<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, 1997
--------------
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 610,373,930 SHARES OUTSTANDING AT APRIL 30, 1997
-------------------------------------------------------------
-1-
<PAGE> 2
WESTINGHOUSE ELECTRIC CORPORATION
INDEX
---------------------------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
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 6-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 14-24
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 24-26
SIGNATURE 27
</TABLE>
-2-
<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
------------------
1997 1996
---- ----
<S> <C> <C>
SALES OF PRODUCTS AND SERVICES $ 2,223 $ 1,883
COSTS OF PRODUCTS AND SERVICES (1,590) (1,459)
RESTRUCTURING, LITIGATION AND OTHER MATTERS
(NOTES 2 AND 3) - (654)
MARKETING, ADMINISTRATION, AND
GENERAL EXPENSES (763) (584)
------- -------
OPERATING LOSS (130) (814)
OTHER INCOME (EXPENSES), NET (NOTE 4) 34 (146)
INTEREST EXPENSE (114) (146)
------- -------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES (210) (1,106)
INCOME TAX BENEFIT 59 384
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES - (1)
------- -------
LOSS FROM CONTINUING OPERATIONS (151) (723)
------- -------
DISCONTINUED OPERATIONS, NET OF
INCOME TAXES (NOTE 9):
LOSS FROM DISCONTINUED OPERATIONS - (51)
ESTIMATED NET GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS - 1,018
------- -------
INCOME FROM DISCONTINUED OPERATIONS - 967
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT
(NOTE 5) - (63)
------- -------
NET INCOME (LOSS) $ (151) $ 181
======= =======
EARNINGS (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ (0.23) $ (1.65)
DISCONTINUED OPERATIONS - 2.20
EXTRAORDINARY ITEM - (0.14)
------- -------
EARNINGS (LOSS) PER COMMON SHARE $ (0.23) $ 0.41
======= =======
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, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
ASSETS (UNAUDITED)
- ------
CASH AND CASH EQUIVALENTS $ 89 $ 220
CUSTOMER RECEIVABLES 1,686 1,561
INVENTORIES (NOTE 6) 863 783
UNCOMPLETED CONTRACTS COSTS OVER RELATED BILLINGS 661 686
PROGRAM RIGHTS 460 431
DEFERRED INCOME TAXES 792 817
PREPAID AND OTHER CURRENT ASSETS 172 289
------- -------
TOTAL CURRENT ASSETS 4,723 4,787
PLANT AND EQUIPMENT, NET 1,841 1,866
FCC LICENSES, NET 2,213 2,199
GOODWILL, NET 8,736 8,776
OTHER INTANGIBLE AND NONCURRENT ASSETS (NOTE 7) 2,318 2,261
NET ASSETS OF DISCONTINUED OPERATIONS (NOTE 9) 53 -
------- -------
TOTAL ASSETS $19,884 $19,889
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
SHORT-TERM DEBT $ 153 $ 497
CURRENT MATURITIES OF LONG-TERM DEBT 34 4
ACCOUNTS PAYABLE 561 887
UNCOMPLETED CONTRACTS BILLINGS OVER RELATED COSTS 410 334
OTHER CURRENT LIABILITIES (NOTE 8) 2,335 2,578
------- -------
TOTAL CURRENT LIABILITIES 3,493 4,300
LONG-TERM DEBT 6,128 5,149
PENSION LIABILITY 1,159 1,069
OTHER NONCURRENT LIABILITIES (NOTE 8) 3,497 3,619
------- -------
TOTAL LIABILITIES 14,277 14,137
------- -------
CONTINGENT LIABILITIES AND COMMITMENTS (NOTE 10)
MINORITY INTEREST IN EQUITY OF CONSOLIDATED
SUBSIDIARIES 12 10
SHAREHOLDERS' EQUITY (NOTE 11):
PREFERRED STOCK, $1.00 PAR VALUE (25 MILLION
SHARES AUTHORIZED):
SERIES C CONVERSION PREFERRED (4 MILLION
SHARES ISSUED) 4 4
COMMON STOCK, $1.00 PAR VALUE (1,100 MILLION
SHARES AUTHORIZED, 612 MILLION AND 609 MILLION
SHARES ISSUED) 612 609
CAPITAL IN EXCESS OF PAR VALUE 5,418 5,376
COMMON STOCK HELD IN TREASURY (533) (546)
MINIMUM PENSION LIABILITY ADJUSTMENT (796) (796)
CUMULATIVE FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS (4) 11
RETAINED EARNINGS 894 1,084
------- -------
TOTAL SHAREHOLDERS' EQUITY 5,595 5,742
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,884 $19,889
======= =======
</TABLE>
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE> 5
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1997 1996
---- ----
<S> <C> <C>
CASH USED FOR OPERATING ACTIVITIES
OF CONTINUING OPERATIONS $ (863) $ (502)
CASH USED FOR OPERATING ACTIVITIES
OF DISCONTINUED OPERATIONS (30) (314)
CASH FLOWS FROM INVESTING ACTIVITIES:
BUSINESS ACQUISITIONS (46) (85)
BUSINESS DIVESTITURES AND OTHER ASSET LIQUIDATIONS 123 3,587
CAPITAL EXPENDITURES (41) (52)
------ ------
CASH PROVIDED BY INVESTING ACTIVITIES 36 3,450
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
BANK REVOLVER BORROWINGS 1,610 988
BANK REVOLVER REPAYMENTS (435) (57)
NET CHANGE IN OTHER SHORT-TERM DEBT (302) (92)
REPAYMENTS OF LONG-TERM DEBT (149) (3,570)
STOCK ISSUED 60 42
DIVIDENDS PAID (41) (32)
BANK FEES PAID AND OTHER (5) (8)
------ ------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 738 (2,729)
------ ------
DECREASE IN CASH AND CASH EQUIVALENTS (119) (95)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 233 226
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 114 $ 131
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
INTEREST PAID:
CONTINUING OPERATIONS $ 117 $ 105
DISCONTINUED OPERATIONS 5 17
------ ------
TOTAL INTEREST PAID $ 122 $ 122
====== ======
INCOME TAXES PAID $ 16 $ 23
====== ======
</TABLE>
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-5-
<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, 1996. CERTAIN AMOUNTS PERTAINING TO THE THREE MONTHS ENDED MARCH
31, 1996 HAVE BEEN RESTATED OR RECLASSIFIED FOR COMPARATIVE PURPOSES. REFERENCE
ALSO SHOULD BE MADE TO THE CORPORATION'S CURRENT REPORT ON FORM 8-K DATED
FEBRUARY 11, 1997 CONTAINING CERTAIN RESTATED FINANCIAL INFORMATION.
DURING RECENT YEARS, THE CORPORATION HAS MADE SEVERAL CHANGES TO ITS BUSINESS
PORTFOLIO. A NUMBER OF BUSINESS SEGMENTS WERE IDENTIFIED AS NON-STRATEGIC AND
WERE RECLASSIFIED TO DISCONTINUED OPERATIONS. WHEN APPROPRIATE, FINANCIAL
INFORMATION PREVIOUSLY ISSUED WAS RESTATED TO GIVE EFFECT TO THE CLASSIFICATION
OF THESE BUSINESSES AS DISCONTINUED OPERATIONS IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES BOARD OPINION (APB) 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." SEE
NOTE 9 TO THE FINANCIAL STATEMENTS.
ON DECEMBER 31, 1996, THE CORPORATION ACQUIRED INFINITY BROADCASTING
CORPORATION (INFINITY). THE ACQUISITION, WHICH WAS ACCOUNTED FOR UNDER THE
PURCHASE METHOD OF ACCOUNTING, IS REFLECTED IN THE YEAR-END 1996 CONSOLIDATED
BALANCE SHEET. EFFECTIVE JANUARY 1, 1997, OPERATING RESULTS FOR INFINITY ARE
INCLUDED IN THE CONSOLIDATED STATEMENT OF INCOME.
ON FEBRUARY 10, 1997, THE CORPORATION ANNOUNCED THAT IT REACHED A DEFINITIVE
MERGER AGREEMENT WITH GAYLORD ENTERTAINMENT COMPANY (GAYLORD) WHEREBY THE
CORPORATION WILL ACQUIRE GAYLORD'S TWO MAJOR CABLE NETWORKS - THE NASHVILLE
NETWORK (TNN) AND COUNTRY MUSIC TELEVISION (CMT). THE ACQUISITION INCLUDES
DOMESTIC AND INTERNATIONAL OPERATIONS OF TNN, THE U.S. AND CANADIAN OPERATIONS
OF CMT, AND APPROXIMATELY $50 MILLION OF WORKING CAPITAL. THE PURCHASE PRICE OF
$1.55 BILLION WILL BE PAID IN WESTINGHOUSE COMMON STOCK. THE NUMBER OF SHARES
TO BE ISSUED WILL DEPEND ON THE AVERAGE OF THE CLOSING PRICES OF THE
CORPORATION'S COMMON STOCK DURING A TRADING PERIOD JUST PRIOR TO THE EFFECTIVE
TIME OF THE TRANSACTION, SUBJECT TO CERTAIN LIMITS ON THE TOTAL NUMBER OF
SHARES TO BE ISSUED AND CERTAIN TERMINATION RIGHTS UNDER THE MERGER AGREEMENT.
THE TRANSACTION IS SUBJECT TO SEVERAL CONDITIONS, INCLUDING REGULATORY
APPROVALS, THE RECEIPT OF A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE,
AND THE APPROVAL OF GAYLORD'S SHAREHOLDERS.
IN NOVEMBER 1996, THE BOARD OF DIRECTORS APPROVED A PLAN TO SEPARATE THE
CORPORATION'S INDUSTRIES AND TECHNOLOGY BUSINESSES BY WAY OF A TAX-FREE
DIVIDEND TO SHAREHOLDERS, FORMING A NEW PUBLICLY TRADED COMPANY TO BE CALLED
WESTINGHOUSE ELECTRIC COMPANY (WELCO). THE PLAN ALSO PROVIDES THAT THERMO KING
WILL CONDUCT A PUBLIC OFFERING OF UP TO 20% OF ITS COMMON STOCK AND WILL BECOME
A MAJORITY-OWNED SUBSIDIARY OF WELCO. COMPLETION OF THE PLAN IS SUBJECT TO A
NUMBER OF CONDITIONS, INCLUDING A FAVORABLE RULING FROM THE INTERNAL REVENUE
SERVICE AND THE REGISTRATION OF THE WELCO COMMON STOCK UNDER THE SECURITIES
EXCHANGE ACT OF 1934. MANAGEMENT CURRENTLY ANTICIPATES THE SEPARATION WILL
OCCUR LATER IN 1997. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE SEPARATION
WILL OCCUR OR AS TO THE RELATED TIMING. FURTHERMORE, IF THE SEPARATION DOES
OCCUR, THERE CAN BE NO ASSURANCE THAT ALL OF THE ASSETS, LIABILITIES AND
CONTRACTUAL OBLIGATIONS WILL BE TRANSFERRED AS CURRENTLY CONTEMPLATED OR THAT
CHANGES WILL NOT BE MADE TO THE SEPARATION PLAN.
THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS
THAT AFFECT THE REPORTED AMOUNTS OF ASSETS AND LIABILITIES, THE DISCLOSURE OF
CONTINGENT ASSETS AND LIABILITIES AT THE DATE OF THE FINANCIAL STATEMENTS, AND
THE REPORTED AMOUNTS OF REVENUES AND EXPENSES DURING THE REPORTING PERIOD.
ACTUAL
-6-
<PAGE> 7
RESULTS COULD DIFFER FROM THOSE ESTIMATES. ON AN ONGOING BASIS, MANAGEMENT
REVIEWS ITS ESTIMATES, INCLUDING THOSE RELATED TO LITIGATION, ENVIRONMENTAL
LIABILITIES, CONTRACTS, PENSIONS, AND DISCONTINUED OPERATIONS, BASED ON
CURRENTLY AVAILABLE INFORMATION. CHANGES IN FACTS AND CIRCUMSTANCES MAY RESULT
IN REVISED ESTIMATES. 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 OR
ANY OTHER INTERIM PERIOD.
IN FEBRUARY 1997, THE FINANCIAL ACCOUNTING STANDARDS BOARD ISSUED STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 128, "EARNINGS PER SHARE," WHICH
REQUIRES THE DUAL PRESENTATION OF BASIC AND DILUTED EARNINGS PER SHARE. BASIC
AND DILUTED EARNINGS PER SHARE CALCULATED IN ACCORDANCE WITH THIS STANDARD
WOULD HAVE BEEN A LOSS OF $0.28 FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
INCOME OF $0.43 FOR THE THREE MONTHS ENDED MARCH 31, 1996. THE CORPORATION WILL
ADOPT THIS STANDARD AS OF DECEMBER 31, 1997, AS REQUIRED. EARLY ADOPTION IS NOT
PERMITTED.
2. RESTRUCTURING, LITIGATION AND OTHER MATTERS
DURING THE FIRST THREE MONTHS OF 1996, THE CORPORATION TOOK SEVERAL ACTIONS TO
STREAMLINE ITS BUSINESSES AND RECOGNIZE THE FINANCIAL IMPACT OF CERTAIN
MATTERS. CERTAIN OF THESE ACTIONS RESULTED IN THE RECOGNITION OF CHARGES TO
OPERATING PROFIT. COSTS FOR NEW RESTRUCTURING PROJECTS OF $123 MILLION WERE
RECOGNIZED PRIMARILY FOR THE CONSOLIDATION OF FACILITIES AND THE SEPARATION OF
EMPLOYEES. A CHARGE OF $486 MILLION WAS RECOGNIZED FOR PENDING LITIGATION
MATTERS. OTHER COSTS OF $45 MILLION RECOGNIZED IN THE FIRST QUARTER GENERALLY
RELATED TO ASSET IMPAIRMENT, AS DISCUSSED IN NOTE 3 TO THE FINANCIAL
STATEMENTS, OR TO COSTS ASSOCIATED WITH PREVIOUSLY DIVESTED BUSINESSES.
NO SUCH CHARGES WERE INCURRED IN THE FIRST THREE MONTHS OF 1997.
3. IMPAIRMENT OF LONG-LIVED ASSETS
DURING THE FIRST QUARTER OF 1996, THE CORPORATION ADOPTED SFAS 121, "ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF." SFAS 121 REQUIRES THAT LONG-LIVED ASSETS, INCLUDING RELATED
GOODWILL, BE REVIEWED FOR IMPAIRMENT AND WRITTEN DOWN TO THEIR ESTIMATED FAIR
VALUE WHENEVER EVENTS OR CHANGES IN CIRCUMSTANCES INDICATE THAT THE CARRYING
VALUE MAY NOT BE RECOVERABLE.
UPON THE ADOPTION OF SFAS 121, AN IMPAIRMENT CHARGE OF $15 MILLION WAS
RECOGNIZED IN THE 1996 FIRST QUARTER OPERATING PROFIT.
4. OTHER INCOME AND EXPENSES, NET (IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME $ 1 $ 5
GAIN ON SALE OF EQUITY INVESTMENT 24 -
LOSS ON DISPOSITION OF OTHER ASSETS - (151)
OPERATING RESULTS - NON-CONSOLIDATED AFFILIATES 2 -
FOREIGN CURRENCY TRANSACTION AND HIGH-INFLATION
TRANSLATION EFFECT 7 (2)
OTHER - 2
----- -----
OTHER INCOME (EXPENSES), NET $ 34 $(146)
===== =====
</TABLE>
-7-
<PAGE> 8
5. EXTRAORDINARY ITEM
ON MARCH 1, 1996, THE CORPORATION EXTINGUISHED PRIOR TO MATURITY $3,565 MILLION
OF DEBT UNDER THE THEN-EXISTING $7.5 BILLION CREDIT FACILITY. AS A RESULT OF
THE EARLY EXTINGUISHMENT OF DEBT AND THE WRITE-OFF OF RELATED DEBT ISSUE COSTS,
THE CORPORATION INCURRED AN EXTRAORDINARY LOSS OF $63 MILLION, NET OF A TAX
BENEFIT OF $41 MILLION, FOR THE THREE MONTHS ENDED MARCH 31, 1996.
6. INVENTORIES (IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
RAW MATERIALS $ 120 $ 127
WORK IN PROCESS 492 493
FINISHED GOODS 133 125
------- -------
745 745
LONG-TERM CONTRACTS IN PROCESS 1,080 986
PROGRESS PAYMENTS TO SUBCONTRACTORS 51 45
RECOVERABLE ENGINEERING AND DEVELOPMENT COSTS 102 68
LESS: INVENTORIED COSTS RELATED TO CONTRACTS
WITH PROGRESS BILLING TERMS (1,115) (1,061)
------- -------
INVENTORIES, NET $ 863 $ 783
======= =======
</TABLE>
7. OTHER INTANGIBLE AND NONCURRENT ASSETS (IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
DEFERRED INCOME TAXES $ 906 $ 774
OTHER INTANGIBLE ASSETS 418 425
INTANGIBLE PENSION ASSET 40 40
DEFERRED CHARGES 41 39
JOINT VENTURES AND OTHER AFFILIATES 222 232
NONCURRENT RECEIVABLES 313 384
PROGRAM RIGHTS 141 142
OTHER 237 225
------- -------
TOTAL OTHER INTANGIBLE AND NONCURRENT ASSETS $ 2,318 $ 2,261
======= =======
</TABLE>
-8-
<PAGE> 9
8. OTHER CURRENT AND NONCURRENT LIABILITIES (IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
OTHER CURRENT LIABILITIES:
- -------------------------
ACCRUED EMPLOYEE COMPENSATION $ 176 $ 248
INCOME TAXES CURRENTLY PAYABLE 179 189
LIABILITIES FOR TALENT AND PROGRAM RIGHTS 455 308
ACCRUED PRODUCT WARRANTY 56 59
ACCRUED INTEREST AND INSURANCE 209 210
ACCRUED RESTRUCTURING COSTS 80 184
LIABILITY FOR BUSINESS DISPOSITIONS 94 79
ACCRUED EXPENSES 558 875
ENVIRONMENTAL LIABILITIES 61 62
OTHER 467 364
------- -------
TOTAL OTHER CURRENT LIABILITIES $ 2,335 $ 2,578
======= =======
OTHER NONCURRENT LIABILITIES:
- ----------------------------
POSTRETIREMENT BENEFITS $ 1,198 $ 1,218
POSTEMPLOYMENT BENEFITS 67 67
ACCRUED RESTRUCTURING COSTS 86 94
LIABILITY FOR BUSINESS DISPOSITIONS 62 87
LIABILITIES FOR TALENT AND PROGRAM RIGHTS 48 51
ACCRUED EXPENSES 1,079 1,112
ENVIRONMENTAL LIABILITIES 398 404
OTHER 559 586
------- -------
TOTAL OTHER NONCURRENT LIABILITIES $ 3,497 $ 3,619
======= =======
</TABLE>
9. DISCONTINUED OPERATIONS
IN RECENT YEARS, THE CORPORATION HAS ADOPTED SEVERAL SEPARATE PLANS TO DISPOSE
OF MAJOR SEGMENTS OF ITS BUSINESS. THESE BUSINESSES HAVE BEEN ACCOUNTED FOR AS
DISCONTINUED OPERATIONS IN ACCORDANCE WITH APB 30.
