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1996
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-977
WESTINGHOUSE ELECTRIC CORPORATION
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(Exact name of registrant as specified in its charter)
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PENNSYLVANIA 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
WESTINGHOUSE BUILDING,
11 STANWIX STREET, PITTSBURGH, PENNSYLVANIA 15222-1384 (412) 244-2000
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(Address of principal executive offices) (Telephone No.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, par value $1.00 per Share New York Stock Exchange Boston Stock Exchange
Pacific Stock Exchange Philadelphia Stock Exchange
Chicago Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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Westinghouse Electric Corporation had 608,654,292 shares of common stock
outstanding at February 28, 1997. As of that date, the aggregate market value of
common stock held by non-affiliates was $10.0 billion.
DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED:
1. Portions of Westinghouse Electric Corporation's Notice of 1997 Annual Meeting
and Proxy Statement filed with the Commission pursuant to Regulation 14A of
the Securities and Exchange Act of 1934 (the Proxy Statement). (Parts I and
III)
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The terms "Westinghouse" and "Corporation" as used in this Report on Form
10-K refer to Westinghouse Electric Corporation and its consolidated
subsidiaries unless the context indicates otherwise.
PART I
ITEM 1. BUSINESS
General
Westinghouse Electric Corporation was founded in 1886 and operates under a
corporate charter granted by the Commonwealth of Pennsylvania in 1872. Today,
Westinghouse is a global company which operates its businesses through the
Westinghouse/CBS Group and the Industries & Technology Group. In November 1996,
Westinghouse announced a plan to separate its media and industries and
technology businesses. See "Separation Plan" discussed below. The Corporation's
Westinghouse/CBS Group combines the media operations of CBS Inc.(CBS) and
Infinity Broadcasting Corporation (Infinity), which the Corporation acquired in
1995 and 1996, respectively, and Group W Broadcasting. The Westinghouse/CBS
Group operates in the principal business areas of television and radio
broadcasting and cable programming. The Industries & Technology Group operates
in the principal business areas of power generation systems, transport
temperature control, and chemical and nuclear materials management.
The Corporation dramatically redefined its business portfolio and future
direction by acquiring CBS in November 1995. This repositioning was furthered by
the acquisition of Infinity in December 1996, and the execution of a definitive
merger agreement in February 1997 whereby the Corporation will acquire Gaylord
Entertainment Company's two major cable networks: The Nashville Network (TNN)
and Country Music Television (CMT). As a result of the acquisitions of CBS and
Infinity, Westinghouse has become the largest television and radio broadcaster
in the United States with 14 owned and operated television stations and 79 radio
stations. As part of this strategic redirection, the Corporation divested The
Knoll Group (Knoll), its office furniture unit, and the Corporation's defense
and electronic systems business in February and March 1996, respectively. In
addition, in December 1996, the Corporation divested Westinghouse Security
Systems (its residential security business) and portions of its Scientific
Ecology Group subsidiary. Financial results for 1996 and prior years include
these and other divested businesses as Discontinued Operations. For information
about principal acquisitions, pending acquisitions, and divestitures, see notes
1, 2, 3 and 23 to the financial statements included in Part II, Item 8 of this
report.
For financial reporting purposes, the Corporation's Continuing Operations
are aligned into four segments: Media, Power Systems, Thermo King and Government
Operations. Except for Media, all of these reporting segments operate as part of
the Industries & Technology Group. Results of international activities,
including manufacturing, export sales, and foreign licensee income, are included
in the financial information of the segment that has operating responsibility.
Financial and other information by segment and geographic area is included in
note 21 to the financial statements included in Part II, Item 8 of this report.
OPERATING SEGMENTS
WESTINGHOUSE/CBS GROUP
The Westinghouse/CBS Group combines the operations of CBS, Group W
Broadcasting and, beginning on December 31, 1996, Infinity. Its principal
businesses include the furnishing of network television services to affiliated
television stations primarily throughout the United States, the production of
news, sports and entertainment programming, and the operation, under licenses
from the Federal Communications Commission (FCC), of 14 television broadcast
stations and 79 radio stations.
Through the CBS Television Network, the Westinghouse/CBS Group distributes
a comprehensive schedule of news and public affairs broadcasts, entertainment
and sports programming and feature films to more than 200 domestic affiliates
and to certain overseas affiliated stations. The CBS Television Network's
domestic affiliates include independently-owned affiliated stations and the
Westinghouse/CBS Group's 14 owned and operated television stations. These
affiliates serve, in the aggregate, the 50 states and the District of Columbia.
The CBS Television Network is responsible for sales of advertising time for the
CBS Television Network broadcasts and related merchandising and sales promotion
activities. It is also responsible for
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managing the full range of ongoing activities and areas of mutual concern
between the television network and the independently-owned affiliated stations.
CBS Entertainment produces and otherwise acquires entertainment series and
other programs for all time periods and acquires feature films for broadcast by
the CBS Television Network. CBS News operates a worldwide news gathering and
production organization which produces regularly scheduled news and public
affairs broadcasts and special reports for CBS Television Stations and CBS
Radio. This unit also produces, for the CBS Television Network, certain
news-oriented programming for broadcast in the early morning daypart and in
designated hours during primetime. A unit of CBS News produces documentaries for
sale to other media outlets. CBS Sports produces and otherwise acquires sports
programs for broadcast by the CBS Television Network.
CBS Television Stations operates the 14 television stations owned by
Westinghouse/CBS. The larger markets served by the owned television stations
include New York, Los Angeles, Chicago, Philadelphia, San Francisco and Boston.
CBS Television Stations operates in seven of the nation's ten largest markets
and ten of the nation's top 20 markets, reaching approximately 33 percent of all
U.S. households.
CBS Radio owns and operates 79 AM and FM radio stations in 16 markets
(including 40 AM and FM radio stations that were acquired as part of the
Infinity acquisition), with 64 stations in the nation's ten largest radio
markets. CBS Radio believes that its presence in large markets makes it
attractive to advertisers and that the overall diversity of its stations reduces
its dependence on any single station, local economy or advertiser. CBS Radio
stations include leading franchises in news, sports and personality programming.
The CBS Radio Network serves approximately 585 affiliated stations nationwide.
The Corporation also has an indirect minority equity investment in Westwood One,
which Infinity manages pursuant to a management agreement. Westwood One is a
leader in producing and distributing syndicated and network radio programming.
The Corporation also participates in the out-of-home media business through
the Corporation's wholly-owned subsidiary TDI Worldwide, Inc. (TDI), which was
acquired by Infinity in March 1996. TDI is one of the largest out-of-home media
companies in the U.S., operating some 100 franchises, the majority of which are
in large metropolitan areas. TDI sells space on various media including buses,
trains, train platforms and terminals throughout commuter rail systems, painted
billboards, thirty-sheet billboards, and phone booths. TDI also has the
franchise to manage advertising space within the London Underground and on
certain London buses and has the exclusive rights to all transit advertising in
Ireland.
CBS Cable (formerly known as Group W Satellite Communications) provides
programming and distribution services to the cable television industry, provides
satellite distribution services, operates a 24-hour, Spanish-language news
service (CBS TeleNoticias), and is developing a new cable information and
entertainment channel, Eye on People. CBS Cable also provides regional sports
programming and the marketing and advertising services for two country music
entertainment networks, TNN and CMT, which are expected to be acquired by
Westinghouse in 1997. See note 23 to the financial statements included in Part
II, Item 8 of this report.
CBS TeleNoticias, which was acquired by Westinghouse in June 1996, is the
world's leading Spanish-language news channel. It provides 24-hour news services
in Latin America and Spain and is distributed to over 200 million homes in 22
countries.
