer of the
Corporation shall have all of the powers granted to the Treasurer under these
by-laws, including the power to sign any check, draft, note or other order for
the payment of money from a disbursing account, including by facsimile signature
or other means.
ARTICLE X.
Controller
The Controller shall have general charge of the Accounting Department of
the Corporation and its controlled companies. He shall prescribe and supervise a
system of accounting and internal auditing that shall be adopted and followed by
the Corporation and its controlled companies. He, or some other person or
persons designated by him by name, in writing, shall prepare and certify all
vouchers and payrolls. As provided in Article IX, procedures for withdrawal of
moneys from accounts other than disbursing accounts shall require the approval
and signature of the Controller, an assistant controller or such person or
persons as may be designated by name by the Controller in writing. The
Controller shall at the close of each month present for the information of the
Board of Directors a complete
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statement of the Corporation's financial affairs and of its operations for
the preceding month and for the months elapsed since the commencement of the
fiscal year. He shall also present full statements of the properties owned and
controlled by the Corporation, under appropriate headings, as the Board of
Directors may at any time require. He shall carefully preserve and keep in his
custody in the office of the Corporation, contracts, leases, assignments and
other valuable instruments in writing. He shall be charged with the duty of
verification of all property of the Corporation and of its controlled companies
and the supervision of the taking of all inventories.
ARTICLE XI.
Assistant Secretary, Assistant Treasurer,
Assistant Controller and Other Officers
In the event of the absence or inability to serve of the Secretary, an
assistant secretary shall perform all the duties of the Secretary; in the event
of the absence or inability to serve of the Treasurer, an assistant treasurer
shall perform all the duties of the Treasurer; and in the event of the absence
or inability to serve of the Controller, an assistant controller shall perform
all the duties of the Controller.
The powers and duties of other officers of the Corporation shall be such as
may, from time to time, be prescribed by the Board of Directors, the Chairman of
the Board, the President or the Chief Executive Officer.
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In case of the absence of any officer of the Corporation, or for any other
reason that the Board of Directors may deem sufficient, the Board, or in the
absence of action by the Board, the Chief Executive Officer, or in his absence,
the President, or in his absence, the Chairman of the Board, may delegate for
the time being the powers and duties of any officer to any other officer or to
any director.
ARTICLE XII.
Corporate Seal
The Corporation shall have a corporate seal, which shall contain within a
circle the name of the Corporation, together with the following: "Incorporated
1872".
ARTICLE XIII.
Certificates of Stock
The shares of stock of the Corporation shall be represented by certificates
of stock, signed by the President or one of the Vice Presidents or other officer
designated by the Board of Directors, countersigned by the Treasurer or an
assistant treasurer and sealed with the corporate seal of the Corporation; and
if such certificates of stock are signed or countersigned by a corporate
transfer agent or a corporate registrar of this Corporation, such signature of
the President, Vice President or other officer, such counter-signature of the
Treasurer or
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assistant treasurer, and such seal, or any of them, may be executed in
facsimile, engraved or printed.
ARTICLE XIV.
Transfers of Stock
Transfers of shares of stock of the Corporation shall be made on the books
of the Corporation by the holder of record thereof or his legal representative,
acting by his attorney-in-fact duly authorized by written power of attorney
filed with the Secretary of the Corporation, or with one of its transfer agents,
and on surrender for cancellation of the certificate or certificates for such
shares. Except as otherwise provided in these By-laws, the person in whose name
shares of stock stand on the books of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation. The Corporation may have
one or more transfer offices of agencies and registrars for the transfer and
registration of shares of stock of the Corporation.
The Board of Directors may fix in advance a time, which shall not be more
than ninety days prior to the date of any meeting of stockholders, or the date
for the payment of any dividend or distribution, or the date for the allotment
of rights, or the date when any change or conversion or exchange of shares will
be made or go into effect, as a record date, for the determination of the
stockholders entitled to notice of, or to vote at, any such meeting, or entitled
to receive payment of any
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such dividend or distribution, or to receive any such allotment of rights,
or to exercise the rights in respect of any such change, conversion or exchange
of shares; and in such case only stockholders of record at the time so fixed as
a record date shall be entitled to notice of, or to vote at, such meeting or to
vote at any adjournment thereof, or to receive payment of such dividend or
distribution, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of stock on the books
of the Corporation after any such record date fixed as aforesaid.
ARTICLE XV.
Fiscal Year
The fiscal year of the Corporation shall be the calendar year.
ARTICLE XVI.
Employees' Stock Purchases and Stock Option Plans
Shares of Common Stock of the Corporation may be reserved, from time to
time, by the Board of Directors for offering for sale, pursuant to one or more
plans, to employees, including assistant officers, of the Corporation and to
employees, including officers, of its subsidiaries, on an installment payment
basis, either by deductions from pay or by direct cash payments, or otherwise.
Shares so reserved may be offered for sale, from time to time, pursuant to such
plan or plans, but may
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be issued only after completion of payment therefor. Except for shares
acquired pursuant to a plan for the deferral of director fees, directors, other
than employee directors, will not be eligible to purchase shares hereunder.
The Board of Directors may determine, with respect to any plan, the class
or classes of employees eligible to participate therein, the number of shares to
be offered, the number of shares which the respective employees may elect to
purchase (which may, but need not, be fixed in proportion to their compensation)
and the price at which the shares will be offered for sale. The price so
determined by the Board (i) may be a fixed price, or (ii) may be a price
determined by the average market price of the shares for a designated period or
periods, or (iii) may be a price less than such average market price by a fixed
amount or a specified percentage thereof. In any event, the price determined by
the Board shall not be less than the par value of the shares.
Each such plan shall set forth the terms and conditions upon which an
employee may elect to purchase shares thereunder, upon which any such election
may be cancelled by the employee or terminated by the Corporation, and upon
which funds credited to the employee's account shall be refunded to him or
applied to the purchase of shares.
Subject to the foregoing, the Board of Directors may prescribe the terms
and conditions of each plan.
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Shares of Common Stock of the Corporation may also be reserved, from time
to time, by the Board of Directors for sale upon the exercise of options granted
pursuant to one or more plans to officers and other employees of the Corporation
and its subsidiaries, but not including any director who is not also such an
officer or employee. Any such plan shall be administered by a committee
consisting of three or more members of the Board of Directors who are not
eligible to receive options under the plan. The members of any such committee
shall be appointed by the Board of Directors and shall have plenary authority to
determine the individuals to whom and the time or times at which options shall
be granted; to determine the number of shares to be subject to each option; to
determine the duration of such options; to determine the purchase price of the
Common Stock under any such option, which may be less than the fair market value
of the stock at the time of the granting of the option and which, upon the
exercise of any option, shall be paid in full with respect to the shares then
purchased under such option; to determine the terms and provisions of the
respective option agreements, which need not be identical, and which may include
such terms and provisions as shall be necessary or desirable under tax law and
to make such other determinations as shall be deemed to be necessary or
advisable for the administration of such plan. Any such plan shall contain such
other terms and conditions as the Board of Directors may prescribe.
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ARTICLE XVII.
Indemnification
A. Indemnification Provisions Applicable to Proceedings Not Covered by
Section B. of this Article.
Every person who is or was a director, officer or employee of the
Corporation, or of any other corporation which he serves or served as such at
the request of the Corporation, shall, in accordance with this Article XVII but
not if prohibited by law, be indemnified by the Corporation as hereinafter
provided against reasonable expense and any liability paid or incurred by him in
connection with or resulting from any threatened or actual claim, action, suit
or proceeding (whether brought by or in the right of the Corporation or such
other corporation or otherwise), civil, criminal administrative or
investigative, in which he may be involved, as a party or otherwise, by reason
of his being or having been a director, officer or employee of the Corporation
or such other corporation, whether or not he continues to be such at the time
such expense or liability shall have been paid or incurred.
As used in this Article XVII, the term "expense" shall mean counsel fees
and disbursements and all other expenses (except any liability) relating to any
such claim, action, suit or proceeding, and the term "liability" shall mean
amounts of judgments, fines or penalties against, and amounts paid in
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settlement by, a director, officer or employee with respect to any such
claim, action, suit or proceeding.
Any person referred to in the first paragraph of this Article XVII who has
been wholly successful, on the merits or otherwise, with respect to any claim,
action, suit or proceeding of the character described in such first paragraph
shall be reimbursed by the Corporation for his reasonable expense.