THE TABLE BELOW SUMMARIZES EACH OF THE CORPORATION'S SEGMENT DISPOSAL PLANS AS
WELL AS THE ASSETS REMAINING AS OF MARCH 31, 1997.
<TABLE>
<CAPTION>
PLAN DATE LINE OF BUSINESS REMAINING ASSETS
- --------- ---------------- ----------------
<S> <C> <C>
NOVEMBER 1996 COMMUNICATION & INFORMATION
SYSTEMS (CISCO) SEVERAL BUSINESSES
MARCH 1996 ENVIRONMENTAL SERVICES SEVERAL BUSINESSES
DECEMBER 1995 THE KNOLL GROUP (KNOLL) -
DECEMBER 1995 DEFENSE AND ELECTRONIC SYSTEMS -
JULY 1995 LAND DEVELOPMENT (WCI) MORTGAGE NOTES RECEIVABLE
AND MISCELLANEOUS SECURITIES
NOVEMBER 1992 FINANCIAL SERVICES LEASING RECEIVABLES
NOVEMBER 1992 DISTRIBUTION & CONTROL (DCBU) -
NOVEMBER 1992 WESTINGHOUSE ELECTRIC SUPPLY
COMPANY (WESCO) MISCELLANEOUS SECURITIES
</TABLE>
-9-
<PAGE> 10
SUMMARIZED OPERATING RESULTS OF DISCONTINUED OPERATIONS, GROUPED BY MEASUREMENT
DATE, FOLLOWS:
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(IN MILLIONS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
MEASUREMENT DATE
---------------------------------------
1996 1995 1992 TOTAL
---- ---- ---- -----
<S> <C> <C> <C>
SALES OF PRODUCTS AND SERVICES $ 109 $ - $ 3 $ 112
LOSS BEFORE INCOME TAXES (18) - (6) (24)
INCOME TAX BENEFIT 6 - - 6
NET OPERATING LOSSES AFTER MEASUREMENT
DATE CHARGED TO LIABILITY FOR ESTIMATED
LOSS ON DISPOSAL (12) - (6) (18)
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
MEASUREMENT DATE
---------------------------------------
1996 1995 1992 TOTAL
---- ---- ---- -----
<S> <C> <C> <C>
SALES OF PRODUCTS AND SERVICES $ 138 $ 352 $ 7 $ 497
LOSS BEFORE INCOME TAXES (57) (78) (6) (141)
INCOME TAX BENEFIT (EXPENSE) 6 (4) - 2
NET LOSS PRIOR TO MEASUREMENT DATE (51) - - (51)
NET OPERATING LOSSES AFTER MEASUREMENT
DATE CHARGED TO LIABILITY FOR ESTIMATED
LOSS ON DISPOSAL - (82) (6) (88)
</TABLE>
THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS HAVE BEEN SEPARATELY
CLASSIFIED ON THE CONSOLIDATED BALANCE SHEET AS NET ASSETS OF DISCONTINUED
OPERATIONS. A SUMMARY OF THESE ASSETS AND LIABILITIES FOLLOWS:
NET ASSETS OF DISCONTINUED OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
CASH AND CASH EQUIVALENTS $ 25 $ 13
RECEIVABLES 71 90
INVENTORIES 29 32
PORTFOLIO INVESTMENTS 823 845
OTHER ASSETS 509 438
------ ------
TOTAL ASSETS -- DISCONTINUED OPERATIONS 1,457 1,418
------ ------
LIABILITIES:
SHORT-TERM DEBT 6 5
CURRENT MATURITIES OF LONG-TERM DEBT 13 2
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL 631 672
LONG-TERM DEBT 425 417
OTHER LIABILITIES 129 142
DEFERRED INCOME TAXES 200 180
------ ------
TOTAL LIABILITIES -- DISCONTINUED OPERATIONS 1,404 1,418
------ ------
NET ASSETS OF DISCONTINUED OPERATIONS $ 53 $ -
====== ======
</TABLE>
-10-
<PAGE> 11
AT MARCH 31, 1997, THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS
INCLUDED THOSE RELATED TO THE REMAINING OPERATING BUSINESSES FROM BOTH THE
CISCO SEGMENT AND THE ENVIRONMENTAL SERVICES BUSINESS, THE REMAINING SECURITIES
FROM WCI, OTHER MISCELLANEOUS SECURITIES, THE LEASING PORTFOLIO, AND DEFERRED
INCOME TAXES. LIABILITIES ALSO INCLUDED DEBT AND THE ESTIMATED LOSSES AND
DIVESTITURE COSTS ASSOCIATED WITH ALL DISCONTINUED OPERATIONS, INCLUDING
ESTIMATED RESULTS OF OPERATIONS THROUGH DIVESTITURE.
EXCEPT FOR THE LEASING PORTFOLIO, THE ASSETS GENERALLY ARE EXPECTED TO BE
DIVESTED DURING 1997. DEFERRED INCOME TAXES, WHICH RESULT FROM TEMPORARY
DIFFERENCES BETWEEN BOOK AND TAX BASES OF THE ASSETS AND LIABILITIES OF
DISCONTINUED OPERATIONS, GENERALLY WILL BE TRANSFERRED TO CONTINUING OPERATIONS
UPON REVERSAL AND WILL NOT RESULT IN THE RECEIPT OR PAYMENT OF CASH BY
DISCONTINUED OPERATIONS. LIABILITIES ASSOCIATED WITH DIVESTITURES ARE EXPECTED
TO BE SATISFIED OVER THE NEXT SEVERAL YEARS. DEBT WILL BE REPAID USING CASH
PROCEEDS FROM THE LIQUIDATION OF ASSETS OF DISCONTINUED OPERATIONS. CASH
PROCEEDS IN EXCESS OF THOSE REQUIRED TO REPAY THE DEBT AND SATISFY THE
DIVESTITURE LIABILITIES OF DISCONTINUED OPERATIONS, IF ANY, WILL BE TRANSFERRED
TO CONTINUING OPERATIONS.
PORTFOLIO INVESTMENTS CONSIST PRIMARILY OF RECEIVABLES RELATED TO THE LEASING
PORTFOLIO OF FINANCIAL SERVICES. ALSO INCLUDED ARE REAL ESTATE PROPERTIES AND
INVESTMENTS IN LEASING PARTNERSHIPS. THE LEASING PORTFOLIO IS EXPECTED TO
LIQUIDATE THROUGH 2015 IN ACCORDANCE WITH CONTRACTUAL TERMS AND GENERALLY
CONSISTS OF DIRECT FINANCING AND LEVERAGED LEASES. AT MARCH 31, 1997 AND
DECEMBER 31, 1996, 83% AND 84%, RESPECTIVELY, RELATED TO AIRCRAFT AND 17% AND
16%, RESPECTIVELY, RELATED TO COGENERATION FACILITIES.
10. CONTINGENT LIABILITIES AND COMMITMENTS
LEGAL MATTERS
- -------------
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 TEN 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. ONE ACTIVE STEAM GENERATOR LAWSUIT REMAINS.
THE CORPORATION IS ALSO A PARTY TO SIX 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 HAS BEEN 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 WERE APPEALED. IN JULY 1996,
THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT (THE CIRCUIT COURT)
AFFIRMED THE COURT'S DISMISSAL OF THE DERIVATIVE CLAIM. THE CIRCUIT COURT ALSO
AFFIRMED IN PART AND REVERSED IN PART THE DISMISSAL OF THE CLASS ACTION CLAIMS.
THOSE CLASS ACTION CLAIMS THAT WERE NOT DISMISSED BY THE CIRCUIT COURT HAVE
BEEN REMANDED TO THE LOWER COURT FOR FURTHER PROCEEDINGS.
-11-
<PAGE> 12
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, 1997, THE
CORPORATION HAD APPROXIMATELY 101,000 CLAIMS OUTSTANDING AGAINST IT.
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 THAT HAVE AGREED TO THE SETTLEMENT
ARE NOW REIMBURSING THE CORPORATION FOR A SUBSTANTIAL PORTION OF ITS CURRENT
COSTS AND SETTLEMENTS ASSOCIATED WITH ASBESTOS CLAIMS. THE CORPORATION HAS
RECORDED A LIABILITY FOR ASBESTOS-RELATED MATTERS THAT ARE DEEMED PROBABLE AND
CAN BE REASONABLY ESTIMATED, AND HAS SEPARATELY RECORDED AN ASSET EQUAL TO THE
AMOUNT OF SUCH ESTIMATED LIABILITIES THAT WILL BE RECOVERED PURSUANT TO
AGREEMENTS WITH INSURANCE CARRIERS. THE CORPORATION CANNOT REASONABLY ESTIMATE
COSTS FOR UNASSERTED ASBESTOS CLAIMS.
GENERAL
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. 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, AND TECHNOLOGY; THE ADEQUACY OF
INFORMATION AVAILABLE FOR INDIVIDUAL SITES; THE EXTENDED TIME PERIODS OVER
WHICH SITE REMEDIATION OCCURS; AND THE IDENTIFICATION OF NEW SITES. THE
CORPORATION HAS, HOWEVER, RECOGNIZED AN ESTIMATED LIABILITY, MEASURED IN
CURRENT DOLLARS, FOR THOSE SITES WHERE IT IS PROBABLE THAT A LOSS HAS BEEN
INCURRED AND THE AMOUNT OF THE LOSS CAN BE REASONABLY ESTIMATED. THE
CORPORATION RECOGNIZES CHANGES IN ESTIMATES AS NEW REMEDIATION REQUIREMENTS ARE
DEFINED OR AS MORE INFORMATION BECOMES AVAILABLE.
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 APPROXIMATELY 90 SITES, INCLUDING THE SITES LOCATED IN
BLOOMINGTON, INDIANA. THE CORPORATION BELIEVES THAT ANY LIABILITY INCURRED FOR
CLEANUP AT THESE SITES WILL BE SATISFIED OVER A NUMBER OF YEARS, AND IN MANY
CASES, THE COSTS WILL BE SHARED WITH OTHER RESPONSIBLE PARTIES. THESE SITES
INCLUDE CERTAIN SITES FOR WHICH THE CORPORATION, AS PART OF AN AGREEMENT FOR
SALE, HAS RETAINED OBLIGATIONS FOR REMEDIATION OF ENVIRONMENTAL CONTAMINATION
AND FOR OTHER COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY
ACT (CERCLA) ISSUES.
-12-
<PAGE> 13
BASED ON THE COSTS ASSOCIATED WITH THE MOST PROBABLE ALTERNATIVE REMEDIATION
STRATEGY FOR THE ABOVE MENTIONED SITES, INCLUDING BLOOMINGTON, THE CORPORATION
HAS AN ACCRUED LIABILITY OF $459 MILLION. DEPENDING ON THE REMEDIATION
ALTERNATIVES ULTIMATELY SELECTED, THE COSTS RELATED TO THESE SITES COULD DIFFER
FROM THE AMOUNTS CURRENTLY ACCRUED. THE ACCRUED LIABILITY INCLUDES $338 MILLION
FOR SITE INVESTIGATION AND REMEDIATION AND $121 MILLION FOR POST CLOSURE AND
MONITORING ACTIVITIES. MANAGEMENT ANTICIPATES THAT THE MAJORITY OF EXPENDITURES
FOR SITE INVESTIGATION AND REMEDIATION WILL OCCUR DURING THE NEXT FIVE TO TEN
YEARS. EXPENDITURES FOR POST-CLOSURE AND MONITORING ACTIVITIES WILL BE MADE
OVER PERIODS UP TO 30 YEARS.
COMMITMENTS -- CONTINUING OPERATIONS
- ------------------------------------
IN THE ORDINARY COURSE OF BUSINESS, STANDBY LETTERS OF CREDIT AND SURETY BONDS
ARE ISSUED ON BEHALF OF THE CORPORATION RELATED PRIMARILY TO PERFORMANCE
OBLIGATIONS UNDER CONTRACTS WITH CUSTOMERS.
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, 1997, THE CORPORATION WAS COMMITTED TO
MAKE PAYMENTS UNDER SUCH BROADCASTING CONTRACTS, ALONG WITH COMMITMENTS FOR
TALENT CONTRACTS, TOTALLING $3,383 MILLION.
COMMITMENTS -- DISCONTINUED OPERATIONS
- --------------------------------------
FINANCIAL SERVICES COMMITMENTS AT MARCH 31, 1997 CONSISTING PRIMARILY OF
GUARANTEES TOTALLED $33 MILLION COMPARED TO $38 MILLION AT YEAR-END 1996. THE
REMAINING COMMITMENTS HAVE FIXED EXPIRATION DATES FROM 1997 THROUGH 2002.
MANAGEMENT EXPECTS THESE COMMITMENTS TO EXPIRE UNFUNDED.
11. SHAREHOLDERS' EQUITY
THE CORPORATION'S SERIES C CONVERSION PREFERRED STOCK (SERIES C PREFERRED) HAS
BEEN TREATED AS OUTSTANDING COMMON STOCK FOR THE CALCULATION OF EARNINGS PER
SHARE, WHICH WAS IN ACCORDANCE WITH PREVALENT PRACTICE AT THE TIME OF SALE. IF
THE SERIES C PREFERRED HAD BEEN TREATED AS COMMON STOCK EQUIVALENTS FOR THE
CALCULATION OF EARNINGS PER SHARE, THE CORPORATION'S PER-SHARE RESULTS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 WOULD HAVE BEEN A LOSS OF $0.27 AND
INCOME OF $0.42, RESPECTIVELY.
IN APRIL 1997, THE CORPORATION ANNOUNCED ITS INTENTION TO REDEEM ALL OUTSTANDING
SHARES OF THE SERIES C PREFERRED ON MAY 30, 1997. IN ACCORDANCE WITH THE TERMS
OF THE OFFERING, EACH SHARE OF THE SERIES C PREFERRED WILL CONVERT INTO
WESTINGHOUSE COMMON STOCK AT THE RATE OF 8.85 SHARES OF WESTINGHOUSE COMMON
STOCK, EQUIVALENT TO 0.885 OF A SHARE OF WESTINGHOUSE COMMON STOCK FOR EACH
$1.30 DEPOSITARY SHARE. EACH DEPOSITARY SHARE REPRESENTS ONE-TENTH OF A SHARE OF
SERIES C PREFERRED. IN CONNECTION WITH THIS REDEMPTION OF THE SERIES C
PREFERRED, THE CORPORATION WILL ISSUE 31,859,902 SHARES OF COMMON STOCK. ALL
ACCRUED AND UNPAID DIVIDENDS ON THE REDEEMED SHARES OF SERIES C PREFERRED WILL
BE PAID ON MAY 30, 1997.
IN CONJUNCTION WITH THE INFINITY ACQUISITION ON DECEMBER 31, 1996, THE
CORPORATION ISSUED 183 MILLION NEW SHARES OF WESTINGHOUSE COMMON STOCK. THESE
SHARES, TOGETHER WITH THE RELATED OPTIONS OUTSTANDING, RESULTED IN AN INCREASE
OF SHAREHOLDERS' EQUITY OF $3.8 BILLION.
-13-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
THE $4.7 BILLION ACQUISITION OF INFINITY BROADCASTING CORPORATION (INFINITY)
RESULTED IN AN INCREASE IN SHAREHOLDERS' EQUITY AT DECEMBER 31, 1996 OF $3.8
BILLION FROM THE ISSUANCE OF 183 MILLION SHARES OF WESTINGHOUSE COMMON STOCK
AND THE CONVERSION OF INFINITY OPTIONS INTO OPTIONS TO ACQUIRE APPROXIMATELY 22
MILLION ADDITIONAL SHARES OF WESTINGHOUSE COMMON STOCK. EFFECTIVE JANUARY 1,
1997, OPERATING RESULTS FOR INFINITY ARE INCLUDED IN THE CORPORATION'S
CONSOLIDATED FINANCIAL STATEMENTS AND ARE REPORTED AS PART OF THE RADIO SEGMENT
OF THE MEDIA GROUP.
SUBSEQUENT TO THE ACQUISITION OF INFINITY AT YEAR-END 1996, THE CORPORATION'S
RADIO GROUP CONTINUED TO OUTPACE THE MARKET. THE RADIO GROUP'S PROFITABILITY IN
THE FIRST QUARTER OF 1997 WAS FURTHER ENHANCED BY COST REDUCTION MEASURES AT
RADIO STATIONS.
NET INCOME FOR THE FIRST QUARTER OF 1997 WAS A LOSS OF $151 MILLION, OR $0.23
PER SHARE, COMPARED TO INCOME OF $181 MILLION, OR $0.41 PER SHARE FOR THE 1996
FIRST QUARTER. INCOME FROM CONTINUING OPERATIONS FOR THE QUARTER WAS A LOSS OF
$151 MILLION, OR $0.23 PER SHARE, COMPARED TO A LOSS OF $723 MILLION, OR $1.65
PER SHARE FOR THE 1996 FIRST QUARTER. RESULTS FOR THE 1996 QUARTER INCLUDED A
NUMBER OF SPECIAL ITEMS WHICH ARE PRESENTED IN THE TABLE BELOW. NO SPECIAL
ITEMS WERE RECOGNIZED IN THE FIRST QUARTER OF 1997. EXCLUDING THE 1996 SPECIAL
ITEMS, THE FIRST QUARTER 1996 LOSS FROM CONTINUING OPERATIONS WAS $114 MILLION,
OR $0.26 PER SHARE.