Also part of CBS Cable, Group W Network Services is a global provider of
production, post-production and satellite services to broadcast, cable and
corporate networks.
EYEMARK Entertainment produces, markets and distributes first-run and
off-network syndicated programming for the domestic and international television
marketplace. EYEMARK Entertainment combines the activities of MAXAM
Entertainment, a distribution and production company acquired in February 1996,
and Group W Productions.
The network broadcast environment is highly competitive. The
Telecommunications Act of 1996 provides both new opportunities and potential new
competition for the Westinghouse/CBS Group. By deregulating station ownership
limits, the Act will allow the Corporation to pursue strategic growth in its
Radio and Television Station groups. The entry of telephone companies into the
video programming and distribution
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businesses will mean new competition in program sales, but will also provide new
opportunities for the distribution of CBS programming.
The CBS Television Network and the CBS Television Stations compete for
audiences with other television networks and television stations, as well as
with other video media, including cable television, satellite television
services and videocassettes. In the sale of advertising time, the CBS Television
Network and the CBS Television Stations compete with other broadcast networks,
other television stations, cable television systems, and other advertising
media. The CBS Television Network and the CBS Television Stations also compete
with other video media for distribution rights to television programming.
In addition, the CBS Television Network competes with other television
networks to secure affiliations with independently-owned television stations in
markets across the country, which are necessary to ensure the effective
distribution of network programming to a nationwide audience. In recent years,
competition among the networks for affiliates has intensified. More than 95
percent of CBS affiliates are under long-term agreements with the CBS Television
Network.
Current and future technological developments may affect competition within
the television marketplace. Developments in advanced digital technology may
enable competitors to provide "high definition" pictures and sound qualitatively
superior to what television stations now provide. Development of the technology
to compress digital signals may also permit the same broadcast or cable channel
or satellite transponder to carry multiple video and data services, and could
result in an expanded field of competing services.
CBS Radio competes with other radio stations, other radio networks and
suppliers of radio programming, and other advertising media. Developments in
radio technology could affect competition in the radio marketplace. New radio
technology, known as "digital audio broadcasting," can provide sound of the
quality of compact discs, which is significantly higher than that now provided
by radio stations and networks using analog technology.
All of the Corporation's television and radio stations operate under
licenses from the FCC, which is empowered by the Communications Act of 1934, as
amended, to, among other things, license and regulate television and radio
broadcasting stations. The FCC has authority to grant or renew broadcast
licenses for a maximum statutory term of eight years if it determines that the
"public convenience, interest or necessity" will be served thereby. During a
specified period after an application for renewal of a broadcast station license
has been filed, persons objecting to the license renewal application may file
petitions to deny.
The approval by the FCC of the Corporation's acquisition of Infinity
contained a number of temporary waivers of the FCC's television and radio
cross-ownership rules. These waivers were granted subject to the outcome of the
pending ownership rulemaking in which certain deregulation of the television and
radio cross-ownership rules has been proposed. In the event that any station
divestitures are required at the conclusion of this rulemaking, the Corporation
would be required to file applications with the FCC for consent to the necessary
divestitures within six months of the rulemaking order. The order granting
approval of the Infinity transaction made permanent the temporary waivers of the
television and radio cross-ownership rules granted in connection with the
Corporation's acquisition of CBS. The FCC orders approving both the CBS and
Infinity acquisitions are subject to judicial appeals by certain third parties.
The FCC has previously rejected the positions of these third parties, and the
Corporation believes that such appeals are without merit.
INDUSTRIES & TECHNOLOGY GROUP
The Industries & Technology Group consists of the following businesses:
Power Systems, Thermo King, and Government Operations.
Power Systems
The Power Systems segment designs, develops, manufactures and services
nuclear and fossil-fueled power generation systems and is a leading supplier of
reload nuclear fuel to the global electric utility market. In addition, Power
Systems provides distributed control, communications, data acquisition, and
information systems to nuclear and fossil-fuel electric utilities and to other
industries.
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The Energy Systems business unit serves the domestic and international
electric power industry by supplying fuel and a wide range of other products and
services to the owners and operators of nuclear power plants. Approximately 40%
of the world's operating commercial nuclear power plants incorporate
Westinghouse's technology. The business unit supplies a wide range of operating
plant services, ranging from performance-based maintenance programs, including
operational and safety upgrades, to new products and services that enhance plant
performance. It also has complete capabilities for supplying customers with
nuclear fuel for pressurized water reactors. The annual demand for operating
plant services and fuel is over $10 billion in the United States and $30 billion
globally. Energy Systems products and equipment are highly engineered and serve
critical safety and operational missions in customer nuclear power plants. The
business unit is marketing new nuclear power plants and components for new
plants to the worldwide market. The business unit is also working with
government agencies to develop a simplified nuclear power plant design that
incorporates passive safety systems.
The Process Control Division (PCD) provides distributed control,
communications, data acquisition, and information systems to domestic and
international nuclear and fossil-fuel electric utilities, and to chemical
processors, water and waste water treatment facilities, and the steel industry.
PCD financial results are included for reporting purposes as part of Energy
Systems.
The Power Generation business unit designs, manufactures and services steam
turbine-generators for nuclear and fossil-fueled power plants and combustion
turbine-generators for natural gas and oil-fired power plants. Power Generation
also constructs turn-key power plants worldwide. In addition to serving the
electric utility industry, the business unit supplies, services and operates
power plants for independent power producers and supplies power generator
equipment and services to other non-utility customers. Growing demand for
electrical energy has contributed to the business unit's increase in orders. In
1996, the business unit was awarded orders for approximately 4,579 megawatts of
new power generating capacity. The domestic demand for new generating equipment
over the next ten years is expected to be approximately 91 gigawatts; the
international demand is expected to be over nine times the domestic demand.
Power Generation is a participant in the development of emerging technologies
that could impact the future power generation business.
In 1996, in excess of 80% of Power Generation's sales of new power
generating equipment and plants were outside of the United States, and more than
65% of its dollar sales volume was outside the United States. The Power
Generation business unit conducts business in more than 50 countries.
The United States electric utility industry is restructuring in response to
a new competitive environment brought on by regulatory changes. Power Systems
has a number of domestic and foreign competitors in the power generation
industry where Westinghouse is recognized as a significant supplier. Positive
factors with respect to competitive position are technology, product
reliability, service capability, and worldwide presence. Potential negative
factors include reduced opportunities for operating fleet products and services,
continued softness in the domestic electric utility sector, and intense
competition for new unit sales worldwide. In addition, the worldwide nuclear
industry is a mature business with intense competition. The principal methods of
competition for Power Systems are technology, product development and
performance, responsiveness, customer service, pricing and financing.
Thermo King
Thermo King is a world leader in the $2.5 billion transport temperature
control market. It designs, manufactures and distributes transport temperature
control equipment, including units and their associated service parts, for
trucks, trailers, seagoing containers, buses and rail cars. The transport
refrigeration units are powered by diesel, gasoline or propane fueled engines,
or electricity. These products provide air conditioning for people and preserve
not only food, but pharmaceuticals, flowers, cosmetics, electronic gear and many
other temperature-sensitive goods and products by heating and cooling as
necessary. Thermo King supplies units for both long distance transportation and
local distribution of all these cargoes.
As an industry leader in its product technology, Thermo King serves its
customers through a network of 14 manufacturing operations and approximately 400
sales and service dealers as well as a network of authorized service locations
throughout the world. International manufacturing facilities are located in
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Ireland, Brazil, Spain, Germany, the Czech Republic, Denmark and the People's
Republic of China. In 1996, more than 50% of Thermo King's sales were outside of
the United States.
Thermo King is subject to competition worldwide for all its products.