Any other person claiming indemnification under the first paragraph of this
Article XVII shall be reimbursed by the Corporation for his reasonable expense
and for any liability (other than any amount paid to the Corporation) if a
Referee shall deliver to the Corporation his written finding that such person
acted, in good faith, in what he reasonably believed to be the best interests of
the Corporation, and in addition with respect to any criminal action or
proceeding, reasonably believed that his conduct was lawful. The termination of
any claim, action, suit or proceeding by judgment, settlement (whether with or
without court approval), adverse decision or conviction after trial or upon a
plea of guilty or of nolo contendere, or its equivalent, shall not create a
presumption that a director, officer or employee did not meet the foregoing
standards of conduct. The person claiming indemnification shall at the request
of the Referee appear before him and answer questions which the Referee deems
relevant and shall be given ample opportunity to present to the Referee evidence
upon which he relies for indemnification; and the Corporation shall, at the
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request of the Referee, make available to the Referee facts, opinions or
other evidence in any way relevant for his finding which are within the
possession or control of the Corporation. As used in this Article XVII, the term
"Referee" shall mean independent legal counsel (who may be regular counsel of
the Corporation), or other disinterested person or persons, selected to act as
such hereunder by the Board of Directors of the Corporation, whether or not a
disinterested quorum exists.
Any expense incurred with respect to any claim, action, suit or proceeding
of the character described in the first paragraph of this Article XVII may be
advanced by the Corporation prior to the final disposition thereof upon receipt
of an undertaking made by or on behalf of the recipient to repay such amount if
it is ultimately determined that he is not indemnified under this Article XVII.
The rights of indemnification provided in this Article XVII shall be in
addition to any rights to which any such director, officer or employee may
otherwise be entitled by contract or as a matter of law and, in the event of
such person's death, such rights shall extend to his heirs and legal
representatives.
B. Indemnification Provisions Applicable to Proceedings Based on Acts or
Omissions on or after January 27, 1987.
SECTION 1. Right to Indemnification and Effect of Amendments.
(a) Right to Indemnification. The Corporation, unless prohibited by
applicable law, shall indemnify any person who is
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or was a director or officer of the Corporation and who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be made so involved in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (a Proceeding) (whether or not the indemnified
liability arises or arose from any threatened, pending or completed Proceeding
by or in the right of the Corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan) (a Covered Entity)
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such Proceeding; provided, however, that except as provided in
Section 4(c) of this Article, the foregoing shall not apply to a director or
officer of the Corporation with respect to a Proceeding that was commenced by
such director or officer. Any director or officer of the Corporation entitled
to indemnification as provided in this Section 1, is hereinafter called an
"Indemnitee". Any right of an Indemnitee to indemnification shall be a contract
right and shall include the right to receive, prior to the conclusion of any
Proceeding, payment of any expenses incurred by the Indemnitee in connection
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with such Proceeding, consistent with the provisions of applicable law as then
in effect and the other provisions of this Article.
(b) Effect of Amendments. Neither the alteration, amendment or repeal
of, nor the adoption of a provision inconsistent with, any provision of this
Article (including, without limitation, this Section 1(b)) shall adversely
affect the rights of any director or officer under this Article with respect to
any Proceeding commenced or threatened, or any alleged act or omission, prior
to such alteration, amendment, repeal or adoption of an inconsistent provision,
without the written consent of such director or officer.
SECTION 2. Insurance; Contracts and Funding. The Corporation may
purchase and maintain insurance to protect itself and any indemnified person
against any expenses, judgments, fines and amounts paid in settlement as
specified in Section 1 or Section 5 of this Article or incurred by any
indemnified person in connection with any Proceeding referred to in such
Sections, to the fullest extent permitted by applicable law as then in effect.
The Corporation may enter into contracts with any director, officer, employee
or agent of the Corporation or of any Covered Entity in furtherance of the
provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to insure the payment of such amounts as may
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be necessary to effect indemnification as provided in this Article.
SECTION 3. Indemnification and Not Exclusive Right. The right of
indemnification provided in this Article shall not be exclusive of any other
rights to which any indemnified person may otherwise be entitled, and the
provisions of this Article shall inure to the benefit of the heirs and legal
representatives of any indemnified person under this Article and shall be
applicable to Proceedings arising from acts or omissions occurring on or after
January 27, 1987.
SECTION 4. Advancement of Expenses; Request for Indemnification;
Remedies; Presumptions and Defenses. In furtherance, but not in limitation of
the foregoing provisions, the following procedures, presumptions and remedies
shall apply with respect to advancement of expenses and the right to
indemnification under this Article:
(a) Advancement of Expenses. All reasonable expenses incurred by or
on behalf of the Indemnitee in connection with any Proceeding (including any
Proceeding commenced by the Indemnitee under Section 4(c) but excluding any
other Proceeding commenced by the Indemnitee) shall be advanced to the
Indemnitee by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the expenses
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incurred by the Indemnitee and, if required by law at the time of such
advance, shall include or be accompanied by an undertaking by or on behalf of
the Indemnitee to repay the amounts advanced if it should ultimately be
determined that the Indemnitee is not entitled to be indemnified against such
expenses pursuant to this Article.
(b) Request for Indemnification. To obtain indemnification under
this Article, an Indemnitee shall submit to the Secretary of the Corporation a
written request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine whether and to
what extent the Indemnitee is entitled to indemnification (the Supporting
Documentation).
(c) Remedies; Presumptions and Defenses. If (i) expenses are not
advanced in full within 20 days after receipt by the Corporation of the
statement or statements and the undertaking (if an undertaking is required by
law, By-law, agreement or otherwise at the time of such advance) required by
Section 4(a) of this Article, or (ii) indemnification is not paid in full within
60 days after receipt by the Corporation of the written request for
indemnification and Supporting Documentation required by Section 4(b) of this
Article, then the person claiming advancement of expenses or indemnification
shall be entitled to seek judicial enforcement of the Corporation's obligation
to pay such advancement of expenses or indemnification. It shall be a defense to
any Proceeding
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seeking judicial enforcement of the Corporation's obligation to pay
indemnification that the conduct of the person claiming indemnification was such
that under Pennsylvania law the Corporation is prohibited from indemnifying such
person for the amount claimed. The Corporation shall have the burden of proving
such defense. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such Proceeding that indemnification
is proper in the circumstances, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that such indemnification is prohibited by law, shall be a defense
to a Proceeding seeking enforcement of the provisions of this Article or create
a presumption that such indemnification is prohibited by law. The only defense
to any such Proceeding to receive payment of expenses in advance shall be
failure to make an undertaking to reimburse, if such an undertaking is required
by law, By-law, agreement or otherwise. Notwithstanding the foregoing, the
Corporation may bring an action, in an appropriate court in the Commonwealth of
Pennsylvania or any other court of competent jurisdiction, contesting the right
of a person claiming advancement of expenses or indemnification to receive such
advancement or indemnification hereunder because such advancement or
indemnification is prohibited by law; provided, however, that in any such action
the Corporation shall have the
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burden of proving that such advancement or indemnification is prohibited by
law.
The Corporation shall be precluded from asserting in any action or
Proceeding commenced pursuant to this Section 4(c) that the procedure and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such court that the Corporation is bound by all the provisions
of this Article.
If the person claiming advancement of expenses or indemnification, pursuant
to this Section 4(c), seeks to enforce his rights under, or to recover damages
for breach of this Article, that person shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any expenses
actually and reasonably incurred by such person if such person prevails in such
Proceeding. If it shall be determined in such Proceeding that such person is
entitled to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by such person in connection with such
Proceeding shall be prorated accordingly.
SECTION 5. Indemnification of Employees and Agents. Notwithstanding any
other provision or provisions of this Article, the Corporation, unless
prohibited by applicable law, may indemnify any person other than a director or
officer of the Corporation who is or was an employee or agent of the Corporation
and who is or was involved in any manner (including, without limitation, as a
party or a witness) or is threatened to
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be made so involved in any threatened, pending or completed Proceeding by
reason of the fact that such person is or was a director, officer, employee or
agent of a Covered Entity against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such Proceeding. The Corporation may also
advance expenses incurred by such employee or agent in connection with any such
Proceeding, consistent with the provisions of applicable law as then in effect.
SECTION 6. Severability. If any provision or provisions of this Article
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Article (including, without limitation, all portions of any Section of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Article (including, without limitation, all
portions of any Section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
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ARTICLE XVIII.