THE $37 MILLION INCREASE IN THE LOSS FROM CONTINUING OPERATIONS FOR THE QUARTER
REFLECTED SEVERAL FACTORS. FOR THE MEDIA GROUP, THE FAVORABLE RADIO RESULTS
WERE MORE THAN OFFSET BY LOWER PERFORMANCE BY THE TELEVISION NETWORK. RESULTS
FOR THE INDUSTRIES AND TECHNOLOGY GROUP ALSO DECLINED PRIMARILY BECAUSE OF A
PROFIT ADJUSTMENT FOR A COMPLEX INTERNATIONAL POWER PROJECT. INTEREST EXPENSE
FOR THE 1997 QUARTER WAS FAVORABLE, REFLECTING THE MARCH 1996 DEBT REPAYMENTS
FROM THE SALE PROCEEDS OF THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS AND THE
KNOLL GROUP (KNOLL), THE CORPORATION'S OFFICE FURNITURE BUSINESS.
ON FEBRUARY 10, 1997, THE CORPORATION ANNOUNCED THAT IT REACHED A DEFINITIVE
MERGER AGREEMENT WITH GAYLORD ENTERTAINMENT COMPANY (GAYLORD) WHEREBY THE
CORPORATION WILL ACQUIRE GAYLORD'S TWO MAJOR CABLE NETWORKS - THE NASHVILLE
NETWORK (TNN) AND COUNTRY MUSIC TELEVISION (CMT). THE ACQUISITION INCLUDES
DOMESTIC AND INTERNATIONAL OPERATIONS OF TNN, THE U.S. AND CANADIAN OPERATIONS
OF CMT, AND APPROXIMATELY $50 MILLION OF WORKING CAPITAL. THE PURCHASE PRICE OF
$1.55 BILLION WILL BE PAID IN WESTINGHOUSE COMMON STOCK. THE NUMBER OF SHARES
TO BE ISSUED WILL DEPEND ON THE AVERAGE OF THE CLOSING PRICES OF THE
CORPORATION'S COMMON STOCK DURING A TRADING PERIOD JUST PRIOR TO THE EFFECTIVE
TIME OF THE TRANSACTION, SUBJECT TO CERTAIN LIMITS ON THE TOTAL NUMBER OF
SHARES TO BE ISSUED AND CERTAIN TERMINATION RIGHTS UNDER THE MERGER AGREEMENT.
THE TRANSACTION IS SUBJECT TO SEVERAL CONDITIONS, INCLUDING REGULATORY
APPROVALS, THE RECEIPT OF A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE,
AND THE APPROVAL OF GAYLORD'S SHAREHOLDERS. MANAGEMENT CURRENTLY ANTICIPATES
THIS TRANSACTION TO BE COMPLETED PRIOR TO THE SEPARATION OF THE INDUSTRIES AND
TECHNOLOGY BUSINESSES AS DISCUSSED BELOW.
IN NOVEMBER 1996, THE BOARD OF DIRECTORS APPROVED A PLAN TO SEPARATE THE
CORPORATION'S INDUSTRIES AND TECHNOLOGY BUSINESSES BY WAY OF A TAX-FREE
DIVIDEND TO SHAREHOLDERS, FORMING A NEW PUBLICLY TRADED COMPANY TO BE CALLED
WESTINGHOUSE ELECTRIC COMPANY (WELCO). THE PLAN ALSO PROVIDES THAT THERMO KING
WILL CONDUCT A PUBLIC OFFERING OF UP TO 20% OF ITS COMMON STOCK AND WILL BECOME
A MAJORITY-OWNED SUBSIDIARY OF WELCO. COMPLETION OF THE PLAN IS SUBJECT TO A
NUMBER OF CONDITIONS, INCLUDING A FAVORABLE RULING FROM THE INTERNAL REVENUE
SERVICE AND THE REGISTRATION OF THE WELCO COMMON STOCK UNDER THE SECURITIES
EXCHANGE ACT OF 1934. MANAGEMENT CURRENTLY ANTICIPATES THE SEPARATION WILL
OCCUR LATER IN 1997. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE SEPARATION
WILL OCCUR OR AS TO THE RELATED TIMING. FURTHERMORE, IF THE SEPARATION DOES
OCCUR, THERE CAN BE NO ASSURANCE THAT ALL OF THE ASSETS, LIABILITIES AND
CONTRACTUAL OBLIGATIONS WILL BE TRANSFERRED AS CURRENTLY CONTEMPLATED OR THAT
CHANGES WILL NOT BE MADE TO THE SEPARATION PLAN.
-14-
<PAGE> 15
DURING 1996, THE CORPORATION COMPLETED THE SALES OF ITS DEFENSE AND ELECTRONIC
SYSTEMS BUSINESS AND KNOLL, 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 1995 $5.4 BILLION ACQUISITION OF CBS INC. (CBS).
THE CORPORATION FURTHER STREAMLINED ITS BUSINESSES IN 1996 AND ADOPTED PLANS TO
EXIT ITS COMMUNICATION & INFORMATION SYSTEMS (CISCO) SEGMENT AND ITS
ENVIRONMENTAL SERVICES LINE OF BUSINESS, RESULTING IN THE TRANSFER OF THESE
BUSINESSES TO DISCONTINUED OPERATIONS. ON DECEMBER 31, 1996, THE CORPORATION
COMPLETED THE SALE OF WESTINGHOUSE SECURITY SYSTEMS, PART OF CISCO.
IN THE FIRST QUARTER OF 1996, THE CORPORATION RECOGNIZED COSTS ASSOCIATED WITH
ADDITIONAL RESTRUCTURING ACTIONS, AS WELL AS OUTSTANDING LITIGATION AND OTHER
MATTERS. THE SPECIAL ITEMS INCLUDED IN THE CORPORATION'S RESULTS FOR THE FIRST
THREE MONTHS OF 1996 ARE SUMMARIZED BELOW.
SPECIAL ITEMS INCLUDED IN RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 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 $ (123)
LITIGATION MATTERS (486)
IMPAIRMENT OF ASSETS (15)
CONTRACT ACCOUNTING ADJUSTMENTS (128)
OTHER (30)
-------
TOTAL IMPACT ON OPERATING PROFIT (782)
OTHER INCOME AND EXPENSE:
LOSS ON ASSETS HELD FOR SALE (152)
-------
TOTAL IMPACT ON CONTINUING OPERATIONS $ (934) $ (609) $ (1.39)
=======
DISCONTINUED OPERATIONS:
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 $ 346 $ 0.79
====== =======
</TABLE>
-15-
<PAGE> 16
RESULTS OF OPERATIONS
THE FOLLOWING REPRESENTS THE SEGMENT RESULTS FOR THE CORPORATION'S CONTINUING
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
SEGMENT RESULTS (IN MILLIONS)(UNAUDITED)
----------------------------------------
<TABLE>
<CAPTION>
OPERATING PROFIT
(LOSS)
SALES OF PRODUCTS OPERATING PROFIT EXCLUDING
& SERVICES (LOSS) SPECIAL CHARGES
----------------- ---------------- ----------------
THREE MONTHS ENDED
MARCH 31 1997 1996 1997 1996 1997 1996
- ------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
MEDIA:
TELEVISION $ 177 $ 188 $ 56 $ 54 $ 56 $ 54
NETWORK 793 766 (60) - (60) -
RADIO 313 121 47 20 47 20
OTHER MEDIA BUSINESSES 60 49 (4) 4 (4) 4
OTHER MEDIA (17) (6) (35) (76) (35) (35)
------ ------ ----- ----- ----- -----
TOTAL MEDIA 1,326 1,118 4 2 4 43
INDUSTRIES & TECHNOLOGY:
POWER SYSTEMS:
ENERGY SYSTEMS 187 231 (60) (26) (60) (5)
POWER GENERATION (a) 474 277 (39) (225) (39) (42)
OTHER POWER SYSTEMS (51) (50) (17) (306) (17) (17)
------ ------ ----- ----- ----- -----
TOTAL POWER SYSTEMS 610 458 (116) (557) (116) (64)
THERMO KING 251 257 47 45 47 45
GOVERNMENT OPERATIONS 23 25 10 18 10 18
------ ----- ----- ----- ----- -----
TOTAL INDUSTRIES &
TECHNOLOGY (a) 884 740 (59) (494) (59) (1)
CORPORATE & OTHER 20 34 (75) (322) (75) (74)
INTERSEGMENT SALES (7) (9) - - - -
------ ------ ----- ----- ----- -----
TOTAL (a) $2,223 $1,883 $(130) $(814) $(130) $ (32)
====== ====== ===== ===== ===== =====
</TABLE>
(a) FIRST QUARTER 1996 SALES WERE REDUCED BY A $180 MILLION ONE-TIME ADJUSTMENT
TO PREVIOUS ACCOUNTING FOR CERTAIN LONG-TERM CONTRACTS.
THE CORPORATION'S REPORTED SALES INCREASED $340 MILLION, OR 18%, FOR THE FIRST
QUARTER OF 1997 COMPARED TO THE 1996 FIRST QUARTER. ADJUSTING FOR THE IMPACT OF
THE INFINITY ACQUISITION AND EXCLUDING THE EFFECTS OF THE SPECIAL ONE-TIME
ACCOUNTING ADJUSTMENT AT POWER GENERATION IN 1996, SALES WERE FLAT FOR THE
QUARTER. THE IMPROVEMENTS ACHIEVED BY POWER GENERATION AND MEDIA WERE
ESSENTIALLY OFFSET BY LOWER SALES FROM ENERGY SYSTEMS, THERMO KING, GOVERNMENT
OPERATIONS, AND CERTAIN MISCELLANEOUS NON-STRATEGIC BUSINESSES THAT WERE
DIVESTED IN 1996.
THE OPERATING LOSS FOR THE CORPORATION FOR THE FIRST QUARTER OF 1997 INCREASED
SIGNIFICANTLY FROM THE FIRST QUARTER OF 1996, EXCLUDING SPECIAL ITEMS IN THE
1996 FIRST QUARTER. WHILE THE STRENGTH OF THE MEDIA GROUP'S RADIO BUSINESS
CAUSED PROFITS IN RADIO TO INCREASE SIGNIFICANTLY AS A RESULT OF THE ADDITION OF
INFINITY AND IMPROVEMENT AT THE EXISTING STATIONS, THE CBS NETWORK PROFITS
DECLINED PRIMARILY AS A RESULT OF LOWER RATINGS AND HIGHER PROGRAMMING COSTS.
POWER SYSTEMS' OPERATING LOSS INCREASED FOR THE QUARTER PRIMARILY AS A RESULT
OF THE COMPLETION OF A REEVALUATION OF A COMPLEX INTERNATIONAL NUCLEAR PROJECT
AT ENERGY SYSTEMS WHICH REQUIRED AN ADJUSTMENT TO SALES AND OPERATING PROFIT.
GOVERNMENT OPERATIONS' RESULTS DECLINED FOR THE FIRST QUARTER OF 1997 COMPARED
-16-
<PAGE> 17
TO 1996 DUE TO THE LOSS OF A DEPARTMENT OF ENERGY (DOE) CONTRACT IN 1996.
THERMO KING, HOWEVER, INCREASED PROFITS SLIGHTLY FOLLOWING TWO FOURTH QUARTER
1996 ACQUISITIONS.
MEDIA
DUE TO THE ACQUISITION OF INFINITY AT DECEMBER 31, 1996, THE RESULTS FOR MEDIA
FOR THE FIRST QUARTER OF 1997 INCLUDE INFINITY FINANCIAL DATA, WHILE THE FIRST
QUARTER OF 1996 RESULTS DO NOT. WHERE APPROPRIATE, THE DISCUSSION BELOW
PROVIDES A COMPARISON OF THE ACTUAL RESULTS FOR THE FIRST QUARTER OF 1997 WITH
THE PROFORMA COMBINED CBS AND INFINITY RESULTS FOR THE FIRST QUARTER OF 1996.
REVENUES FOR THE TELEVISION GROUP DECLINED $11 MILLION OR 6% FOR THE FIRST
QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR. LOWER RATINGS IN CERTAIN
MAJOR MARKETS AND THE LACK OF POLITICAL ADVERTISING IN THE 1997 FIRST QUARTER
CONTRIBUTED TO THE DECLINE. THE 1996 FIRST QUARTER ALSO INCLUDED REVENUES FROM
WPRI, THE PROVIDENCE, RHODE ISLAND STATION SOLD IN JULY 1996. DESPITE THE LOWER
REVENUES, OPERATING PROFIT INCREASED NEARLY 4% AS COST IMPROVEMENTS AT THE
STATIONS MORE THAN OFFSET THE DECREASED REVENUES.
THE NETWORK EXPERIENCED A 4% INCREASE IN REVENUES FOR THE FIRST QUARTER OF 1997
COMPARED TO THE SAME PERIOD LAST YEAR PRIMARILY AS A RESULT OF INCREASED
SYNDICATION FEES AND THE TIMING OF THE NCAA FINAL BASKETBALL GAME. THE FINAL
GAME WAS PLAYED ON MARCH 31, 1997 COMPARED TO APRIL 1, 1996. OPERATING PROFIT,
HOWEVER, DECLINED AS A RESULT OF LOWER AUDIENCE LEVELS IN KEY DEMOGRAPHIC
CATEGORIES AND HIGHER PROGRAMMING COSTS PRIMARILY ASSOCIATED WITH SPORTS AND
SPECIAL EVENTS. THE FAVORABLE EFFECT FROM PURCHASE PRICE ACCOUNTING ADJUSTMENTS
RELATED TO PROGRAM RIGHTS DECLINED $32 MILLION IN THE FIRST QUARTER OF 1997
COMPARED TO THE SAME PERIOD LAST YEAR.
ON A PROFORMA COMBINED BASIS, SALES FOR RADIO FOR THE FIRST QUARTER OF 1997
INCREASED NEARLY 18% COMPARED TO THE FIRST QUARTER OF 1996, OUTPACING THE
MARKET. OPERATING PROFIT, ON A PROFORMA COMBINED BASIS, INCREASED 38% FOR THE
SAME PERIOD AS A RESULT OF THE INCREASED REVENUES AND BENEFITS FROM COST
REDUCTION INITIATIVES. RESULTS FOR THE RADIO GROUP INCLUDE AMORTIZATION OF
GOODWILL AND INTANGIBLE ASSETS RELATED TO THE INFINITY ACQUISITION.
OTHER MEDIA BUSINESSES INCLUDES OPERATING RESULTS FOR CBS CABLE, FORMERLY GROUP
W SATELLITE COMMUNICATIONS, AND EYEMARK ENTERTAINMENT (EYEMARK) WHICH PRODUCES
AND DISTRIBUTES PROGRAMMING. REVENUES FOR CBS CABLE INCREASED NEARLY 16% IN THE
FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR, PRIMARILY AS A
RESULT OF INCREASED SALES FOR SPORTS AND OTHER CABLE SERVICES AND THE JUNE 1996
ACQUISITION OF TELENOTICIAS, A 24-HOUR, SPANISH-LANGUAGE NEWS SERVICE.
OPERATING PROFIT, HOWEVER, DECLINED FOR THE FIRST QUARTER OF 1997 COMPARED TO
THE SAME PERIOD LAST YEAR PRIMARILY DUE TO INCREASED EXPENSES RELATED TO
TELENOTICIAS AND COSTS TO DEVELOP AND LAUNCH EYE ON PEOPLE, A NEW CABLE CHANNEL
WHICH DEBUTED MARCH 31, 1997. THE ACQUISITION OF TNN AND CMT LATER IN 1997 IS
EXPECTED TO STRENGTHEN THE GROUP'S CABLE BUSINESS. REVENUES FOR EYEMARK
INCREASED IN THE FIRST QUARTER OF 1997 COMPARED TO THE FIRST QUARTER OF 1996.
THE OPERATING LOSS ALSO IMPROVED DUE TO THE MIX OF PROGRAMMING.
COSTS FOR THE MEDIA GROUP'S HEADQUARTERS AND AMORTIZATION OF ALL GOODWILL
ARISING FROM THE CBS ACQUISITION COMPRISE OTHER MEDIA. FOR THE FIRST QUARTER OF
1996, OTHER MEDIA INCLUDED A $41 MILLION RESTRUCTURING CHARGE FOR
WESTINGHOUSE'S ACTIONS TO OBTAIN OPERATIONAL SYNERGIES BETWEEN CBS AND
WESTINGHOUSE. THE COST OF THE CBS ACTIONS WAS RECORDED IN CONNECTION WITH THE
CBS ACQUISITION. GOODWILL AMORTIZATION RELATED TO THE CBS ACQUISITION TOTALS
$30 MILLION PER QUARTER.
FOR THE ENTIRE MEDIA GROUP, EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND
AMORTIZATION (EBITDA) TOTALLED $110 MILLION FOR THE FIRST QUARTER OF 1997, FLAT
WITH THE SAME PERIOD IN 1996, EXCLUDING THE RESTRUCTURING CHARGE IN 1996. ON A
PROFORMA COMBINED BASIS, EBITDA FOR THE FIRST QUARTER OF 1996 WAS $146 MILLION.
EBITDA DIFFERS FROM OPERATING CASH FLOWS FOR THE GROUP PRIMARILY BECAUSE IT
DOES NOT CONSIDER CHANGES IN ASSETS AND LIABILITIES FROM PERIOD TO PERIOD.
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<PAGE> 18
POWER SYSTEMS
POWER SYSTEMS INCLUDES RESULTS FOR THE ENERGY SYSTEMS AND POWER GENERATION
BUSINESS UNITS. EXCLUDING SPECIAL ITEMS IN THE 1996 FIRST QUARTER, SALES FOR
POWER SYSTEMS DECREASED SLIGHTLY IN THE 1997 FIRST QUARTER, WHILE THE OPERATING
LOSS INCREASED SIGNIFICANTLY.
ENERGY SYSTEMS' SALES AND OPERATING PROFIT DECREASED FOR THE FIRST QUARTER OF
1997 COMPARED TO THE FIRST QUARTER OF 1996. SALES DECREASED $44 MILLION OR 19%
FOR THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR, WHILE THE
OPERATING LOSS INCREASED $55 MILLION FOR THE SAME PERIOD, EXCLUDING LAST YEAR'S
$21 MILLION RESTRUCTURING CHARGE. THE PRIMARY REASON FOR THE DECREASE IN SALES
AND OPERATING PROFIT FOR THE PERIOD WAS A $49 MILLION ADJUSTMENT TO BOTH SALES
AND OPERATING PROFIT FOLLOWING A COMPREHENSIVE REEVALUATION OF THE WORK SCOPE
AND COSTS TO COMPLETE A COMPLEX INTERNATIONAL NUCLEAR PROJECT WHICH ORIGINATED
IN 1993. ALTHOUGH THIS $352 MILLION CONTRACT REMAINS PROFITABLE, MANAGEMENT HAS
DETERMINED THAT THE CORPORATION'S PROFIT WILL BE LESS THAN ORIGINALLY
ESTIMATED. ORDERS FOR THE QUARTER WERE DOWN 24%, PRIMARILY DUE TO A LARGE FUEL
RELOAD ORDER IN THE FIRST QUARTER OF 1996.