Thermo King's products compete on the basis of service, technology, warranty,
product performance, and cost.
Government Operations
Westinghouse's Government Operations business unit includes management
services for certain government-owned facilities under contracts with the
Department of Energy (DOE), management of the nuclear reactors program for the
U.S. Navy, and management of a chemical agent and weapons destruction program
for the Department of Defense (DOD).
Government Operations manages three government-owned facilities under
contracts with the DOE. Westinghouse Savannah River Company manages the Savannah
River site in Aiken, South Carolina; West Valley Nuclear Services Company
manages the West Valley Demonstration Project in New York; and the Waste
Isolation Division manages the Waste Isolation Pilot Project in Carlsbad, New
Mexico. In addition, Safe Sites of Colorado L.L.C., a company 65% owned by
Westinghouse, performs nuclear waste management services and environmental
cleanup under a major subcontract with Kaiser-Hill, L.L.C. at the DOE Rocky
Flats facility. The principal mission at all of these sites is waste management,
environmental cleanup, and the safe management of the nation's nuclear materials
inventory. In March 1996, Westinghouse was awarded a nine-year DOD contract to
destroy chemical weapons at the Anniston Chemical Agent Disposal Facility in
Anniston, Alabama.
The U.S. Navy work of the Government Operations business unit includes new
ship reactor plants and advanced designs, training and fleet support. The
government-funded U.S. naval nuclear reactors program consists of Westinghouse's
U.S. Navy nuclear and technical support businesses, including the Bettis Atomic
Power Laboratory, the Plant Apparatus Division, and the Machinery Apparatus
Operation Division.
The federal government reserves the right to terminate these contracts for
convenience.
Competition for services provided by businesses in the Government
Operations segment is based on safety, price, technology preference,
environmental experience, and performance reputation. Government Operations
competes primarily in the market for DOE operation and maintenance contracts.
DISCONTINUED OPERATIONS
During 1996, Discontinued Operations consisted of the Communication &
Information Systems Company (CISCO), the environmental services business, Knoll,
the defense and electronic systems business, and Financial Services. The largest
component of the CISCO segment, Westinghouse Security Systems (the Corporation's
residential security business), and portions of Westinghouse's Scientific
Ecology Group subsidiary were sold in December 1996. Knoll and the defense and
electronic systems business were divested in the first quarter of 1996.
During 1996, the Corporation continued to liquidate Financial Services. The
remaining Financial Services assets consist of the leasing portfolio and are
expected to liquidate in accordance with contractual terms. The remaining assets
of Discontinued Operations generally are expected to be divested within the next
year.
SEPARATION PLAN
In November 1996, Westinghouse announced that its Board of Directors had
approved, subject to certain conditions, a plan to separate the Corporation's
industries and technology businesses from its media businesses. This separation
(the Separation) is expected to be effected by means of a tax-free dividend to
shareholders of Westinghouse, forming a publicly-traded company to be called
Westinghouse Electric Company (WELCO). In addition, the Corporation also
announced that Thermo King, Westinghouse's transport temperature control
company, was planning a public offering of up to 20 percent of its common stock.
If the Separation is completed, shares of WELCO common stock (WELCO Common
Stock) will be
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distributed on a pro rata basis to the shareholders of record of Westinghouse
common stock as of a date to be determined.
As currently contemplated, after the Separation, Westinghouse (the Media
Company) will be renamed "CBS Corporation" and will consist primarily of the
businesses in the Westinghouse/CBS Group and the TNN and CMT networks (assuming
consummation of the merger discussed previously), and WELCO will consist
primarily of Thermo King, Power Systems and Government Operations. Also, as
currently contemplated, the Media Company will retain all debt obligations of
the current Westinghouse as well as the approximately $1.5 billion tax net
operating loss carryforward, and WELCO will assume most of the unfunded pension
obligation and other non-debt obligations generated by Westinghouse's industrial
businesses in earlier years.
Completion of the Separation is subject to a number of conditions,
including a favorable ruling from the Internal Revenue Service that the
transaction will not be taxable for U.S. federal income tax purposes to
Westinghouse's shareholders or to Westinghouse and the registration of the WELCO
Common Stock under the Securities Exchange Act of 1934. The Corporation
estimates that the separation will be completed later in 1997. For a discussion
of the results of each of the businesses comprising the Westinghouse/CBS Group
and the Industries & Technology Group, see Management's Discussion and Analysis
of Financial Condition and Results of Operations included in Part II, Item 7 of
this report.
Notwithstanding the foregoing, there can be no assurance that the
Separation will occur or as to the timing thereof. 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.
RAW MATERIALS
The Corporation has experienced no significant difficulty with respect to
sources and availability of raw materials essential to its businesses.
PATENTS AND TRADEMARKS
Westinghouse owns or is licensed under a large number of patents and patent
applications in the United States and other countries that, taken together, are
of material importance to its businesses. Such patent rights are, in the
judgment of Westinghouse, adequate for the conduct of its business. No patents
which Westinghouse considers material to its business as a whole will expire
within the next five years.
Westinghouse has a world-wide trademark portfolio which it considers
important in the marketing of its products and services, including, among
others, the trademarks "WESTINGHOUSE," "CIRCLE W," "CBS," the CBS "Eye" logo,
and "THERMO KING." Westinghouse believes that its rights in these trademarks are
adequately protected and of unlimited duration.
BACKLOG
The backlog of firm orders of the Corporation's Continuing Operations was
$5,591 million and $5,954 million at December 31, 1996 and 1995, respectively.
Of the 1996 backlog $3,281 million is expected to be liquidated after 1997. In
addition to the reported backlog, the Corporation provides certain non-
Westinghouse products primarily for nuclear steam supply customers.
Backlog for the Corporation is as follows:
Power Systems backlog at year end 1996 and 1995 was $5,414 million and
$5,699 million, respectively. Backlog of $3,214 million is expected to be
liquidated after 1997. Energy Systems backlog at year end 1996 and 1995 was
$2,744 million and $2,675 million, respectively. Power Generation backlog at
year end 1996 and 1995 was $2,670 million and $3,024 million, respectively.
Thermo King backlog at year end 1996 and 1995 was $130 million and $174
million, respectively. Backlog of $65 million is expected to be liquidated after
1997.
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Government Operations backlog at year end 1996 and 1995 was $16 million and
$39 million, respectively. Backlog of $2 million is expected to be liquidated
after 1997.
Also included in backlog at year end 1996 and 1995 was $31 million and $42
million, respectively, attributable to Corporate and Other. This backlog
primarily relates to research activities for outside customers.
ENVIRONMENTAL MATTERS
Information with respect to Environmental Matters is incorporated herein by
reference to Management's Discussion and Analysis--Environmental Matters
included in Part II, Item 7 and in note 17 to the financial statements included
in Part II, Item 8 of this report.
RESEARCH AND DEVELOPMENT
Data with respect to research and development is incorporated herein by
reference to note 21 to the financial statements included in Part II, Item 8 of
this report.
EMPLOYEE RELATIONS
During 1996, Westinghouse employed an average of 59,275 people, of whom
49,430 were located in the United States. Included in the 1996 average employees
were 22,533 employees associated with government-owned facilities and the U.S.
naval nuclear reactors program and 6,330 employees in Discontinued Operations.
During the same period, 5,741 domestic employees were represented in collective
bargaining by 36 labor organizations.
FOREIGN AND DOMESTIC OPERATIONS
Information with respect to foreign and domestic operations and export
sales is incorporated herein by reference to note 21 to the financial statements
included in Part II, Item 8 of this report.
ITEM 2. PROPERTIES.
