<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 1-977
-----
WESTINGHOUSE ELECTRIC CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0877540
------------ ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
Westinghouse Building, 11 Stanwix Street, Pittsburgh, Pa. 15222-1384
--------------------------------------------------------------------
(Address of principal executive offices, zip code)
(412) 244-2000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark 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
--- ---
Common stock 418,824,407 shares outstanding at April 30, 1996
-------------------------------------------------------------
<PAGE> 2
WESTINGHOUSE ELECTRIC CORPORATION
INDEX
---------------------------------
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to the Condensed Consolidated
Financial Statements 6-15
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 16-27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 6. Exhibits and Reports on Form 8-K 29-30
SIGNATURE 31
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
------------------------------------------
(in millions except per share amounts) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
Sales of products and services $ 1,956 $ 1,202
Costs of products and services (1,515) (862)
Restructuring, litigation and other
matters (note 2) (695) -
Marketing, administration, and general
expenses (602) (306)
------- -------
Operating profit (loss) (856) 34
Other income and expenses, net (note 4) (146) (2)
Interest expense (146) (48)
------- -------
Loss from Continuing Operations before
income taxes and minority interest in
income of consolidated subsidiaries (1,148) (16)
Income taxes 385 9
Minority interest in income of
consolidated subsidiaries (1) (2)
------- ------
Loss from Continuing Operations (764) (9)
Discontinued Operations, net of income taxes
(note 9):
Income (loss) from Discontinued Operations (10) 24
Estimated net gain on disposal of
Discontinued Operations 1,018 -
------- ------
Income from Discontinued Operations 1,008 24
Extraordinary item:
Loss on early extinguishment of debt
(note 5) (63) -
------- -------
Net income $ 181 $ 15
======= =======
Earnings (loss) per common share:
Continuing Operations $ (1.74) $ (0.05)
Discontinued Operations 2.29 0.06
Extraordinary item (0.14) -
------- -------
Earnings (loss) per common share $ 0.41 $ 0.01
======= =======
Cash dividends per common share $ 0.05 $ 0.05
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
-3-
<PAGE> 4
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(in millions)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
ASSETS -------------- -----------------
- ------ (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 95 $ 196
Customer receivables 1,576 1,494
Inventories (note 6) 758 852
Uncompleted contracts costs over related billings 673 584
Program rights 343 301
Deferred income taxes 612 547
Prepaid and other current assets 296 261
------- -------
Total current assets 4,353 4,235
Plant and equipment, net 1,885 1,924
Intangible and other noncurrent assets (note 7) 9,131 8,827
Net assets of Discontinued Operations (note 9) - 1,669
------- -------
Total assets $15,369 $16,655
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Revolving credit borrowings and
other short-term debt $ 1,168 $ 309
Current maturities of long-term debt 327 330
Accounts payable 661 829
Uncompleted contracts billings over related costs 343 322
Other current liabilities (note 8) 2,080 2,123
------- -------
Total current liabilities 4,579 3,913
Long-term debt 3,658 7,226
Net liabilities of Discontinued Operations (note 9) 178 -
Other noncurrent liabilities (note 8) 5,075 3,997
------- -------
Total liabilities 13,490 15,136
------- -------
Contingent liabilities and commitments (note 10)
Minority interest in equity of consolidated
subsidiaries 10 11
Shareholders' equity (note 11):
Preferred stock, $1.00 par value (25 million
shares authorized):
Series A preferred (no shares issued) - -
Series C conversion preferred (4 million
shares issued) 4 4
Common stock, $1.00 par value (630 million
shares authorized, 426 million shares issued) 426 426
Capital in excess of par value 1,831 1,848
Common stock held in treasury (661) (720)
Minimum pension liability adjustment (1,050) (1,220)
Cumulative foreign currency translation
adjustments (11) (11)
Retained earnings 1,330 1,181
------- -------
Total shareholders' equity 1,869 1,508
------- -------
Total liabilities and shareholders' equity $15,369 $16,655
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 5
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1996 1995
---- ----
<S> <C> <C>
Cash used for operating activities
of Continuing Operations $ (530) $ (119)
Cash used for operating activities
of Discontinued Operations (305) (18)
Cash flows from investing activities:
Business acquisitions (75) (22)
Business divestitures 3,565 6
Liquidation of assets of Discontinued Operations 22 97
Capital expenditures (33) (38)
Other (10) -
------- -------
Cash provided by investing activities 3,469 43
------- -------
Cash flows from financing activities:
Bank revolver borrowings 988 175
Bank revolver repayments (57) (117)
Net change in other short-term debt (92) 12
Repayments of long-term debt (3,570) (2)
Treasury stock reissued 42 17
Dividends paid (32) (42)
Debt issue costs (8) (2)
Other - 2
------- -------
Cash provided (used) by financing activities (2,729) 43
------- -------
Decrease in cash and cash equivalents (95) (51)
Cash and cash equivalents at beginning of period 226 344
------- -------
Cash and cash equivalents at end of period $ 131 $ 293
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid:
Continuing Operations $ 105 $ 37
Discontinued Operations 17 32
------- -------
Total interest paid $ 122 $ 69
======= =======
Income taxes paid $ 23 $ 29
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 6
WESTINGHOUSE ELECTRIC CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------
1. GENERAL
The condensed 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.
When reading the financial information contained in this Quarterly Report,
reference should be made to the financial statements, schedules and notes
contained in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995. Certain amounts pertaining to the three months ended March
31, 1996 and the year ended December 31, 1995 have been restated or
reclassified for comparative purposes.
In March 1996, the Corporation adopted a plan to exit its environmental
services line of business that was previously reported as part of the
Government & Environmental Services business segment in Continuing Operations.
As a result, financial information previously issued has been restated to give
effect to the classification of the environmental services business as a
Discontinued Operation 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 9 to the financial
statements. The Corporation previously classified as Discontinued Operations,
WCI Communities, Inc. (WCI), The Knoll Group (Knoll), the defense and
electronic systems business, the Distribution and Control Business Unit (DCBU),
Westinghouse Electric Supply Company (WESCO), and the financial services
business.
In the opinion of management, the Condensed Consolidated Financial Statements
include all material adjustments necessary to present fairly the Corporation's
financial position, results of operations and cash flows. Such adjustments are
of a normal recurring nature. The results for this interim period are not
necessarily indicative of results for the entire year.
2. RESTRUCTURING AND OTHER ACTIONS
During the first quarter of 1996, the Corporation took several actions to
streamline its businesses and reduce the future financial impact of certain
matters. Certain of these actions resulted in the recognition of charges to
operating profit. Costs for restructuring plans of $125 million are discussed
below. A charge of $486 million was recognized for pending litigation matters,
which are described in note 10. As discussed in note 3, impairment of $54
million was recognized based on a modification of the projected recoverability
of certain long-lived assets. Other costs of $30 million recognized in the
quarter generally relate to previously divested businesses.
During the first quarter of 1996, management approved new restructuring
projects with costs totalling $125 million primarily for consolidation of
facilities and the separation of employees.
-6-
<PAGE> 7
A summary of the restructuring charges by business segment follows:
1996 RESTRUCTURING PROGRAM
(dollars in millions)(unaudited)
<TABLE>
<CAPTION>
Employee Separation Other
Separations Costs Costs Total Costs
----------- ---------- ----- ----------
<S> <C> <C> <C> <C>
Broadcasting 129 $ 5 $ 36 $ 41
Power Systems 1,145 44 27 71
Communication &
Information Systems 24 2 - 2
Corporate & Other 6 2 9 11
----- ----- ----- -----
Total restructuring 1,304 $ 53 $ 72 $ 125
===== ===== ===== =====
</TABLE>
3. IMPAIRMENT OF LONG-LIVED ASSETS
During the first quarter of 1996, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No.
121 requires that long-lived assets, including related goodwill, be reviewed
for impairment and written down to fair value whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
The adoption of SFAS No. 121 resulted in an impairment charge included in
operating profit of $54 million.
4. OTHER INCOME AND EXPENSES, NET (in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
Net loss on disposition of assets $ (151) $ (5)
Miscellaneous, net 5 3
------ ------
Other income (expenses), net $ (146) $ (2)
====== ======
</TABLE>
The net loss on disposition of assets for the three months ended March 31,
1996, includes a loss of $152 million resulting from a decision to sell
certain miscellaneous non-strategic assets.
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<PAGE> 8
5. EXTRAORDINARY ITEM
On March 1, 1996, the Corporation extinguished prior to maturity $3,565 million
of debt under the $7.5 billion credit agreement. Term Loan I was repaid in
full and $1,065 million of Term Loan II was repaid. As a result of the early
extinguishment of debt and the writeoff of related debt issue costs, the
Corporation incurred an extraordinary loss of $63 million, net of a tax benefit
of $41 million.
6. INVENTORIES (in millions)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $ 94 $ 88
Work in process 471 446
Finished goods 140 122
------- -------
705 656
Long-term contracts in process 802 1,002
Progress payments to subcontractors 33 21
Recoverable engineering and development costs 84 60
Less: Inventoried costs related to contracts
with progress billing terms (866) (887)
------- -------
Inventories, net $ 758 $ 852
======= =======
</TABLE>
7. INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
Deferred income taxes $ 1,264 $ 1,209
Goodwill 5,316 5,303
FCC licenses 1,262 1,242
Other intangible assets 161 162
Intangible pension asset 54 63
Deferred charges 246 353
Joint ventures, affiliates, and other 76 70
Noncurrent receivables 414 172
Program rights 113 21
Other 225 232
------- -------
Total intangible and other noncurrent assets $ 9,131 $ 8,827
======= =======
</TABLE>
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<PAGE> 9
8. OTHER CURRENT AND NONCURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
Other current liabilities:
- -------------------------
Accrued employee compensation $ 172 $ 215
Income taxes currently payable 184 182
Liabilities for talent and program rights 413 254
Accrued product warranty 58 58
Accrued taxes, interest, and insurance 249 190
Accrued restructuring costs 181 153
Liability for asset dispositions 169 46
Accrued expenses 361 690
Environmental liabilities 38 47
Other 255 288
------- -------
Total other current liabilities $ 2,080 $ 2,123
======= =======
Other noncurrent liabilities:
- ----------------------------
Postretirement and postemployment benefits $ 1,307 $ 1,311
Pension liability 1,502 1,426
Accrued restructuring 75 8
Liability for asset dispositions 80 19
Liabilities for talent and program rights 51 47
Accrued expenses 1,196 629
Environmental liabilities 237 238
Other 627 319
------- -------
Total other noncurrent liabilities $ 5,075 $ 3,997
======= =======
</TABLE>
9. DISCONTINUED OPERATIONS
During the first quarter of 1996, the Corporation completed the sales of Knoll
and its defense and electronic systems business. These sales resulted in a
combined after-tax gain of $1.2 billion. The net proceeds from these
transactions were used to repay a significant portion of the debt incurred to
finance the acquisition of CBS, all of which was classified as debt of
Continuing Operations.
In March 1996, the Corporation adopted a plan to exit its environmental
services line of business included in its former Government & Environmental
Services segment. The Corporation recorded an after-tax charge for the
estimated loss on disposal of $146 million.
During the third quarter of 1995, the Corporation sold WCI and used the
proceeds to repay debt of Discontinued Operations.
In November 1992, the Corporation announced a plan that included exiting
Financial Services through the disposition of its $9 billion asset portfolios
and selling DCBU and WESCO. The Corporation has since completed the sales of
DCBU and WESCO and liquidated substantially all of Financial Services real
estate and corporate portfolios. The liquidation of Financial Services leasing
portfolio is expected to occur over a longer period of time in accordance with
contractual terms.
-9-
<PAGE> 10
The operating results for Discontinued Operations for the quarters ended March
31, 1996 and 1995 are grouped by measurement date as follows:
<TABLE>
<CAPTION>
Discontinued Operation Measurement Date
- --------------------------------------------------------------------------------
<S> <C>
Environmental Services March 1996
Defense and Electronic Systems December 1995
Knoll December 1995
WCI July 1995
Financial Services November 1992
</TABLE>
Operating results for a discontinued operation subsequent to its measurement
date are recorded directly to the liability for estimated loss on disposal.