POWER GENERATION'S ORDERS FOR THE FIRST QUARTER OF 1997 DECREASED $269 MILLION
OR 55% COMPARED TO THE FIRST QUARTER OF 1996. DELAYS IN THE CLOSING OF CERTAIN
PROJECT ORDERS WAS THE PRIMARY CAUSE OF THE DECREASED ORDER LEVEL. ALSO, THE
1996 FIRST QUARTER CONTAINED A NUMBER OF LARGE INTERNATIONAL AND DOMESTIC
ORDERS.
IN LIGHT OF CHANGING MARKET CONDITIONS AND PRICING PRESSURES AT POWER
GENERATION, EFFECTIVE JANUARY 1, 1996, THE BUSINESS UNIT MODIFIED ITS
APPLICATION OF CONTRACT ACCOUNTING PRINCIPLES TO REFLECT A MORE CONSERVATIVE
APPROACH. A ONE-TIME ACCOUNTING ADJUSTMENT WAS RECOGNIZED IN THE FIRST QUARTER
OF 1996 TO REDUCE SALES BY $180 MILLION AND OPERATING PROFIT BY $128 MILLION.
REVENUES IN POWER GENERATION INCREASED $17 MILLION OR 4% FOR THE FIRST QUARTER
OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR, EXCLUDING THE EFFECTS OF THE
1996 ONE-TIME ADJUSTMENT. HIGHER SERVICE SALES WAS THE PRIMARY REASON FOR THIS
REVENUE INCREASE. THE OPERATING LOSS DECLINED 7%, EXCLUDING THE CONTRACT
ACCOUNTING ADJUSTMENT, A $5 MILLION LITIGATION CHARGE, AND A $50 MILLION
RESTRUCTURING CHARGE, ALL OF WHICH WERE RECOGNIZED IN THE FIRST QUARTER OF
1996. HIGHER SERVICE REVENUES AND COST IMPROVEMENTS FROM RESTRUCTURINGS CAUSED
THE IMPROVEMENTS IN THE OPERATING LOSS.
THE OPERATING LOSS FOR THE FIRST QUARTER OF 1996 FOR OTHER POWER SYSTEMS, WHICH
PRIMARILY REFLECTS DISCOUNTS ON PRIOR LITIGATION SETTLEMENTS, INCLUDED A $289
MILLION CHARGE FOR LITIGATION AND OTHER MATTERS. EXCLUDING THIS CHARGE, THE
OPERATING LOSS FOR THE FIRST QUARTER OF 1997 WAS FLAT WITH THE SAME PERIOD LAST
YEAR.
THERMO KING
THERMO KING CONTINUES TO POST POSITIVE RESULTS IN THE FACE OF SOFT MARKETS IN
NORTH AMERICA AND EUROPE. ORDERS FOR THE FIRST QUARTER OF 1997 WERE UP 5%,
PRIMARILY AS A RESULT OF A LARGE CONTAINER ORDER AND INCREASES IN SERVICE PARTS
BUSINESS. SALES WERE DOWN SLIGHTLY DUE PRIMARILY TO THE STRONG U.S. DOLLAR AND
WEAK NORTH AMERICAN TRUCK AND TRAILER SALES. REVENUES FROM TWO FOURTH QUARTER
1996 ACQUISITIONS, SABROE AND THERMAL, PARTIALLY OFFSET THE LOWER TRUCK AND
TRAILER SALES. OPERATING PROFIT INCREASED 4% IN THE FIRST QUARTER OF 1997
COMPARED TO THE SAME PERIOD LAST YEAR AS REVENUES FROM THE TWO ACQUISITIONS AND
SUBSTANTIAL FOCUS ON MATERIAL COST AND PRODUCTIVITY IMPROVEMENTS OFFSET THE
EFFECT OF LOWER TRUCK AND TRAILER SALES.
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<PAGE> 19
GOVERNMENT OPERATIONS
REVENUES FOR THE FIRST QUARTER OF 1997 WERE DOWN 8% AND OPERATING PROFIT WAS
DOWN $8 MILLION, OR 44%, COMPARED TO THE FIRST QUARTER OF 1996. THE DECREASE IN
SALES WAS ATTRIBUTABLE TO THE LOSS OF A DOE CONTRACT AT HANFORD, WASHINGTON, IN
LATE 1996, PARTIALLY OFFSET BY INCREASED PASS-THROUGH SALES AT THE DOE SAVANNAH
RIVER SITE. OPERATING PROFIT DECREASED AS A RESULT OF THE LOSS OF THE HANFORD
CONTRACT PERFORMANCE FEE.
CORPORATE AND OTHER
SALES FOR THE FIRST QUARTER OF 1997 WERE DOWN 41% DUE PRIMARILY TO THE 1996
SALE OF SEVERAL NON-STRATEGIC BUSINESSES. THE OPERATING LOSS, EXCLUDING THE
FIRST QUARTER 1996 CHARGE OF $248 MILLION FOR RESTRUCTURING, LITIGATION AND
OTHER MATTERS, WAS FLAT. DESPITE COST REDUCTIONS FROM RESTRUCTURING ACTIVITIES,
CORPORATE COSTS ARE CONSISTENT WITH THE PRIOR YEAR. COSTS ASSOCIATED WITH THE
CORPORATION'S CONTINUING PENSION OBLIGATION FOR RETIRED INDIVIDUALS WHO WERE
PART OF THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS SOLD IN MARCH 1996
CONTINUES TO UNFAVORABLY IMPACT OPERATING PROFIT. THESE COSTS FOR JANUARY AND
FEBRUARY OF 1996 WERE INCLUDED IN DISCONTINUED OPERATIONS AS PART OF THE
RESULTS FOR THAT BUSINESS PRIOR TO ITS DISPOSAL.
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 1996, MANAGEMENT APPROVED NEW RESTRUCTURING PROJECTS WITH COSTS
TOTALLING $273 MILLION, $123 MILLION IN THE FIRST QUARTER AND $150 MILLION IN
THE FOURTH QUARTER, PRIMARILY FOR CONSOLIDATION OF FACILITIES AND THE
SEPARATION OF EMPLOYEES. AS OF MARCH 31, 1997, $162 MILLION HAD BEEN EXPENDED
ON THE 1996 PROGRAMS, $106 MILLION OF WHICH WAS CASH. FUTURE CASH EXPENDITURES
FOR THESE PROGRAMS ARE ESTIMATED TO APPROXIMATE $71 MILLION FOR THE REMAINDER
OF 1997, AND $10 MILLION FOR 1998 AND BEYOND.
IN ADDITION TO THE RESERVES ESTABLISHED IN 1996, RESTRUCTURING RESERVES WERE
ALSO ESTABLISHED IN 1994 AND 1995. THE EMPLOYEE SEPARATIONS INCLUDED IN THE
1994 PLAN ARE COMPLETE. THE EMPLOYEE SEPARATIONS INCLUDED IN THE 1995 PLAN ARE
85% COMPLETE WITH THE REMAINDER OF SEPARATIONS TO OCCUR DURING 1997. REMAINING
TOTAL COSTS UNDER THIS PLAN OF APPROXIMATELY $6 MILLION REPRESENT PRIMARILY
CASH EXPENDITURES, ALL OF WHICH WILL OCCUR IN 1997. IN ADDITION, A CBS
RESTRUCTURING PLAN WAS ADOPTED IN CONJUNCTION WITH THE ACQUISITION IN NOVEMBER
1995. IMPLEMENTATION OF THIS PLAN WILL CONTINUE OVER THE NEXT TWO YEARS.
ANNUALIZED SAVINGS FROM THE 1994 AND 1995 RESTRUCTURING PROGRAMS OTHER THAN THE
CBS PLAN ARE ESTIMATED TO TOTAL APPROXIMATELY $75 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 WILL BE
GRADUALLY ACHIEVED OVER THE NEXT TWO YEARS, ARE ESTIMATED AT $100 MILLION.
THE CORPORATION EXPECTS TO CONTINUE TO IDENTIFY RESTRUCTURING INITIATIVES AT
ITS BUSINESS UNITS AND ITS CORPORATE HEADQUARTERS IN AN ONGOING EFFORT TO
REDUCE ITS OVERALL COST STRUCTURE AND IMPROVE COMPETITIVENESS.
DISCONTINUED OPERATIONS
AT MARCH 31, 1997, THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS
INCLUDED THOSE RELATED TO THE REMAINING OPERATING BUSINESSES FROM THE CISCO
SEGMENT AND THE ENVIRONMENTAL SERVICES BUSINESS, THE REMAINING SECURITIES FROM
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<PAGE> 20
THE LAND DEVELOPMENT SUBSIDIARY, OTHER MISCELLANEOUS SECURITIES, THE LEASING
PORTFOLIO, AND DEFERRED INCOME TAXES. LIABILITIES ALSO INCLUDED DEBT AND THE
ESTIMATED LOSSES AND DIVESTITURE COSTS ASSOCIATED WITH ALL DISCONTINUED
OPERATIONS, INCLUDING ESTIMATED RESULTS OF OPERATIONS THROUGH DIVESTITURE. IN
APRIL 1997, THE CORPORATION COMPLETED THE SALE OF TWO OF THE REMAINING
ENVIRONMENTAL SERVICES BUSINESSES.
OTHER THAN THE LEASING PORTFOLIO, THE CORPORATION IS ACTIVELY PURSUING THE SALE
OF ASSETS, WHICH ARE GENERALLY EXPECTED TO BE DIVESTED DURING 1997. DEFERRED
INCOME TAXES, WHICH RESULT FROM TEMPORARY DIFFERENCES BETWEEN BOOK AND TAX
BASES OF THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS, GENERALLY WILL
BE TRANSFERRED TO CONTINUING OPERATIONS UPON REVERSAL AND WILL NOT RESULT IN
THE RECEIPT OR PAYMENT OF CASH BY DISCONTINUED OPERATIONS. LIABILITIES
ASSOCIATED WITH DIVESTITURES ARE EXPECTED TO BE SATISFIED OVER THE NEXT SEVERAL
YEARS. DEBT WILL BE REPAID USING CASH PROCEEDS FROM THE LIQUIDATION OF ASSETS
OF DISCONTINUED OPERATIONS. CASH PROCEEDS IN EXCESS OF THOSE REQUIRED TO REPAY
THE DEBT AND SATISFY THE DIVESTITURE LIABILITIES OF DISCONTINUED OPERATIONS, IF
ANY, WILL BE TRANSFERRED TO CONTINUING OPERATIONS.
MANAGEMENT BELIEVES THAT THE NET PROCEEDS ANTICIPATED FROM THE CONTINUED
LIQUIDATION OF ASSETS OF DISCONTINUED OPERATIONS WILL BE SUFFICIENT TO FUND THE
LIABILITIES OF DISCONTINUED OPERATIONS, INCLUDING THE REPAYMENT OF ITS DEBT.
MANAGEMENT FURTHER BELIEVES THAT THE LIABILITY FOR THE ESTIMATED LOSS ON
DISPOSAL OF DISCONTINUED OPERATIONS OF $631 MILLION AT MARCH 31, 1997 IS
ADEQUATE TO COVER FUTURE OPERATING COSTS, ESTIMATED LOSSES, AND THE REMAINING
DIVESTITURE COSTS ASSOCIATED WITH ALL DISCONTINUED BUSINESSES.
OTHER INCOME AND EXPENSES
OTHER INCOME AND EXPENSES FOR THE FIRST QUARTER OF 1997 WAS INCOME OF $34
MILLION COMPARED TO A LOSS OF $146 MILLION FOR THE FIRST QUARTER OF 1996. THE
1997 INCOME INCLUDED THE SALE OF AN EQUITY INVESTMENT IN A REGIONAL SPORTS
NETWORK. DURING THE FIRST QUARTER OF 1996, A COMPREHENSIVE REVIEW WAS
UNDERTAKEN BY THE CORPORATION TO IDENTIFY NON-STRATEGIC ASSETS. A CHARGE OF
$152 MILLION WAS RECOGNIZED DURING THE QUARTER FOR LOSSES EXPECTED TO BE
REALIZED UPON THE SALE OF THOSE ASSETS.
INTEREST EXPENSE
INTEREST EXPENSE FOR CONTINUING OPERATIONS FOR THE FIRST QUARTER OF 1997 WAS
$114 MILLION COMPARED TO $146 MILLION FOR THE SAME PERIOD IN 1996. THE DECREASE
IN INTEREST EXPENSE IS PRIMARILY THE RESULT OF THE REPAYMENT OF $3.6 BILLION OF
DEBT IN MARCH 1996 THROUGH PROCEEDS FROM THE DIVESTITURES OF KNOLL AND THE
DEFENSE AND ELECTRONIC SYSTEMS BUSINESS, AND FAVORABLE INTEREST RATES UNDER THE
NEW BANK CREDIT AGREEMENT COMPLETED IN AUGUST 1996 (SEE REVOLVING CREDIT
FACILITY). THIS DECREASE IN INTEREST EXPENSE IS OFFSET SOMEWHAT BY THE INCREASE
IN DEBT ASSOCIATED WITH THE ACQUISITION OF INFINITY AND INCREASED WORKING
CAPITAL REQUIREMENTS.
INCOME TAXES
THE CORPORATION'S EFFECTIVE INCOME TAX RATE FOR THE FIRST QUARTER OF 1997 AND
1996 WAS A BENEFIT OF 28% AND 35%, RESPECTIVELY. BECAUSE OF THE AMORTIZATION OF
NON-DEDUCTIBLE GOODWILL FOR CBS AND INFINITY AND THE IMPACT OF SPECIAL
TRANSACTIONS, THESE RATES CAN VARY DRAMATICALLY DEPENDING ON THE CORPORATION'S
INCOME OR LOSS LEVELS.
AT MARCH 31, 1997, THE CORPORATION HAD RECORDED NET DEFERRED INCOME TAX
BENEFITS TOTALLING $1,498 MILLION COMPARED TO $1,411 MILLION AT DECEMBER 31,
1996. 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.
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<PAGE> 21
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.
ON FEBRUARY 10, 1997, THE CORPORATION ANNOUNCED AN AGREEMENT TO ACQUIRE TWO
CABLE NETWORKS - TNN AND CMT. THE PURCHASE PRICE OF $1.55 BILLION WILL BE PAID
IN WESTINGHOUSE COMMON STOCK, WHICH WILL FURTHER INCREASE THE CORPORATION'S
EQUITY. NO DEBT WILL BE ASSUMED IN CONJUNCTION WITH THIS TRANSACTION.
AS DISCUSSED PREVIOUSLY, THE CORPORATION INTENDS TO SEPARATE ITS MEDIA
BUSINESSES FROM ITS INDUSTRIES AND TECHNOLOGY BUSINESSES THROUGH A TAX-FREE
DIVIDEND OF THE INDUSTRIES AND TECHNOLOGY BUSINESSES TO SHAREHOLDERS. AS
CURRENTLY CONTEMPLATED, THE MEDIA COMPANY WILL RETAIN ALL DEBT OBLIGATIONS OF
THE CURRENT WESTINGHOUSE AS WELL AS THE $1.5 BILLION TAX NET OPERATING LOSS
CARRYFORWARD. THE INDUSTRIES AND TECHNOLOGY COMPANY WILL ASSUME MOST OF THE
UNFUNDED PENSION OBLIGATION AND OTHER NON-DEBT OBLIGATIONS GENERATED BY THE
CORPORATION'S INDUSTRIAL BUSINESSES IN EARLIER YEARS. MANAGEMENT CURRENTLY
ANTICIPATES THE SEPARATION WILL OCCUR LATER IN 1997. HOWEVER, THERE CAN BE NO
ASSURANCE THAT ALL OF THE ASSETS, LIABILITIES AND CONTRACTUAL OBLIGATIONS WILL
BE TRANSFERRED AS CURRENTLY CONTEMPLATED OR THAT CHANGES WILL NOT BE MADE TO
THE SEPARATION PLAN.
THE CORPORATION HAS AND WILL CONTINUE TO MONETIZE NON-STRATEGIC ASSETS. IN
1996, THE CORPORATION ADOPTED PLANS TO EXIT ITS ENVIRONMENTAL SERVICES BUSINESS
AND CISCO. IN ADDITION TO THE $3.6 BILLION OF CASH GENERATED BY THE SALE OF
KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS, SALES OF VARIOUS
NON-STRATEGIC ASSETS IN 1996 GENERATED CASH PROCEEDS OF APPROXIMATELY $550
MILLION. DURING 1997, SALES OF NON-STRATEGIC ASSETS ARE EXPECTED TO GENERATE
ADDITIONAL CASH OF $300 TO $400 MILLION. THE MAJORITY OF THESE PROCEEDS ARE
ANTICIPATED TO BE RECEIVED IN THE SECOND HALF OF THE YEAR.
TOTAL DEBT FOR THE CORPORATION WAS $6,759 MILLION AT MARCH 31, 1997, OF WHICH
$444 MILLION WAS INCLUDED IN DISCONTINUED OPERATIONS AND WILL BE REPAID THROUGH
THE LIQUIDATION OF THOSE ASSETS. DEBT OF CONTINUING OPERATIONS OF $6,315
MILLION INCREASED $665 MILLION FROM DECEMBER 31, 1996 REFLECTING HIGHER WORKING
CAPITAL REQUIREMENTS. THE CORPORATION'S DEBT OF CONTINUING OPERATIONS IS
EXPECTED TO REMAIN AT APPROXIMATELY THIS LEVEL FOR THE REMAINDER OF THE YEAR.
MANAGEMENT EXPECTS THAT THE CORPORATION WILL HAVE SUFFICIENT LIQUIDITY TO MEET
ORDINARY FUTURE BUSINESS NEEDS. SOURCES OF LIQUIDITY GENERALLY AVAILABLE TO THE
CORPORATION INCLUDE CASH FROM OPERATIONS, AVAILABILITY UNDER ITS CREDIT
FACILITY, CASH AND CASH EQUIVALENTS, PROCEEDS FROM SALES OF NON-STRATEGIC
ASSETS, BORROWINGS FROM OTHER SOURCES, INCLUDING FUNDS FROM THE CAPITAL
MARKETS, AND THE ISSUANCE OF ADDITIONAL CAPITAL STOCK.