Director Liability
To the fullest extent that the law of the Commonwealth of Pennsylvania, as
it exists on January 27, 1987, or as it may thereafter be amended, permits the
elimination of the liability of directors, no director of the Corporation shall
be liable for monetary damages for any action taken, or any failure to take any
action. This Article shall not apply to any breach of performance of duty or any
failure of performance of duty by any director occurring prior to January 27,
1987. No amendment to or repeal of this Article shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any act or failure to act on the part of such director
occurring prior to such amendment or repeal.
ARTICLE XIX.
Pennsylvania Opt Out
A. "Subsections (e) through (g) of Section 1721, "Board of Directors," of
Title 15 of the Pennsylvania Consolidated Statutes, or any successor subsections
thereto, shall not be applicable to the Corporation.
B. Subchapter G, "Control-Share Acquisitions," of Chapter 25, Title 15 of
the Pennsylvania Consolidated Statutes, or any
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successor subchapter thereto, shall not be applicable to the Corporation.
C. Subchapter H, "Disgorgement By Certain Controlling Shareholders
Following Attempts to Acquire Control," of Chapter 25, Title 15 of the
Pennsylvania Consolidated Statutes, or any successor subchapter thereto, shall
not be applicable to the Corporation."
ARTICLE XX.
Amendments
The By-laws of the Corporation, regardless of whether adopted by the
stockholders or by the Board of Directors, may be altered, amended or repealed
by the Board of Directors, to the extent permitted by applicable law, or,
subject to the third paragraph of Article I hereof, by the stockholders. Such
action at a meeting of the Board of Directors shall be taken by the affirmative
vote of a majority of the members of the Board of Directors in office at the
time; and such action by the stockholders shall be taken by the affirmative vote
of the holders of 80% of the shares of capital stock of the Corporation entitled
to vote thereon.
These By-laws are subject to any requirements of law, any provisions of the
Articles of the Corporation, as from time to time amended, and any terms of any
series of preferred stock or any other securities of the Corporation.
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ARTICLE XXI.
Confidentiality in Voting
Stockholders shall be provided permanent confidentiality in all voting,
except as necessary to meet applicable legal requirements. The Corporation shall
engage the services of an independent third party to receive, inspect, count and
tabulate proxies. A representative of the independent third party shall also act
as a judge of election at the annual meeting of stockholders.
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Exhibit 10(d)
WESTINGHOUSE EXECUTIVE PENSION PLAN
As Amended and Restated
Effective January 1, 1995
99
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1 - Definitions 1
Section 2 - Qualification for Benefits;
Mandatory Retirement 4
Section 3 - Calculation of Executive Pension 4
Supplement
Section 4 - Death in Active Service 5
Section 5 - Payment of Benefits 6
Section 6 - Plan Costs 7
Section 7 - Conditions to Receipt of Executive 7
Pension Supplement
Section 8 - Administration 7
Section 9 - Modification or Termination 8
Section 10 - Miscellaneous 9
Section 11 - Creditors' Claims 9
Section 12 - Change in Control 9
Section 13 - Governing Law 12
Section 14 - Severability 12
Section 15 - Authority to Expand Benefits 12
Appendix A - Executive Buy Back 13
Appendix B - Rehired Executives 14
</TABLE>
<PAGE> 3
WESTINGHOUSE EXECUTIVE PENSION PLAN
WHEREAS, Westinghouse Electric Corporation ("Westinghouse") established the
Westinghouse Executive Pension Plan (the "Plan") in order to provide
supplemental pension benefits for its eligible employees and their
beneficiaries; and
WHEREAS, the Plan has been established by Westinghouse primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees; and
WHEREAS, the Board of Directors of Westinghouse has determined to amend the
Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended and restated in its entirety,
effective as of January 1, 1995, as follows:
SECTION 1. DEFINITIONS
(a) ADMINISTRATIVE MANAGERS. Administrative Managers means the persons or
entities identified from time to time by the chief executive officer of
Westinghouse to serve as administrative managers for the Plan, the Westinghouse
Pension Plan and certain other plans, and to have authority with respect to
administration and all other fiduciary matters with respect to such plans that
are not within the authority of the Financial Managers.
(b) AVERAGE ANNUAL COMPENSATION. Average Annual Compensation means the
amount determined by multiplying 12 times the average of the five highest of the
Executive's December 1 monthly base salaries during the ten year period
immediately preceding the earliest of the Executive's date of death, the
Executive's actual retirement date or the Executive's Normal Retirement Date,
and adding to that product the average of the Executive's five highest annual
incentive compensation awards paid under the Westinghouse Annual Incentive
Programs or equivalent annual program or programs during the ten-year period
ending with the earliest of the year of the Executive's death, the year of the
Executive's actual retirement date or the year of the Executive's Normal
Retirement Date.
(c) BOARD. Board means the Board of Directors of Westinghouse.
(d) DEFINED CONTRIBUTION PLAN. When used in the Plan, the term "defined
contribution plan" shall not include (1) the Westinghouse Savings Program or any
similar program of an Employer or a Designated Entity or (2) any amount received
pursuant to a cash or deferred arrangement (as that term is defined in the
Internal Revenue Code of 1986, as amended) maintained by Westinghouse, an
Employer or a Designated Entity.
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(e) DESIGNATED ENTITY. Designated Entity means an Affiliated Entity or
other entity that has been and is still designated by the Managers as
participating in the Plan.
(f) EMPLOYER. Employer means a participating Employer under the
Westinghouse Pension Plan.
(g) EXECUTIVE. Executive means any Employee who is employed in a corporate
grade 40 or above position or a comparable position with Westinghouse, an
Employer or a Designated Entity, or in a position with Westinghouse, an Employer
or a Designated Entity that is otherwise determined by the chief executive
officer of Westinghouse or the Managers to be eligible as an Executive position
under the Plan based upon the duties and responsibilities of the position, and
the Employee has been so notified in writing.
By participating in the Westinghouse Executive Pension Plan, an
Executive is also deemed to be a "bona fide executive" and/or "high policymaking
employee," as defined under the federal Age Discrimination in Employment Act, as
amended.
(h) EXECUTIVE BENEFIT SERVICE. Executive Benefit Service means the
Executive's total years of Eligibility Service if: (1) the Executive was making
the Maximum Contribution during each of those years; or (2) the Executive (i)
was making the Maximum Contribution during each of those years after the date he
or she first became an Executive and (ii) has complied with the provisions of
the Executive Buy Back process (as set forth in Appendix A of the Plan) as to
those years prior to his or her first becoming an Executive. The Executive
Benefit Service of an Executive who did not make the Maximum Contribution during
those years prior to the date he or she first became an Executive and has not
complied with the Executive Buy Back process will be based solely on the
period(s) of Eligibility Service during which he or she made the Maximum
Contribution.
(i) EXECUTIVE PENSION BASE. Executive Pension Base means the amount
determined by multiplying 1.47 percent times Average Annual Compensation times
the number of years of Executive Benefit Service accrued to the earliest of the
Executive's actual retirement date, the Executive's Normal Retirement Date or
the date of the Executive's death.
(j) EXECUTIVE PENSION SUPPLEMENT. Executive Pension Supplement means the
pension calculated pursuant to Sections 3 and 4 of this Plan. There will be no
Executive Pension Supplement payable if the Executive's Qualified Plan Benefit
equals or exceeds his or her Executive Pension Base.
(k) FINANCIAL MANAGERS. Financial Managers means the persons or entities
identified from time to time by the chief executive officer of Westinghouse to
serve as financial managers for the Plan, the Westinghouse Pension Plan and
certain other plans, and to have authority with respect to establishing
investment policy, appointing,
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directing, providing guidelines to and monitoring the performance of investment
managers and trustees, establishing funding and actuarial policies and
practices, and managing the funding, cost and financial aspects of such plans.
(l) MANAGERS. Managers means the Financial Managers and the Administrative
Managers.
(m) MAXIMUM CONTRIBUTION. Maximum Contribution means: (1) during such time
as the Employee was eligible to participate in the Westinghouse Pension Plan,
the Employee contributed the maximum amount the Employee was permitted to
contribute to the Westinghouse Pension Plan, and (2) during such time as the
Employee was employed by a Designated Entity, the Employee (i) contributed the
maximum amount the Employee was permitted to contribute, if any, to that
Designated Entity's defined benefit pension or defined contribution plan, if
any, and (ii) paid Westinghouse an amount of each of his or her annual incentive
compensation awards based on the maximum Westinghouse Pension Plan contribution
formula applied to 50% of said awards.