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(in millions) (unaudited)
For the three months ended March 31, 1996
<TABLE>
<CAPTION>
Measurement Date
---------------------------------------
1996 1995 1992 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Sales of products and services $ 56 $ 350 $ 7 $ 413
Income (loss) before income taxes (15) (15)
Income taxes 5 5
Net income (loss) (10) (10)
Operating losses charged to liability
for estimated loss on disposal (13) (13) (26)
</TABLE>
For the three months ended March 31, 1995
<TABLE>
<CAPTION>
Measurement Date
---------------------------------------
1996 1995 1992 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Sales of products and services $ 78 $ 747 $ 8 $ 833
Income (loss) before income taxes (3) 47 44
Income taxes 1 (21) (20)
Net income (loss) (2) 26 24
Operating losses charged to liability
for estimated loss on disposal (18) (18)
</TABLE>
-10-
<PAGE> 11
The assets and liabilities of Discontinued Operations have been separately
classified on the consolidated balance sheet as net assets (liabilities) of
Discontinued Operations. A summary of these assets and liabilities follows:
NET ASSETS (LIABILITIES) OF DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
(in millions) March 31, 1996 December 31,1995
-------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 36 $ 30
Receivables 39 448
Inventories 10 283
Portfolio investments 895 901
Deferred income taxes - 432
Other assets 435 1,412
------ ------
Total assets -- Discontinued Operations 1,415 3,506
------ ------
LIABILITIES:
Revolving credit facility borrowings 141 81
Current maturities of long-term debt 188 265
Liability for estimated loss on disposal 720 212
Long-term debt 155 157
Other liabilities 320 1,122
Deferred income taxes 69 -
------ ------
Total liabilities -- Discontinued Operations 1,593 1,837
------ ------
Net assets (liabilities) of
Discontinued Operations $ (178) $1,669
====== ======
</TABLE>
Portfolio investments by category of investment and financing at March 31, 1996
and December 31, 1995 are summarized in the following table:
PORTFOLIO INVESTMENTS
<TABLE>
<CAPTION>
At March 31, 1996 (unaudited)
(in millions) ---------------------------------------
Real Estate
Leasing & Corporate Total
------- ----------- -----
<S> <C> <C> <C>
Receivables $ 818 $ 2 $ 820
Other portfolio investments 45 30 75
----- ----- -----
Portfolio investments $ 863 $ 32 $ 895
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995
---------------------------------------
Real Estate
Leasing & Corporate Total
------- ----------- -----
<S> <C> <C> <C>
Receivables $ 820 $ 2 $ 822
Other portfolio investments 45 34 79
----- ----- -----
Portfolio investments $ 865 $ 36 $ 901
===== ===== =====
</TABLE>
Other portfolio investments remaining at March 31, 1996 consist of real estate
properties and investments in leasing partnerships.
-11-
<PAGE> 12
The leasing portfolio is expected to liquidate through 2015 in accordance with
contractual terms. Leasing receivables consist of direct financing and
leveraged leases. At March 31, 1996 and December 31, 1995, 83% and 84%,
respectively, related to aircraft and 17% and 16%, respectively, related to
cogeneration facilities.
Other assets of Discontinued Operations include mortgage receivables and other
notes or securities acquired or retained in divestiture transactions. These
assets are generally expected to liquidate in accordance with their contractual
terms.
10. CONTINGENT LIABILITIES AND COMMITMENTS
Litigation
- ----------
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. Since 1993, settlement agreements have been
entered resolving nine 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. Two steam generator lawsuits remain.
The Corporation is also a party to five tolling agreements with utilities or
utility plant owners' groups which have asserted steam generator claims. The
tolling agreements delay initiation of any litigation for various specified
periods of time and permit the parties time to engage in discussion.
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. The court dismissed both the derivative claim and the class action
claims in their entirety. These dismissals have been appealed.
Asbestos
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products, generally in
the pre-1970 time period. Typically, these lawsuits are brought against
multiple defendants. The Corporation was neither a manufacturer nor a producer
of asbestos and is oftentimes dismissed from these lawsuits on the basis that
the Corporation has no relationship to the products in question or the claimant
did not have exposure to the Corporation's product. At March 31, 1996, the
Corporation had approximately 89,000 claims outstanding against it. On May 2,
1996, 16,500 claims pending in the Multidistrict Litigation No. 875 in the
United States District Court for the Eastern District of Pennsylvania were
dismissed. Plaintiffs may appeal this dismissal.
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<PAGE> 13
In court actions which have been resolved, the Corporation has prevailed in the
majority of the asbestos claims and has resolved others through settlement.
Furthermore, the Corporation has brought suit against certain of its insurance
carriers with respect to these asbestos claims. Under the terms of a
settlement agreement resulting from this suit, carriers which have agreed to
the settlement are now reimbursing the Corporation for a substantial portion of
its current costs and settlements associated with asbestos claims.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in the steam generator claims, the securities class action
and certain groupings of asbestos claims 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 that the Corporation
has adequately provided for costs arising from potential settlement of these
matters when in the best interest of the Corporation. 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 laws and regulations relating to the
discharge of pollutants 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 made estimates of the probable
and reasonably possible remediation costs that could be incurred by the
Corporation based on the facts and circumstances currently known. In addition,
the Corporation and its outside consultants are in the process of reviewing the
Corporation's environmental remediation strategies to determine the most
effective way to satisfy these obligations. Although the results of this
review are not yet available, it may result in a second quarter charge.
PRP Sites and Other Remedial Activities
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named 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 74 sites including 18 CBS 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 cost for remedial actions of these
sites as of March 31, 1996 is approximately $164 million, all of which has been
accrued.
As part of the agreements for the sale of certain of its businesses or sites,
the Corporation has assumed obligations for remediation of contamination that
may exist at these sites, other Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) issues, and compliance matters.
Management believes that the total cost for these obligations is approximately
$21 million, all of which has been accrued. In addition, the Corporation has
accrued for the estimated remediation costs associated with Discontinued
Operations.
-13-
<PAGE> 14
Bloomington Sites
The Corporation is a party to a 1985 Consent Decree relating to remediation of
six sites in Bloomington, Indiana. In the Consent Decree, the Corporation
agreed to construct and operate an incinerator, which would be permitted under
federal and state law to burn excavated 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 alternative remedial
action, which could include a combination of containment, treatment,
remediation, and monitoring. The parties recognize that the Consent Decree
remains in full force and effect during this process.
One of the six sites covered by the Consent Decree has been remediated. The
Corporation estimates that its total cost to implement the most reasonable
alternative for the five remaining sites covered by the Consent Decree is
approximately $61 million, all of which has been accrued. Included in this
amount is approximately $43 million for site construction and other related
costs valued as of the year of expenditure. The remaining $18 million is the
present value, assuming a 5% discount rate, of approximately $46 million of
operating and maintenance costs that will be incurred during a 30-year period.
Other reasonable remediation alternatives, while considered less likely, could
cause the total costs to be as much as $115 million.
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 immaterial.
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 the willful misconduct or lack of good faith of
its managers or their failure to exercise prudent business judgement. There
are currently no material claims for which the Corporation believes it is
responsible.
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 approximate $131 million, of which $29 million
had been accrued at March 31, 1996. 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 annual costs currently being accrued are
$6 million.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations.
Commitments -- Continuing Operations
- ------------------------------------
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.
-14-
<PAGE> 15
The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sporting events. These
contracts permit the broadcast of such properties for various periods ending no
later than April 2002. As of March 31, 1996, the Corporation was committed to
make payments of $3,416 million under such broadcasting contracts.
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 1996 through 2002.
At March 31, 1996, Financial Services commitments, consisting of guarantees,
credit enhancements, other standby agreements, and commitments to extend
credit, totalled $43 million compared to $45 million at year-end 1995.
Management expects the remaining commitments to expire unfunded or be funded
with the resulting assets being sold shortly after funding.
11. SHAREHOLDERS' EQUITY
As a result of the first quarter sale of the defense and electronic systems
business and the buyer's assumption of certain pension obligations, the
Corporation's unfunded accumulated benefit obligation was reduced by
approximately $400 million. This decrease in the unfunded pension liability
improved shareholders' equity by $170 million by reducing the amount of minimum
pension liability required to be recognized.
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). 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 converted at any time prior to June 1, 1997 by the holder. In
accordance with prevalent practice at the time of sale, these shares were
treated as outstanding common stock for the calculation of earnings per share.
If the Series C Preferred had been treated as common stock equivalents for the
calculation of earnings per share, the Corporation's earnings per share for the
quarter ended March 31, 1996 would have been income of 42 cents compared to a
loss of 3 cents for the same period last year.
-15-
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
During the first quarter of 1996, the Corporation completed the sales of its
defense and electronic systems business and The Knoll Group (Knoll), its office
furnishings unit, and recorded a combined after-tax gain of $1.2 billion. The
cash proceeds from these divestitures, which totalled nearly $3.6 billion, were
used to repay ahead of schedule a significant portion of the debt incurred to
finance the CBS acquisition.
The Corporation also continued to streamline its businesses and reduce the
future financial impact of legacies in the first quarter of 1996.
Management adopted a plan to exit its environmental services line of business
resulting in the transfer of the environmental services businesses to
Discontinued Operations and the recognition of a loss on disposal. The
Corporation recognized costs associated with additional restructuring actions
and outstanding litigation matters. The Corporation also recognized impairment
of assets that will continue to be used in the business as well as certain
assets that have been identified for sale, and modified its application of
contract accounting principles. The special items included in the first
quarter results are summarized below:
SPECIAL ITEMS INCLUDED IN RESULTS OF OPERATIONS
FIRST QUARTER 1996 (in millions except per share amounts) (unaudited)
<TABLE>
<CAPTION>
Pre-Tax After-Tax Per-Share
Amount Amount Impact
------- --------- ---------
<S> <C> <C> <C>
Continuing Operations:
Operating Profit:
Restructuring $ (125)
Litigation matters (486)
Impairment of assets (54)
Contract accounting adjustments (128)
Other (30)
------
Total impact on operating profit (823) $(547)
Other income and expense:
Loss on assets held for sale (152) (101)
------ -----
Total impact on Continuing Operations (975) (648) $(1.48)
Discontinued Operations:
Estimated loss on disposal of
environmental services business (146)
Gain on disposal of the defense and
electronic systems business and Knoll 1,164
-----
Net gain on disposal of businesses 1,018 2.32
Extraordinary Item:
Loss on early extinguishment of debt (63) (0.14)
----- -----
Net amount of special items $ 307 $0.70
===== =====
</TABLE>
-16-
<PAGE> 17
Net income for the first quarter of 1996 totalled $181 million, or $0.41 per
share, compared to $15 million, or $0.01 per share, for the prior year quarter.
Excluding the special items summarized above, the Corporation had a net loss of
$126 million, or $0.29 per share, for the current quarter. The first quarter
of 1995 did not include any special items. For Continuing Operations, the net
loss was $116 million, or $0.26 per share, compared to a net loss of $9
million, or $0.05 per share, for the 1995 quarter.
Interest expense was $98 million higher in the first quarter of 1996 reflecting
the cost of the debt that was incurred to finance the CBS acquisition. The
repayment of a significant portion of that debt in March 1996 will favorably
affect future interest expense. In addition, amortization of intangible assets
acquired with CBS, principally FCC licenses and goodwill, totalled
approximately $40 million for the 1996 quarter. The impact of the higher
amortization will continue. Net of income taxes, these two factors contributed
approximately $90 million to the earnings decline.
The Corporation's reported sales increased $754 million, or 63%, for the first
quarter of 1996 compared to the 1995 first quarter. Excluding the effects of
the CBS acquisition and the special one-time accounting adjustment at Power
Generation, sales were flat. The improvements achieved by certain businesses,
including Power Generation and Group W, were essentially offset by the loss of
sales from miscellaneous businesses that were divested in 1995, including
MICROS Systems, Inc. (MICROS).
Operating profits for most of the Corporation's major businesses were generally
consistent with the prior-year results. However, reduced profitability for the
Power Systems segment continued to reflect the difficult market conditions
under which that business is operating.
Also, the Corporation's equity improved by $170 million during the quarter
because of a reduction in the charge to shareholders' equity related to the
Corporation's pension obligations. This improvement resulted from the
assumption of certain pension liabilities by the buyer of the defense and
electronic systems business.