OPERATING ACTIVITIES
THE FOLLOWING TABLE PROVIDES A RECONCILIATION OF NET INCOME TO CASH USED BY
OPERATING ACTIVITIES OF CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1997 AND 1996:
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<PAGE> 22
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS
(IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1997 1996
---- ----
<S> <C> <C>
LOSS FROM CONTINUING OPERATIONS $ (151) $ (723)
ADJUSTMENTS TO RECONCILE LOSS FROM
CONTINUING OPERATIONS TO NET CASH USED FOR
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 134 104
LOSSES (GAINS) ON ASSET DISPOSITIONS (24) 151
NONCASH RESTRUCTURING CHARGES - 30
OTHER NONCASH PROVISIONS AND ACCOUNTING
ADJUSTMENTS (28) 185
CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS
OF ACQUISITIONS AND DIVESTITURES OF BUSINESSES:
RECEIVABLES, CURRENT AND NONCURRENT (127) (55)
INVENTORIES (80) (10)
ACCOUNTS PAYABLE (326) (172)
DEFERRED AND CURRENT INCOME TAXES (117) (121)
ACCRUED RESTRUCTURING COSTS (112) 93
OTHER ASSETS AND LIABILITIES (32) 16
------ ------
CASH USED FOR OPERATING ACTIVITIES
OF CONTINUING OPERATIONS $ (863) $ (502)
====== ======
</TABLE>
THE OPERATING ACTIVITIES OF CONTINUING OPERATIONS USED $863 MILLION OF CASH
DURING THE FIRST THREE MONTHS OF 1997 COMPARED TO CASH USED OF $502 MILLION
DURING THE FIRST THREE MONTHS OF 1996. THE TWO PRIMARY FACTORS CONTRIBUTING TO
THE ADDITIONAL USE OF CASH IN THE 1997 QUARTER WERE A SIGNIFICANT INCREASE IN
WORKING CAPITAL REQUIREMENTS AND HIGHER RESTRUCTURING EXPENDITURES.
WORKING CAPITAL REQUIREMENTS INCREASED RELATIVE TO THE FIRST QUARTER OF 1996.
INCREASES IN BOTH RECEIVABLES AND INVENTORIES TOTALLED $207 MILLION IN THE
FIRST THREE MONTHS OF 1997 COMPARED TO AN INCREASE OF $65 MILLION IN THE FIRST
THREE MONTHS OF 1996. IN ADDITION, A SIGNIFICANT REDUCTION IN ACCOUNTS PAYABLE
CONTRIBUTED SUBSTANTIALLY TO THE HIGHER WORKING CAPITAL AT MARCH 31, 1997.
RESTRUCTURING SPENDING INCREASED IN THE FIRST QUARTER OF 1997 RELATIVE TO THE
FIRST QUARTER OF 1996. THIS WAS PRIMARILY ATTRIBUTABLE TO EXPENDITURES
ASSOCIATED WITH THE RESTRUCTURING PLANS ADOPTED IN LATE 1996.
THE CORPORATION'S PENSION CONTRIBUTION LEVEL FOR 1997, WHICH IS EXPECTED TO BE
APPROXIMATELY $250 MILLION TO $300 MILLION, IS CONSISTENT WITH THE
CORPORATION'S GOAL TO FULLY FUND ITS QUALIFIED PENSION PLANS OVER THE NEXT
SEVERAL YEARS. IN JULY 1997, THE CORPORATION WILL BEGIN MAKING ITS PENSION
CONTRIBUTIONS QUARTERLY PURSUANT TO CERTAIN MINIMUM FUNDING REQUIREMENTS.
THE OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS USED $30 MILLION OF CASH
DURING THE FIRST THREE MONTHS OF 1997 COMPARED TO $314 MILLION OF CASH USED
DURING THE SAME PERIOD OF 1996. DURING 1996, A SIGNIFICANT AMOUNT OF CASH WAS
USED FOR THE DIVESTITURE COSTS OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS
BUSINESS AS WELL AS IN THE OPERATIONS OF THOSE BUSINESSES THROUGH THE DATE OF
THEIR DISPOSAL.
FUTURE CASH REQUIREMENTS OF DISCONTINUED OPERATIONS WILL CONSIST PRIMARILY OF
INTEREST COSTS ON DEBT, REMAINING COSTS ASSOCIATED WITH COMPLETED DIVESTITURES,
AND OPERATING AND DISPOSAL COSTS ASSOCIATED WITH THE ENVIRONMENTAL SERVICES
BUSINESS AND CISCO. MANAGEMENT BELIEVES THAT THE FUTURE CASH RECEIPTS OF
DISCONTINUED OPERATIONS WILL BE SUFFICIENT TO SATISFY THE DIVESTITURE
LIABILITIES OF DISCONTINUED OPERATIONS AND THE REMAINING DEBT. ANY CASH IN
EXCESS OF THAT REQUIRED TO SATISFY THOSE LIABILITIES WILL BE TRANSFERRED TO
CONTINUING OPERATIONS.
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<PAGE> 23
INVESTING ACTIVITIES
INVESTING ACTIVITIES PROVIDED $36 MILLION OF CASH DURING THE FIRST THREE MONTHS
OF 1997 COMPARED TO $3.5 BILLION OF CASH PROVIDED DURING THE SAME PERIOD OF
1996. IN THE FIRST QUARTER OF 1997, THE CORPORATION HAD INVESTING CASH OUTFLOWS
RELATED TO THE ACQUISITION OF BUSPACK, A TRANSIT ADVERTISING COMPANY IN THE
UNITED KINGDOM, AND A $20 MILLION PAYMENT IN CONJUNCTION WITH A SWAP OF THREE
RADIO STATIONS IN ORLANDO FOR TWO RADIO STATIONS IN CHICAGO. ACQUISITION CASH
OUTFLOWS IN THE 1996 QUARTER INCLUDED THE PURCHASE OF TWO CHICAGO RADIO
STATIONS.
INVESTING CASH INFLOWS FROM BUSINESS DIVESTITURES IN THE FIRST QUARTER OF 1997
INCLUDED PROCEEDS FROM THE SALES OF ONE RADIO STATION IN CHICAGO, TWO RADIO
STATIONS IN DALLAS, AND AN EQUITY INVESTMENT. IN THE 1996 QUARTER, THE
CORPORATION COMPLETED THE SALES OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS
BUSINESS, GENERATING $3.6 BILLION OF CASH. LIQUIDATIONS OF OTHER ASSETS
GENERATED APPROXIMATELY $20 MILLION IN THE FIRST QUARTER OF BOTH YEARS.
CAPITAL EXPENDITURES WERE $41 MILLION FOR THE FIRST THREE MONTHS OF 1997, A
DECREASE OF $11 MILLION FROM THE SAME PERIOD OF 1996. CAPITAL SPENDING DURING
1997 IS EXPECTED TO BE APPROXIMATELY $50 MILLION HIGHER THAN 1996 PRIMARILY
DRIVEN BY THE MEDIA GROUP.
FINANCING ACTIVITIES
CASH PROVIDED BY FINANCING ACTIVITIES DURING THE FIRST THREE MONTHS OF 1997
TOTALLED $738 MILLION COMPARED TO CASH USED OF $2.7 BILLION DURING THE SAME
PERIOD OF 1996. THE CASH OUTFLOWS IN THE FIRST QUARTER OF 1997 INCLUDED $149
MILLION TO EXTINGUISH THE LONG-TERM DEBT PREVIOUSLY ISSUED BY INFINITY. THE
CASH OUTFLOWS IN THE FIRST QUARTER OF 1996 INCLUDED $3.6 BILLION OF DEBT
PREPAID UPON THE SALES OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS
BUSINESS.
TOTAL BORROWINGS UNDER THE CORPORATION'S $5.5 BILLION REVOLVING CREDIT FACILITY
WERE $4.2 BILLION AT MARCH 31, 1997 (SEE REVOLVING CREDIT FACILITY). THESE
BORROWINGS WERE SUBJECT TO A FLOATING INTEREST RATE OF 6.1% AT MARCH 31, 1997,
WHICH WAS 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 THREE MONTHS OF 1997 AND 1996 INCLUDED $12 MILLION
FOR THE SERIES C PREFERRED STOCK, WHICH THE CORPORATION EXPECTS TO REPLACE WITH
31,859,902 SHARES OF COMMON STOCK ON MAY 30, 1997. COMMON STOCK DIVIDENDS
INCREASED FROM $20 MILLION IN THE FIRST QUARTER OF 1996 TO $29 MILLION IN THE
FIRST QUARTER OF 1997 BECAUSE OF ADDITIONAL SHARES OUTSTANDING.
AT MARCH 31, 1997, THE CORPORATION HAD A SHELF REGISTRATION STATEMENT FOR DEBT
SECURITIES WITH AN UNUSED AMOUNT OF $400 MILLION.
REVOLVING CREDIT FACILITY
ON AUGUST 29, 1996, THE CORPORATION EXECUTED A NEW FIVE-YEAR REVOLVING CREDIT
AGREEMENT WITH TOTAL COMMITMENTS OF $5.5 BILLION. THE UNUSED CAPACITY UNDER THE
FACILITY EQUALED $1.3 BILLION AS OF MARCH 31, 1997. 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, AND RESTRICTIONS ON
LIENS INCURRED. DURING THE FIRST QUARTER OF 1997, THIS AGREEMENT WAS AMENDED
TWICE.
THE CORPORATION IS SUBJECT TO FINANCIAL COVENANTS INCLUDING A MAXIMUM LEVERAGE
RATIO, A MINIMUM INTEREST COVERAGE RATIO, AND MINIMUM CONSOLIDATED NET WORTH.
THESE COVENANTS BECOME MORE RESTRICTIVE OVER THE REMAINING TERM OF THE
AGREEMENT. AT MARCH 31, 1997, THE CORPORATION WAS IN COMPLIANCE WITH THESE
COVENANTS.
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LEGAL, ENVIRONMENTAL, AND OTHER MATTERS
OVER THE PAST SEVERAL YEARS, THE CORPORATION HAS ADDRESSED A VARIETY OF LEGAL,
ENVIRONMENTAL, AND OTHER MATTERS RELATED TO CURRENT OPERATIONS AS WELL AS TO
PREVIOUSLY DIVESTED BUSINESSES. SEE NOTE 10 TO THE FINANCIAL STATEMENTS. THE
COSTS ASSOCIATED WITH RESOLVING THESE MATTERS ARE RECOGNIZED IN THE PERIOD IN
WHICH THE COSTS ARE DEEMED PROBABLE AND CAN BE REASONABLY ESTIMATED. MANAGEMENT
BELIEVES THAT THE CORPORATION HAS ADEQUATELY PROVIDED FOR THE ESTIMATED COSTS
OF RESOLVING THESE MATTERS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NO REPORTABLE EVENTS.
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 DECEMBER
13, 1996, ARE INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.1 TO
THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON POST-
EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997.
(b) THE BYLAWS OF THE CORPORATION, AS AMENDED TO SEPTEMBER 25, 1996,
ARE INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.2 TO THE
CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON FORM S-4
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22,
1996.
(4) RIGHTS OF SECURITY HOLDERS
(a) 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.
(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, AS AMENDED TO NOVEMBER 1, 1996, IS
INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(a) TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
(b*) THE 1993 LONG-TERM INCENTIVE PLAN, AS AMENDED TO NOVEMBER 1,
1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(b) TO
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
(c*) THE 1984 LONG-TERM INCENTIVE PLAN, AS TO AMENDED NOVEMBER 1,
1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(c) TO
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
(d*) THE WESTINGHOUSE EXECUTIVE PENSION PLAN, AS AMENDED TO SEPTEMBER
25, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(d)
TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
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<PAGE> 25
(e*) THE DEFERRED COMPENSATION AND STOCK PLAN FOR DIRECTORS, AS
AMENDED TO NOVEMBER 1, 1996, IS INCORPORATED HEREIN BY REFERENCE
TO EXHIBIT 10(e) TO FORM 10-K FOR THE YEAR ENDED 1996.
(f*) THE DIRECTOR'S CHARITABLE GIVING PROGRAM, AS AMENDED TO APRIL
30, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(g)
TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996.
(g*) THE 1991 LONG-TERM INCENTIVE PLAN, AS AMENDED TO JANUARY 29,
1997.
(h*) ADVISORY DIRECTOR'S PLAN TERMINATION FEE DEFERRAL TERMS AND
CONDITIONS, DATED APRIL 30, 1996, IS INCORPORATED HEREIN BY
REFERENCE TO EXHIBIT 10(i) TO FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1996.
(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) $5.5 BILLION CREDIT AGREEMENT AMONG WESTINGHOUSE ELECTRIC
CORPORATION, THE LENDERS PARTIES THERETO, NATIONSBANK, N.A. AND
THE TORONTO-DOMINION BANK AS SYNDICATION AGENTS, THE CHASE
MANHATTAN BANK AS DOCUMENTATION AGENT, AND MORGAN GUARANTY TRUST
COMPANY OF NEW YORK AS ADMINISTRATIVE AGENT, DATED AUGUST 29,
1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(l) TO
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
(l*) EMPLOYMENT AGREEMENT BETWEEN CBS INC. AND PETER LUND, DATED AS
OF NOVEMBER 28, 1995, IS HEREBY INCORPORATED BY REFERENCE TO
EXHIBIT 10(l) TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996.
(m*) EMPLOYMENT AGREEMENT BETWEEN THE CORPORATION AND F. J. HARVEY,
DATED AS OF APRIL 30, 1996, IS INCORPORATED HEREIN BY REFERENCE
TO EXHIBIT 10(n) TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30,
1996.
(n*) CBS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, AS AMENDED TO
NOVEMBER 15, 1995, IS INCORPORATED HEREIN BY REFERENCE TO
EXHIBIT 10(n) TO FORM 10-K FOR THE YEAR ENDED 1996.
(o*) CBS BONUS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, AS AMENDED, TO
NOVEMBER 15, 1995, IS INCORPORATED HEREIN BY REFERENCE TO
EXHIBIT 10(o) TO FORM 10-K FOR THE YEAR ENDED 1996.
(p) FIRST AMENDMENT, DATED AS OF JANUARY 29, 1997 TO THE CREDIT
AGREEMENT, DATED AS OF AUGUST 29, 1996, AMONG WESTINGHOUSE
ELECTRIC CORPORATION, THE LENDERS PARTIES THERETO, NATIONSBANK,
N.A. AND THE TORONTO-DOMINION BANK AS SYNDICATION AGENTS, THE
CHASE MANHATTAN BANK AS DOCUMENTATION AGENT, AND MORGAN
GUARANTEE TRUST COMPANY OF NEW YORK AS ADMINISTRATIVE AGENT.
(q) SECOND AMENDMENT, DATED AS OF MARCH 21, 1997, TO THE CREDIT
AGREEMENT, DATED AS OF AUGUST 29, 1996, AS AMENDED BY THE FIRST
AMENDMENT THERETO DATED AS OF JANUARY 29, 1997, AMONG
WESTINGHOUSE ELECTRIC CORPORATION, THE SUBSIDIARY BORROWERS
PARTIES THERETO, THE LENDERS PARTIES THERETO, NATIONSBANK, N.A.
AND THE TORONTO-DOMINION BANK AS SYNDICATION AGENTS, THE CHASE
MANHATTAN BANK AS DOCUMENTATION AGENT, AND MORGAN GUARANTEE
TRUST COMPANY OF NEW YORK AS ADMINISTRATIVE AGENT.
(r) AGREEMENT AND PLAN OF MERGER, DATED AS OF FEBRUARY 9, 1997,
AMONG WESTINGHOUSE ELECTRIC CORPORATION, G ACQUISITION CORP.,
AND GAYLORD ENTERTAINMENT COMPANY IS INCORPORATED HEREIN BY
REFERENCE TO EXHIBIT 99.2 TO FORM 8-K OF WESTINGHOUSE ELECTRIC
CORPORATION, DATED AS OF FEBRUARY 11, 1997.
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<PAGE> 26
(s*) EMPLOYMENT AGREEMENT BETWEEN THE CORPORATION AND MEL KARMAZIN,
MADE AS OF JUNE 20, 1996 AND EFFECTIVE AS OF DECEMBER 31, 1996.
(t*) AMENDED AND RESTATED INFINITY BROADCASTING CORPORATION STOCK
OPTION PLAN IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.4
TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON
POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997.
(u*) THE WCK ACQUISITION CORP. STOCK OPTION PLAN IS INCORPORATED
HEREIN BY REFERENCE TO EXHIBIT 4.5 TO THE CORPORATION'S
REGISTRATION STATEMENT NO. 333-13219 ON POST-EFFECTIVE AMENDMENT
NO. 1 ON FORM S-8 TO FORM S-4 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON JANUARY 2, 1997.
(v*) INFINITY BROADCASTING CORPORATION WARRANT CERTIFICATE NO. 3 TO
MEL KARMAZIN IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.6
TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON
POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997.
* 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 (ITEMS 5 AND 7) DATED JANUARY 10, 1997
FILING A PRESS RELEASE CONCERNING THE CORPORATION'S DIVESTITURE OF
ITS RESIDENTIAL SECURITY BUSINESS.
A CURRENT REPORT ON FORM 8-K (ITEMS 5 AND 7) DATED FEBRUARY 11, 1997
FILING A PRESS RELEASE ANNOUNCING AN AGREEMENT TO ACQUIRE, THROUGH A
PLAN OF MERGER, THE NASHVILLE NETWORK (TNN) AND COUNTRY MUSIC
TELEVISION (CMT) FROM GAYLORD ENTERTAINMENT COMPANY.
A CURRENT REPORT ON FORM 8-K (ITEMS 5 AND 7) DATED FEBRUARY 11, 1997
FILING A PRESS RELEASE CONCERNING THE CORPORATION'S EARNINGS FOR THE
FOURTH QUARTER OF 1996 AND YEAR-END RESULTS FOR 1996.
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<PAGE> 27
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 9TH DAY OF MAY 1997.
WESTINGHOUSE ELECTRIC CORPORATION
/s/ CAROL V. SAVAGE
---------------------------------------
VICE PRESIDENT AND
CHIEF ACCOUNTING OFFICER
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<PAGE> 1
Exhibit 10(g)
1991 LONG-TERM INCENTIVE PLAN
(as amended as of January 29, 1997)
ARTICLE I
GENERAL
1.1 Purpose
The purposes of the 1991 Long-Term Incentive Plan ("Plan") for
eligible employees of Westinghouse Electric Corporation ("Corporation") and its
Subsidiaries (the Corporation and its Subsidiaries severally and collectively
referred to in the Plan as the "Company") are to foster and promote the
long-term financial success of the Company and materially increase stockholder
value by (i) attracting and retaining employees of outstanding ability, (ii)
strengthening the Company's capability to develop, maintain and direct a high
performance team, (iii) motivating employees, by means of performance-related
incentives, to achieve long-range performance goals, (iv) providing incentive
compensation opportunities competitive with those of other major companies and
(v) enabling employees to participate in the long-term growth and financial
success of the Company.