(n) PLAN. Plan means the Westinghouse Executive Pension Plan.
(o) QUALIFIED PLAN BENEFIT. Qualified Plan Benefit means (1) the annual
amount of pension the Executive has accrued under the Westinghouse Pension Plan
and any applicable defined benefit pension plan of a Designated Entity based on
Credited Service accumulated up to the earlier of the Executive's actual
retirement date or death, (2) the amount the Executive is entitled to receive on
a life annuity basis for retirement under any applicable defined contribution
plan of a Designated Entity, and (3) in any case where service included in the
Executive's Eligibility Service also entitles that Executive to benefits under
one or more retirement plans (whether a defined benefit or defined contribution
plan or both) of another company, the amount the Executive is entitled to
receive on a life annuity basis for retirement from those plans; provided, the
method of benefit measurement, in the case of (2) and (3) above, shall be on the
basis of procedures determined by the Administrative Managers on a plan-by- plan
basis. The Qualified Plan Benefit does not include any early pension retirement
supplement or any amount received pursuant to a cash or deferred arrangement (as
that term is defined in the Internal Revenue Code of 1986, as amended)
maintained by Westinghouse, an Employer or a Designated Entity or any amount
received pursuant to the Westinghouse Savings Program or any similar program of
an Employer or a Designated Entity.
(p) RETIREMENT ELIGIBLE. Retirement Eligible means that the Executive is
accruing Eligibility Service and (i) has attained age 65 and completed five or
more years of Eligibility Service, (ii) has attained age 60 and completed 10 or
more years of Eligibility Service, (iii) has attained age 58 and completed 30 or
more years of Eligibility Service, or (iv) has satisfied the requirements for an
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immediate pension under the Special Retirement Pension provisions of the
Westinghouse Pension Plan.
(q) WESTINGHOUSE. Westinghouse means Westinghouse Electric Corporation.
(r) WESTINGHOUSE ANNUAL INCENTIVE PROGRAMS. Westinghouse Annual Incentive
Programs means the Westinghouse Annual Performance Plan, the Westinghouse Annual
Incentive Plan, and the former Westinghouse By-law XVI Incentive Compensation
Program.
(s) WESTINGHOUSE PENSION PLAN DEFINITIONS. Terms used in this Plan which
are defined in the Westinghouse Pension Plan, as amended, shall have the same
meanings unless otherwise expressly stated in this Plan.
SECTION 2. QUALIFICATION FOR BENEFITS; MANDATORY RETIREMENT
(a) QUALIFICATION FOR BENEFITS. Subject to Section 8 and other applicable
provisions hereof, if any, each Executive shall be entitled to the benefits of
this Plan on separation of service from Westinghouse, an Employer or a
Designated Entity, provided that such Executive: (i) has been employed in a
position that meets the definition of Executive for five or more continuous
years immediately preceding the earlier of the Executive's actual retirement
date or the Executive's Normal Retirement Date; (ii) has made the Maximum
Contribution during each year of Eligibility Service from the date he or she
first became an Executive until the earliest of his or her date of death, actual
retirement date or Normal Retirement Date; (iii) is a participant in the
Westinghouse Pension Plan or in the defined benefit or defined contribution plan
of a Designated Entity, if any; and (iv) is Retirement Eligible on the date of
voluntary or involuntary separation of service from Westinghouse, an Employer or
a Designated Entity or, in the case of a Surviving Spouse benefit, satisfies the
requirements for benefits under Section 4 of the Plan.
(b) MANDATORY RETIREMENT. Pursuant to this Plan, Westinghouse shall be
entitled, at its option, to retire any Executive who has attained sixty-five
years of age and who, for the two-year period immediately before his or her
retirement, has participated in this Plan, if such Executive is entitled to an
immediate nonforfeitable annual retirement benefit from a pension,
profit-sharing, savings or deferred compensation plan, or any combination of
such plans, of Westinghouse, an Employer or any Affiliated Entity, which equals,
in the aggregate, at least $44,000. The calculation of such $44,000 (or greater)
amount shall be performed in a manner consistent with 29 U.S.C.A. Section
631(c)(2).
SECTION 3. CALCULATION OF EXECUTIVE PENSION SUPPLEMENT
The Executive Pension Supplement for an Executive who meets the
qualifications of Section 2 of the Plan retiring on an Early, Normal or Special
Retirement Date shall be calculated as follows:
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(a) If the Executive (i) has attained age 60 and completed 10 or more years
of Eligibility Service, (ii) has attained age 65, or (iii) has satisfied the
eligibility requirements for an immediate pension under the Special Retirement
Pension provisions of the Westinghouse Pension Plan, the Executive Pension
Supplement is determined by subtracting the Executive's Qualified Plan Benefit
that would be payable if he or she elected a Life Annuity Option (after any
reduction for early retirement, if applicable) from his or her Executive Pension
Base.
(b) If the Executive has not met the requirements of Section 3(a) above but
has attained age 58 and completed 30 or more years of Eligibility Service, the
Executive Pension Supplement is determined by subtracting the Executive's
Qualified Plan Benefit that would be payable if he or she elected a Life Annuity
Option (before any reduction for retirement prior to age 60) from his or her
Executive Pension Base.
SECTION 4. DEATH IN ACTIVE SERVICE
(a) ELIGIBILITY FOR AN IMMEDIATE BENEFIT. If an Executive dies in active
service and, on his or her date of death, satisfies the requirements of the
Surviving Spouse Benefit for Death Before Retirement provisions of the
Westinghouse Pension Plan and satisfied the requirements of Section 2(ii) and
(iii) at the time of death, a Surviving Spouse benefit shall also be payable
under this Plan if his or her Executive Pension Base exceeds his or her
Qualified Plan Benefit. The duration portion of the requirement of Section 2(i)
of the Plan that the Executive be employed in a position that meets the
definition of Executive for five or more continuous years is waived in this
case.
The Surviving Spouse Benefit under this Section 4(a) shall be the
Executive Pension Supplement reduced in the same manner as though the benefit
were payable under the Westinghouse Pension Plan. For purposes of this
paragraph, the Executive Pension Supplement shall be calculated as follows:
(i) If the Executive had attained age 60 or if the Executive had
completed 30 years of Eligibility Service, the Executive Pension Supplement
would be calculated as described in Section 3(a);
(ii) If the Executive did not meet either of the requirements set forth
in subparagraph (i) above, the Executive Pension Supplement would be 80% of the
difference between the Executive Pension Base and the unreduced Qualified Plan
Benefit.
(b) ELIGIBILITY FOR A DEFERRED BENEFIT. If an Executive dies in active
service who does not satisfy the requirements of Section 4(a) above but who
satisfies the requirements of the Surviving Spouse Benefit for Certain Vested
Employees provisions of the Westinghouse Pension Plan and satisfied the
requirements of Section 2(ii) and
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(iii) at the time of death, a Surviving Spouse benefit shall also be payable
under this Plan if his or her Executive Pension Base exceeds his or her
Qualified Plan Benefit. The duration portion of the requirement of Section 2(i)
of the Plan that the Executive be employed in a position that meets the
definition of Executive for five or more continuous years is waived in this
case.
The Surviving Spouse benefit under this Section 4(b) shall be the Executive
Pension Supplement reduced in the same manner as though the benefit were payable
under the Westinghouse Pension Plan. For purposes of this paragraph, the
Executive Pension Supplement shall be calculated by subtracting the Executive's
Qualified Plan Benefit (before any reductions) from his or her Executive Pension
Base.
SECTION 5 - PAYMENT OF BENEFITS
No benefits shall be payable under this Plan to any Executive whose
employment terminates for any reason other than death prior to satisfying the
definition of Retirement Eligible hereunder.
The Executive Pension Supplement shall be paid in monthly installments,
each equal to 1/12th of the annual amount determined in Section 3 or 4,
whichever is applicable. If the Executive or Surviving Spouse is eligible for
Plan benefits, such payments shall commence at the same time as payments under
the Westinghouse Pension Plan, if any. If the Executive or Surviving Spouse is
eligible for Plan benefits and is receiving payments from a defined benefit or
defined contribution plan of a Designated Entity and not from the Westinghouse
Pension Plan, payments shall commence at the same time as payments under the
Designated Entity's plan provided the requirements of Section 2(iv) have been
met. The payments shall be payable for the life of the Executive or the
Executive's Surviving Spouse, as the case may be.