At December 31, 1996, the Corporation's Continuing Operations owned or
leased 850 locations totalling more than 24 million square feet of floor area in
the United States and 38 foreign countries. Domestic locations of Continuing
Operations comprised approximately 82% of the total space.
Facilities leased in the United States accounted for approximately 16% of
the total space occupied by Continuing Operations and facilities leased in
foreign countries accounted for approximately 7% of the total space occupied by
Continuing Operations. No individual lease was material.
A number of manufacturing plants and other facilities formerly used in
operations are either vacant, partially utilized, or leased to others. All of
these plants are expected to be sold, leased, or otherwise utilized. Except for
these facilities, the Corporation's physical properties are adequate and
suitable, with an appropriate level of utilization, for the conduct of its
businesses in the future.
ITEM 3. LEGAL PROCEEDINGS
(a) On February 27, 1996, suit was brought against the Corporation in the
United States District Court (USDC) for the District of New Jersey by Public
Service Electric & Gas Company, PECO Energy Company, Atlantic City Electric
Company, and Delaware Power & Light Company, the owners of the Salem Generating
Station. The suit alleges counts under the Racketeer Influenced and Corrupt
Organization Act (RICO), for fraud and for negligent misrepresentation and for
breach of contract in connection with the Corporation's supply of steam
generators and for service orders in 1993 and 1995 related to these steam
generators. The parties continue to engage in discovery.
(b) In August 1988, the Pennsylvania Department of Environmental Resources
(PDER) filed a complaint against the Corporation alleging violations of the
Pennsylvania Clean Streams Law at the Corporation's Gettysburg, Pennsylvania,
elevator plant. The PDER requested that the Environmental Hearing Board assess a
penalty in the amount of $9 million. The Corporation has denied these
allegations. The parties
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completed discovery and a portion of the hearing on the complaint began in 1991.
The hearing resumed in 1992 and concluded in February 1993. In November 1996,
the Board assessed a civil penalty of approximately $5.5 million. The
Corporation timely filed an appeal with Commonwealth Court.
(c) The Corporation has been defending, in the USDC for the Western
District of Pennsylvania (the District Court), consolidated class and derivative
actions and an individual lawsuit brought by shareholders of the Corporation
against the Corporation, Westinghouse Financial Services, Inc. (WFSI) and
Westinghouse Credit Corporation (WCC), previously subsidiaries of the
Corporation, and/or certain present and former directors and officers of the
Corporation, as well as other unrelated parties. Together, these actions allege
various federal securities law and common law violations arising out of alleged
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation, WFSI and WCC in
connection with a $975 million charge to earnings announced on February 27,
1991, a public offering of Westinghouse common stock in May 1991, a $1,680
million charge to earnings announced on October 7, 1991, and alleged
misrepresentations regarding the adequacy of internal controls at the
Corporation, WFSI and WCC. In July 1993, the court dismissed in its entirety the
derivative claim and dismissed most of the class action claims, with leave to
replead certain claims in both actions. Both actions were subsequently repled.
On January 20, 1995, the court again dismissed the derivative complaint in its
entirety with prejudice. On February 8, 1995, this dismissal was appealed. Also
on January 20, 1995, the court dismissed the class action claims, but granted
plaintiffs the right to replead certain of the class action claims. Plaintiffs,
in the class action, did not replead the claims and on February 28, 1995, the
court dismissed these claims in their entirety. Plaintiffs in both the
derivative and class action suits appealed the rulings and dismissals of their
claims by the District Court to the United States Court of Appeals for the Third
Circuit. In July 1996, the Court of Appeals affirmed in part and reversed in
part the class action claims. Pursuant to the ruling, this case has been
remanded to the District Court, where the plaintiffs will proceed with their
surviving claims against the Westinghouse defendants and others. In the
derivative action, the Court of Appeals affirmed the dismissal of this action by
the District Court.
In February 1997, a duplicative class action suit was brought against the
Corporation in the USDC for the Western District of Pennsylvania. This case
alleges similar facts and includes the same defendants named in the previous
class action complaint filed in the USDC for the Western District of
Pennsylvania.
(d) In February 1993, the Corporation was sued by 108 former employees who
were laid off subsequent to the cancellation by the federal government of all
contracts pertaining to the carrier-based A-12 aircraft program. The complaint
alleges age discrimination on the part of the Corporation. The suit was filed in
the USDC for the District of Maryland. The plaintiffs seek back pay with
benefits and reinstatement of jobs or front pay. In April 1993, the Equal
Employment Opportunity Commission (EEOC) filed a class-action, age
discrimination suit against Westinghouse in the USDC for the District of
Maryland on behalf of 388 former Westinghouse employees (which includes the
aforementioned 108 employees) who were laid off or involuntarily terminated from
employment subsequent to the federal government's cancellation of all contracts
pertaining to the carrier-based A-12 aircraft program. The suit alleges age
discrimination and discriminatory employment practices. The suit seeks back pay,
interest, liquidated damages, reinstatement of jobs, court costs and other
appropriate relief. In May 1993, these two cases were consolidated by the court.
The court has adopted a trial structure which contemplates separate trials for
plaintiffs in each of the 10 business segments within the Electronic Systems
Group at the time of the February 1991 reduction-in-force. The parties have
engaged in extensive discovery which was largely concluded in June of 1995.
Currently, there is a stay in the proceedings as the parties attempt to effect a
settlement which has been reached in principle.
(e) 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 December 31, 1996, the
Corporation had approximately 103,000 claims outstanding against it. In court
actions that have been resolved, the Corporation has prevailed in the vast
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.
9
<PAGE> 10
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.
A number of the asbestos-related cases pending against the Corporation,
including those pending in Mississippi, Baltimore and West Virginia, are
consolidated or purported class action cases. In consolidated cases, the claims
of a group of plaintiffs are tried together, and oftentimes limited findings
with respect to common issues of fact and punitive damages are decided with
respect to a representative grouping of plaintiffs and then applied to other
individuals in the group. However, for the Corporation to be liable for damages
to any particular claimant, that individual claimant must prove that he
developed an asbestos-related disease, that he was exposed to a Westinghouse
product, and that this exposure was a substantial factor in the development of
the disease.
(f) In August of 1993, the bankruptcy Trustee for the Bonneville Pacific
Corporation (Bonneville) sued over 70 defendants, including the Corporation, in
federal district court in Salt Lake City, Utah. The Trustee's claims against the
group of defendants, including the Corporation; Deloitte & Touche, Mayer, Brown
& Platt; Piper Jaffray, Inc.; and Kidder Peabody and Company, were numerous, but
consisted primarily of common law fraud and aiding and abetting in breaches of
fiduciary duty on the part of former officers and directors of Bonneville. There
were also claims by the Trustee for the tort of conspiracy and civil RICO
violations. The Corporation's involvement with Bonneville consisted of four
sale-leaseback transactions in co-generation projects through its former
subsidiary, WCC. On December 3, 1996, the parties reached an agreement resolving
all claims in this matter.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in certain of the foregoing matters and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that the
Corporation has meritorious defenses to the litigation described in items (a)
through (e) 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A special meeting of shareholders of the Corporation was held on December
10, 1996.
(b) The following matters were submitted to a vote of the shareholders at the
special meeting with the following results:
(i) A management proposal regarding an amendment to the Restated
Articles of Incorporation of the Corporation to increase the
number of authorized shares of common stock from 630,000,000 to
1,100,000,000: 264,457,464 shares of common stock were voted for,
7,324,247 shares were voted against, and 2,833,278 shares
abstained in connection with the adoption of this proposal.