-17-
<PAGE> 18
RESULTS OF OPERATIONS
The following represents the segment results for the Corporation's Continuing
Operations for the three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Segment Results ($ in millions)(unaudited)
------------------------------------------
Operating Profit
(Loss)
Sales of Products Operating Profit Excluding
& Services (Loss) Special Charges
----------------- ---------------- ----------------
Three Months Ended
March 31 1996 1995 1996 1995 1996 1995
- ------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Broadcasting:
Television $ 188 $ 74 $ 54 $ 26 $ 54 $ 26
Network 766 0 0 0 0 0
Radio 121 43 20 7 20 7
Other Broadcasting 43 34 (72) 0 (31) 0
------ ------ ------ ------ ------ ------
Total Broadcasting 1,118 151 2 33 43 33
Power Systems:
Energy Systems 231 284 (26) 6 (5) 6
Power Generation* 277 322 (225) (31) (42) (31)
Other Power Systems (50) (37) (306) (14) (17) (14)
------ ------ ------ ------ ------ ------
Total Power Systems* 458 569 (557) (39) (64) (39)
Thermo King 257 273 45 44 45 44
Government Operations 25 27 18 15 18 15
Communication &
Information Systems 82 70 (42) 2 (1) 2
Corporate & Other 33 133 (322) (21) (74) (21)
Intersegment sales (17) (21) - - - -
------ ------ ------ ------ ------ ------
Total* $1,956 $1,202 $ (856) $ 34 $ (33) $ 34
====== ====== ====== ====== ====== ======
<FN>
*First quarter 1996 sales were reduced by a $180 million one-time adjustment to
previous accounting for certain long-term contracts.
</TABLE>
Broadcasting
The first quarter 1996 results for Broadcasting include a full quarter of CBS
financial data for the first time. Where appropriate, the discussion below
provides a comparison of the actual first quarter 1996 results with the
combined Group W and CBS actual first quarter 1995 results.
Reported revenues for the television group reflect the ownership of 15
television stations during the first quarter of 1996 compared to five stations
during the same 1995 quarter. On a comparable basis, revenues for the stations
declined slightly as a result of lower ratings and a weak advertising market.
Operating profit on a comparable basis also declined reflecting the lower
revenues although cost
-18-
<PAGE> 19
improvements at the stations were beginning to become evident. Operating
profit for 1996 included a benefit related to the writedown of CBS program
rights in purchase accounting, but that benefit was essentially offset by
amortization of FCC licenses arising from the acquisition.
Network revenues, all of which were acquired with CBS, increased 9% for the
first quarter of 1996 compared to the same period of 1995. The addition of
college football bowl games and the timing of the NCAA Final Four Basketball
Tournament were the primary driving factors. Operating profit increased
slightly as the favorable effects of purchase accounting were essentially
offset by increased costs for affiliate compensation, sports rights, and
advertising. The first-quarter 1996 benefit from the writedown of program
rights in purchase accounting totalled $57 million.
The reported results for the radio group included 39 radio stations for the
1996 period, including two Chicago stations acquired January 2, 1996, compared
to 16 stations for the 1995 period. On a comparable basis, results for the
radio group were strong. Revenues increased 8% while operating profit
increased 25%, reflecting early benefits from the integration of the Group W
and CBS stations. Amortization of FCC licenses totalled $3 million for the
first quarter of 1996.
Other Broadcasting includes operating results for Group W Satellite
Communications and Group W Productions, including MAXAM, a production company
acquired in February 1996, costs for the Broadcasting group's headquarters, and
amortization of all goodwill arising from the CBS acquisition. For the first
quarter of 1996, Other Broadcasting also includes a $41 million restructuring
charge for Group W's actions to obtain operational synergies between CBS and
Group W. The cost of the CBS actions was recognized on the opening balance
sheet at the date of the CBS acquisition. Revenues and operating profit for
Group W Satellite Communications showed significant increases over the
prior-year period due to certain services acquired from CBS coupled with
improved advertising revenues. Results for production operations were
consistent with the prior year. Goodwill amortization totalled $30 million for
the first quarter of 1996.
For the entire Broadcasting group, earnings before interest, taxes,
depreciation, and amortization (EBITDA) and excluding the restructuring charge
totalled $110 million for the first quarter of 1996. On a combined basis,
EBITDA for the 1995 period was $101 million. EBITDA differs from operating
cash flows for the group primarily because it includes $62 million of benefits
in the 1996 period from purchase accounting adjustments related to program
rights, and it does not consider changes in assets and liabilities from period
to period.
Power Systems
In Energy Systems, sales and operating profit for the first quarter of 1996
decreased compared to the same period in 1995 primarily in the fuel and service
businesses due to a less favorable utility outage season. In 1996 the outage
season began later than in 1995, causing a lower percentage of the work to
occur in the first quarter. There are fewer outages this spring compared to
last year, and the average work scope for outage services to be performed this
year is smaller due to fewer major repair initiatives at power plants. The
first quarter of 1996 also includes a $21 million restructuring charge
primarily for employee separation costs.
Power Generation's orders declined nearly 16% in the first quarter of 1996
compared to the same period last year primarily as a result of large orders for
China and Korea booked in the first quarter of 1995. In light of changing
market conditions and pricing pressures in the Power Generation business, the
business unit modified its application of contract accounting principles to
reflect a more conservative approach. Had the new approach been applied
previously, the effect on any individual quarter's results would not have been
material. A one-time accounting adjustment was made to reduce sales by $180
million and operating profit by $128 million. Excluding this adjustment, sales
increased $135 million or 42% in the first quarter of 1996 as increased project
and new apparatus sales were partially offset by lower field service sales.
-19-
<PAGE> 20
The business unit's operating loss, excluding the one-time accounting
adjustment and a $50 million restructuring charge, which was primarily required
due to the decision to close the Pensacola, Florida manufacturing facility,
increased $9 million compared to last year as price compression on new
apparatus continued to overshadow the higher margin field service business.
Operating loss for Other Power Systems for the first quarter of 1996 included a
$289 million charge for litigation and other matters. The impact of discounts
on goods and services resulting from prior steam generator settlements was
consistent in both periods.
Thermo King
Orders and revenues for the first quarter of 1996 declined 8% and 6%,
respectively, primarily due to decreased container volume. Operating profit,
however, remained flat as a favorable sales mix and cost improvements offset
the effects of the lower volume.
Government Operations
Sales for the first quarter of 1996 were essentially flat compared to the same
period last year. Operating profit increased due to a bonus related to a cost
saving program and the timing of fee billings at one of the Department of
Energy facilities.
Communication & Information Systems
Increased sales in the residential security and wireless communications
businesses accounted for the 17% sales growth in the first quarter of 1996
compared to the same period last year. Excluding a first quarter 1996 charge
of $41 million for restructuring and asset impairment, operating profit
declined slightly as additional strategic spending for sales branches offset
the effects of the higher volume.
Corporate & Other
Revenues declined in the first quarter of 1996 compared to last year as
non-strategic businesses, including MICROS, were sold in 1995. The operating
loss for the quarter included $248 million of special charges for
restructuring, litigation contingencies, and asset impairment. Corporate costs
also include costs associated with obligations retained in certain recent
divestitures.
RESTRUCTURING AND OTHER ACTIONS
In recent years, the Corporation has restructured many businesses and its
corporate headquarters in an effort to reduce costs and remain competitive in
its markets. Restructuring activities primarily involve the separation of
employees, the closing of facilities, the termination of leases, and the
exiting of product lines. Costs for restructuring activities are limited to
incremental costs that directly result from the restructuring activities and
that provide no future benefit to the Corporation.
During the first quarter of 1996, management approved new restructuring
projects with costs totalling $125 million primarily for consolidation of
facilities and the separation of employees. Cash expenditures, which are
primarily tied to announced facility consolidations, are estimated to
approximate $20 million for the remainder of 1996, $35 million for 1997, and
$40 million for 1998.
-20-
<PAGE> 21
A summary of the restructuring charges by business segment follows:
1996 RESTRUCTURING PROGRAM
(dollars in millions)(unaudited)
<TABLE>
<CAPTION>
Employee Separation Other Total
Separations Costs Costs Costs
---------- ---------- ----- --------
<S> <C> <C> <C> <C>
Broadcasting 129 $ 5 $ 36 $ 41
Power Systems:
Energy Systems 351 18 3 21
Power Generation 794 26 24 50
Communication &
Information Systems 24 2 - 2
Corporate & Other 6 2 9 11
----- ----- ---- -----
Total restructuring 1,304 $ 53 $ 72 $ 125
===== ===== ==== =====
</TABLE>
In addition to the reserve established in the first quarter of 1996,
restructuring reserves were also established in each of the years 1993 through
1995. The following is a reconciliation of the restructuring liability for
Continuing Operations:
RECONCILIATION OF RESTRUCTURING LIABILITY FOR CONTINUING OPERATIONS
(in millions) (unaudited)
<TABLE>
<S> <C>
Balance at January 1, 1993 $ -
Provision for restructuring 244
Noncash expenditures (22)
----
Balance at December 31, 1993 222
----
Provision for restructuring 19
Cash expenditures (129)
Noncash expenditures (31)
----
Balance at December 31, 1994 81
----
Provision for restructuring 86
CBS acquisition plan 100
Cash expenditures (101)
Noncash expenditures (5)
----
Balance at December 31, 1995 161
----
Provision for restructuring 125
Cash expenditures (30)
----
Balance at March 31, 1996 $256
====
</TABLE>
The employee separations included in the plans for the years 1993 and 1994 are
complete. Remaining costs under those plans of approximately $10 million
represent 1996 cash expenditures for exit costs.
The employee separations included in the 1995 plan are 80% complete with the
remainder of separations to occur during 1996. Remaining total costs under
this plan of approximately $30 million represent cash expenditures, the
majority of which will occur in 1996. Implementation of the CBS restructuring
plan is expected to continue over the next two years.
-21-
<PAGE> 22
Annualized savings from the 1993, 1994, and 1995 restructuring programs other
than the CBS plan are estimated to total approximately $140 million; however,
competitive pressures causing price compression in certain of the Corporation's
markets have absorbed a significant portion of the savings achieved through
restructuring actions. Annualized savings from the 1996 plan, which generally
will not be realized in the near term, are estimated at $50 million.
The Corporation expects to continue to identify restructuring initiatives in an
ongoing effort to reduce its overall cost structure and improve its
competitiveness.
DISCONTINUED OPERATIONS
During the first quarter of 1996, the Corporation completed the sales of Knoll
and its defense and electronic systems business in accordance with a December
1995 plan and recognized a combined after-tax gain of $1,164 million. The
Corporation also adopted a new plan to exit its environmental services line of
business and recorded a $146 million after-tax provision for the estimated loss
on disposal of these businesses.
In November 1992, the Corporation announced a plan that included exiting the
financial services business and selling both the Distribution and Control
Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO). The
portfolio investments of Financial Services have decreased from $8,967 million
at year-end 1992, to $895 million at March 31, 1996, a decrease of $8,072
million. The remaining assets, consisting primarily of the leasing
portfolio, are expected to liquidate through 2015 in accordance with
contractual terms. The Corporation completed the sales of DCBU and WESCO in
1994. Under a July 1995 plan, the Corporation sold WCI Communities, Inc.
(WCI), its land development subsidiary, in 1995.
The liability for the estimated loss on the disposal of Discontinued
Operations, totalling $720 million at March 31, 1996, represents amounts
necessary to cover remaining costs and obligations associated with the 1992,
1995 and 1996 plans. Remaining costs include interest on debt, estimated
credit losses on the portfolio investments of financial services, and future
disposition costs and obligations relating to the environmental services
businesses, Knoll, the defense and electronic systems business, DCBU and WESCO.
These costs and related items include purchase price adjustments, transaction
costs, insurance liabilities, and potential environmental remediation costs.
Management believes that the total liability for the estimated loss on disposal
of Discontinued Operations is adequate. Any variances from estimates which may
occur for one component will be considered in conjunction with other components
in determining whether an adjustment of the total liability is necessary. The
adequacy of the liability is evaluated each quarter.
The Corporation believes that the debt of Discontinued Operations at March 31,
1996 is supportable by the assets of Discontinued Operations and can be repaid
as the portfolio liquidates over its contractual terms.
OTHER INCOME AND EXPENSES
Other income and expenses netted to a loss of $146 million for the first
quarter of 1996 compared to a loss of $2 million for the first quarter of 1995.
During the first quarter of 1996, a comprehensive review was undertaken by the
Corporation to identify for sale non-strategic assets. A charge of $152
million was recognized during the quarter for losses expected upon sale of
those assets.
-22-
<PAGE> 23
INTEREST EXPENSE
Interest expense for Continuing Operations for the first quarter of 1996 was
$146 million compared to $48 million for the same period of 1995. The increase
in interest expense is primarily a result of $5.4 billion of debt incurred for
the acquisition of CBS in the fourth quarter of 1995. The Corporation repaid
$3,565 million of this debt in the first quarter of 1996 through proceeds from
the divestitures of Knoll and the defense and electronic systems business.