Unless the Financial Managers determine otherwise, the Executive may elect
that the Executive Pension Supplement determined in Section 3 be paid in
accordance with any of the optional forms of payment, other than as a lump sum,
then available under the Westinghouse Pension Plan, subject to the same
reductions or other provisions that apply to the elected form of payment under
the Westinghouse Pension Plan. Any election hereunder as to optional forms of
payment may be revoked prior to the effective date of such election, but may not
be revoked on or after the Executive's actual retirement date for any reason.
All elections hereunder become effective on the Executive's actual retirement
date.
Regardless of the form of payment elected by the Executive, after the
Executive retires and begins receiving an Executive Pension Supplement a minimum
of 60 times the monthly payment he or she would have received on a life annuity
basis is guaranteed hereunder.
Surviving Spouse benefits under this Plan will be paid in accordance with
the form of payment made for Surviving Spouse
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Benefits under the Westinghouse Pension Plan. Once a Surviving Spouse Benefit
determined under Section 4(a) has commenced, a minimum of 60 times the monthly
benefit payable to the Surviving Spouse is guaranteed hereunder.
In the event that an Executive retires or otherwise ceases to be an
Employee of Westinghouse, an Employer or a Designated Entity and is later
rehired by one of those entities, the additional provisions set forth in
Appendix B to the Plan will apply.
SECTION 6 - PLAN COSTS
Benefits payable under the Plan and any expenses in connection therewith
will be paid by Westinghouse to the extent they are not available to be paid
from any trust fund established by Westinghouse to help defray the costs of
providing Plan benefits.
SECTION 7 - CONDITIONS TO RECEIPT OF EXECUTIVE PENSION SUPPLEMENT
Payments of benefits under this Plan to Executives are subject to the
condition that the recipient shall not engage directly or indirectly in any
business which is at the time competitive with any business or part thereof, or
activity then conducted by, Westinghouse, any of its subsidiaries or any other
corporation, partnership, joint venture or other entity of which Westinghouse
directly or indirectly holds a 10% or greater interest (together, the "Company")
in the area in which such business, or part thereof, or activity is then being
conducted by the Company, unless such condition is specifically waived with
respect to such recipient by the Westinghouse Board of Directors. Breach of the
condition contained in the preceding sentence shall be deemed to occur
immediately upon an Executive's engaging in competitive activity. Payments
suspended for breach of the condition shall not thereafter be resumed whether or
not the Executive terminates the competitive activity. A recipient shall be
deemed to be engaged in such a business indirectly if he or she is an employee,
officer, director, trustee, agent or partner of, or a consultant or advisor to
or for, a person, firm, corporation, association, trust or other entity which is
engaged in such a business or if he or she owns, directly or indirectly, in
excess of five percent of any such firm, corporation, association, trust or
other entity. The ongoing condition of this Section 7 shall not apply to an
Executive age 65 or older.
SECTION 8 - ADMINISTRATION
This Plan shall be administered by the Administrative Managers. The
Administrative Managers shall have the right to make reasonable rules from time
to time regarding the Plan. All such rules shall be consistent with the policy
provided herein, and the Plan shall be further subject to such reasonable
interpretations as may be made from time to time by the Administrative Managers,
which interpretations shall in all cases be final and not be subject to appeal.
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In accordance with the provisions of Section 503 of the Employee Retirement
Income Security Act of 1974, the Administrative Managers shall provide a
procedure for handling claims of participants or their beneficiaries under this
Plan. Such procedure shall be in accordance with regulations issued by the
Secretary of Labor and shall provide adequate written notice within a reasonable
period of time with respect to the denial of any such claim as well as a
reasonable opportunity for a full and fair review of any such denial.
The Board may authorize the establishment of one or more trusts and the
appointment of a trustee or trustees ("Trustee") to hold any and all assets of
the Plan in trust.
SECTION 9 - MODIFICATION OR TERMINATION
(a) Westinghouse reserves the right, at any time and from time to time,
without notice, to suspend or terminate the Plan or to amend, in whole or in
part, any and all provisions of the Plan, acting as follows:
(i) The Board may suspend the Plan, terminate the Plan, or adopt Plan
amendments that amend any and all provisions of the Plan in whole or in part;
(ii) The Compensation Committee of the Board may adopt Plan amendments
that amend any and all provisions of the Plan in whole or in part;
(iii) The Managers may adopt Plan amendments that amend any and all
provisions of the Plan in whole or in part, provided that no amendments may be
adopted by the Managers that would materially change any Plan benefits or
materially increase the costs of the Plan; and
(iv) The Administrative Managers may adopt Plan amendments that relate
solely to the administration of the Plan and do not materially change any Plan
benefits or materially increase the costs of the Plan.
Any such change, termination or suspension shall be effective at such time
as is specified by the Board, the Compensation Committee, the Managers, or the
Administrative Managers, as applicable, or, if no such time is so specified,
upon the adoption thereof.
(b) Notwithstanding the above, no such change or termination may adversely
affect (i) the benefits of any Executive who retires prior to such change or
termination or (ii) the right of any then current Executive to receive upon
retirement (or to have a Surviving Spouse or beneficiary receive upon the
Executive's death), an Executive Pension Supplement, calculated as of the
effective date of such change or termination, under the Plan provided that the
Executive meets the following two conditions: (1) at the time of such change or
termination the Executive has vested pension benefits under the
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Westinghouse Pension Plan and/or any applicable pension plan of a Designated
Entity, and (2) at the date of such change or termination and at the date of
actual retirement or death the Executive has occupied, for the then required
period next preceding such dates, a position that meets the definition of
Executive in Section 1(g) of this Plan as in effect at the date of such change
or termination.
SECTION 10 - MISCELLANEOUS
(a) No Executive, former Executive or Surviving Spouse shall have the right
to anticipate, alienate, sell, transfer, assign, pledge, encumber, or otherwise
subject to lien any of the benefits provided under this Plan. Such rights may
not be subject to the debts, contracts, liabilities, engagements or torts of the
Executive, former Executive or Surviving Spouse of an Executive.
(b) If, in the opinion of Westinghouse, a person to whom a benefit is
payable is unable to care for his or her affairs because of illness, accident or
any other reason, any payment due the person, unless prior claim therefore shall
have been made by a duly qualified guardian or other duly appointed and
qualified representative of such person, may be paid to some member of the
person's family, or to some other party who, in the opinion of Westinghouse, has
incurred expense for such person. Any such payment shall be a payment for the
account of such person and shall be a complete discharge of Westinghouse's
liability under this Plan.
(c) Westinghouse, in adopting this Plan, shall not be held to create or
vest in any Executive or any other person any interest, pension or benefits
other than the benefits specifically provided herein, or to confer upon any
Executive the right to remain in the service of Westinghouse.
SECTION 11 - CREDITORS' CLAIMS
Any assets purchased by Westinghouse to provide benefits under this Plan
shall at all times remain subject to the claims of general creditors of
Westinghouse and any Executive, former Executive or Surviving Spouse of an
Executive participating in the Plan has only an unsecured promise to pay
benefits from Westinghouse.
SECTION 12 - CHANGE IN CONTROL
A. The term "Change in Control" means the occurrence of one or more of the
following events:
(a) there shall be consummated (i) any consolidation or merger of
Westinghouse in which Westinghouse is not the continuing or surviving
corporation or pursuant to which shares of Westinghouse's Common Stock would be
converted into cash, securities or other property, other than a merger of
Westinghouse in which the holders of Westinghouse's Common Stock immediately
prior to the merger have the same proportionate ownership of common stock of the
surviving
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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 Westinghouse, or (b) the stockholders of
Westinghouse shall approve any plan or proposal for the liquidation or
dissolution of Westinghouse, 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
Westinghouse (or securities convertible into Westinghouse 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 Westinghouse
Common Stock (or securities convertible into Westinghouse 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 Exchange Act), corporation or other entity (other than Westinghouse or
any benefit plan sponsored by Westinghouse or any of its subsidiaries) shall
become the "beneficial owner" (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Westinghouse
representing twenty percent or more of the combined voting power of
Westinghouse'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 of Directors of Westinghouse 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 of
Directors of Westinghouse shall cease for any reason to constitute at least a
majority thereof, unless the election or the 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.