(ii) A management proposal regarding the issuance of common stock
of the Corporation in accordance with the terms of the Agreement
and Plan of Merger among the Corporation, R Acquisition Corp.,
and Infinity Broadcasting Corporation, dated as of June 20, 1996,
as amended: 259,491,956 shares of common stock were voted for,
5,936,426 shares were voted against, and 2,922,020 shares
abstained in connection with the adoption of this proposal.
10
<PAGE> 11
EXECUTIVE OFFICERS
The names, ages, offices, and positions held during the past five years by
each of the executive officers of the Corporation as of March 5, 1997 are listed
below. Officers are elected annually. There are no family relationships among
any of the executive officers of the Corporation.
<TABLE>
<CAPTION>
AGE AT
NAME, OFFICES, AND POSITIONS MARCH 5, 1997
------------------------------------------------------------ -----------------
<S> <C>
Michael H. Jordan -- Chairman and Chief Executive Officer 60
since June 30, 1993; Partner with Clayton, Dublier & Rice,
Inc. from September 1992 to June 1993; Chairman of PepsiCo
International Foods and Beverages Division from December
1990 to September 1992.
Gary M. Clark -- Vice Chairman and President since November 61
12, 1996; President from June 30, 1993 to November 1996;
President and Acting Chief Executive Officer from January
27, 1993 to June 30, 1993; Member of President's Office
from January 1, 1993 to January 27, 1993; Executive Vice
President, Industries and Corporate Resources from
December 1990 to January 1993.
Louis J. Briskman -- Senior Vice President and General 48
Counsel since January 1994; Senior Vice President,
Secretary and General Counsel from January 1993 to January
1994; Deputy General Counsel from January 1989 to January
1993.
Francis J. Harvey -- Executive Vice President and Chief 53
Operating Officer, Industries & Technology Group since
March 1, 1996; President, Electronic Systems from March 1,
1995 to February 29, 1996; President, Westinghouse
Government and Environmental Services Co. from January
1994 to March 1, 1995; Vice President, Science and
Technology from July 1993 to January 1994; General
Manager, Marine Division from July 1986 to July 1993.
Mel Karmazin -- Chairman and Chief Executive Officer of CBS 53
Radio since December 31, 1996; President and Chief
Executive Officer, Infinity Broadcasting Corporation from
1986 to December 31, 1996.
Peter A. Lund -- President and Chief Executive Officer of 56
the CBS Television and Cable Group since January 1997 and
Chief Executive Officer and President of CBS Inc. since
November 28, 1995; President, CBS/Broadcast Group, from
February 1995 to November 27, 1995; President, CBS
Television Network, from March 1994 to February 1995;
Executive Vice President of CBS/ Broadcast Group, from
October 1990 to March 1994.
Charles W. Pryor, Jr. -- President, Energy Systems, since 52
March 5, 1997; management consultant within his own
company in Lynchburg, Virginia from the end of 1995 to
March 1997; President and Chief Executive Officer of B&W
Nuclear Technologies (which became a subsidiary of
Framatome, S.A. in 1993) from 1991 to the end of 1995.
Fredric G. Reynolds -- Executive Vice President and Chief 46
Financial Officer since March 1994; Senior Vice President,
Finance, and Chief Financial Officer, PepsiCo
International Foods from December 1990 to March 1994.
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
AGE AT
NAME, OFFICES, AND POSITIONS MARCH 5, 1997
------------------------------------------------------------ -----------------
<S> <C>
Carol V. Savage -- Vice President and Chief Accounting 46
Officer since July 30, 1996; Director, Corporate Reporting
and Policies from November 1994 through July 1996;
Controller, Nuclear and Advanced Technology Division,
Energy Systems from June 1992 through October 1994;
Assistant Controller, Westinghouse Financial Services,
Inc., from August 1989 through May 1992.
James F. Watson -- President, Thermo King since February 59
1993; Vice President and General Manager, North American
Division of Thermo King from October 1983 to February
1993.
Randy H. Zwirn -- President, Power Generation since December 43
20, 1996; Executive Vice President and Chief Operating
Officer of Power Generation from January 1996 to December
20, 1996; General Manager, Power Generation Systems
Division from 1994 to January 1996; General Manager, Power
Generation Projects Division from 1990 to 1994.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal markets for the Corporation's common stock are identified on
page 1 of this report. The remaining information required by this item appears
on page 64 of this report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on pages 63 and 64 of this
report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item appears on pages 14 through 30 of
this report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item, together with the reports of KPMG
Peat Marwick LLP dated January 29, 1997 and Price Waterhouse LLP dated February
12, 1996, except for the restatements discussed in notes 1 and 3, for which the
dates are March 31, 1996 and November 13, 1996, appears on pages 31 through 64
of this report and is incorporated herein by reference.
12
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Management 31
Reports of Independent Auditors and Accountants 32
Consolidated Statement of Income for each of the three years in the 33
period ended December 31, 1996
Consolidated Balance Sheet at December 31, 1996 and 1995 34
Consolidated Statement of Cash Flows for each of the three years in the 35
period ended December 31, 1996
Notes to the Financial Statements 36
Quarterly Financial Information (unaudited) 63
Five-Year Summary Selected Financial and Statistical Data (unaudited) 64
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by Item 304(a) of Regulation S-K was previously
reported in a Current Report on Form 8-K (Items 4 and 7) dated June 5, 1996 to
report a change in the Corporation's independent accountants.
There were no reportable events as described in Item 304(b).
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
For most of 1996, the Corporation operated essentially as two separate
companies--a media company and an industries and technology company--joined
only by a shared capital structure, certain common overhead functions, and
senior management.
Following the acquisition of CBS in late 1995, the media company focused on
integrating its radio and television stations, improving its network operations,
and expanding its radio and cable programming operations. On December 31, 1996,
the Corporation completed an acquisition of Infinity Broadcasting Corporation
(Infinity), thus creating the premier radio group consisting of 79 radio
stations. The total purchase price of $4.7 billion consisted of $3.8 billion of
equity and $.9 billion of debt. In exchange for Infinity's shares, Westinghouse
issued 183 million new common shares which, when the merger agreement was
reached, had a market value of $18.875 each. These new shares, together with the
options outstanding, resulted in an increase in shareholders' equity of $3.8
billion. In addition, the Corporation repaid $936 million of Infinity's debt by
replacing it with Westinghouse revolver debt.
The industries and technology company focused on strengthening its operations
through increased market penetration and continued cost improvement efforts.
Thermo King Corporation (Thermo King) built on its strength in domestic markets
and expanded its international presence, particularly in Europe, Latin America
and Asia. It made two strategic acquisitions--a Danish manufacturer of
container refrigeration units and a German manufacturer of air conditioning
units for buses. Power Generation also continued its global expansion. Of its
$2.5 billion of new orders, nearly 65% originated outside the United States.
Its joint venture investments in China are expected to provide unique oppor-
tunities to develop that market. Cost reduction efforts throughout the
industries and technology company continued with improvements in supply
management and production efficiencies as well as through workforce reductions.
In early 1996, the Corporation completed the sales of The Knoll Group (Knoll),
its office furniture business, and its defense and electronic systems business
for cash proceeds totalling $3.6 billion. A combined after-tax gain of $1.2
billion was recorded on the sales of these Discontinued Operations. The
proceeds were used to repay a portion of the debt incurred to finance the
acquisition of CBS. The debt repayment enabled the Corporation to complete a
new $5.5 billion credit facility with more favorable terms to replace its $7.5
billion credit facility. The repayment of the outstanding debt under the
previous facility resulted in a $93 million after-tax extraordinary loss from a
non-cash write-off of deferred financing fees for the early extinguishment of
debt.