1.2 Administration
(a) The Plan shall be administered by a committee of the Board of Directors of
the Corporation ("Committee") which shall consist of two or more members. The
members shall be appointed by the Board of Directors, and any vacancy on the
Committee shall be filled by the Board of Directors.
The Committee shall keep minutes of its meetings and of any action
taken by it without a meeting. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present shall be the acts of the Committee. Any action that
may be taken at a meeting of the Committee may be taken without a meeting if a
consent or consents in writing setting forth the action so taken shall be signed
by all of the members of the Committee. The Committee shall make appropriate
reports to the Board of Directors concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee shall have the sole
and complete authority: (i) to select in accordance with Section 1.3 persons
who shall participate in the Plan ("Participant" or "Participants") (including
the right to delegate authority to select Participants); (ii) to make Awards
and payments in such forms and amounts as it shall determine, including the
right to delegate authority to make Awards within limits approved by the
Committee; (iii) to impose such limitations, restrictions, terms and conditions
upon such Awards as the Committee or its authorized delegates shall deem
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<PAGE> 2
appropriate; (iv) to interpret the Plan and the terms of any document relating
to the Plan and to adopt, amend and rescind administrative guidelines and other
rules and regulations relating to the Plan; (v) to amend or cancel an existing
Award in whole or in part (including the right to delegate authority to amend
or cancel an existing Award in whole or in part within limits approved from
time to time by the Committee), except that the Committee and its authorized
delegates may not, unless otherwise provided in the Plan, or unless the
Participant affected thereby consents, take any action under this clause that
would adversely affect the rights of such Participant with respect to the
Award, and except that the Committee and its authorized delegates may not take
any action to amend any outstanding Option under the Plan in order to decrease
the Option Price under such Option or to cancel and replace any such Option
with an Option with a lower Option Price; and (vi) to make all other
determinations and to take all other actions necessary or advisable for the
interpretation, implementation and administration of the Plan. The Committee's
determinations on matters within its authority shall be conclusive and binding
upon the Company and all other persons.
(c) The Committee shall act with respect to the Plan on behalf of the
Corporation and on behalf of any Subsidiary issuing stock under the Plan,
subject to appropriate action by the board of directors of any such Subsidiary.
All expenses associated with the Plan shall be borne by the Corporation subject
to such allocation to its Subsidiaries and operating units as it deems
appropriate.
1.3 Selection for Participation
Participants selected by the Committee or its authorized delegates
shall be Eligible Persons as defined below. "Eligible Persons" are persons who
are employees of the Company ("Employee" or "Employees") or, in the event of
death while an Employee, his or her estate. Eligible Persons shall also include
independent contractors of the Company as to an Award if the person is an
independent contractor at the time the Award is granted. In making this
selection and in determining the form and amount of Awards, the Committee may
give consideration to the functions and responsibilities of the Eligible
Person, his or her past, present and potential contributions to the Company and
other factors deemed relevant by the Committee.
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<PAGE> 3
1.4 Types of Awards under Plan
Awards ("Awards") under the Plan may be in the form of any one or more
of the following: (i) Non-statutory Stock Options ("NSOs" or "Options"), as
described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited
Stock Appreciation Rights ("Limited Rights"), as described in Article III,
(iii) Performance Awards ("Performance Awards") as described in Article IV, and
(iv) Restricted Stock ("Restricted Stock") as described in Article V.
1.5 Shares Subject to the Plan
Shares of stock issued under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in
Section 8.12(d) (Common Stock and Formula Value Stock severally and
collectively referred to in the Plan as "Stock").
The maximum number of shares of Stock which may be issued for all
purposes under the Plan shall be 27,500,000.
Except as otherwise provided below, any shares of Stock subject to an
Option or other Award which is canceled or terminates without having been
exercised shall again be available for Awards under the Plan. Shares subject to
an option canceled upon the exercise of an SAR shall not again be available for
Awards under the Plan except to the extent the SAR is settled in cash. To the
extent that an Award is settled in cash, shares of Stock subject to that Award
shall again be available for Awards. Shares of Stock tendered by a Participant
or withheld by the Company to pay the exercise price of an Option or to satisfy
the tax withholding obligations of the exercise or vesting of an Award shall be
available again for Awards under the Plan. Shares of Restricted Stock forfeited
to the Company in accordance with the Plan and the terms of the particular
Award shall be available again for Awards under the Plan.
No fractional shares shall be issued, and the Committee shall
determine the manner in which fractional share value shall be treated.
ARTICLE II
STOCK OPTIONS
2.1 Award of Stock Options
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, award
to any Participant Options to purchase Stock.
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<PAGE> 4
The Committee may provide with respect to any option to purchase Stock
that, if the Participant, while an Eligible Person, exercises the option in
whole or in part using already-owned Stock, the Participant will, subject to
this Section 2.1 and such other terms and conditions as may be imposed by the
Committee, receive an additional option ("Reload Option"). The Reload Option
will be to purchase, at Fair Market Value as of the date the original option
was exercised, a number of shares of Stock equal to the number of whole shares
used by the Participant to exercise the original option. The Reload Option will
be exercisable only between the date of its grant and the date of expiration of
the original option.
A Reload Option shall be subject to such additional terms and
conditions as the Committee shall approve, which terms may provide that the
Committee may cancel the Participant's right to receive the Reload Option and
that the Reload Option will be granted only if the Committee has not canceled
such right prior to the exercise of the original option. Such terms may also
provide that, upon the exercise by a Participant of a Reload Option while an
Eligible Person, an additional Reload Option will be granted with respect to
the number of whole shares used to exercise the first Reload Option.
2.2 Stock Option Agreements
The award of an option shall be evidenced by a written agreement
("Stock Option Agreement") in such form and containing such terms and
conditions as the Committee may from time to time determine.
2.3 Option Price
The purchase price of Stock under each Option ("Option Price") shall
be not less than the Fair Market Value of such Stock on the date the Option is
awarded.
2.4 Exercise and Term of Options
(a) Except as otherwise provided in the Plan, Options shall become exercisable
at such time or times as the Committee may specify. The Committee may at any
time and from time to time accelerate the time at which all or any part of the
Option may be exercised.
(b) The Committee shall establish procedures governing the exercise of options
and shall require that notice of exercise be given. Stock purchased on exercise
of an option must be paid for as follows: (1) in cash or by check (acceptable
to the Company in accordance with guidelines established for this purpose),
bank draft or money order payable to the order of the Company or (2) if so
provided by the Committee (i) through the delivery of shares of Stock which are
then outstanding and which have a Fair Market Value on the date of exercise
equal to the exercise price, (ii) by delivery of an unconditional and
irrevocable undertaking
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<PAGE> 5
by a broker to deliver promptly to the Company sufficient funds to pay the
exercise price, or (iii) by any combination of the permissible forms of payment.
2.5 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and
ceased to be such as a result of termination of service to the Company with the
consent of the Committee or as a result of his or her death, retirement or
disability, each of his or her outstanding Options shall be exercisable by the
Participant (or his or her legal representative or designated beneficiary), to
the extent that such Option was then exercisable, at any time prior to an
expiration date established by the Committee at the time of award, but in no
event after such expiration date. In the event an Award is made to the estate
of a person who died while an Employee, each outstanding Option held by such
estate shall be exercisable by the estate (or the distributee of said estate)
at any time prior to an expiration date established by the Committee at the
time of award. If the Participant ceases to be an Eligible Person for any other
reason, all of the Participant's then outstanding Options shall terminate
immediately.
ARTICLE III
STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS
3.1 Award of Stock Appreciation Right
(a) An SAR is an Award entitling the recipient on exercise to receive an
amount, in cash or Stock or a combination thereof (such form to be determined
by the Committee), determined in whole or in part by reference to appreciation
in Stock value.
(b) In general, an SAR entitles the Participant to receive, with respect to
each share of Stock as to which the SAR is exercised, the excess of the share's
Fair Market Value on the date of exercise over its Fair Market Value on the
date the SAR was granted.
(c) SARs may be granted in tandem with options granted under the Plan ("Tandem
SARS") or independently of Options ("Independent SARs"). An SAR granted in
tandem with an NSO may be granted either at or after the time the option is
granted.
(d) SARs awarded under the Plan shall be evidenced by either a Stock Option
Agreement (when SARs are granted in tandem with an Option) or a separate
agreement between the Company and the Participant.
(e) Except as otherwise provided herein, a Tandem SAR shall be exercisable only
at the same time and to the same extent and subject to the same conditions as
the option related thereto is exercisable, and the Committee may prescribe
additional
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<PAGE> 6
conditions and limitations on the exercise of the SAR. The exercise of a Tandem
SAR shall cancel the related Option. Tandem SARs may be exercised only when the
Fair Market Value of Stock to which it relates exceeds the Option Price.
(f) Except as otherwise provided herein, an Independent SAR will become
exercisable at such time or times, and on such conditions, as the Committee may
specify, and the Committee may at any time accelerate the time at which all or
any part of the SAR may be exercised.
The Committee may provide, under such terms and conditions as it may
deem appropriate, for the automatic grant of additional SARs upon the full or
partial exercise of an Independent SAR.
Any exercise of an Independent SAR must be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.
(g) Except as otherwise provided herein, all SARs shall automatically be
exercised on the last trading day prior to the expiration date established by
the Committee at the time of the award for the SAR, or, in the case of a Tandem
SAR, for the related Option, so long as exercise on such date will result in a
payment to the Participant.
(h) Unless otherwise provided by the Committee, no SAR shall become exercisable
or shall be automatically exercised for six months following the date on which
it was granted.
(i) At the time of award of an SAR, the Committee may limit the amount of the
payment that may be made to a Participant upon the exercise of the SAR. The
Committee may further determine that, if the amount to be received by a
Participant in any year is limited pursuant to this provision, payment of all
or a portion of the amount that is unpaid as a result of the limitation may be
made to the Participant at a subsequent time. No such limitation shall require
a Participant to return to the Company any amount theretofore received by him
or her upon the exercise of an SAR.
(j) Payment of the amount to which a Participant is entitled upon the exercise
of an SAR shall be made in cash, Stock, or partly in cash and partly in Stock,
as the Committee shall determine. To the extent that payment is made in Stock,
the shares shall be valued at their Fair Market Value on the date of exercise
of the SAR.
(k) Each SAR shall expire on a date determined by the Committee or earlier upon
the occurrence of the first of the following: (i) in the case of a Tandem SAR,
termination of the related option, (ii) expiration of a period of six months
after the
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<PAGE> 7
Participant's ceasing to be an Eligible Person as a result of termination of
service to the Company with the consent of the Committee or as a result of his
or her death, retirement or disability, or (iii) the Participant ceasing to be
an Eligible Person for any other reason.
3.2 Limited Rights
(a) The Committee may award Limited Rights pursuant to the provisions of this
Section 3.2 to the holder of an Option to purchase Common Stock granted under
the Plan (a "Related Option") with respect to all or a portion of the shares
subject to the Related Option. A Limited Right may be exercised only during the
period beginning on the first day following a Change in Control, as defined in
Section 7.2 of the Plan, and ending on the thirtieth day following such date.
Each Limited Right shall be exercisable only to the same extent that the
Related Option is exercisable, and in no event after the termination of the
Related Option. In no event shall a Limited Right be exercised during the first
six months after the date of grant of the Limited Right. Limited Rights shall
be exercisable only when the Fair Market Value (determined as of the date of
exercise of the Limited Rights) of each share of Common Stock with respect to
which the Limited Rights are to be exercised shall exceed the Option Price per
share of Common Stock subject to the Related option.
(b) Upon the exercise of Limited Rights, the Related Option shall be considered
to have been exercised to the extent of the number of shares of Common Stock
with respect to which such Limited Rights are exercised. Upon the exercise or
termination of the Related Option, the Limited Rights with respect to such
Related Option shall be considered to have been exercised or terminated to the
extent of the number of shares of Common Stock with respect to which the
Related Option was so exercised or terminated.
(c) The effective date of the grant of a Limited Right shall be the date on
which the Committee approves the grant of such Limited Right. Each grantee of a
Limited Right shall be notified promptly of the grant of the Limited Right in
such manner as the Committee shall prescribe.
(d) Upon the exercise of Limited Rights, the holder thereof shall receive in
cash an amount equal to the product computed by multiplying (i) the excess of
(a) the higher of (x) the Minimum Price Per Share (as hereinafter defined), or
(y) the highest reported closing sales price of a share of Common Stock on the
New York Stock Exchange at any time during the period beginning on the sixtieth
day prior to the date on which such Limited Rights are exercised and ending on
the date on which such Limited Rights are exercised, over (b) the Option Price
per share of Common Stock subject to the Related Option, by (ii) the number of
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<PAGE> 8
shares of Common Stock with respect to which such Limited Rights are being
exercised.
(e) For purposes of this Section 3.2, the term "Minimum Price Per Share" shall
mean the highest gross price (before brokerage commissions and soliciting
dealers' fees) paid or to be paid for a share of Common Stock (whether by way
of exchange, conversion, distribution upon liquidation or otherwise) in any
Change in Control which is in effect at any time during the period beginning on
the sixtieth day prior to the date on which such Limited Rights are exercised
and ending on the date on which such Limited Rights are exercised. For purposes
of this definition, if the consideration paid or to be paid in any such Change
in Control shall consist, in whole or in part, of consideration other than
cash, the Board shall take such action, as in its judgment it deems
appropriate, to establish the cash value of such consideration.
ARTICLE IV
PERFORMANCE AWARDS
4.1 Nature of Performance Awards
A Performance Award provides for the recipient to receive an amount in
cash or Stock or a combination thereof (such form to be determined by the
Committee) following the attainment of Performance Goals. Performance Goals may
be related to personal performance, corporate performance (including corporate
stock performance), departmental performance or any other category of
performance deemed by the Committee to be important to the success of the
Company. The Committee shall determine the Performance Goals, the period or
periods during which performance is to be measured and all other terms and
conditions applicable to the Award. Regardless of the degree to which
Performance Goals are attained, a Performance Award shall be paid only when, if
and to the extent that the Committee determines to make such payment.
4.2 Other Awards Subject to Performance Condition
The Committee may, at the time any Award described in this Plan is
granted, impose the condition (in addition to any conditions specified or
authorized in the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
ARTICLE V
RESTRICTED STOCK
5.1 Award of Restricted Stock
The Committee may award to any Participant shares of Stock subject to
this Article V and such other terms and conditions as the Committee may
prescribe, such Stock referred to herein as "Restricted Stock."
- 8 -
<PAGE> 9
Each certificate for Restricted Stock shall be registered in the name
of the Participant and deposited by him or her, together with a stock power
endorsed in blank, with the Corporation.
5.2 Restricted Stock Agreement
Shares of Restricted Stock awarded under the Plan shall be evidenced
by a written agreement in such form and containing such terms and conditions as
the Committee may determine.
5.3 Restriction Period
At the time of award, there shall be established for each Participant
a "Restriction Period" of such length as shall be determined by the Committee.
The Restriction Period may be waived by the Committee. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered,
except as hereinafter provided, during the Restriction Period. Subject to such
restriction on transfer, the Participant as owner of such shares of Restricted
Stock shall have the rights of the holder of such Restricted Stock, except that
the Committee may provide at the time of the Award that any dividends or other
distributions paid on such Stock during the Restriction Period shall be
accumulated and held by the Company and shall be subject to forfeiture under
Section 5.4.
Upon the expiration or waiver by the Committee of the Restriction
Period, the Corporation shall redeliver to the Participant (or his or her legal
representative or designated beneficiary) the shares deposited pursuant to
Section 5.1.
5.4 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and
ceased to be such as a result of termination of service to the Company with the
consent of the Committee, or as a result of his or her death, retirement or
disability, the restrictions imposed under this Article V shall lapse with
respect to such number of shares theretofore awarded to him or her as shall be
determined by the Committee. All other shares of Restricted Stock theretofore
awarded to him or her which are still subject to restrictions, along with any
dividends or other distributions thereon that have been accumulated and held by
the Company, shall be forfeited, and the Corporation shall have the right to
complete the blank stock power.
In the event the Participant ceases to be an Eligible Person for any
other reason, all shares of Restricted Stock theretofore awarded to him or her
which are still subject to restrictions, along with any dividend or other
distributions thereon that have been accumulated and held by the Company, shall
be forfeited, and the Corporation shall have the right to complete the blank
stock power.
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<PAGE> 10
ARTICLE VI
DEFERRAL OF PAYMENTS
6.1 Deferral of Amounts
If the Committee makes a determination to designate Awards or, from
time to time, groups or types of Awards, eligible for deferral hereunder, a
Participant may, subject to such terms and conditions and within such limits as
the Committee may from time to time establish, elect to defer the receipt of
amounts due to him or her under the Plan. Amounts so deferred are referred to
herein as "Deferred Amounts." The Committee may also permit amounts now or
hereafter deferred or available for deferral under any present or future
incentive compensation program or deferral arrangement of the Company to be
deemed Deferred Amounts and to become subject to the provisions of this
Article. Awards which are so deferred will be deemed to have been awarded in
cash and the cash deferred as Deferred Amounts.
The period between the date on which the Participant's Deferred Amount
would have been payable absent deferral and the final payment of such Deferred
Amount shall be referred to herein as the "Deferral Period."
6.2 Investment During Deferral Period
Unless otherwise determined by the Committee, and subject to such
changes as the Committee may determine, the Deferred Amount will be treated
during the Deferral Period as if it were invested in putative convertible
debentures with a fixed interest rate, compounded annually, for the entire
Deferral Period. For purposes of determining the value of the Deferred Amount
at the time of payment, each putative debenture will be deemed to be
convertible into Common Stock at a conversion rate computed by reference to the
Fair Market Value of the Common Stock on the last trading day prior to the
regular January meeting of the Board of Directors on or preceding the date of
deferral. Payment of Deferred Amounts may be made in cash, Stock, or partly in
cash and partly in Stock, in the Committee's sole discretion.
6.3 Participant Reports
Annually, each Participant who has a Deferred Amount will receive a
report setting forth all of his or her then Deferred Amounts and the yield
thereon to date.