B. Notwithstanding any other provision of this Plan, upon a Change in
Control, as defined above, the following shall apply: (i) all Executives shall
be deemed vested; (ii) an amount sufficient to fund all unpaid benefits and any
Surviving Spouse Benefits payable under this Plan, shall be paid immediately by
Westinghouse to the Trustee pursuant to a trust agreement for the Westinghouse
Executive Pension Plan Trust for payment of such benefits at the earliest date
available in accordance with the provisions hereof and on such other terms as a
committee composed of the Chief Executive Officer, the Chief Financial Officer
and the Chief Legal Officer of Westinghouse, shall deem appropriate (including a
direction to the Trustee to pay immediately all benefits on a present value
basis and/or such other terms as they may deem appropriate). Notwithstanding
this funding, Westinghouse shall be obligated to pay benefits to Executives and
to Surviving Spouses of Executives to the extent such funding proves to
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be insufficient. To the extent such funding proves to be more than sufficient,
the excess shall revert to Westinghouse.
Upon a Change in Control, for any Executive in the Plan who is
involuntarily separated and who is not then eligible for a Normal or Special
Retirement Pension under the Westinghouse Pension Plan, such separation shall
be deemed to be a separation due to a Permanent Job Separation, and the Special
Retirement Pension provisions under the Westinghouse Pension Plan shall be used
for purposes of determining eligibility and payment of benefits to such
Executive under the Plan.
The present value of benefits payable by the Trustee shall be calculated
for specific groups of Executives at the time of the Change in Control as
follows:
a. The present value of the benefits payable from this Plan to Executives
who have retired at the time of the Change in Control (as well as
benefits payable from this Plan to any Surviving Spouse of an
Executive) shall be calculated by using the PBGC immediate discount
rate established and in effect for the beginning of the calendar year
in which the Change in Control occurs.
b. The present value of the benefits payable from this Plan to Executives
who are eligible to retire under the terms of this Plan at the time of
the Change in Control shall be calculated by using the PBGC immediate
discount rates established and in effect at the beginning of the
calendar year in which the Change in Control occurs, assuming a
pension which is immediately payable at the time of the Change in
Control.
c. The present value of the benefits payable from this Plan to Executives
who have completed at least thirty (30) years of service with
Westinghouse, an Employer or a Designated Entity but have not yet
attained age 58 at the time of the Change in Control shall be
calculated by using the PBGC deferred discount rates established and
in effect for the beginning of the calendar year in which the Change
in Control occurs, assuming a pension which is payable at age 58.
d. The present value of benefits payable from this Plan to Executives who
have completed at least ten (10) years of service with Westinghouse,
an Employer or a Designated Entity but less than thirty (30) years of
service at the time of the Change in Control, but have not yet
attained age 60 at the time of the Change in Control, shall be
calculated by using the PBGC deferred discount rates established and
in effect for the beginning of the calendar year in which the Change
in Control occurs, assuming a pension which is payable at age 60.
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e. The present value of benefits payable from this Plan to Executives who
have completed less than ten (10) years of service with Westinghouse,
an Employer or a Designated Entity at the time of the Change in
Control shall be calculated by using the PBGC deferred discount rates
established and in effect for the beginning of the calendar year in
which the Change in Control occurs, assuming a pension which is
payable at age 65.
In calculating the benefit payable to each Executive, any offset for the
Westinghouse Pension Plan or other qualified plan in which the Executive
participates, shall be based upon the last official pension file data available,
adjusted to the date of any Change in Control by assuming that the most recent
salary reflected in the pension file remains constant.
Notwithstanding any provision of this Plan, this Plan may not be (a)
amended such that future benefits would be reduced, (b) suspended or (c)
terminated (i) as to the further accrual of benefits, at any time following a
Change in Control; and (ii) as to the payment of benefits, at any time prior to
the last payment, determined in accordance with the provisions of this Plan, to
each Executive, former Executive receiving benefits under the Plan, or eligible
spouse.
SECTION 13 - GOVERNING LAW
To the extent not preempted by federal law, the law of the Commonwealth of
Pennsylvania shall govern the construction and administration of the Plan.
SECTION 14 - SEVERABILITY
If any provision of this Plan or the application thereof to any
circumstance or person is held to be invalid by a court of competent
jurisdiction, the remainder of the Plan and the application of such provision to
other circumstances or persons shall not be affected thereby.
SECTION 15 - AUTHORITY TO EXPAND BENEFITS
The Board or the Compensation Committee of the Board may, from time to time
and without notice, by resolution of the Board or of the Compensation Committee
of the Board, authorize the payment of benefits or expand the benefits otherwise
payable or to be payable hereunder to any one or more individuals.
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APPENDIX A
EXECUTIVE BUY BACK
The Executive Buy Back process permits newly eligible Executives to "buy
back" past years of Executive Benefit Service under the Plan for periods of time
during which they did not make the Maximum Contribution.
If an Employee did not make the Maximum Contribution during each of the
years of his or her Eligibility Service prior to the time he or she first became
an Executive, the Employee will be permitted to pay an amount equal to the
Maximum Contributions that would have been payable during the ten years prior to
the date he or she first became an Executive (or such lesser period from the
later of January 1, 1985 or the date the Employee was employed by Westinghouse,
an Employer or a Designated Entity) plus compounded interest on that amount in
order to "buy back" his or her non-contributory years of service.
Upon qualifying as an Executive, an Executive will be offered an Executive
Buy Back opportunity at the time he or she first becomes an Executive. The
actual terms of the Executive Buy Back will be determined from time to time by
the Administrative Managers. This election will be offered one time to the
Executive and his or her decision whether or not to "buy back" will be
irrevocable.
Executive Buy Back payments will be made to Westinghouse and will not be
deposited into the Westinghouse Pension Plan Trust. Any Executive Buy Back
payments made by the Executive will not increase the Executive's Qualified Plan
Benefit.
If, at some point, an Employee is no longer an Executive or otherwise
becomes ineligible to receive an Executive Pension Supplement, any Executive Buy
Back payments the Employee has made (including any interest the Employee paid)
plus any other amount as defined in Section 1(m)(ii) in the definition of
Maximum Contribution paid by the Employee to Westinghouse will be refunded, with
interest, at such time as the Employee meets one of the following criteria:
termination or retirement from Westinghouse, an Employer or a Designated Entity;
or death; provided, however, no refund shall be made if the Employee is an
eligible Executive, whether or not the amount of his or her Executive Pension
Supplement exceeds zero. All interest rates will be determined at the discretion
of Westinghouse.
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APPENDIX B
REHIRED EXECUTIVES
SECTION 1 - RETIRED EXECUTIVES REHIRED AS EXECUTIVES
If an Executive who retired from Westinghouse, an Employer or a Designated
Entity and who received or is receiving an Executive Pension Supplement as a
lump sum or on a monthly basis is rehired in an Executive position by
Westinghouse, an Employer or a Designated Entity, the following provisions
apply:
(a) For an Executive who elected a monthly Executive Pension Supplement,
the Plan will:
(i) suspend all Executive Pension Supplement payments; and
(ii) if, but only if, the Executive is Retirement Eligible at the
time of subsequent actual retirement:
(1) restore previous years of Eligibility Service and
Executive Benefit Service accrued prior to the
Executive's retirement; and
(2) recalculate the Executive's Executive Pension Supplement
in accordance with the Plan at his or her subsequent
actual retirement date as long as the Executive then
meets all Plan benefit qualification requirements.
The Executive, having previously met the five years of continuous service
as an Executive requirement prior to his or her first retirement, need not again
meet that requirement. The Executive's Average Annual Compensation will be
computed without regard to the break in service, using zero for any periods
during which the Executive was a retiree.
In addition, if the Executive elected to take a lump sum Qualified Plan
Benefit with respect to his or her initial retirement, then in any subsequent
calculation of the Executive's Executive Pension Supplement, the Executive's
Executive Pension Base will be reduced by both the Executive's Qualified Plan
Benefit received at the time of the initial retirement and the Executive's
Qualified Plan Benefit accrued from the date of rehire through the date of his
or her subsequent retirement.