In determining the core businesses that would comprise its industries and
technology company, the Corporation decided to exit both its environmental
services and its communication and information systems businesses. Both of
these segments have been accounted for as Discontinued Operations. On December
31, 1996, the Corporation completed the sale of Westinghouse Security Systems,
its residential security business, for approximately $425 million, including
the assumption of certain liabilities by the buyer.
In November 1996, the Board of Directors approved a plan to separate the
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. 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
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 closing price of the Corporation's
stock during a trading period just prior to closing 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.
CONSOLIDATED OPERATING RESULTS
The Corporation reported net income for 1996 of $30 million compared to $15
million for 1995 and $77 million for 1994. On a per-share basis, net income was
$.07 for 1996, a loss of $.05 for 1995, and income of $.07 for 1994. The
per-share amounts for 1995 and 1994 reflect a reduction for dividend
requirements on the Series B preferred stock, which converted to common stock
in September 1995. Net income includes results from Continuing Operations,
Discontinued Operations, and the extraordinary loss on early extinguishment of
debt, as presented below.
COMPONENTS OF NET INCOME (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
================================================
<S> <C> <C> <C>
Loss from Continuing
Operations $(838) $(19) $ (8)
Income from Discontinued
Operations 961 34 85
Extraordinary loss (93) - -
- ------------------------------------------------
Net income $ 30 $ 15 $77
================================================
</TABLE>
The results for Continuing Operations included a number of special items,
summarized in the following table:
IMPACT OF SPECIAL ITEMS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
==============================================================
<S> <C> <C> <C>
Restructuring $ (273) $ (83) $ (19)
Litigation matters (486) (236) -
Impairment of assets (15) - -
Environmental remediation
activities (175) - -
Contract accounting adjustments (128) - -
Other (30) - -
- --------------------------------------------------------------
Total impact on
operating profit $(1,107) $ (319) $ (19)
- --------------------------------------------------------------
Gain on sale of investment - 115 -
Pension settlement loss - - (308)
Loss on assets held for sale (152) - -
- --------------------------------------------------------------
Total impact on other
income and expenses $ (152) $ 115 $ (308)
- --------------------------------------------------------------
Total pre-tax impact on
Continuing Operations $(1,259) $ (204) $ (327)
==============================================================
After-tax impact on
Continuing Operations $ (814) $ (132) $ (207)
==============================================================
Per-share impact on
Continuing Operations $ (1.84) $(0.32) $(0.54)
==============================================================
</TABLE>
Excluding the after-tax impact of the special items included in the table
above, income from Continuing Operations for 1996 was a loss of $24 million, or
$.05 per share, compared to income of $113 million, or $.19 per share, for 1995
and $199 million, or $.39 per share, for 1994. Performance improvements by some
of the businesses were more than offset by higher interest expense in each of
the last two years, arising substantially from CBS acquisition debt and
goodwill amortization resulting from the CBS acquisition.
15
<PAGE> 16
RESULTS OF OPERATIONS--CONTINUING OPERATIONS
RESULTS OF OPERATIONS--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
OPERATING PROFIT (LOSS)
SALES OF PRODUCTS AND SERVICES OPERATING PROFIT (LOSS) EXCLUDING SPECIAL CHARGES
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 1996 1995 1994 1996 1995 1994 1996 1995 1994
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Media:
Television $ 809 $ 405 $ 325 $ 295 $ 149 $ 130 $ 295 $ 149 $ 130
Network 2,581 230 - 25 12 - 25 12 -
Radio 554 216 175 161 55 47 161 55 47
Other Media Businesses 227 164 150 7 10 21 7 10 21
Other Media (26) 1 - (178) (14) (1) (137) (14) (3)
- --------------------------------------------------------------------------------------------------------------------------
Total Media 4,145 1,016 650 310 212 197 351 212 195
- --------------------------------------------------------------------------------------------------------------------------
Industries & Technology:
Power Systems:
Energy Systems 1,234 1,369 1,364 (30) 114 114 94 130 140
Power Generation (a) 2,016 1,769 1,715 (183) (16) 130 18 12 125
Other Power Systems (172) (138) (149) (362) (305) (79) (73) (69) (79)
----------------------------------------------------------------------------------------------------------------------
Total Power Systems (a) 3,078 3,000 2,930 (575) (207) 165 39 73 186
----------------------------------------------------------------------------------------------------------------------
Thermo King 1,013 1,065 877 180 176 135 186 176 135
Government Operations 121 155 133 63 81 77 71 81 77
- --------------------------------------------------------------------------------------------------------------------------
Total Industries &
Technology (a) 4,212 4,220 3,940 (332) 50 377 296 330 398
- --------------------------------------------------------------------------------------------------------------------------
Corporate & Other 133 393 674 (734) (161) (165) (296) (122) (165)
Intersegment Sales (41) (30) (54) - - - - - -
- --------------------------------------------------------------------------------------------------------------------------
Total (a) $8,449 $5,599 $5,210 $(756) $ 101 $ 409 $ 351 $ 420 $ 428
==========================================================================================================================
</TABLE>
(a) Sales for 1996 were reduced by a $180 million one-time adjustment to
previous accounting for certain long-term contracts.
During 1996, the Corporation made several changes to its reported business
segments. The environmental services line of business and the Communication &
Information Systems (CISCO) segment were reclassified to Discontinued
Operations in March and November 1996, respectively, in accordance with the
Corporation's plan to exit these businesses. Previously, the environmental
services business was reported as part of the Government & Environmental
Services business segment. The remaining line of business comprising that
segment is now reported as Government Operations. The previously reported Other
Businesses segment, which consisted of non-strategic businesses that have been
divested or closed over the last three years, has been combined with Corporate
& Other. Segment information for 1995 and 1994 has been restated to reflect
these changes.
The Corporation's consolidated revenues from sales of products and services
increased $2,850 million in 1996 compared to 1995 and increased $389 million in
1995 compared to 1994, primarily due to the November 1995 acquisition of CBS.
Operating profit for each of the last three years included special charges
related to restructuring activities, which totalled $273 million in 1996, $83
million in 1995, and $19 million in 1994. Operating profit for 1996 also
included special charges of $486 million for litigation matters, $15 million
for asset impairment based on the modification of projected recoverability of
certain long-lived assets, and $175 million for environmental remediation
matters. Also included in 1996 operating profit was a special charge of $128
million for contract accounting adjustments and $30 million for other costs
related to previously divested businesses. See notes 1, 17, and 20 to the
financial statements. Other special charges of $236 million for litigation
matters were included in operating profit in 1995.
Excluding special charges, the 1996 increases in profits for the media
businesses were more than offset by a 10% decline in profits for the industries
and technology businesses and a significant increase in Corporate & Other
costs. Subsequent to the sale of the defense and electronic systems business
in February 1996, retiree pension and postretirement benefit costs previously
absorbed by the operations of that business were included in Corporate & Other.
Results for the Corporation continue to be unfavorably affected by pension
costs related to the unfunded pension obligation. Although the Corporation's
objective is to reduce this earnings constraint over the next few years,
management expects that it will continue to negatively affect operating results
in 1997.
16
<PAGE> 17
MEDIA
The results for CBS subsequent to the completion of the acquisition on November
24, 1995 are included in the results for Media. Sales and operating profit for
CBS for the last 37 days of 1995 included in the Corporation's 1995 results
were $305 million and $9 million, respectively.
The television group owned 14 television stations at year-end 1996 compared to
15 television stations and 5 television stations at December 31, 1995 and 1994,
respectively. The radio group owned 79 radio stations at year-end 1996,
including 40 radio stations acquired with Infinity on December 31, 1996,
compared to 37 stations and 16 stations at December 31, 1995 and 1994,
respectively. No results of operations are included in 1996 for Infinity. See
note 2 to the financial statements.