This decrease in debt was offset somewhat by additional borrowings to cover
working capital requirements.
INCOME TAXES
The Corporation's effective income tax rate for the first three months of 1996
was a benefit of 34% compared to a benefit of 57% for the first three months of
1995 because of the amortization of non-deductible goodwill for CBS as well as
the impact of certain special transactions in the first quarter of 1996. These
rates can vary dramatically depending on the Corporation's income levels.
At March 31, 1996, the Corporation had recorded net deferred income tax
benefits totalling $1,807 million compared to $2,188 million at December 31,
1995. As a result of these net deferred income tax benefits, cash payments for
federal income taxes are minimal. 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.
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.
Late in 1995, the Corporation acquired CBS for $5.4 billion and financed the
entire purchase price with debt. In the first quarter of 1996, the Corporation
completed the sales of Knoll and the defense and electronic systems business
and repaid approximately 65% of the acquisition debt.
In an effort to improve liquidity, the Corporation has and will continue to
monetize non-strategic assets. In March 1996, the Corporation adopted a plan
to sell its environmental services businesses. The Corporation also completed
a comprehensive review and identified additional non-strategic assets for sale.
In total, sales of various non-strategic assets are expected to generate cash
proceeds of $300 million to $500 million in 1996.
Operating activities of Continuing Operations required substantial cash
outflows in the first quarter of 1996. Management is focusing significant
attention on minimizing working capital requirements and improving cost
structures.
Management expects that cash from Continuing Operations and availability under
its $2.5 billion revolving credit facility 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 borrowing from other sources, including funds from the
capital markets.
-23-
<PAGE> 24
Operating Activities
The following table provides a reconciliation of net income to cash provided by
operating activities of Continuing Operations for the three months ended March
31, 1996 and 1995:
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1996 1995
---- ----
<S> <C> <C>
Net loss from Continuing Operations $ (764) $ (9)
Adjustments to reconcile net loss from Continuing
Operations to net cash provided by operating
activities:
Depreciation and amortization 113 48
Losses on asset dispositions 151 5
Purchase accounting benefits (62) -
Noncash restructuring charges 30 -
Other noncash provisions and accounting
adjustments 286 -
Changes in assets and liabilities, net of effects
of acquisitions and divestitures of businesses:
Receivables, current and noncurrent (51) 60
Inventories (34) 33
Progress payments net of costs on
uncompleted contracts (68) (160)
Accounts payable (168) (93)
Deferred and current income taxes (129) (77)
Program rights 91 -
Other assets and liabilities 75 74
------ ------
Cash used for operating activities
of Continuing Operations $ (530) $ (119)
====== ======
</TABLE>
The operating activities of Continuing Operations used $530 million of cash
during the first three months of 1996, an increase of $411 million from the
amount used during the first quarter of 1995. Major factors contributing to
the additional use of cash were higher interest payments, certain contractual
prepayments for program rights, and higher required levels of working capital
for the businesses.
Interest payments for Continuing Operations during the first quarter of 1996
were $105 million compared to $37 million during the first quarter of 1995.
This increase in interest payments was primarily attributable to the higher
debt associated with the CBS acquisition.
In the first quarter of 1996, the Broadcasting business segment, in its drive
to improve CBS programming and ratings, successfully negotiated certain
long-term contracts requiring the Corporation to make prepayments for future
program rights and program development. However, these cash payments for
program rights were more than offset by favorable payment terms on programming
already aired.
Working capital requirements increased relative to the first quarter of 1995.
Increases in both receivables and inventories totalled $85 million in the first
three months of 1996 compared to the reduction in receivables and inventories
in the first three months of 1995 of $93 million. The Corporation's investment
in long-term contracts increased in the first quarter of 1996 by $68 million.
In last year's first quarter, the investment in long-term contracts increased
$160 million. In addition, a significant reduction in accounts payable was a
major contributor to the higher working capital.
-24-
<PAGE> 25
No cash contributions to the Corporation's pension plans were made during the
first quarter of 1996 or 1995. The Corporation's contribution level for 1996
is expected to be $200 million to $250 million, which is consistent with the
Corporation's goal to fully fund its qualified plans over the next several
years.
The operating activities of Discontinued Operations used $305 million of cash
during the first three months of 1996 and used $18 million of cash for the same
period of 1995. The increase in the use of cash during 1996 primarily related
to divestiture costs of Knoll and the defense and electronic systems business
as well as cash used in the operations of these businesses.
Future cash requirements of Discontinued Operations will consist primarily of
interest costs on debt, remaining costs associated with the completed
divestitures, and operating and disposal costs associated with the
Corporation's environmental services businesses.
Investing Activities
Investing activities provided $3.5 billion of cash during the first three
months of 1996 compared to $43 million of cash provided during the same period
of 1995. In the first three months of 1996, the Corporation completed the
sales of Knoll and its defense and electronic systems business, generating
$3,565 million of cash. Investing activities in the first quarter of 1996
included the purchase of two Chicago radio stations.
In the first quarter of 1995, the Corporation completed the sale of Aptus,
Inc., an environmental services subsidiary. The majority of the proceeds for
Aptus consisted of notes. Also, during the quarter, approximately $22 million
was paid in connection with the 1994 acquisition of Norden Systems, which was
divested in 1996 along with the defense and electronic systems business.
Liquidations of Financial Services portfolio investments generated $17 million
in the first three months of 1996 compared to cash generated of $97 million for
the same period of 1995. These liquidations are substantially complete except
for leasing assets which will be liquidated in accordance with contractual
terms. In addition, $5 million was generated from WCI mortgage maturities.
Capital expenditures were $33 million for the first three months of 1996, a
decrease of $5 million from the same period of 1995. Capital spending in 1996
is expected to approximate the 1995 level.
Financing Activities
Cash used by financing activities during the first three months of 1996
totalled $2.7 billion compared to cash provided of $43 million during the same
period of 1995. The increase in financing cash outflows was primarily
attributable to the early extinguishment of $3,565 million of the term loans
under the $7.5 billion credit agreement. Short-term borrowings increased $813
million compared to the same period of 1995. Total debt of the Corporation was
$5.6 billion at March 31, 1996, a decrease of $2.8 billion from December 31,
1995.
Total borrowings under the Corporation's $2.5 billion revolving credit facility
were $1,285 million at March 31, 1996 (see Revolving Credit Facilities). These
borrowings carried a composite interest rate of 6.9% at March 31, 1996 and were
based on the London Interbank Offer Rate (LIBOR), plus a margin based on the
Corporation's senior unsecured debt rating and leverage.
Dividends paid in the first quarter of 1996 included approximately $12 million
for Series C preferred stock, with the remaining $20 million representing
common stock dividends. Dividends paid in the same quarter last year included
approximately $12 million for Series C preferred stock, $13 million for Series
B preferred shares and approximately $17 million representing common stock
dividends.
At March 31, 1996, the Corporation had a shelf registration statement for debt
securities with an unused amount of $400 million.
-25-
<PAGE> 26
Revolving Credit Facilities
In September 1995, the Corporation entered into three new bank facilities under
a credit agreement with a total commitment level of $7.5 billion. These credit
facilities included two term loans of $2.5 billion each. The first term loan
was repaid prior to its maturity. The second term loan, of which approximately
$1 billion was prepaid in March 1996, is payable in quarterly installments
beginning in August 1998 through November 2002. This term loan is subject to
certain mandatory prepayment provisions. Amounts repaid under both term loans
may not be reborrowed. In addition to these term loans, the credit agreement
includes a $2.5 billion revolving credit facility with a seven-year maturity.
The unused capacity under the revolving credit facility equalled $1,215 million
as of March 31, 1996. Borrowing availability under the revolver 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 term of the agreement. At
March 31, 1996, the Corporation was in compliance with these covenants.
Hedging Activities
The Corporation has entered into interest rate exchange agreements to manage
the interest rate 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 notional
amount of interest rate exchange agreements outstanding at March 31, 1996 was
$3,183 million, all of which was associated with long-term debt of Continuing
Operations. The average remaining maturity of interest rate exchange
agreements was 6 months at March 31, 1996.
The total notional amount outstanding at March 31, 1996 relates to interest
rate exchange agreements with rate and maturity characteristics set forth in
the table below:
CONTRACTUAL MATURITIES OF INTEREST RATE EXCHANGE AGREEMENTS
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three months ended March 31 Total 1996 1997 1998 1999 2000
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Notional amount $3,183 $3,053 $ - $ 50 $ 55 $ 25
Wtd. avg. fixed rate paid 5.65% 5.51% - 8.73% 8.86% 9.36%
</TABLE>
Under the majority of the exchange agreements, the floating rate received is
based on 30-day LIBOR for the relevant periods indicated in the agreements.
This rate was 5.42% on March 31, 1996.
The Corporation's credit exposure under these agreements is limited to the cost
of replacing an agreement in the event of non-performance by its counterparty.
To minimize this risk, the Corporation has selected high credit quality
counterparties. As of March 31, 1996, the Corporation had no credit exposure
under its interest rate exchange agreements.
For the three months ended March 31, 1996, outstanding interest rate exchange
agreements resulted in a net increase in interest expense of Continuing
Operations of approximately $1 million with a de minimus impact on the average
borrowing rate.
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.
-26-
<PAGE> 27
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 the first three months of
1996.
OTHER MATTERS
Environmental Matters
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants 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 made estimates of the probable
and reasonably possible remediation costs that could be incurred by the
Corporation based on the facts and circumstances currently known. In addition,
the Corporation and its outside consultants are in the process of reviewing the
Corporation's environmental remediation strategies to determine the most
effective way to satisfy these obligations. Although the results of the review
are not yet available, it may result in a second quarter charge. See note 10
to the financial statements.
At March 31, 1996, the Corporation had accrued liabilities totalling $164
million for sites where it has been either named a potentially responsible
party (PRP) or has other remedial responsibilities, $21 million for sites that
have been divested and the Corporation has remedial or compliance obligations,
$61 million for the Bloomington sites and $29 million for environmental closure
activities at facilities where the Corporation has ongoing operations. Also,
in conjunction with its Discontinued Operations, the Corporation has provided
for remediation costs related to past operations of such sites.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations.
Legal Matters
The Corporation is defending a number of lawsuits on various matters. See note
10 to the financial statements. In the first quarter of 1996, the Corporation
recognized $486 million of costs for potential settlements of outstanding
litigation matters.
Since 1993, the Corporation has entered into agreements to resolve nine
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 the Corporation's pending 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 in note 10 and
that the Corporation has adequately provided for costs arising from potential
settlement of these matters when in the best interest of the Corporation.
Management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a) As previously reported, the Corporation was defending against a lawsuit
filed in February 1993 in the United States District Court (USDC) for the
Western District of Pennsylvania by Portland General Electric Company
(Portland) 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
similar suit. On April 26, 1996, the Corporation and Portland reached an
agreement resolving all claims asserted in this matter. The Corporation
previously reached a settlement with the Board.
b) As previously reported, the Corporation was defending against a lawsuit
filed in July 1993 in the USDC for the District of Minnesota by Northern States
Power Company (NSP) based on the Corporation's supply of steam generators at
NSP's Prairie Island Nuclear Plant. On April 23, 1996, Westinghouse and NSP
reached an agreement resolving all claims asserted in this matter.
c) The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products, generally in
the pre-1970 time period. Typically, these lawsuits are brought against
multiple defendants. The Corporation was neither a manufacturer nor a producer
of asbestos and is oftentimes dismissed from these lawsuits on the basis that
the Corporation has no relationship to the products in question or the claimant
did not have exposure to the Corporation's product. At March 31, 1996, the
Corporation had approximately 89,000 claims outstanding against it. On May 2,
1996, 16,500 claims pending in the Multidistrict Litigation No. 875 in the USDC
for the Eastern District of Pennsylvania were dismissed. Plaintiffs may appeal
this dismissal. In court actions which have been resolved, the Corporation has
prevailed in the majority of the asbestos claims and has resolved others
through settlement. Furthermore, the Corporation has brought suit against
certain of its insurance carriers with respect to these asbestos claims. Under
the terms of a settlement agreement resulting from this suit, carriers which
have agreed to the settlement are now reimbursing the Corporation for a
substantial portion of its current costs and settlements associated with
asbestos claims.