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<PAGE> 17
(b) For an Executive who elected a lump sum Executive Pension Supplement
and who is Retirement Eligible at the time of subsequent actual retirement, the
Plan will:
(i) restore previous years of Eligibility Service but not previous
years of Executive Benefit Service; and
(ii) calculate the Executive's additional Executive Pension
Supplement at his or her subsequent actual retirement date on
the basis of years of service after the rehire in accordance
with the Plan as long as the Executive then meets all Plan
benefit qualification requirements.
As under Section 1(a) of this Appendix B, the Executive, having previously
met the five years of continuous service as an Executive requirement prior to
his or her first retirement, need not again meet that requirement. The
Executive's Average Annual Compensation will be computed without regard to the
break in service, using zero for any periods during which the Executive was a
retiree.
In addition, if the Executive elected a monthly Qualified Plan Benefit with
respect to his or her initial retirement, then the Executive's Qualified Plan
Benefit accrued from the date of rehire through the subsequent date of actual
retirement will be subtracted from the Executive's Executive Pension Base in
calculating the Executive's additional Executive Pension Supplement at his or
her subsequent retirement.
SECTION 2 - FORMER EXECUTIVES WITH VESTED PENSIONS REHIRED AS EXECUTIVES
If the employment of an Executive of Westinghouse, an Employer or a
Designated Entity who was eligible only for a vested pension under the relevant
qualified defined benefit or defined contribution plan, if any, was terminated
and the Executive is rehired by Westinghouse, an Employer or a Designated
Entity, the following provisions apply:
(i) restore previous years of Eligibility Service and Executive
Benefit Service accrued prior to the Executive's termination
of employment;
(ii) the Executive must meet the five years of continuous service
as an Executive requirement prior to a subsequent actual
retirement counting only years of service after the rehire;
and
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<PAGE> 18
(iii) only base salary and incentive awards earned after
the rehire will be used in computing Average Annual
Compensation.
In addition, if the Executive elected to take his or her Vested Pension
as a lump sum, in any calculation of an Executive Pension Supplement at actual
retirement the Executive's Executive Pension Base will be reduced by both the
Executive's Qualified Plan Benefit at the time of the initial termination of
employment and the Executive's Qualified Plan Benefit accrued from the date of
rehire through the date of actual retirement.
SECTION 3 - RETIRED EXECUTIVES REHIRED IN NON-EXECUTIVE POSITIONS
If an Executive who retired from Westinghouse, an Employer or a
Designated Entity and who received or is receiving an Executive Pension
Supplement as a lump sum or on a monthly basis is rehired by Westinghouse, an
Employer or a Designated Entity in a non-Executive position, the following
provisions apply:
(a) For a former Executive who elected a monthly Executive Pension
Supplement, the Plan will:
(i) suspend all Executive Pension Supplement payments; and
(ii) if, but only if, the former Executive is still
Retirement Eligible at time of subsequent actual
retirement, recommence Executive Pension Supplement
payments at the time of the Executive's subsequent actual
retirement without recalculation of amount.
At subsequent actual retirement, the former Executive may re-select any
form of payment of his or her Executive Pension Supplement then permitted under
the Plan.
(b) For a former Executive who elected to take his or her Executive
Pension Supplement as a lump sum, no further benefits will be paid by the Plan.
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<PAGE> 1
Exhibit 10(g)
DIRECTOR'S CHARITABLE GIVING PROGRAM
1. PURPOSE
The purpose of the Director's Charitable Giving Program (the "Program")
established hereby for non-employee members of the Board of Directors, the
Chairman and Chief Executive Officer and his immediate predecessor (the
"Directors") of the Westinghouse Electric Corporation (the "Company") is to
provide a unique opportunity for the Company and the Directors to jointly
participate in a program of charitable giving.
2. ADMINISTRATION
The Program shall be administered by a Committee of the Company consisting
of the Chief Operating Officer, the Chief Financial Officer and the Chief
Legal Officer of the Company (the "Committee").
The Committee shall have full power and authority to adopt, alter and
repeal any administrative rules, regulations and practices governing the
operation of the Program as it shall deem advisable and to interpret the
terms and provisions of the Program. All decisions, interpretations or
resolutions of the Committee shall be conclusive and binding on all
interested parties.
3. ELIGIBILITY
All current non-employee Directors, the Chairman and Chief Executive
Officer of the Company and his immediate predecessor shall be eligible to
participate in the Program. Any person who becomes a non-employee Director
of the Company after the effective date of the Program shall be eligible to
participate after the completion of five years of service as a Director.
117
<PAGE> 2
4. CHARITABLE DONATION
The Company will make a tax-deductible charitable donation in the total
amount of $500,000 on behalf of each Director at the time of the Director's
death to the charitable or other non-profit organizations (the "Charity")
as selected by the Director. Initially, to fund such donation, the Company
will purchase a life insurance policy or policies insuring the lives of the
Directors. The Company will pay the premiums for each life insurance policy
and will be the owner and beneficiary thereof.
The Company and each Director shall execute a written agreement containing
such terms and conditions as the Committee may determine are necessary and
appropriate in furtherance of the Program.
5. DESIGNATION OF CHARITABLE/NON-PROFIT ORGANIZATION
(a) Each Director may designate not more than two Charities as donees of
the $500,000 contribution to be made by the Company by filing with the
Secretary of the Company, a written designation in a form approved by
the Committee, which shall be confirmed in writing by the Secretary.
In the event a Director shall select two donees, each donation shall
be in the amount of $250,000.
(b) Each such Charity designated as a donee in the manner described herein
must be a tax-exempt organization qualified as such under Section
501(c)(3) of the Internal Revenue Code, as amended.
(c) Each designated Charity shall be sent a written notification of such
designation in a form approved by the Committee.
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<PAGE> 3
(d) Prior to death, the designation of a Charity as done by a Director as
described herein may be revoked by the Director at any time by filing
a written revocation or by filing a new written designation form with
the Secretary of the Company, which shall be confirmed in writing by
the Secretary.
6. AMENDMENT AND DISCONTINUANCE
The Company may at any time amend, suspend, or discontinue the Program.
7. CHANGE IN CONTROL
In the event of a Change in Control as defined herein, donations to
charities or other non-profit organizations contemplated hereby may be made
as the Committee may determine as of the date of such Change in Control and
then paid on such basis and in such form as the Committee may prescribe.
A Change in Control shall mean the occurrence of one or more of the
following events:
(a) there shall be consummated (i) 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 Corporation's Common Stock
would be converted into cash, securities or other property, other than a
merger of the Corporation in which the holders of the Corporation's 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 of any plan or proposal for the
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<PAGE> 4
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 the Corporation's 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 Exchange Act), corporation or
other entity (other than the Corporation or any benefit plan sponsored by
the Corporation or any of its subsidiaries) shall become the "beneficial
owner" (as such term is 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 as
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.
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<PAGE> 5
8. EFFECTIVE DATE
The effective date of the Program is July 28, 1988.
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<PAGE> 1
Exhibit 10(h)
1991 LONG-TERM INCENTIVE PLAN
(as amended as of January 26, 1995)
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
122
<PAGE> 2
of three or more members. The members shall be appointed by the 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, including the right
to delegate authority to make Awards within limits approved by the Committee;
(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
<PAGE> 3
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 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.
<PAGE> 4
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 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
<PAGE> 5
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 16,500,000.
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.
<PAGE> 6
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
<PAGE> 7
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.
<PAGE> 8
(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
<PAGE> 9
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
<PAGE> 10
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.
<PAGE> 11
(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
<PAGE> 12
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
<PAGE> 13
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
<PAGE> 14
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.
<PAGE> 15
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.
<PAGE> 16
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
<PAGE> 17
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.
<PAGE> 18
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.
<PAGE> 19
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 on or 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.
<PAGE> 20
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
<PAGE> 21
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, subject to
the exercise provisions of Section 3.2(a) of the Plan, 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.
<PAGE> 22
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) 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 Exchange Act),
corporation or other entity (other than the Corporation or any benefit plan
sponsored by the Corporation or any of its
<PAGE> 23
subsidiaries) shall be the "beneficial owner" (as such term is 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
<PAGE> 24
the Participant other than by will or the applicable laws of 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
<PAGE> 25
the price per share subject to outstanding Options or which may 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
<PAGE> 26
usual vacation periods or periods of illness or other incapacity. 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").
<PAGE> 27
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.
<PAGE> 28
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.
<PAGE> 29
(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 8.11, 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.
<PAGE> 30
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)
<PAGE> 31
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.