The approval by the Federal Communications Commission (FCC) of the
Corporation's acquisition of Infinity contained a number of temporary waivers
of the FCC's television and radio cross-ownership rules. These waivers were
granted subject to the outcome of the pending ownership rulemaking in which
certain deregulation of the television and radio cross-ownership rules has
been proposed. In the event that any station divestitures are required at the
conclusion of this rulemaking, the Corporation would be required to file
applications with the FCC for consent to the necessary divestitures within six
months of the rulemaking order.
The order granting approval of the Infinity transaction made permanent the
temporary waivers of the television and radio cross-ownership rules granted in
connection with the Corporation's acquisition of CBS. The FCC orders approving
both the CBS and Infinity acquisitions are subject to judicial appeals by
certain third parties. The FCC has previously rejected the positions of these
third parties, and the Corporation believes that such appeals are without merit.
The reported results for television, radio and the network include depreciation
and amortization of specifically identifiable assets based on their fair values
when acquired. Amortization of goodwill arising from the CBS acquisition, which
approximates $120 million per year, is included in the results of Other Media.
Where appropriate, the separate business discussions that follow provide a
comparison of the actual 1996 results with the pro forma combined Group W and
CBS actual results for 1995 and 1994.
For the entire Media group, earnings before interest, taxes, depreciation, and
amortization (EBITDA) and the restructuring charge totalled $628 million for
1996. On a pro forma combined basis, EBITDA for 1995 was $536 million and $728
million for 1994. EBITDA differs from operating cash flows for the group
primarily because it does not consider changes in assets and liabilities from
period to period, and it includes the impact of purchase price accounting
adjustments related to program rights of $164 million and $24 million for 1996
and 1995, respectively.
TELEVISION
On a pro forma combined basis, revenues for the television stations fell
slightly for 1996 compared to 1995 due to lower ratings and affiliation changes
at certain stations. Operating profit on a pro forma combined basis also
declined slightly reflecting the lower revenues, although cost improvements at
the stations reduced that impact. Also in 1996, WPRI, the television station
in Providence, Rhode Island, was sold. No gain or loss was reported on this
sale. A decline in pro forma combined performance for 1995 compared to 1994
generally was attributable to the CBS stations.
NETWORK
The network, on a pro forma basis, experienced a 3% increase in revenues in
1996 compared to 1995. Higher prices, revenues from the addition of college
football, and increased syndication revenues were the primary factors.
Operating profit on a pro forma basis increased to $25 million reflecting the
favorable effects of higher prices and increased syndication revenues as well
as lower demographic ratings and higher costs associated with coverage of the
presidential election, advertising and promotion for the new primetime season,
programming, and affiliate compensation. In addition, operating profit included
the favorable effect of purchase accounting adjustments related to program
rights totalling $131 million in 1996 and $24 million in 1995. Network results
were strong in 1994 due to the broadcast of the Olympic Winter Games.
RADIO
Performance for 1996, which included results for two Chicago radio stations
acquired January 2, 1996, was strong. On a pro forma combined basis, revenues
grew 11% for 1996 compared to 1995. Operating profit on a pro forma combined
basis increased 51% during the same period, reflecting increased revenues and
significant benefits from cost reduction activities. Revenues and profits
increased approximately 5% on a pro forma combined basis for 1995 compared
to 1994.
17
<PAGE> 18
OTHER MEDIA BUSINESSES
Other Media Businesses includes operating results for Group W Satellite
Communications (GWSC) and EYEMARK Entertainment (EYEMARK). EYEMARK combines the
activities of Group W Productions and MAXAM, a distribution and production
company acquired in February 1996. Revenues for GWSC increased in 1996 compared
to the prior year as a result of certain cable channel and network services
acquired from CBS, increased advertising revenues, and the acquisition of
TeleNoticias, a 24-hour, Spanish-language news service. Operating profit for
GWSC was flat with 1995 as the increased revenues were offset by startup costs
for TeleNoticias and a new cable channel, Eye on People. GWSC reported strong
results in 1995. While revenues for production operations increased in 1996
compared to 1995, operating losses also increased due to absorbing MAXAM's
operations. Operating results for 1995 and 1994 included significant program
development costs at Group W Productions.
OTHER MEDIA
Costs for the Media group's headquarters and amortization of all goodwill
arising from the CBS acquisition comprised Other Media. For 1996, Other Media
included a $41 million restructuring charge for Group W's actions to obtain
operational synergies between CBS and Group W. The cost of the CBS actions was
recorded in connection with the CBS acquisition. Goodwill amortization related
to the CBS acquisition totalled approximately $120 million for 1996.
INDUSTRIES & TECHNOLOGY
POWER SYSTEMS
Power Systems consists of Energy Systems and Power Generation, the
Corporation's manufacturing and service businesses for the nuclear and
fossil-fueled power generation industry. The results for the Power Systems
segment in total reflect the impact of discounts on goods and services provided
to customers under litigation settlements. However, the results for Energy
Systems and Power Generation are presented as if the sales had been made at
normal commercial rates. The effect of these discounts is presented in Other
Power Systems.
Sales for Power Systems increased slightly over the last three years while
operating profit declined significantly. However, excluding a one-time
accounting adjustment for certain long-term contracts at Power Generation
discussed below, sales for Power Systems in 1996 increased $258 million, or 9%,
over 1995 due to a strong sales increase of $427 million from Power Generation,
partially offset by a sales decrease of $135 million at Energy Systems.
In general, Power Systems has been unfavorably affected by the uncertainties
caused by deregulation of the U.S. utility industry and price compression
globally. In the United States, new power generation capacity additions have
been modest. In addition, pressures on utilities to reduce spending for capital
improvements and minimize outages for nuclear and fossil-fueled plants have
adversely impacted the U.S. market. Internationally, new capacity additions are
growing, but price compression continues to impact profitability.
ENERGY SYSTEMS Energy Systems sales were $1,234 million in 1996, a 10% decrease
from 1995. Sales remained constant from 1994 to 1995. The decrease in sales in
1996 was due primarily to lower parts and service volume associated with
utilities' spring power plant outages and a decline in simulator sales.
The operating loss for 1996 included $113 million for restructuring activities,
including the separation of approximately 1,200 employees and $11 million for
environmental remediation activities. Operating profit for 1995 and 1994
included $16 million and $26 million, respectively, for restructuring
activities. Excluding restructuring charges in all years, 1996 operating
profit of $94 million declined 28%, or $36 million, from 1995. This decrease in
1996 operating profit was primarily the result of lower volume from spring
outages and a reduced level of income from project close-outs. Operating profit
decreased 7% to $130 million in 1995 compared to 1994, primarily due to lower
licensee income. Cost savings from restructuring activities have been
partially offset by price compression.
Energy Systems orders were approximately $1.2 billion for both 1996 and 1995
and $1.3 billion in 1994 reflecting continued strong demand despite operating
in a shrinking market. Year-end backlog remained stable at approximately
$3.2 billion for all three years.
POWER GENERATION In 1996, in recognition of changing market conditions and
pricing pressures at Power Generation, 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
to reduce 1996 sales by $180 million and operating profit by $128 million.
18
<PAGE> 19
Approximately half of this amount was recognized as profit in 1996 under the
revised application. Excluding the special adjustment, the difference between
operating profit as reported and operating profit that would have been reported
under the previous method is not significant.
Excluding this adjustment, Power Generation sales were $2,196 million in 1996,
a 24% increase from 1995. This sales increase resulted primarily from greater
volume for combustion and steam turbines and large projects, particularly in
the international market. In addition, slightly higher service volume
contributed to the sales increase. Sales for 1995 increased 3% due to
increased volume for combustion and steam turbines.