- 10 -
<PAGE> 11
6.4 Payment of Deferred Amounts
Payment of Deferred Amounts will be made at such time or times, and
may be in cash, Stock, or partly in cash and partly in Stock, as the Committee
shall from time to time determine. The limitations respecting the issuance of
Stock or other limitations on aggregate awards payable contained in the Annual
Performance Plan of the Corporation, Article XVI of the by-laws of the
Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term
Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan
hereafter adopted by the stockholders shall be limitations applicable to the
payment of any Deferred Amounts under this Article VI.
6.5 Alternative Valuation Election
Unless otherwise determined by the Committee, a Participant may, at a
time established by the Committee, but prior to such Participant's ceasing to
be an Eligible Person, elect to establish the ultimate payable value of each
Deferred Amount by reference to the Fair Market Value of the Common Stock as of
the day on which an alternate valuation election is received by the corporation
in accordance with procedures established by the Committee.
Notwithstanding the establishment of the ultimate payable value
resulting from the alternate valuation election by the Participant, the yield
will continue as though no such election had been made and will continue to be
subject to the limitations set forth in Section 6.2, and Deferred Amounts and
the yield thereon will be paid as otherwise provided in this Article.
ARTICLE VII
CHANGES IN CONTROL
7.1 Effect of Change in Control
Notwithstanding any other provision of the Plan, upon the occurrence
of a Change in Control, as defined in Section 7.2: (i) all Options and, subject
to the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but
not SARS, outstanding and unexercised on the date of the Change in Control
shall become immediately exercisable; (ii) all Performance Awards shall be
deemed to have been earned on such basis as the Committee may prescribe and
then paid on such basis, at such time and in such form as the Committee may
prescribe, or deferred in accordance with the elections of Participants; (iii)
all Restricted Stock shall be deemed to be earned and the Restriction Period
shall be deemed expired on such terms and conditions as the Committee may
determine; and (iv) all amounts deferred under this Plan shall be paid to a
trustee or otherwise on such terms as the Committee may prescribe or permit.
7.2 Definition of Change in Control
The term "Change in Control" means the occurrence of one or
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<PAGE> 12
more of the following events: (a) there shall be consummated (i) any
consolidation or merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares of the Common
Stock would be converted into cash, securities or other property, other than a
merger of the Corporation in which the holders of Common Stock immediately prior
to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Corporation, or
(b) the stockholders of the Corporation shall approve any plan or proposal for
the liquidation or dissolution of the Corporation, or (c) (i) any person (as
such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), corporation or other entity shall purchase any
Common Stock of the Corporation (or securities convertible into Common Stock)
for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, unless, prior to the making of such purchase of Common Stock (or
securities convertible into Common Stock), the Board shall determine that the
making of such purchase shall not constitute a Change in Control, or (ii) any
person (as such term is defined in Section 13(d) of the Exchange Act),
corporation or other entity (other than the Corporation or any benefit plan
sponsored by the Corporation or any of its subsidiaries) shall be the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
twenty percent or more of the combined voting power of the Corporation's then
outstanding securities ordinarily (and apart from any rights accruing under
special circumstances) having the right to vote in the election of directors
(calculated as provided in Rule 13d-3(d) in the case of rights to acquire any
such securities), unless, prior to such person so becoming such beneficial
owner, the Board shall determine that such person so becoming such beneficial
owner shall not constitute a Change in Control, or (d) at any time during any
period of two consecutive years, individuals who at the beginning of such period
constituted the entire Board shall cease for any reason to constitute at least a
majority thereof, unless the election or nomination for election of each new
director during such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such two-year period.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Transferability
No Option, SAR, Performance Award or share of Restricted Stock or
Deferred Amount under the Plan shall be transferable by the Participant other
than by will, by the applicable laws of
- 12 -
<PAGE> 13
descent and distribution, or by transfer to a properly designated beneficiary in
the event of death. All Awards and Deferred Amounts shall be exercisable or
received during the Participant's lifetime only by such Participant or his or
her legal representative. Any transfer contrary to this Section 8.1 will nullify
the option, SAR, Performance Award or share of Restricted Stock, and any
attempted transfer of a Deferred Amount contrary to this Section 8.1 will be
void and of no effect.
8.2 Beneficiaries
The Committee may establish or authorize the establishment of
procedures not inconsistent with Section 8.1 under which a Participant may
designate a beneficiary or beneficiaries to hold, exercise and/or receive
amounts due under an Award or with respect to Deferred Amounts in the event of
the Participant's death.
8.3 Adjustments Upon Changes in Stock
If there shall be any change in the Stock of the Company, through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split up, dividend in kind or other change in the corporate structure or
distribution to the stockholders, appropriate adjustments may be made by the
Board of Directors of the Company (or if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation) in the aggregate number and kind of shares subject to the Plan,
and the number and kind of shares and the price per share subject to
outstanding Options or which may be issued under outstanding Performance Awards
or Awards of Restricted Stock. Appropriate adjustments may also be made by the
Board of Directors or the Committee in the terms of any Awards under the Plan
to reflect such changes and to modify any other terms of outstanding Awards on
an equitable basis, including modifications of performance targets and changes
in the length of Performance Periods.
8.4 Conditions of Awards
(a) The rights of a Participant with respect to any Award received under this
Plan shall be subject to the conditions that, until the Participant has fully
received all payments, transfers and other benefits under the Award, he or she
shall (i) not engage, either directly or indirectly, in any manner or capacity
as advisor, principal, agent, partner, officer, director, employee, member of
any association or otherwise, in any business or activity which is at the time
competitive with any business or activity conducted by the Company and (ii) be
available, unless he or she shall have died, at reasonable times for
consultations at the request of the Company's management with respect to phases
of the business with which he or she is or was actively connected during his or
her employment, but such consultations shall not (except in the case of a
Participant whose active service was outside the United States) be required to
be performed at any
- 13 -
<PAGE> 14
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 Performance Award or Stock held which
has not yet been determined by the Committee to be payable or unrestricted (and
any unpaid amounts equivalent to dividends or other distributions or amounts
equivalent to interest relating thereto) as of the date of the breach of
condition. Any determination by the Board of Directors of the Corporation, which
shall act upon the recommendation of the Chief Executive Officer, that the
Participant is, or has, engaged in a competitive business or activity as
aforesaid or has not been available for consultations as aforesaid shall be
conclusive.
(b) This Section 8.4 shall not apply to Limited Rights.
8.5 Use of Proceeds
All cash proceeds from the exercise of options shall constitute
general funds of the Company.
8.6 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may
permit the Participant or such other person to elect at such time and in such
manner as the Committee provides to have the Company hold back from the shares
to be delivered, or to deliver to the Company, Stock having a value calculated
to satisfy the withholding requirement. In the alternative, the Committee may,
at the time of grant of any such Award, require that the Company withhold from
any shares to be delivered Stock with a value calculated to satisfy applicable
tax withholding requirements.
8.7 Non-Uniform Determinations
The Committee's determinations under the Plan, including without
limitation, (i) the determination of the Participants to receive Awards, (ii)
the form, amount, timing and payment of such Awards, (iii) the terms and
provisions of such Awards and (iv) the agreements evidencing the same, need not
be uniform and may be made by it selectively among Participants who receive, or
who are eligible to receive, Awards under the Plan, whether or not such
Participants are similarly situated.
- 14 -
<PAGE> 15
8.8 Leaves of Absence; Transfers
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect to any leave
of absence from the Company granted to a Participant. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine (i)
whether or not any such leave of absence shall be treated as if the Participant
ceased to be an Employee and (ii) the impact, if any, of any such leave of
absence on Awards under the Plan. In the event a Participant transfers within
the Company, such Participant shall not be deemed to have ceased to be an
Employee for purposes of the Plan.
8.9 General Restriction
(a) Each Award under the Plan shall be subject to the condition that, if at any
time the Committee shall determine that (i) the listing, registration or
qualification of shares of Stock upon any securities exchange or under any
state or federal law, (ii) the consent or approval of any government or
regulatory body or (iii) an agreement by the Participant with respect thereto,
is necessary or desirable, then such Award shall not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free from any conditions not
acceptable to the Committee.
(b) Shares of Common Stock for use under the provisions of this Plan shall not
be issued until they have been duly listed, upon official notice of issuance,
upon the New York Stock Exchange and such other exchanges, if any, as the Board
of Directors of the Corporation shall determine, and a registration statement
under the Securities Act of 1933 with respect to such shares shall have become,
and be, effective.
8.10 Effective Date
The Plan shall be deemed effective as of December 4, 1991.
No Award may be granted under the Plan after the Plan is terminated
pursuant to Section 8.11, but Awards previously made may extend beyond that
date and Reload Options and additional Reload Options provided for with respect
to original options outstanding prior to that date may continue unless the
Committee otherwise provides and subject to such additional terms and
conditions as the Committee may provide, and the provisions of Article VI of
the Plan shall survive and remain effective as to all present and future
Deferred Amounts until such later date as the Committee or the Board of
Directors shall determine.
The adoption of the Plan shall not preclude the adoption by
appropriate means of any other stock option or other incentive plan for
employees and/or independent contractors.
- 15 -
<PAGE> 16
8.11 Amendment, Suspension and Termination of Plan
The Board of Directors may at any time or times amend the Plan for any
purpose which may at the time be permitted by law, or may at any time suspend
or terminate the Plan as to any further grants of Awards.
8.12 Certain Definitions
(a) Unless otherwise determined by the Committee, the terms "retirement" and
"disability" as used under the Plan shall be construed by reference to the
provisions of the Westinghouse Pension Plan or other similar plan or program of
the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock means the mean
of the high and low prices of the Common Stock as reported by the Composite
Tape of the New York Stock Exchange (or such successor reporting system as
shall be selected by the Committee) on the relevant date or, if no sale of the
Common Stock shall have been reported for that day, the average of such prices
on the next preceding day and the next following day for which there were
reported sales. The term "Fair Market Value" as it relates to Formula Value
Stock shall mean the value determined by the Committee.
(c) The term "Subsidiary" shall mean, unless the context otherwise requires,
any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the corporation if each of the corporations other
than the last corporation in such chain owns stock possessing at least 50% of
the voting power in one of the other corporations in such chain.
(d) "Formula Value Stock" means shares of a class or classes of stock the value
of which is derived from a formula established by the Committee which reflects
such financial measures as the Committee shall determine. Such shares shall
have such other characteristics as shall be determined at time of their
authorization.
- 16 -
<PAGE> 1
Exhibit 10(p)
FIRST AMENDMENT, dated as of January 29, 1997 (this "First
Amendment"), to the Credit Agreement, dated as of August 29, 1996 (the "Credit
Agreement"), among WESTINGHOUSE ELECTRIC CORPORATION ("Westinghouse"), the
Lenders parties thereto, NATIONSBANK, N.A. and THE TORONTO-DOMINION BANK, as
Syndication Agents, THE CHASE MANHATTAN BANK, as Documentation Agent, and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. Unless
otherwise specified herein, all capitalized terms defined in the Credit
Agreement and used herein are so used as so defined.
WITNESSETH:
WHEREAS, Westinghouse wishes to amend the Credit Agreement in the
manner set forth herein; and
WHEREAS, each of the parties hereto is willing to enter into this
First Amendment on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I-AMENDMENTS TO THE CREDIT AGREEMENT
The parties hereto hereby agree that the Credit Agreement shall be
amended by (a) adding the shaded underlined text set forth in the Composite
Copy of the Credit Agreement (the "Composite Credit Agreement") attached hereto
as Appendix 1, (b) deleting the shaded stricken text set forth in the Composite
Credit Agreement and (c) adding Annex I and Annex II to this First Amendment as
Exhibit B-7 and Exhibit B-8, respectively, to the Credit Agreement.
ARTICLE II--MISCELLANEOUS
1. Representations and Warranties. Westinghouse hereby represents and
warrants, on and as of the First Amendment Effective Date (as defined below),
that (a) the execution and delivery of this First Amendment and the performance
of this First Amendment and the Credit Agreement as amended by this First
Amendment (the "Amended Credit Agreement") will not conflict with or result in
a breach of, or require any consent under, the charter or By-laws (or other
equivalent organizational documents) of Westinghouse, or any applicable law or
regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any material agreement or instrument to which Westinghouse or any
of its Material Subsidiaries is a party or by which any of them is bound or to
which any of them is subject, or constitute a default under any such agreement
or instrument, or result in the creation or imposition of any Lien upon any of
the revenues or assets of Westinghouse or any of its Material Subsidiaries
pursuant to the terms of any such agreement or
- 1 -
<PAGE> 2
instrument; (b) Westinghouse has all necessary corporate power and authority to
execute and deliver this First Amendment and to perform its obligations under
this First Amendment and the Amended Credit Agreement; (c) the execution and
delivery of this First Amendment and the performance of this First Amendment and
the Amended Credit Agreement have been duly authorized by all necessary
corporate action on the part of Westinghouse; (d) this First Amendment has been
duly and validly executed and delivered by Westinghouse and each of this First
Amendment and the Amended Credit Agreement constitutes a legal, valid and
binding obligation of Westinghouse, enforceable in accordance with its terms
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws of general
applicability affecting the enforcement of creditors' rights and (ii) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law); (e) no
authorizations, approvals or consents of, and no filings or registrations with,
any Governmental Authority are necessary for the execution and delivery by
Westinghouse of this First Amendment, for the performance by Westinghouse of
this First Amendment and the Amended Credit Agreement or for the validity or
enforceability hereof or thereof, and (f) each of the representations of
Westinghouse set forth in Article III of the Amended Credit Agreement is true
and correct in all material respects on and as of the First Amendment Effective
Date with the same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier date
in which case such representations and warranties were true and correct in all
material respects as of such earlier date.
2. No Other Modifications. Except as expressly modified hereby, all
the provisions of the Credit Agreement are and shall continue to be in full
force and effect. Each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof" and words of like import referring to the Credit
Agreement shall mean the Credit Agreement as amended hereby.
3. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS
AND PRINCIPLES OF SUCH STATE.
4. Counterparts. This First Amendment may be executed by one or
more of the parties to this First Amendment on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
5. Effectiveness. This First Amendment shall become effective on and
as of the date (the "First Amendment Effective Date") upon which the following
conditions shall have been satisfied:
- 2 -
<PAGE> 3
(a) the Administrative Agent shall have received
executed counterparts of this First Amendment from
Westinghouse and the Required Lenders; and
(b) the Administrative Agent shall have received (i)
the executed legal opinion of Louis J. Briskman, Senior Vice
President and General Counsel of Westinghouse, dated the
First Amendment Effective Date, covering, with respect to
this First Amendment and the Amended Credit Agreement,
substantially the same matters covered in Exhibit E-1 to the
Credit Agreement; and (ii) the executed legal opinion of an
Assistant General Counsel or Associate General Counsel of
Westinghouse licensed to practice law in the State of New
York, dated the First Amendment Effective Date, covering,
with respect to this First Amendment and the Amended Credit
Agreement, substantially the same matters covered in Exhibit
E-2 to the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.
WESTINGHOUSE ELECTRIC CORPORATION
By
------------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as a Lender and as
Administrative Agent
By
------------------------------------
Title:
THE CHASE MANHATTAN BANK
By
------------------------------------
Title:
NATIONSBANK, N.A.
By
------------------------------------
Title:
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<PAGE> 4
THE TORONTO-DOMINION BANK
By
------------------------------------
Title:
BANKERS TRUST COMPANY
By
------------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By
------------------------------------
Title:
CITIBANK, N.A.
By
------------------------------------
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By
------------------------------------
Title:
DEUTSCHE BANK AG NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
By
-------------------------------------
Title:
- 4 -
<PAGE> 5
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By
------------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By
------------------------------------
Title:
MELLON BANK, N.A.
By
------------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By
------------------------------------
Title:
ROYAL BANK OF CANADA
By
------------------------------------
Title:
THE SANWA BANK, LIMITED, NEW YORK
BRANCH
By
------------------------------------
Title:
SOCIETE GENERALE, NEW YORK BRANCH
By
------------------------------------
Title:
- 5 -
<PAGE> 6
THE SUMITOMO BANK, LIMITED
By
-----------------------------------
Title:
ABN AMRO BANK N.V.
By
---------------------------------------
Title:
THE ASAHI BANK, LTD.
By
-----------------------------------
Title:
BANK OF MONTREAL
By
-----------------------------------
Title:
BARCLAYS BANK PLC
By
-----------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
-----------------------------------
Title:
LTCB TRUST COMPANY
By
-----------------------------------
Title:
- 6 -
<PAGE> 7
THE MITSUBISHI TRUST AND BANKING CORPORATION
By
-----------------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By
-----------------------------------------
Title:
THE SAKURA BANK, LTD.
By
-----------------------------------------
Title:
THE TOKAI BANK, LIMITED
By
-----------------------------------------
Title:
WESTDEUTSCHE LANDESBANK GIROZENTRALE
By
-----------------------------------------
Title:
By
------------------------------------------
Title:
THE YASUDA TRUST AND BANKING CO., LTD.
By
-----------------------------------------
Title:
ARAB BANK PLC
By
-----------------------------------------
Title:
- 7 -
<PAGE> 8
THE BANK OF NOVA SCOTIA
By
-----------------------------------------
Title:
BANQUE PARIBAS
By
-----------------------------------------
Title:
By
-----------------------------------------
Title:
BAYERISCHE VEREINSBANK AG CHICAGO BRANCH
By
-----------------------------------------
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By
-----------------------------------------
Title:
CIBC INC.
By
-----------------------------------------
Title:
CP, AGMOE FOMAMCOERE DE COC ET DE L'UNION
EUROPEENNE
By
-----------------------------------------
Title:
By
-----------------------------------------
Title:
- 8 -
<PAGE> 9
CREDIT LYONNAIS NEW YORK BRANCH
By
-----------------------------------------
Title:
KEYBANK NATIONAL ASSOCIATION
By
-----------------------------------------
Title:
NIPPON CREDIT BANK, LTD.
By
-----------------------------------------
Title:
THE NORINCHUKIN BANK
By
-----------------------------------------
Title:
THE ROYAL BANK OF SCOTLAND plc
By
-----------------------------------------
Title:
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH
By
-----------------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By
-----------------------------------------
Title:
- 9 -
<PAGE> 10
BANCA COMMERCIALE ITALIANA
By
---------------------------------------
Title:
By
---------------------------------------
Title:
BANQUE NATIONALE DE PARIS
By
---------------------------------------
Title:
CORESTATES BANK, N.A.