<PAGE> 1
Exhibit 10(j)
January 31, 1994
Mr. Fredric G. Reynolds
5400 Preston Oaks Road, Apt. 4035
Dallas, Texas 75240
Dear Fred,
This letter confirms Westinghouse's offer of employment to you for the
position of Senior Vice President, Chief Financial Officer.
Provisions of the offer are as follows:
BASE SALARY - Your annualized base salary for 1994 will be $350,000
paid in accordance with the regular payroll practices of the
Corporation.
ANNUAL INCENTIVE AWARDS - You will be eligible to participate in the
Corporation's annual incentive plan for executives. For this position,
award opportunities typically range between $150,000 and $250,000.
Awards are generally based on: 1) Westinghouse's financial performance
against objectives, 2) Corporate Development's performance on strategic
initiatives and 3) evaluation of individual contributions. For each of
fiscal years 1994 and 1995, a minimum annual incentive award of
$150,000 will be paid if you are actively employed by the Corporation
at the time annual incentive payments are made in January 1995 and
1996, respectively.
LONG-TERM INCENTIVES - The Corporation will provide a one-time
non-qualified stock option grant of 150,000 shares. The option price
will be the fair market value, as defined in the plan, of Westinghouse
common stock on the day the Management Compensation Policy Committee of
the Board ("MCPC") authorizes the grant. The other option terms will be
consistent with the standard Westinghouse stock option provisions of
the options granted by the MCPC in May 1993 under the new plan,
including a provision vesting the options after one year of employment
from the grant date. In addition, an Equity Plus Grant will be made to
you with a target value of $75,000 for the 1992-1994 performance cycle,
subject to the measurements, terms and requirements applicable to
grants to other executives in connection with the 1992-1994 Equity
Plus Grants. You will have an opportunity to defer any amounts earned
in accordance with the applicable deferral provisions (which currently
provide for
153
<PAGE> 2
Mr. Fredric G. Reynolds
January 31, 1994
page -2-
deferral of up to 100% of any amounts earned). Both of the above grants
are subject to shareholder approval of the new long-term incentive
plan.
You will also be eligible for long-term incentive grants applicable to
your position. These grants are typically made in the second quarter of
each year.
EMPLOYEE BENEFITS - Westinghouse will reimburse you for the cost of
COBRA coverage to extend your current health care plan for the three
month waiting period until you and your eligible dependents are
eligible to be covered by Westinghouse's plan.
During your employment, the standard Westinghouse benefit programs
(including pension, disability, life insurance, savings, relocation
program) and perquisites applicable to this position will be extended
to you.
SEPARATION - If you are terminated for any reason, other than for gross
misconduct, gross neglect of duties, or malfeasance, you will be
entitled to receive each month after termination, for a period of
twelve months, an amount equal to your then applicable monthly base
salary, which will be in lieu of any other Westinghouse salary
continuation programs. In addition, the Corporation would arrange for
an outplacement service with a firm to be selected by Westinghouse.
I'm pleased that you will be joining Westinghouse and am looking
forward to a long and successful association. I believe you will make an
important contribution to Westinghouse and that Westinghouse will be able to
provide you with opportunities that will fulfill your future career aspirations.
Congratulations and welcome aboard!
Sincerely,
<PAGE> 1
EXHIBIT (11)
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
EQUIVALENT SHARES:
Average shares outstanding.................... 354,580,674 349,416,570 342,637,241
Additional shares due to:
Stock options................................. 3,964,508 3,485,100 3,466,167
Series C preferred shares..................... 25,191,067 -- --
----------- ----------- -----------
Total equivalent shares.................. 383,736,249 352,901,670 346,103,408
=========== =========== ===========
ADJUSTED EARNINGS (IN MILLIONS):
Income (loss) from Continuing Operations...... $ 77 $ (175) $ 357
Less: Series B preferred stock dividends...... 50 50 28
----------- ----------- -----------
Adjusted income (loss) from Continuing
Operations.................................. 27 (225) 329
Loss from Discontinued Operations............. -- (95) (1,413)
Cumulative effect of changes in
accounting principles....................... -- (56) (338)
----------- ----------- -----------
Adjusted net income (loss) after cumulative
effect of changes in accounting
principles.................................. $ 27 $ (376) $ (1,422)
=========== =========== ===========
EARNINGS (LOSS) PER SHARE:
From Continuing Operations.................... $ 0.07 $ (0.64) $ 0.95
From Discontinued Operations.................. -- (0.27) (4.08)
From cumulative effect of changes in
accounting principle........................ -- (0.16) (0.98)
----------- ----------- -----------
Earnings (loss) per share (a)............ $ 0.07 $ (1.07) $ (4.11)
=========== =========== ===========
<FN>
- ---------
(a) For earnings per share using an alternative treatment for the Series C
Preferred Shares, see note 14 to the financial statements included in Part
II, Item 8 of this report.
</TABLE>
155
<PAGE> 1
EXHIBIT (12)(A)
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
minority interest............................. $ 157 $(236) $ 550 $ 496 $1,106
Less: Equity in loss of 50 percent or less
owned affiliates.............................. (5) (7) (2) (19) (4)
Add: Dividends from affiliates.................. -- -- -- 2 --
Fixed charges excluding capitalized
interest.................................. 212 253 270 271 283
----- ----- ----- ----- ------
Earnings as adjusted............................ $ 374 $ 24 $ 822 $ 788 $1,393
===== ===== ===== ===== ======
Fixed charges:
Interest expense........................... $ 177 $ 217 $ 225 $ 231 $ 221
Rental expense............................. 35 36 45 40 62
Capitalized interest....................... -- 3 15 23 --
----- ----- ----- ----- ------
Total fixed charges............................. $ 212 $ 256 $ 285 $ 294 $ 283
===== ===== ===== ===== ======
Ratio of earnings to fixed charges.............. 1.76x (a) 2.88x 2.68x 4.92x
===== ===== ===== ===== ======
<FN>
- -------
(a) Additional income before income taxes and minority interest of $232 million
would be necessary to attain a ratio of earnings to fixed charges of 1.00x
for the year ended December 31, 1993.
</TABLE>
156
<PAGE> 1
EXHIBIT (12)(B)
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
minority interest............................. $ 157 $(236) $ 550 $ 496 $1,106
Less: Equity in loss of 50 percent or less
owned affiliates.............................. (5) (7) (2) (19) (4)
Add: Dividends from affiliates.................. -- -- -- 2 --
Combined fixed charges and preferred
dividends, excluding capitalized
interest................................. 369 325 313 271 283
----- ----- ----- ----- ------
Earnings as adjusted............................ $ 531 $ 96 $ 865 $ 788 $1,393
===== ===== ===== ===== ======
Combined fixed charges and preferred dividends:
Interest expense........................... $ 177 $ 217 $ 225 $ 231 $ 221
Rental expense............................. 35 36 45 40 62
Capitalized interest....................... -- 3 15 23 --
Pre-tax earnings required to cover
preferred dividend requirements (a)...... 157 72 43 -- --
----- ----- ----- ----- ------
Total combined fixed charges and
preferred dividends........................... $ 369 $ 328 $ 328 $ 294 $ 283
===== ===== ===== ===== ======
Ratio of earnings to combined fixed charges and
preferred dividends........................... 1.44x (b) 2.64x 2.68x 4.92x
===== ===== ===== ===== ======
<FN>
- ---------
(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.
</TABLE>
157
<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>
INCORPORATED VOTING POWER
UNDER LAWS OWNED BY
NAME 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 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>
158
<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. 33-41417,
33-41475, 33-45586, 33-51298 and 33-59272), and on Form S-8 (Nos. 2-64733,
2-83376, 2-92085, 33-07761, 33-22198, 33-44044, 33-45365, 33-46051, 33-46779,
33-51445, 33-51579, 33-53815 and 33-53819) of Westinghouse Electric Corporation
of our report dated January 31, 1995 appearing on page 26 of this Form 10-K. We
also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 55 of this Form 10-K.
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
February 28, 1995
159
<PAGE> 1
Exhibit 24
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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/S/ LOUIS J. VALERIO
-----------------------------------
160
<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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/S/ WILLIAM H. GRAY III
-----------------------------------
<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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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 6th day of March, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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 7th day of March, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/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, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric
G. Reynolds and Louis J. Valerio 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, 1995.
/S/ ROBERT D. WALTER
-----------------------------------
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