A number of the asbestos-related cases pending against the Corporation,
including those pending in Mississippi, Baltimore and West Virginia, are
consolidated cases. In consolidated cases, the claims of a group of plaintiffs
are tried together, and oftentimes limited findings with respect to common
issues of fact and punitive damages are decided with respect to a
representative grouping of plaintiffs and then applied to other individuals in
the group. However, for the Corporation to be liable for damages to any
particular claimant, that individual claimant must prove that he developed an
asbestos-related disease, that he was exposed to a Westinghouse product, and
that this exposure was a substantial factor in the development of the disease.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in each of 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 meritorious defenses to the litigation described in item
(c) above, and management believes that the litigation should not have a
material adverse effect on the financial condition of the Corporation.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) The Restated Articles of the Corporation as amended to January 8,
1996 are incorporated herein by reference to Exhibit 3(a) to Form
10-K for the year ended December 31, 1995.
(b) The Bylaws of the Corporation, as amended to December 28, 1995, are
incorporated herein by reference to Exhibit 3(c) to Form 10-K for
the year ended December 31, 1995.
(4) RIGHTS OF SECURITY HOLDERS
(a) 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.
(1) 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.
(b) Rights Agreement is incorporated herein by reference to Exhibit 1
to Form 8-A filed with the Securities and Exchange Commission on
January 9, 1996.
(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, as amended, is incorporated
herein by reference to Exhibit 10(b) to Form 10-K for the year
ended December 31, 1995.
(c*) The 1984 Long-Term Incentive Plan, as amended.
(d*) The Westinghouse Executive Pension Plan, as amended, is
incorporated herein by reference to Exhibit 10(d) to Form 10-K for
the year ended December 31, 1994.
(e*) The Deferred Compensation and Stock Plan for Directors, as amended,
is incorporated herein by reference to Exhibit 10(e) to Form 10-Q
for the quarter ended March 31, 1995.
(f*) The Advisory Director's Plan, as amended, is incorporated herein by
reference to Exhibit 10(k) to Form 10-K for the year ended December
31, 1989.
(g) The Director's Charitable Giving Program is incorporated herein by
reference to Exhibit 10(g) to Form 10-K for the year ended December
31, 1994.
(h*) The 1991 Long-Term Incentive Plan, as amended, is incorporated
herein by reference to Exhibit 10(h) to Form 10-K for the year
ended December 31, 1995.
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(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 is incorporated herein by reference to Exhibit 10(j) to
Form 10-K for the year ended December 31, 1994.
(k) $7.5 billion Credit Agreement among Westinghouse Electric
Corporation, the Lenders, Morgan Guaranty Trust Company of New
York, and Chemical Bank, dated September 12, 1995, is incorporated
herein by reference to Exhibit 10(n) to Form 10-Q for the quarter
ended September 30, 1995.
(l*) Employment Agreement between CBS Inc. and Peter Lund, dated as of
November 28, 1995.
* Identifies management contract or compensatory plan or arrangement.
(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
(27) Financial Data Schedule
B) REPORTS ON FORM 8-K:
A Current Report on Form 8-K (Item 7) dated January 9, 1996, filing a
Rights Agreement by and between Westinghouse Electric Corporation and First
Chicago Trust Company of New York, dated December 28, 1995.
A Current Report on Form 8-K/A (Item 7) dated February 6, 1996, amending
Item 7(b) of the Current Report on Form 8-K filed November 24, 1995.
A Current Report on Form 8-K (Items 5 and 7) dated February 8, 1996, filing
financial information for the redefined reporting segments of the
Corporation.
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SIGNATURE
Pursuant to the requirements 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 15th day of May 1996.
WESTINGHOUSE ELECTRIC CORPORATION
/s/ Fredric G. Reynolds
-----------------------------
Executive Vice President and
Chief Financial Officer
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EXHIBIT 10(c)
1984 LONG-TERM INCENTIVE PLAN
(as amended as of February 28, 1996)
ARTICLE I
GENERAL
1.1 Purpose:
--------
The purpose of the 1984 Long-Term Incentive Plan (Plan) for key
employees of Westinghouse Electric Corporation (Corporation) and its
Subsidiaries (the Corporation, its operating units and its Subsidiaries
severally and collectively referred to hereinafter 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
executives of outstanding ability, (ii) strengthening the company's capability
to develop, maintain and direct a competent management team, (iii) motivating
executives, 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 executives 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
(Committee) which shall consist of three or more members. Each member shall be
a "disinterested person", as that term is defined by Rule 16b-3(d)(3)
promulgated under the
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Securities Exchange Act of 1934. 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 from the regular, full-time salaried
employees of the Company who are exempt from the minimum wage and overtime
provisions of the Fair Labor Standards Act of 1938, as amended (Employee or
Employees), those who shall participate in the Plan (Participant or
Participants), (ii) to make awards in such forms and amounts as it shall
determine, (iii) to impose such limitations, restrictions and conditions upon
such awards as it shall deem appropriate, (iv) to interpret the Plan and to
adopt, amend and rescind administrative guidelines and other rules and
regulations relating
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to the Plan and (v) to make all other determinations and to take all other
actions necessary or advisable for the 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 on behalf of the Corporation as sponsor of
the Plan and on behalf of any subsidiary issuing stock under the Plan, subject
to appropriate action by the board of directors of any such Subsidiary. All
expenses associated with the Plan shall be borne by the Corporation subject to
such allocation to its Subsidiaries and operating units as it deems
appropriate.
1.3 Selection for Participation:
----------------------------
Participants shall be selected by the Committee from the employees who
occupy responsible managerial or professional positions and who have the
capacity to contribute to the success of the Company. 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 employee, his or her
past, present and potential contributions to the Company's profitability and
sound growth, the value of his or her services to the Company and other factors
deemed relevant by the Committee.
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1.4 Types of Awards under Plan:
---------------------------
Awards under the Plan may be in the form of any one or more of the
following (i) Incentive Stock Options (ISOs) and Non-statutory Stock Options
(NSOs) (options), Stock Appreciation Rights (SARs), as described in Article II,
(ii) Performance Units and Performance Shares (Performance Units or Performance
Shares) as described in Article III, (iii) Restricted Stock (Restricted Stock)
as described in Article IV and (iv) rights to purchase Convertible Debentures
(Debentures) 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
7.6 (Formula Value Stock). The maximum number of shares of Common Stock and
Formula Value Stock which may be issued for all purposes under the Plan shall
be 13,200,000. Any shares of Stock that are used by a Participant as full or
partial payment to the Corporation of the purchase price of shares of Stock
acquired upon exercise of an option shall be made available for future awards
under the Plan. Further, any shares of Stock subject to an option which for
any reason is cancelled (excluding shares subject to an Option cancelled upon
the exercise of a related SAR) or terminated without having been exercised, or
any shares of Restricted Stock or Performance Shares which are forfeited, shall
again be
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available for awards under the Plan. Shares subject to an option cancelled
upon the exercise of an SAR shall not again be available 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. Common Stock,
Putative Common Stock, Restricted Stock, and Formula Value Stock are
collectively referred to herein as "Stock".
ARTICLE II
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
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 ISOs and NSOs to purchase Common Stock or Formula Value
Stock.
The Committee may, effective as of the date of exercise by a
Participant of all or part of an option using already-owned Common Stock, grant
an additional option (reload option) to purchase at the fair market value as of
the date of said exercise, the number of shares of Common Stock equal to the
sum of the number of whole shares used by the Participant in payment of the
purchase price. A reload option shall only be available during the period the
Participant is an employee of the Company. The reload option may be exercised
between the date of its grant and the date of
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expiration of the underlying option to which the reload option relates. The
reload option shall be evidenced by an agreement containing such additional
terms and conditions as the Committee shall approve, which conditions may
provide that upon the exercise of any reload option, an additional reload
option may be granted with respect to the number of whole shares used to
exercise the reload option.
2.2 Stock Option Agreements:
------------------------
The award of an Option shall be evidenced by a signed written
agreement (Stock option Agreement) containing such terms and conditions as the
Committee may from time to time determine.
2.3 Option Price:
-------------
Purchase price of Common Stock or Formula Value Stock under each
Option (Option Price) shall be not less than the Fair Market Value of the
Common Stock or Formula Value Stock, as the case may be, on the date the Option
is awarded.
2.4 Exercise and Term of Options:
-----------------------------
(a) Unless otherwise provided by the Committee in the Stock Option
Agreement and subject to the limitations set forth in section 2.5, an option
awarded under the Plan shall become exercisable in whole or in part after the
commencement of the second year of its specified term and thereafter may be
exercised
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in whole or in part at any time before it terminates under the provisions of
the Plan.
(b) The Committee shall establish procedures governing the exercise of
options and shall require that notice of exercise be given. Stock purchased
upon 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 (not later than the time of grant, in the case
of an ISO) (i) through the delivery of shares of Stock which are then
outstanding and which have a Fair Market Value on 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. As soon as practicable after receipt of each notice and full payment,
the Company shall deliver to the Participant a certificate or certificates
representing the acquired shares of Common Stock or Formula Value Stock. The
exercise of an Option shall cancel any related SAR.
2.5 Limitations on ISOs:
--------------------
No Participant shall be awarded, in any one calendar year under this
Plan and under all plans of the Company, ISOs covering stock with an aggregate
Fair Market Value (determined as of the
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time the ISOs are granted) in excess of $100,000 plus any "unused limit
carryover" to such year for such Participant, as provided in Section 422A of
the Internal Revenue Code of 1954, as amended, or such other limit as may be
imposed by law in substitution thereof.
2.6 Termination of Employment:
--------------------------
In the event the Participant ceases to be an employee with the consent
of the Committee or upon his death, retirement or disability, each of his
outstanding Options shall be exercisable by the Participant (or his 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 its respective expiration
date. If the Participant ceases to be an employee for any other reason, all of
the Participant's then outstanding options shall terminate immediately.
2.7 Award of Stock Appreciation Rights:
-----------------------------------
(a) At any time prior to six months before an option's expiration date,
the Committee may award to the Participant an SAR related to the Option.
(b) The SAR shall represent the right to receive payment of a sum not to
exceed the amount, if any, by which the Fair Market Value of the Common Stock
or Formula Value Stock, as the case may be, on the date of exercise of the SAR
exceeds the Option Price.
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(c) SARs awarded under the Plan shall be evidenced by either the Stock
option Agreement or a separate agreement between the Company and the
Participant.
(d) An 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, except that (i) the Committee may prescribe additional conditions
and limitations on the exercise of any SAR and (ii) no SAR shall be exercisable
for six months after the date of award. The exercise of an SAR shall cancel
the related Option. SARs may be exercised only when the Fair Market Value of a
share of Common Stock or Formula Value Stock, as the case may be, exceeds the
Option Price.
(e) All SARs shall automatically be exercised on the last trading day
prior to the expiration of the related ISO or NSO, so long as the Fair Market
Value on such date exceeds the specified option Price.
(f) 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 reduced may be made to the Participant at a
subsequent time. No such limitation shall require a Participant to return to
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the Company any amount theretofore received by him upon the exercise of an SAR.
(g) 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 shares shall be valued at their Fair Market Value on the date of
exercise of the SAR.
(h) Each SAR shall expire on a date determined by the Committee at the
time of award, or earlier upon the occurrence of the first of the following:
(i) termination of the related option, (ii) expiration of a period of six
months after the later of either (1) the Participant ceasing to be an employee
with the consent of the Committee or upon his death, retirement or disability
or (2) termination of the Participant's service as a director of the
corporation or (iii) the Participant ceasing to be an employee for any other
reason.
2.8 Limited Stock Appreciation Rights:
----------------------------------
(a) The Committee may award limited stock appreciation rights (Limited
Rights) pursuant to the provisions of this paragraph to the holder of an Option
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
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period beginning on the first day following a Change in Control, as defined in
Section 7.6(g) of the Plan, and ending on the thirtieth day following such
date. Each Limited Right shall be exercisable only to the same extent the
related option is exercisable, and in no event after the determination of the
related option. In no event shall a Limited Right be exercised during 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, and shall
be considered to have been exercised to that extent for purposes of determining
the number of shares of Common Stock available for the grant of options under
the Plan. 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.
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(c) Except as otherwise provided in Section 7.3, the provisions of the
Plan shall also be applicable to Limited Rights unless the context otherwise
requires. 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 multiplying (i) the excess
of (a) the higher of (x) the Minimum Price Per Share (as hereinafter defined),
or (y) 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 2.8, 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
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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.