By
---------------------------------------
Title:
FIRST COMMERCIAL BANK, NEW YORK AGENCY
By
---------------------------------------
Title:
GULF INTERNATIONAL BANK BSC
By
--------------------------------------------
Title:
- 10 -
<PAGE> 1
Exhibit 10(q)
SECOND AMENDMENT, dated as of March 21, 1997 (this "Second
Amendment"), to the Credit Agreement, dated as of August 29, 1996, as amended
by the First Amendment thereto dated as of January 29, 1997 (the "Credit
Agreement"), among WESTINGHOUSE ELECTRIC CORPORATION ("Westinghouse"), the
Subsidiary Borrowers parties thereto, the Lenders parties thereto, NATIONSBANK,
N.A. and THE TORONTO-DOMINION BANK, as Syndication Agents, THE CHASE MANHATTAN
BANK, as Documentation Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent. Unless otherwise specified herein, all capitalized terms
defined in the Credit Agreement and used herein are so used as so defined.
W I T N E S S E T H:
WHEREAS, Westinghouse wishes to amend the Credit Agreement in
the manner set forth herein; and
WHEREAS, each of the parties hereto is willing to enter into
this Second Amendment on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
1. Section 5.7. Section 5.7 of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"SECTION 5.7. Consolidated Leverage Ratio.
Westinghouse will not permit the Consolidated Leverage Ratio at the
end of any period of four consecutive fiscal quarters ending on any
date set forth below to be greater than the ratio set forth below
opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
12/31/96 6.00 to 1
3/31/97 and 6/30/97 7.25 to 1
9/30/97 7.00 to 1
12/31/97 6.00 to 1
3/31/98 5.25 to 1
6/30/98 4.75 to 1
9/30/98 4.25 to 1
12/31/98, 3/31/99,
6/30/99 and 9/30/99 3.50 to 1
12/31/99 and thereafter 3.00 to 1
</TABLE>
- 1 -
<PAGE> 2
2. Section 5.8. Section 5.8 of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"SECTION 5.8. Consolidated Coverage Ratio.
Westinghouse will not permit the Consolidated Coverage Ratio for any
period of four consecutive fiscal quarters ending on any date set
forth below to be less than the ratio set forth below opposite such
date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
9/30/96 1.75 to 1
12/31/96 2.00 to 1
3/31/97 and 6/30/97 1.75 to 1
9/30/97 2.00 to 1
12/31/97 2.25 to 1
3/31/98, 6/30/98
and 9/30/98 2.50 to 1
12/31/98 and thereafter 3.00 to 1
</TABLE>
3. Annex 1. Annex 1 to the Credit Agreement is hereby
amended by adding the following sentence to the end thereof:
"Notwithstanding anything above to the contrary,
commencing on April 1, 1997, the Leverage Margin
shall be deemed to be applicable until the Leverage
Margin shall be eliminated as otherwise provided
above."
ARTICLE II - MISCELLANEOUS
1. Representations and Warranties. Westinghouse and each
Subsidiary Borrower (to the extent specifically applicable to such Subsidiary
Borrower) hereby represents and warrants, on and as of the Second Amendment
Effective Date (as defined below), that (a) the execution and delivery of this
Second Amendment and the performance of this Second Amendment and the Credit
Agreement as amended by this Second Amendment (the "Amended Credit Agreement")
will not conflict with or result in a breach of, or require any consent under,
the charter or By-laws (or other equivalent organizational documents) of
Westinghouse or any Subsidiary Borrower, or any applicable law or regulation,
or any order, writ, injunction or decree of any Governmental Authority, or any
material agreement or instrument to which Westinghouse or any of its Material
Subsidiaries is a party or by which any of them is bound or to which any of
them is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of
- 2 -
<PAGE> 3
Westinghouse or any of its Material Subsidiaries pursuant to the terms of any
such agreement or instrument; (b) Westinghouse and each Subsidiary Borrower has
all necessary corporate power and authority to execute and deliver this Second
Amendment and to perform its obligations under this Second Amendment and the
Amended Credit Agreement; (c) the execution and delivery of this Second
Amendment and the performance of this Second Amendment and the Amended Credit
Agreement have been duly authorized by all necessary corporate action on the
part of Westinghouse and each Subsidiary Borrower; (d) this Second Amendment has
been duly and validly executed and delivered by Westinghouse and each Subsidiary
Borrower and each of this Second Amendment and the Amended Credit Agreement
constitutes a legal, valid and binding obligation of Westinghouse and each
Subsidiary Borrower, enforceable in accordance with its terms except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws of general applicability
affecting the enforcement of creditors' rights and (ii) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (e) no authorizations,
approvals or consents of, and no filings or registrations with, any Governmental
Authority are necessary for the execution and delivery by Westinghouse and each
Subsidiary Borrower of this Second Amendment, for the performance by
Westinghouse and each Subsidiary Borrower of this Second Amendment and the
Amended Credit Agreement or for the validity or enforceability hereof or
thereof, and (f) each of the representations of Westinghouse and each Subsidiary
Borrower set forth in Article III of the Amended Credit Agreement is true and
correct in all material respects on and as of the Second Amendment Effective
Date with the same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier date
in which case such representations and warranties were true and correct in all
material respects as of such earlier date.
2. No Other Modifications. Except as expressly modified
hereby, all the provisions of the Credit Agreement are and shall continue to be
in full force and effect. Each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" and words of like import referring to the
Credit Agreement shall mean the Credit Agreement as amended hereby.
3. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS AND PRINCIPLES OF SUCH STATE.
4. Counterparts. This Second Amendment may be executed by
one or more of the parties to this Second Amendment on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
- 3 -
<PAGE> 4
5. Effectiveness. This Second Amendment shall become
effective on and as of the date (the "Second Amendment Effective Date") upon
which (a) the Administrative Agent shall have received (i) an executed
counterpart of this Second Amendment from Westinghouse and each Subsidiary
Borrower, (ii) executed Lender Consent Letters (or facsimile transmissions
thereof) from the Required Lenders consenting to the execution of this Second
Amendment by the Administrative Agent and (b) Westinghouse shall have paid to
the Administrative Agent, for the benefit of each relevant Lender, an amendment
fee equal to (x) 0.075% of such Lender's Commitment if such Lender shall have
delivered its Lender Consent Letter, in accordance with the terms thereof, no
later than 5:00 P.M., New York City time, on March 17, 1997, or (y) if clause
(x) above is not applicable, 0.050% of such Lender's Commitment if such Lender
shall have delivered its Lender Consent Letter, in accordance with the terms
thereof, no later than 5:00 P.M., New York City time, on March 21. 1997.
IN WITNESS WHEREOF, the parties hereto have caused this
Second Amendment to be duly executed by their respective authorized officers as
of the day and year first above written.
WESTINGHOUSE ELECTRIC CORPORATION
By
------------------------------------------
Title:
---------------------------------------
HEMISPHERE BROADCASTING CORPORATION
By
------------------------------------------
Title:
---------------------------------------
INFINITY BROADCASTING CORPORATION OF BOSTON
By
------------------------------------------
Title:
---------------------------------------
- 4 -
<PAGE> 5
INFINITY BROADCASTING CORPORATION OF NEW YORK
By
------------------------------------------
Title:
---------------------------------------
TRANSPORTATION DISPLAYS, INCORPORATED
By
------------------------------------------
Title:
---------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
By
------------------------------------------
Title:
---------------------------------------
- 5 -
<PAGE> 1
Exhibit 10(s)
AGREEMENT made as of the 20th day of June, 1996 by and between Westinghouse
Electric Corporation ("Westinghouse") and Mel Karmazin ("Executive").
WITNESSETH:
Upon the consummation of the Agreement and Plan of Merger dated as of
the date hereof among Westinghouse, R Acquisition Corp. and Infinity
Broadcasting Corporation ("Infinity") (the "Merger"), and pursuant to the terms
thereof, Executive shall be employed as Chairman and Chief Executive Officer,
Westinghouse/CBS Radio Group. Executive will report only to the highest
executive officer of Westinghouse (currently Michael H. Jordan) and the Board
of Directors of Westinghouse ("the Board").
Subject to the supervision of the Board, Executive will be responsible
for and have full authority to manage all owned and operated radio stations and
other radio-related activities of the Westinghouse/CBS Radio Group, such as the
CBS Radio Networks, radio sales representatives, and administrative functions.
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 the Westinghouse/CBS Radio Group and the presidents or other
<PAGE> 2
2
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 Infinity operated or controlled or in which it or
any entity related to it had an interest on the date of consummation of the
Merger. Such activities and operations include, or are deemed to include,
without limitation, the following, anywhere throughout the world: (A) radio
broadcast operations and activities; (B) ownership, management and/or operation
of radio stations; (C) development, production, co-production, financing,
distribution and exploitation of audio 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.
Executive's authority shall include the right to hire and fire all persons
employed by the Westinghouse/CBS Radio Group and to approve any and all
employment and similar agreements relating to such persons
<PAGE> 3
3
in accordance with CBS and Westinghouse personnel policies and practices,
including the Westinghouse Compensation Committee Charter. All officers,
employees and other personnel of the Westinghouse/CBS Radio Group 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 the
Westinghouse/CBS Radio Group, including its personnel, business and operations
in accordance with applicable policies and procedures, including those of the
Board.
Executive will be employed for a four-year term commencing on the
effective time of the Merger (the "Effective Time"), at a starting annual
salary of $925,000. Thereafter, Executive's salary shall be subject to merit
review and annual increase (but not decrease) at the sole discretion of the
Compensation Committee of the Board ("Compensation Committee").
Executive shall have the opportunity to receive an annual incentive
bonus payment for each year of the term of this Agreement based on performance
of the Westinghouse/CBS Radio Group. The target amount of the annual incentive
bonus for each full calendar year during the employment term will be
$1,500,000, with a range of $900,000 to $2,625,000. No amount shall be payable
under this paragraph for any such
<PAGE> 4
4
year unless the minimum performance standards determined by the Compensation
Committee for any such year have been met. The full amount of the annual
incentive bonus payments provided in this paragraph may be deferred in
accordance with the terms of the Westinghouse Deferred Incentive Compensation
Program as in effect from time to time.
Promptly following the Effective Time, Executive shall be granted
500,000 options to acquire Westinghouse common stock, with an exercise price
equal to the fair market value of a share on the date of grant, and otherwise
containing customary terms, representing a one-time only grant of options for
the four-year term of this Agreement. 250,000 of the options shall vest one
year from the date of grant, and the remaining 250,000 options shall vest two
years from the date of grant. All previously granted unvested options shall
vest effective (i) on the date of Executive's death, (ii) upon the occurrence
of a change in control of Westinghouse/CBS Radio Group, or upon the date that
Executive's employment is terminated without cause or for disability.
Westinghouse has expressed its intention to effect certain internal
reorganizations and restructurings. For purposes of determining whether a
change in control has occurred under clause (ii) of the second preceding
sentence, as long as Westinghouse Electric Corporation or an affiliate
<PAGE> 5
5
owns or controls at least 50% of the radio assets of the Westinghouse/CBS Radio
Group, as such entity is constituted from time to time, no change of control
shall be deemed to have occurred under this Agreement.
Benefits and perquisites shall be consistent with those of
Westinghouse executives at Executive's level of authority and responsibility.
Executive may be terminated for cause on the same terms and conditions
as set forth in Executive's most recent employment agreement with Infinity. In
the event of any termination by Westinghouse of Executive's employment without
cause, or any other breach of this Agreement by Westinghouse, Westinghouse
shall pay Executive immediately a lump sum cash payment equal to the
compensation (including annual incentive compensation) that would otherwise
have been paid to Executive, for the remainder of the term and such payment
shall be Executive's exclusive remedy.
Westinghouse shall own all right, title and interest in perpetuity to
the result of Executive's services and all artistic materials and intellectual
properties which are, in whole or in part, created, developed or produced by
Executive during the term of this Agreement and which are suggested by or
related to Executive's employment hereunder or any activities to which
Executive is assigned, and
<PAGE> 6
6
Executive shall not have or claim to have any right, title or interest therein
of any kind or nature. Nothing in the preceding sentence is intended to
constitute a waiver of Westinghouse's or CBS' conflict of interest policies.
Executive agrees to devote all customary business time and attention
to the affairs of Westinghouse/CBS Radio Group except during vacation periods
and reasonable periods of illness or other incapacity consistent with the
practices of Westinghouse for executives in comparable positions, and agrees
that his services shall be completely exclusive to Westinghouse/CBS Radio Group
during the term hereof.
Executive acknowledges that he has been furnished a copy of the
Westinghouse policy concerning conflicts of interest ("Conflicts Policy").
Executive further acknowledges that he has read and fully 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 with any revisions thereof or additions thereto.
To the fullest extent permitted by the laws of the State of New York,
Westinghouse/CBS Radio Group 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
<PAGE> 7
7
reasonable attorneys' fees) arising from or relating to Executive's employment
by Westinghouse/CBS Radio Group.
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 respective legal representatives, executors, heirs, administrators,
successors and assigns. This Agreement and all matters and issues collateral
thereto (other than benefits under a plan or option agreement, which shall be
subject to the laws specified therein) 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 or unenforceable, the same shall in no
way affect any other provision of this Agreement or the validity or
enforceability thereof.
It is understood that at the Effective Time the existing employment
agreements and all ancillary agreements related thereto between Executive and
Infinity are terminated.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties have executed this Agreement as of
June 20, 1996.
Westinghouse Electric Corporation
By /s/ FREDRIC G. REYNOLDS
-----------------------
/s/ MEL KARMAZIN
-----------------------
Mel Karmazin
<PAGE> 1
EXHIBIT (11) COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1997 1996
---- ----
<S> <C> <C>
EQUIVALENT SHARES:
AVERAGE SHARES OUTSTANDING 588,523,744 397,459,976
ADDITIONAL SHARES DUE TO:
STOCK OPTIONS (a) 17,037,916 5,949,398
SERIES C PREFERRED SHARES 36,000,000 36,000,000
----------- -----------
TOTAL EQUIVALENT SHARES 641,561,660 439,409,374
=========== ===========
ADJUSTED EARNINGS
(IN MILLIONS):
LOSS FROM CONTINUING OPERATIONS $ (151) $ (723)
INCOME FROM DISCONTINUED OPERATIONS - 967
EXTRAORDINARY ITEM - (63)
-------- --------
ADJUSTED NET INCOME (LOSS) $ (151) $ 181
======== ========
EARNINGS (LOSS) PER SHARE:
FROM CONTINUING OPERATIONS $ (0.23) $ (1.65)
FROM DISCONTINUED OPERATIONS - 2.20
FROM EXTRAORDINARY ITEM - (0.14)
-------- --------
EARNINGS (LOSS) PER SHARE (b) $ (0.23) $ 0.41
======== ========
</TABLE>
(a) THE 1997 STOCK OPTIONS AMOUNT INCLUDES APPROXIMATELY 10,368,000 OPTIONS
WHICH WERE ASSUMED AS A RESULT OF THE INFINITY ACQUISITION.
(b) 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.
-28-
<PAGE> 1
EXHIBIT (12)(a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31 DECEMBER 31
------------------ -----------
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST $ (210) $(1,106) $(1,298)
LESS: EQUITY IN INCOME OF 50 PERCENT
OR LESS OWNED AFFILIATES 1 - 9
ADD: FIXED CHARGES 124 152 484
------- ------- -------
EARNINGS AS ADJUSTED $ (87) $ (954) $ (823)
======= ======= =======
FIXED CHARGES:
INTEREST EXPENSE $ 114 $ 146 $ 456
RENTAL EXPENSE 10 6 28
------- ------- -------
TOTAL FIXED CHARGES $ 124 $ 152 $ 484
======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES (a) (a) (a)
======= ======= =======
</TABLE>
(a) ADDITIONAL INCOME BEFORE INCOME TAXES AND MINORITY INTEREST NECESSARY TO
ATTAIN A RATIO OF 1.00X FOR THE THREE MONTHS ENDED MARCH 31, 1997, MARCH
31, 1996, AND THE YEAR ENDED DECEMBER 31, 1996 WOULD BE $211 MILLION,
$1,106 MILLION, AND $1,307 MILLION, RESPECTIVELY.
-29-
<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 YEAR ENDED
MARCH 31 DECEMBER 31
------------------ -----------
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST $ (210) $(1,106) $(1,298)
LESS: EQUITY IN INCOME OF 50 PERCENT
OR LESS OWNED AFFILIATES 1 - 9
ADD: COMBINED FIXED CHARGES AND
PREFERRED DIVIDENDS 140 170 557
------- ------- -------
EARNINGS AS ADJUSTED $ (71) $ (936) $ (750)
======= ======= =======
COMBINED FIXED CHARGES AND PREFERRED
DIVIDENDS:
INTEREST EXPENSE $ 114 $ 146 $ 456
RENTAL EXPENSE 10 6 28
PRE-TAX EARNINGS REQUIRED TO COVER
PREFERRED DIVIDEND REQUIREMENTS (b) 16 18 73
------- ------- -------
TOTAL COMBINED FIXED CHARGES AND
PREFERRED DIVIDENDS $ 140 $ 170 $ 557
======= ======= =======
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED DIVIDENDS (a) (a) (a)
======= ======= =======
</TABLE>
(a) ADDITIONAL INCOME BEFORE INCOME TAXES AND MINORITY INTEREST NECESSARY TO
ATTAIN A RATIO OF 1.00X FOR THE THREE MONTHS ENDED MARCH 31, 1997, MARCH
31, 1996, AND THE YEAR ENDED DECEMBER 31, 1996 WOULD BE $211 MILLION,
$1,106 MILLION, AND $1,307 MILLION, RESPECTIVELY.
(b) DIVIDEND REQUIREMENT DIVIDED BY 100% MINUS THE EFFECTIVE INCOME TAX RATE
OR THE STATUTORY RATE, WHICHEVER IS MORE APPROPRIATE
-30-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 89
<SECURITIES> 0
<RECEIVABLES> 1,719
<ALLOWANCES> 33
<INVENTORY> 863
<CURRENT-ASSETS> 4,723
<PP&E> 3,585
<DEPRECIATION> 1,744
<TOTAL-ASSETS> 19,884
<CURRENT-LIABILITIES> 3,493
<BONDS> 6,128
4
0
<COMMON> 612
<OTHER-SE> 4,979
<TOTAL-LIABILITY-AND-EQUITY> 19,884
<SALES> 2,223
<TOTAL-REVENUES> 2,223
<CGS> 1,590
<TOTAL-COSTS> 1,590
<OTHER-EXPENSES> 763
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114
<INCOME-PRETAX> (210)
<INCOME-TAX> (59)
<INCOME-CONTINUING> (151)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (151)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