ARTICLE III
PERFORMANCE SHARES AND UNITS
3.1 Award of Performance Units and Performance Shares:
--------------------------------------------------
The Committee may award to any Participant Performance Shares and
Performance Units (Performance Award or Performance Awards). Each Performance
Share shall represent, as the Committee shall determine, one Share of the
Stock. Each Performance Unit shall represent the right of a Participant to
receive an amount equal to the value determined in the manner established by
the Committee at time of award, which value may, without limitation, be equal
to the Fair Market Value of one share of Stock.
3.2 Performance Unit and Performance Share Agreements:
--------------------------------------------------
Each Performance Award under the Plan shall be evidenced by a signed
written agreement containing such terms and conditions as the committee may
determine.
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3.3 Establishment of Performance Accounts:
--------------------------------------
At the time of award, the Company shall establish an account
(Performance Account) for each Participant. Performance Units and Performance
Shares awarded to a Participant shall be credited to the Participant's
Performance Account. Performance Shares in the form of Restricted Stock shall
be registered in the name of the Participant and deposited, together with a
stock power endorsed in blank, with the Corporation; at such time the
Participant's Performance Account will be credited.
3.4 Performance Period and Targets:
-------------------------------
(a) The performance period for each award of Performance Shares and
Performance Units shall be of such duration as the Committee shall establish at
the time of award (Performance Period). There may be more than one award in
existence at any one time, and Performance Periods may differ.
(b) At the time of each Performance Award, the Committee shall establish
superior and satisfactory performance targets to be achieved within the
Performance Period. The superior and satisfactory performance targets shall be
determined by the Committee using such measures of the performance of the
Company over the Performance Period as it shall select. Attainment of superior
performance target in respect of a Performance Period shall earn 100% of the
related Performance Award. Failure to meet the satisfactory performance target
will earn no Performance
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<PAGE> 15
Award. Performance Awards will be earned as determined by the Committee in
respect of a Performance Period in relation to the degree of attainment of
performance between the superior and satisfactory performance targets.
3.5 Rights and Benefits During Performance Period:
----------------------------------------------
(a) The Committee may provide that amounts equivalent to dividends paid
shall be payable with respect to each Performance Share awarded, and that
amounts equivalent to interest at such rates as the Committee may determine
shall be payable with respect to amounts equivalent to dividends previously
credited to the Participant's Performance Account.
(b) The Committee may provide that amounts equivalent to interest at such
rates as the Committee may determine shall be payable with respect to
Performance Units.
(c) All amounts payable pursuant to this section shall be credited to the
Participant's Performance Account.
3.6 Payment Respecting Performance Awards:
--------------------------------------
(a) Performance Awards shall be earned to the extent that the terms and
conditions of the Plan are met. Notwithstanding the foregoing, Performance
Shares, Performance Units and any other amounts credited to the Participant's
Performance Account shall be
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payable to the Participant only when, if and to the extent that the Committee
determines to make such payment.
(b) All payment determinations shall be made by the Committee during the
first four months following the end of the Performance Period. If such
determinations are not made during such four-month period, the Performance
Shares and Performance Units awarded in connection with that Performance Period
shall terminate and be canceled and related dividends or amounts equivalent to
dividends and any amounts equivalent to interest shall be forfeited.
(c) The Participant may, other than with respect to those Performance
Shares or Performance Units awarded in the form of Restricted Stock, elect, not
later than October 31 of the last year of the Performance Period applicable to
such Performance Shares or Performance Units, to defer any payment respecting
an award of Performance Shares or Performance units pursuant to Article VI
hereof.
3.7 Forms of Payment:
-----------------
(a) Payment for Performance Shares and any related dividends, amounts
equivalent to dividends and amounts equivalent to interest may be made in a
lump sum or in installments, in cash, Stock, Debentures or in a combination
thereof as the Committee may
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<PAGE> 17
determine. Performance Shares paid in the form of Restricted Stock shall be
redelivered to the Participant.
(b) Payment for Performance Units and any related amounts equivalent to
interest may be made in a lump sum or in installments, in cash, Stock,
Debentures or in a combination thereof as the Committee may determine.
3.8 Termination of Employment:
--------------------------
In the event the Participant ceases to be an employee before the end
of any Performance Period with the consent of the committee, or upon his death,
retirement or disability before the end of any Performance Period, the
Committee, taking into consideration the performance of such Participant and
the performance of the Company over the Performance Period, may authorize the
payment to such Participant (or his legal representative or designated
beneficiary) of all or a portion of the amount which would have been paid to
him had he continued as an employee to the end of the Performance Period. In
the event a Participant ceases to be an employee for any other reason, all
Performance Shares, Performance Units and all amounts credited to his
Performance Account shall be forfeited.
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<PAGE> 18
ARTICLE IV
RESTRICTED STOCK
4.1 Award of Restricted Stock:
--------------------------
The Committee may award to any Participant shares of Common Stock,
Putative Common Stock or Formula Value Stock subject to this Article IV and
such other terms and conditions as the Committee may prescribe, such shares
being herein called "Restricted Stock".
Each certificate for Restricted Stock shall be registered in the name
of the Participant and deposited by him, together with a stock power endorsed
in blank, with the Corporation.
4.2 Restricted Stock Agreement:
---------------------------
Shares of Restricted Stock awarded under the Plan shall be evidenced
by a signed written agreement containing such terms and conditions as the
Committee may determine.
4.3 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.
Shares of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as hereinafter provided, during the Restriction
Period. Except for such restriction on transfer, the Participant as owner
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<PAGE> 19
of such shares of Restricted stock shall have all the rights of a holder of
such Restricted Stock.
At the expiration of the Restriction Period, the Corporation shall
redeliver to the Participant (or his legal representative or designated
beneficiary) the shares deposited pursuant to Section 4.1.
4.4 Termination of Employment:
--------------------------
In the event the Participant ceases to be an employee with the consent
of the Committee, or upon his death, retirement or disability, the restrictions
imposed under this Article IV shall lapse with respect to such number of shares
theretofore awarded to him as shall be determined by the Committee, but, in no
event less than a number equal to the product of (i) a fraction the numerator
of which is the number of completed months elapsed after the date of award of
the Restricted Stock to the Participant to the date of termination and the
denominator of which is the number of months in the Restriction Period and (ii)
the number of shares of Restricted Stock.
In the event the Participant ceases to be an employee for any other
reason, all shares of Restricted Stock theretofore awarded to him which are
still subject to restrictions shall be forfeited and the Corporation shall have
the right to complete the blank stock power.
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<PAGE> 20
ARTICLE V
CONVERTIBLE DEBENTURES
5.1 Award of Rights to Purchase Convertible Debentures:
---------------------------------------------------
Convertible Debentures on such terms and conditions as the Committee
shall determine. The purchase price per Debenture shall be its face
amount, which shall equal its Fair Market Value. The Participant
shall retain the right to purchase Debentures for such period as the
Committee shall determine at the time of award, but in no event for
longer than four years from date of award.
5.2 Convertible Debenture Agreements:
---------------------------------
The Debentures are to be issued pursuant to a signed written agreement
and any agreement supplemental thereto (collectively, a Convertible Debenture
Agreement) containing such terms and conditions as the Committee may determine.
The Debentures are to be issued in series; each series may be issued under a
separate Convertible Debenture Agreement, or two or more series may be issued
under a single Convertible Debenture Agreement.
The Convertible Debenture Agreement may provide that a Participant may
pledge Debentures as security to provide all or a part of the financing
necessary to purchase the Debentures upon providing the Company with written
notice of the pledge. The
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<PAGE> 21
conversion privilege will not be exercisable during such times as the Debenture
is pledged, and at all other times shall be exercisable only by the Participant
(or his legal representative or designated beneficiary).
5.3 Terms and Conditions of the Debentures:
---------------------------------------
(a) Each Debenture will be due upon the earliest of (i) five years from the
date of issuance, (ii) such date as the Committee shall determine at time of
award or (iii) such date as the Company redeems a series of Debentures or
prepays an individual Debenture (Due Date). The Committee may extend the term
of a series for any period of time up to ten years without stockholder
approval, as shall be set forth in the Convertible Debenture Agreement for that
series. The Debentures shall be issued in denominations equal to fair market
value and will accrue interest, from the date of issuance, at the rate, which
may be fixed or variable, set by the Committee at the time of award.
(b) Debentures will be convertible into fully paid and nonassessable
shares Of Common Stock or Formula Value Stock or such other type of securities,
which may immediately be convertible into Common Stock, as the Committee shall
determine at time of award, at any time after one year from the date of
issuance and to the extent the terms and conditions of the award and the Plan
are met, but in no event later than the Due Date. The conversion rate of a
Debenture shall be set by reference to
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<PAGE> 22
the Fair Market Value of the Common Stock or Formula Value Stock on the last
trading day prior to the date of issuance (and not thereafter adjusted).
5.4 Termination of Employment:
--------------------------
In the event the Participant ceases to be an employee with the consent
of the Committee, or upon his death, retirement or disability, the Participant
(or his legal representative or designated beneficiary) may convert all or a
part of the Debentures, to the extent such Debentures were then convertible,
for such period as the Committee shall determine at the time of award. In the
event a Debenture is not converted within the time allowed under this Section
5.4, the Company may prepay the Debenture. In the event the Participant ceases
to be an employee for any other reason, all of the Participant's then
outstanding conversion rights shall terminate immediately.
ARTICLE VI
DEFERRAL OF PAYMENTS
6.1 Election to Defer:
------------------
A Participant may elect, no later than October 31 of the last year of
the Performance Period, to defer all or a portion of his Performance Award
within deferral limits established by the Committee (Deferred Amount). The
Committee may permit amounts now or hereafter deferred or available for
deferral under any
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<PAGE> 23
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.
All Deferred Amounts will be subject to such terms and conditions as
the Committee may from time to time establish.
6.2 Deferral Period:
----------------
The Participant may elect to receive payment of Deferred Amounts and
any yield thereon either before or after retirement in a lump sum or in
installments. Upon the death of a Participant, payment of any amounts
hereunder shall be made to the Participant's designated beneficiary or estate
(in the absence of a designated beneficiary) in the manner elected by the
Participant or (in the event the Participant made no election) in the manner
determined by the Committee.
The period between the date the Participant's Deferred Amount becomes
payable and the final payment of such Deferred Amount hereunder shall be known
as the "Deferral Period."
6.3 Investment During Deferral Period:
----------------------------------
Unless otherwise determined by the Committee, the Deferral Amount will
be treated as if it had been invested in putative debentures. Each putative
debenture will be deemed to be
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<PAGE> 24
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. The yield to be paid by the
Company on Deferred Amounts, whatever the form of investment selected by the
Committee, shall not exceed the higher of (i) the market rate available from
time to time on such investment or (ii) the rate of return on equity of the
Corporation or any relevant Subsidiary as determined by the Committee.
6.4 Participant Reports:
--------------------
Annually, each Participant who has a Deferred Amount will receive a
report setting forth all then Deferred Amounts and the yield thereon to date.
6.5 Payment of Deferred Amounts:
----------------------------
Unless otherwise agreed by the Company and the Participant, 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 determine. The
limitations respecting the issuance of Stock or other limitations on aggregate
awards payable contained in Article XVI of the by-laws of the Corporation, in
the 1974 Stock Option Plan, 1979 Stock Option and 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.
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<PAGE> 25
6.6 Alternate Valuation Election:
-----------------------------
A Participant may, at a time established by the Committee but prior to
such Participant ceasing to be an Employee, elect to establish the ultimate
payable value of each Deferred Amount by reference to the Fair Market Value of
the Stock as of the day on which notice of the alternate valuation election is
received by the Corporation in accordance with the 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 has been made and will continue to be
subject to the limitations set forth in Section 6.3, and Deferred Amounts and
the yield thereon will be paid as otherwise provided in this Article.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Non-Transferability:
--------------------
No Option, SAR, Performance Share, Performance Unit, share of
Restricted Stock or Debenture award under the Plan shall be transferable by the
Participant otherwise than by will or, if the Participant dies intestate, by
the laws of descent and distribution. All awards shall be exercisable or
received during the Participant's lifetime only by such Participant or his
legal
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<PAGE> 26
representative. Any transfer contrary to this Section 7.1 will nullify the
Option, SAR, Performance Share, Performance Unit or share of Restricted Stock
and will nullify the conversion right of a Debenture.
7.2 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, spinoff, split up, dividend in kind or other change in the corporate
structure or distribution to the stockholders, appropriate adjustments may be
made by the Board of Directors of the Company (or if the Company is not the
surviving corporation in any such transaction, the board of directors of the
surviving corporation) in the aggregate number and kind of shares subject to the
Plan, and the number and kind of shares and the price per share subject to
outstanding Options or which may be issued under Outstanding Performance Shares
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.
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<PAGE> 27
7.3 Conditions on Awards:
---------------------
In the event that the employment of a Participant holding any
unexercised Option or SAR, or any unearned right to purchase or conversion
right under a Debenture or unearned Performance Award or Stock shall terminate
with the consent of the Committee or by reason of retirement or disability, the
rights of such Participant to any such Option, SAR, Debenture, Performance
Award or Stock shall be subject to the conditions that until any such Option or
SAR is exercised, or any such conversion right, Purchase right, Performance
Award or Stock is earned, he 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 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 was actively
connected during his employment, but such consultations shall not (except in
the case of a Participant whose active service was outside the United States)
be required to be performed at any place or places outside of the United States
of America or during usual vacation periods or periods of illness or other
incapacity. 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 unearned conversion right, purchase right, Performance Award or
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<PAGE> 28
Stock held (and any unpaid amounts equivalent to dividends 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 Chairman, 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.
7.4 Use of Proceeds:
----------------
All cash proceeds from the exercise of options or the sale of
Debentures shall constitute general funds of the Company.
7.5 Amendment, Suspension and Termination of Plan:
----------------------------------------------
(a) The Board of Directors may suspend or terminate the Plan or any
portion thereof at any time and may amend it from time to time in such respects
as the Board of Directors may deem advisable in order that any awards
thereunder shall conform to any change in applicable laws or regulations, or to
permit the Company or its employees to enjoy the benefits of any change in
applicable laws or regulations, or in any other respect the Board of Directors
may deem to be in the best interests of the Company; provided, however, that no
such amendment shall, without stockholder approval, (i) except as provided in
Section 7.2, materially increase the number of shares of Stock which may be
issued under the Plan, (ii) materially modify the requirements as to
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<PAGE> 29
eligibility for participation in the Plan, (iii) materially increase the
benefits accruing to Participants under the Plan, (iv) make any other change
that would disqualify the Plan for purposes of the exemption provided by Rule
16b-3(d)(3), (v) reduce the Option Price below the Fair Market Value of the
Common Stock or Formula Value Stock on the day the Option is awarded, (vi)
permit the award of SARs other than in tandem with an Option, (vii) permit the
exercise of an SAR during the first six months of its term except as otherwise
provided herein, (viii) permit the exercise of an Option or SAR without
surrender of the correlative rights or (ix) extend the termination date of the
Plan. However, no such amendment, suspension or termination shall, unless the
Participant affected thereby consents, alter or impair any outstanding Option,
SAR, share of Stock, Performance Unit, Performance Share or Debenture in any
way that would adversely affect the rights of such Participant with respect to
such award.
(b) The Committee may and, with respect to awards of persons who are not
required to file reports with respect to securities of the Company pursuant to
Section 16(a) of the Securities Exchange Act of 1934, may authorize its
delegates, acting with within limits approved from time to time by the
Committee, to amend or modify any outstanding Options, SARs, shares of Stock,
Performance Units, Performance Shares or Debentures, in any manner to the
extent that the Committee would have had the authority under the Plan to
initially award such options, SARs, shares of Stock, Performance
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<PAGE> 30
Units, Performance Shares or Debentures, as so modified or amended, including
without limitation, to change the date or dates as of which such Options or
SARs may be exercised, the restrictions on shares of Restricted Stock are
removed or the Performance Units or Performance Shares are determined and paid,
or may cancel any outstanding award, except that the Committee and its
authorized delegates may not, unless the Participant affected thereby consents,
take any action pursuant to this Section 7.5(b) that would adversely affect the
rights of such Participant with respect to such award.
7.6 Definitions and other General Provisions:
-----------------------------------------
(a) 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 Corporation's 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 Corporation's 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
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<PAGE> 31
"Fair Market Value" as it relates to Formula Value Stock and Debentures 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) 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) The term "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.
(e) The adoption of the Plan shall not preclude the adoption by
appropriate means of any other stock option or other incentive plan for
employees.
(f) Change in Control.
Notwithstanding any other provision of the Plan, upon the
occurrence of a Change in Control, as defined in Section 7.6(g), (i) all
Options and Limited Rights, but not SARs, outstanding and unexercised on the
date of the Change in Control
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<PAGE> 32
shall become immediately exercisable; (ii) all Performance Shares and
Performance Units 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; (iv) all Convertible Debentures
shall be immediately convertible on such terms and conditions as the Committee
may determine; and (v) all amounts deferred under this Plan paid to a trustee
or otherwise on such terms as the Committee may prescribe or permit.
(g) 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 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
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<PAGE> 33
(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 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
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<PAGE> 34
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.
7.7 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 and timing 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.
7.8 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,
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<PAGE> 35
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.
7.9 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 the shares of Common Stock or Formula Value Stock or the
Debentures subject or related thereto 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 or any conditions not
acceptable to the Committee.
(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.
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<PAGE> 36
7.10 Effective Date:
---------------
The Plan shall be deemed effective as of January 1, 1984 and shall
terminate on December 31, 1993. Notwithstanding the foregoing, the provisions
of Article VI of the Plan shall survive and remain effective as to all present
and future Deferred Amounts until such date after December 31, 1993 as the
Committee or the Board of Directors shall determine.
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<PAGE> 1
EXHIBIT 10(l)
AGREEMENT made as of the 28th day of November, 1995, by and between
CBS Inc. ("CBS"), a New York corporation, having its principal office at
51 West 52 Street, New York, New York 10019, and PETER LUND ("Executive").
W I T N E S S E T H:
--------------------
WHEREAS, Executive has been performing services as President of the
CBS Broadcast Group of CBS pursuant to an agreement between Executive and CBS,
made as of February 23, 1995 (the "Existing Agreement"); and
WHEREAS, CBS desires to secure the services of Executive as President
and Chief Executive Officer of CBS and Executive is willing to perform such
services, upon the terms, provisions and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants hereinafter contained, it is agreed upon between CBS and Executive as
follows:
1. This Agreement supersedes, cancels and replaces the Existing
Agreement between CBS and Executive in all respects as of the date hereof,
except that the compensation arrangement set forth in the Existing Agreement
shall be superseded by the compensation arrangements set herein as of January
1, 1996, provided that the bonus payment of $350,000 due Executive in respect
of "the first contract year" under paragraph 3(b) of the Existing Agreement
shall be paid to Executive in February, 1996.
2. (a) CBS hereby employs Executive, and Executive hereby
accepts employment as President and Chief Executive Officer of CBS for a term
cornmencing as of the date hereof and ending December 31, 1999 (the "Employment
Term").
(b) Executive shall be based in New York City and report
directly and only to the
<PAGE> 2
highest executive officer of Westinghouse Electric Corporation ("Westinghouse")
(currently, Michael H. Jordan) and the Board of Directors of Westinghouse and
will act in accordance with the requirement of Law with respect to all CBS and
all applicable CBS and Westinghouse subsidiaries engaged in the Broadcasting
business. Executive's authority shall include the right to hire and fire all
persons employed by CBS and to approve any and all employment and similar
agreements relating to such persons in accordance with CBS and Westinghouse
personnel policies and practices, including the Westinghouse Compensation
Committee Charter.
(c) All officers, employees and other personnel of CBS
shall report only to Executive either directly or through such channels as
Executive in his discretion shall specify. Executive shall have full authority
to manage CBS, including its personnel, business and operations in accordance
with applicable policies and procedures, including those of the Westinghouse
Board.
(d) All entities which conduct activities or operations
described below and which are owned, operated or controlled in whole or part by
Westinghouse or in which Westinghouse has a direct or indirect interest will be
treated as if they were part of CBS, and the presidents or other chief
executive officers, as applicable, of such entities will report solely to
Executive. Without limitation, the foregoing shall apply to any such domestic
United States entity, regardless of where it conducts business and any foreign
entity which conducts business in the United States, which Westinghouse owns,
operates, controls or in which it acquires a direct or indirect interest
following the date hereof, and which is engaged, directly or indirectly, in any
activity or operation which the CBS Broadcast Group operated or controlled or
in which it or any entity related to it had an interest on November 24, 1995.
Such activities and operations include, or are deemed to include, with
limitation, the following, anywhere throughout the world: (A) television
network broadcast
2
<PAGE> 3
operations and activities; (B) ownership, management and/or operation of
television stations; (C) development, production, co-production, financing,
distribution and exploitation of audiovisual works and any elements thereof and
derivatives therefrom; (D) the ownership, management and/or operation of radio
stations and/or radio networks; and, (E) commercial tie-ups and merchandising.
3. (a) CBS agrees to pay Executive, and Executive agrees to
accept from CBS for his services hereunder, a base salary of $1,700,000 per
annum for the first contract year (effective January 1, 1996), $1,950,000 for
the second contract year (effective January 1, 1997), $2,200,000 for the third
contract year (effective January 1, 1998), and $2,450,000 for the fourth
contract year (effective January 1, 1999). Executive's base salary shall be
paid bi-weekly or in such other manner as CBS may designate for employees
generally.
(b) CBS agrees that Executive's Annual Incentive target
for each of 1996, 1997, 1998, and 1999 shall be $1,000,000 (100 percent of
target), but that Executive shall receive no les than $1,000,000 as his Annual
Incentive payment with respect to 1996 (payable in February, 1997) and no less
than $600,000 (60 percent of target) as his Annual Incentive payment with
respect to each of 1997, 1998, and 1999 (payable in February of 1998, 1999, and
2000, respectively). The precise amount of such payments in respect of 1996,
1997, 1998, and 1999 shall be determined on an annual basis at the sole
discretion of the Compensation Committee of the Board of Directors of
Westinghouse within the award range of 60% to 200% of target, subject to the
foregoing guaranteed minimum payments. The full amount of the Annual Incentive
payments may be deferred in accordance with the terms of the Westinghouse
Deferred Incentive Compensation Program as in effect from time to time.
(c) Executive shall be granted 500,000 options on
December 6, 1995 at that day's
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<PAGE> 4
fair market value. The options will be under and subject to the terms of
Westinghouse's 1993 Long-Term Incentive Plan and the non-qualified option
agreement between Executive and Westinghouse, a copy of which is annexed hereto,
except to the extent that any of the terms otherwise provided in this
subparagraph (c) are more favorable to Executive, in which case such more
favorable terms will apply to Executive: 250,000 of the options shall vest after
one year from the date of the grant, and 250,000 of the options shall vest after
two years from the date of the grant. In the event of Executive's death,
however, all previously granted unvested options shall vest effective on the
date of Executive's death. An additional 100,000 options will be granted in
December, 1998, and shall vest one year from the date of the grant so that said
shares shall vest no later than the last business day of December, 1999 pursuant
to the non-qualified option agreement with the same terms as the option
agreement which is annexed hereto. All of the options granted shall expire ten
years from the date of the grant, or upon the termination of Executive's
employment with CBS, whichever occurs first, except that in the event of a
change in control of Westinghouse, or in the event Executive is terminated
without Cause, for disability, or resigns for Good Reason, all unvested options
shall vest immediately and all options shall expire two years from the date of
termination or ten (10) years from the date of grant, if earlier; if Executive
retires, he shall have three years from the date of retirement in which to
exercise outstanding vested options or ten (10) years from the date of grant,
whichever occurs earlier. Notwithstanding the foregoing, or any other provision
in agreement, or the stock option agreements, in the event that Executive should
become engaged in a conflict of interest with CBS following the termination of
Executive's employment because of retirement, all options shall terminate
immediately upon Executive's failure to cure such conflict within fifteen (15)
days after receipt of written notice specifying the alleged breach in detail. A
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<PAGE> 5
conflict of interest for the purpose of this paragraph shall be defined by the
same standards as a conflict of interest that arises during the course of
Executive's employment.
(d) In no event will Executive be deemed to be disabled
until he has been unable to render all or substantially all of his material
duties for a period of twelve (12) consecutive weeks and CBS shall have given
him written notice that it considers him contractually disabled. If Executive
is given such notice, Executive shall continue to receive as long as he remains
so disabled up to December 31, 1999 an amount equal to his base salary (in
effect at the time of such notice), reduced by the maximum amount of salary
which is insured and paid under the CBS Long Term Disability ("LTD") Plan (or
any successor plan thereto). In addition, with respect to the year in which
Executive is given such notice, he shall receive a pro rated portion of his
minimum Guarantee Annual Incentive payment to the date of such notice, but no
further Annual Incentive payments.
(e) In the event of the death of Executive, salary
payments and Annual Incentive payments to be paid pursuant to this Agreement
shall cease immediately. Notwithstanding the foregoing, the estate of
Executive, or his designated beneficiary in the case of insurance proceeds,
shall receive all salary payments due through the date of Executive's death, a
pro rated portion of his minimum guaranteed Annual Incentive payment with
respect to the year of death pro rated to the date of death, and all of the
proceeds under all insurance plans covering Executive pursuant to Paragraph 4
or successor plans thereto as designated by Executive on an appropriate
beneficiary form.
4. (a) Executive shall be included in all plans now existing
or hereafter adopted for the general benefit of CBS Employees, such as
investment funds and group medical, disability or other insurance plans and
benefits, subject to the provisions of such plans as the same may be in
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<PAGE> 6
effect from time to time. With respect to pension benefits, Executive is a
vested participant in the CBS Pension Plan and shall be entitled to the same
benefit accruals as are provided under the CBS Pension Plan (and related
supplemental and excess retirement plans) as of November 24, 1995 (including all
provisions relating to the calculation and payment of, and eligibility to
receive, benefits, with the understanding that the actuarial assumptions for the
calculation of the lump sum benefit, may be modified in accordance with
applicable law); provided, to the extent that the foregoing pension benefits and
any other benefits to which Executive was entitled on November 28, 1995, exceed
the benefits payable to Executive under any plan or plans in effect at the time
Executive is to receive benefit thereunder, CBS will pay Executive in each
instance on a supplemental basis the excess of the benefits to which Executive
was entitled on November 28, 1995, over the benefits to which Executive then is
entitled. Executive will also participate in other CBS benefit plans in which
participation is limited to CBS executives in positions comparable to or lesser
than Executive's, and in any Westinghouse benefit plans for which a similar type
of CBS plan does not exist or does exist but with benefits that are less than
the Westinghouse plan and in which participation is limited to executives in
positions comparable to Executive's. To the extent Executive participates in any
benefit plan, such participation shall be based upon Executive's base salary and
minimum Annual Incentive payment, unless otherwise indicated in the plan
document, as in the case of the Supplemental Executive Retirement Plan.
(b) At all times during the Term, Executive will be
covered under the Universal Life Insurance and disability policies which
presently cover Executive.
5. Executive shall be entitled to four weeks vacation with pay,
and vacation shall be governed in accordance with CBS policy.
-6-
<PAGE> 7
6. Executive agrees to devote all customary business time and
attention to the affairs of CBS, except during vacation periods and reasonable
periods of illness or other incapacity consistent with the practices of CBS for
executives in comparable positions, and agrees that his services shall be
completely exclusive to CBS during the term hereof
7. Executive acknowledges that he has been furnished a copy of
the "Policy Notes from the President" concerning conflicts of interest
("Conflicts Policy"), dated December 13, 1989, and a copy of the "CBS Policy
Summary." Executive further acknowledges that he has read and understands all
the requirements thereof, and acknowledges that at all times during the
Employment Period he shall perform his services hereunder in full compliance
with the Conflicts Policy and the CBS Policy Summary and with any revisions
thereof or additions thereto.
8. (a) If, during the term of this Agreement, CBS properly
terminates the employment of Executive for Cause, then CBS's obligations
hereunder, except pursuant to paragraph 10 (provided that the exception for
paragraph 10 shall not apply to any claim, loss, liability, judgment or expense
resulting from the Cause for which Executive has been terminated), shall
terminate immediately. Nothing herein shall be deemed to affect Executive's
entitlement under benefit or other plans in which he participates, it being
understood that the construction or termination of such entitlement shall be as
provided for in the relevant plan documents. For all purposes of Agreement,
"Cause" shall mean on the part of Executive any of the following: (i) rendering
business-related services for others, if such violative act is not cured within
fifteen (15) days after written notice specifying the alleged breach in detail;
(ii) misappropriating or embezzling assets of CBS or committing an act of fraud
or other dishonesty as to CBS, (iii) being convicted in a court of law of
committing any other act of misappropriation, embezzlement, fraud or
dishonesty; (iv) failure to render material services under this Agreement
other than by reason of disability, unless
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<PAGE> 8
such failure is cured within fifteen (15) days after written notice
specifying the alleged breach in detail; or (v) intentionally violating
material policies and procedures of CBS, which are consistently applied to
other executives of CBS and are not inconsistent with this Agreement, after
Executive has received written notice that continued violation of such policies
could result in his termination.
(b) If, during the term of this Agreement, the employment
of Executive by CBS should be terminated by CBS other than for Cause (as
defined above) or it is terminated by Executive for Good Reason (as hereafter
defined) Executive shall immediately receive a lump sum payment in an amount
equal to the balance of all base salary payments and minimum Annual Incentive
payments called for by this Agreement for the balance of the Employment Term or
severance pay in accordance with CBS's present policy, whichever is greater
(and in no event shall the amount of such lump-sum payment be less than the sum
of one (1) year of base salary at Executive's then-existing rates and the
amount of the minimum Annual Incentive payment for the year in which the
termination occurs). Notwithstanding the above, if the employment of Executive
is terminated by CBS for Cause or by reason of disability or death, this
paragraph 8(b) shall not be applicable. The provisions of this paragraph 8(b)
shall not affect the right of Executive to receive all base salary payments and
a prorated portion of the minimum Annual Incentive payment called for by this
Agreement through the date of termination, irrespective of the reason for
termination. If the employment of Executive is terminated by CBS for Cause,
the provisions of this paragraph 8(b) shall not affect the right of Executive
to receive all base salary payments called for by this Agreement through the
date of termination.
(c) "Good Reason" shall mean a change in control of
Westinghouse or any of the following (without the Executive's prior express
written consent) which, on written notice received from the Executive, CBS
shall not have cured within fifteen (15) days; (A) the repeated failure of
-8-
<PAGE> 9
CBS to pay Executive any compensation or benefits due and owing hereunder (it
being agreed that written notice in respect of a repeated failure need be given
oly one time); (B) removing the Executive from his title or position as
President and Chief Executive Officer of CBS; (C) inserting any other person in
the chain of authority between the Executive and the highest executive officer
of Westinghouse Electric Corporation, (D) diminishing the Executive's authority
for the management and operation of CBS, or (E) diminishing in any substantial
way the functions of CBS, provided that this provision shall not be deemed to
alter the terms of paragraph 2(d).
9. CBS and Executive agree that, beginning not later than April
1, 1999, if this Agreement is then in effect, and if both parties desire to
continue their relationship, they will engage in good faith discussions looking
to an extension of this Agreement, or to a successor employment agreement, to
become effective on or before the expiration of this Agreement.
10. To the fullest extent permitted by the laws of the State of
New York, CBS shall protect, indemnify and hold harmless Executive and any
entity claiming under or through him from and against any claim, loss,
liability, judgment and expense (including reasonable attorneys' fees) arising
from or relating to Executive's employment by CBS.
11. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration held in New
York City and administered by the American Arbitration Association in
accordance with its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
12. This Agreement contains the entire understanding of the
parties with respect to the subject matter thereof, supersedes any and all
prior agreements of the parties with respect to the subject matter thereof and
cannot be changed or extended except by a writing signed by both parties
hereto. This Agreement shall be binding upon and inure to the benefit of the
parties and their
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<PAGE> 10
respective legal representatives, executors, heirs,
administrators, successors and assigns. This Agreement and all matters and
issues collateral thereto shall be governed by the laws of the State of New
York applicable to contracts performed entirely therein. If any provision of
this Agreement, as applied to either party or to any circumstance, shall be
adjudged by a court to be void and unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
thereof.
13. All notices or other communications hereunder shall be given
in writing and shall be deemed given if served personally or mailed by
registered or certified mail, return receipt requested, to the parties at their
respective addresses above indicated, or at such other address or address they
may hereafter designate in writing. Any notice to CBS shall be sent to the
attention of the Senior Vice President, Human Resources, with a copy to the
General Counsel of CBS. Any notice to Executive also shall be sent in the same
manner to:
Franklin, Weinrib, Rudell & Vassallo, P.C.
488 Madison Avenue
New York, New York 10022
Attn: Michael I. Rudell, Esq.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
November 28, 1995.
CBS INC.
By MICHAEL H. JORDAN
-----------------------------
PETER A. LUND
-----------------------------
Executive
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<PAGE> 1
EXHIBIT (11) COMPUTATION OF PER SHARE EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
EQUIVALENT SHARES:
Average shares outstanding 397,459,976 357,422,449
Additional Shares due to:
Stock options 5,949,398 4,378,665
Series C Preferred Shares 36,000,000 36,000,000
----------- -----------
Total equivalent shares 439,409,374 397,801,114
=========== ===========
ADJUSTED EARNINGS
(in millions):
Loss from Continuing Operations $ (764) $ (9)
Less: Series B preferred
stock dividends - 13
------- -------
Adjusted loss from Continuing Operations $ (764) $ (22)
------- -------
Income from Discontinued Operations $ 1,008 $ 24
Extraordinary item (63) -
------- -------
Adjusted net income $ 181 $ 2
======= =======
EARNINGS (LOSS) PER SHARE
From Continuing Operations $ (1.74) $ (0.05)
From Discontinued Operations 2.29 0.06
From Extraordinary item (0.14) -
------- -------
Earnings (loss) per share (a) $ 0.41 $ 0.01
======= =======
</TABLE>
(a) For earnings per share using an alternative treatment for the Series C
Preferred Shares, see note 11 to the condensed consolidated financial
statements included in Part I of this report
-32-
<PAGE> 1
EXHIBIT (12)(a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
Income (loss) before income taxes
and minority interest $(1,148) $ (16)
Less: Equity in income (loss) of 50 percent
or less owned affiliates - -
Add: Fixed charges excluding capitalized interest 153 53
------- -------
Earnings as adjusted $ (995) $ 37
======= =======
Fixed charges:
Interest expense $ 146 $ 48
Rental expense 7 5
Capitalized interest - -
------- -------
Total fixed charges $ 153 $ 53
======= =======
Ratio of earnings to fixed charges (a) (b)
======= =======
</TABLE>
(a) Additional income before income taxes and minority interest of $1,148
million would be necessary to attain a ratio of earnings to fixed charges
of 1.00x for the quarter ended March 31, 1996.
(b) Additional income before income taxes and minority interest of $16 million
would be necessary to attain a ratio of earnings to fixed charges of 1.00x
for the quarter ended March 31, 1995.
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<PAGE> 1
EXHIBIT (12)(b) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
Income (loss) before income taxes
and minority interest $(1,148) $ (16)
Less: Equity in income (loss) of 50 percent
or less owned affiliates - -
Add: Fixed charges excluding capitalized interest 171 109
------- -------
Earnings as adjusted $ (977) $ 93
======= =======
Combined fixed charges and preferred dividends:
Interest expense $ 146 $ 48
Rental expense 7 5
Capitalized interest - -
Pre-tax earnings required to cover
preferred dividend requirements (a) 18 56
------- -------
Total combined fixed charges and preferred
dividends $ 171 $ 109
======= =======
Ratio of earnings to combined fixed charges
and preferred dividends (b) (c)
======= =======
</TABLE>
(a) Dividend requirement divided by 100% minus effective income tax rate.
(b) Additional income before income taxes and minority interest of $1,148
million would be necessary to attain a ratio of earnings to combined fixed
charges and preferred dividends of 1.00x for the quarter ended March 31,
1996.
(c) Additional income before income taxes and minority interest of $16 million
would be necessary to attain a ratio of earnings to combined fixed charges
and preferred dividends of 1.00x for the quarter ended March 31, 1995.
-34-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000106413
<NAME> WESTINGHOUSE ELECTRIC
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 1,614
<ALLOWANCES> 38
<INVENTORY> 758
<CURRENT-ASSETS> 4,353
<PP&E> 3,638
<DEPRECIATION> 1,753
<TOTAL-ASSETS> 15,369
<CURRENT-LIABILITIES> 4,579
<BONDS> 3,658
<COMMON> 426
4
0
<OTHER-SE> 1,439
<TOTAL-LIABILITY-AND-EQUITY> 15,369
<SALES> 1,956
<TOTAL-REVENUES> 1,956
<CGS> 1,515
<TOTAL-COSTS> 1,515
<OTHER-EXPENSES> 1,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146
<INCOME-PRETAX> (1,148)
<INCOME-TAX> (385)
<INCOME-CONTINUING> (764)
<DISCONTINUED> 1,008
<EXTRAORDINARY> (63)
<CHANGES> 0
<NET-INCOME> 181
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