The operating loss for 1996 included $68 million for restructuring costs
related to the separation of approximately 900 employees and the closing of
a manufacturing plant, as well as the $128 million one-time accounting
adjustment. The operating loss for 1995 included $28 million for restructuring
activities while 1994's results included a favorable adjustment of $5 million
for a modification of previous restructuring plans.
Excluding the impact of these special items, 1996 operating profit increased
$6 million to $18 million; operating profit in 1995 decreased $113 million
to $12 million compared to 1994. A shift in product mix from higher margin
service and parts sales to lower margin new apparatus and project sales has
depressed profits in recent years. Service and parts sales were affected by a
combination of improved equipment reliability and deferral of maintenance by
utilities. The severe price compression experienced in 1995 in the new
apparatus business appeared to moderate in 1996. The reduced service and parts
volume combined with the price compression on new apparatus more than offset
the cost improvements made as a result of restructuring activities. Power
Generation continues to respond to the significant market pressures through
aggressive cost reduction measures in both direct product cost and overhead.
Power Generation orders of $2.5 billion for 1996 were slightly higher than
1995. The focus on international orders has grown dramatically over the last
several years. In 1996, nearly 65% of new orders originated outside the United
States. Also in 1996, Power Generation adjusted backlog by approximately
$650 million for project cancellations, delays, or other uncertainties.
Backlog was $2.8 billion at the end of 1996 compared to $3.1 billion at
year-end 1995.
OTHER POWER SYSTEMS Other Power Systems includes eliminations of sales between
Energy Systems and Power Generation, as well as activities related to uranium,
steam generator and Philippines litigation matters, including legal fees
incurred, estimated losses for settlements, and discounts. Other Power Systems
operating losses excluding special charges primarily represent discounts from
commercial prices on goods and services supplied under previous settlement
arrangements when discounted prices exceed costs. Special charges for
litigation matters reflect discounts that exceed profit margins. In 1996 and
1995, special charges of $289 million and $236 million, respectively, were
recognized for estimated costs in excess of discounted prices related to
litigation and other matters. Excluding these special charges, the operating
losses in 1996, 1995 and 1994 were $73 million, $69 million and $79 million,
respectively.
THERMO KING
Orders for 1996 totalling $1 billion were flat with 1995. Strong orders for
service parts offset a downturn in the North American truck and trailer
business and reduced container volume. Orders in 1995 exceeded 1994 by
$20 million, or 2%, due to strong international demand, particularly in Europe.
International orders accounted for nearly 52% of Thermo King's total orders
for 1996.
Sales in 1996 declined $52 million, or 5%, from 1995, primarily driven by the
slowdown in the North American truck and trailer market. This reduction was
offset in part by strong sales of service parts. Total international sales
remained consistent with the prior year in part because of two fourth-quarter
1996 acquisitions-Sabroe Reefer Cool, a Danish manufacturer of container
refrigeration units, and Thermal, a German manufacturer of air conditioning
units for buses. Sales in 1995 exceeded 1994 by $188 million, or 21%, due to
strong international demand.
Despite downturns in the North American truck and trailer market, Thermo King
reported record profit in 1996. Operating profit reached $180 million, which
was $4 million, or 2%, higher than 1995. The impact of reduced sales levels was
more than offset by a significant reduction in operating costs and higher
margin on service parts. Substantial cost reductions were achieved through
improvements on material procurement and productivity. In addition, operating
profit for 1996 included $6 million of
19
<PAGE> 20
restructuring costs related to a plant closing in the United Kingdom and the
exit of the heavy rail refrigeration business. Operating profit was also strong
in 1995, exceeding 1994 by $41 million, or 30%. This was primarily a result of
the higher 1995 sales volume.
The Corporation's current plan to separate its industries and technology
businesses and its media businesses includes a public offering by Thermo King
of up to 20% of its common stock.
GOVERNMENT OPERATIONS
Government Operations supplies nuclear services to the U.S. Department of
Energy (DOE), U.S.Army, and the U.S. naval nuclear reactors program. Sales in
1996 decreased 22% from 1995 due to losses of a Navy engineering contract and
reduced government spending. The loss of the maintenance and operations
contract for the DOE's Hanford site did not materially impact results in 1996
although future results will be affected. The lost revenue from the Navy
engineering contract was partially replaced by a new five-year contract with
the U.S. Army for a chemical demilitarization project and a one-year contract
for the nuclear maintenance planning and control activities at a DOE
laboratory. Government Operations was also awarded the DOE's Savannah River
contract for an additional five-year period.
Sales for the management of government sites were strong for 1995, with sales
up 17% compared to 1994. Benefits from the DOE's new performance based
contracts were partially offset by the loss of a management contract at a
DOE facility in Idaho.
The Corporation intends to aggressively pursue retention of its current
government contracts and to selectively bid for sites not currently managed by
the Corporation. This has resulted in increased bid and proposal costs,
particularly in 1996.
The 1996 operating profit included $8 million for restructuring activities
related to the separation of approximately 30 employees associated with
terminated contracts. Excluding the restructuring charge, operating profit
decreased 12% to $71 million in 1996 compared to 1995. Operating profit for
1995 increased 5% to $81 million compared to 1994 as a result of the new DOE
performance based contracts, partially offset by the loss of operating profit
from the Idaho DOE facility.
CORPORATE & OTHER
During 1996, the Corporation completed the sale of Wittnauer International,
Inc., a previously identified non-strategic business. In 1995, several other
non-strategic businesses were sold as well as the Corporation's majority
interest in MICROS Systems, Inc. (MICROS). In addition, the Corporation closed
a plant in Abingdon, Virginia. Controlmatic and Gladwin were divested in 1994.
The decline in revenues over the last three years reflects these divestitures.
Included in the operating loss for 1996 is $37 million for restructuring costs,
$164 million for environmental remediation matters related primarily to
businesses previously divested, $192 million for litigation contingencies,
$15 million for asset impairment, and $30 million for other matters. Included
in the 1995 operating loss was $39 million for restructuring.
Corporate costs excluding special charges increased dramatically in 1996.
Nearly $150 million of this increase represents pension and other benefits
associated with previously divested businesses. These costs increased in part
because of a reduction in the pension discount rate from 8.5% to 6.75%, all of
which is reflected in corporate costs. Upon the sale of the defense and
electronic systems business in February 1996, Corporate & Other absorbed the
retiree pension and postretirement benefit costs that previously were included
in the results of operations for that business. In addition, corporate
overheads were higher, in part, because of significant systems reengineering
activities. Under the current plan to separate the media businesses from the
industries and technology businesses, approximately 15% of costs for Corporate
& Other would be allocated to the media businesses.
RESTRUCTURING OF OPERATIONS
The Corporation is committed to strengthening its businesses and improving its
profitability through restructuring actions ranging from changes in business
and product-line strategies to downsizing for process reengineering and
productivity improvements. To the extent possible, the Corporation is committed
to reducing its workforce through normal attrition. See note 20 to the
financial statements.
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<PAGE> 21
During the last three years, the Corporation has undertaken restructuring
programs at its corporate headquarters as well as at several of its major
businesses. In particular, Power Systems has identified initiatives at both its
Power Generation and Energy Systems business units in an effort to remain
competitive in light of a reduction in the demand for services and intense
pricing pressures. Restructuring actions for Continuing Operations, including
corporate headquarters, have resulted in the recognition of restructuring costs
net of adjustments of prior plans totalling $273 million in 1996, $83 million
in 1995, and $19 million in 1994.
The most significant cost component of the Corporation's restructuring plans
generally involves the elimination of positions and the separation of
employees. Approximately 4,200 positions were eliminated from Continuing
Operations during the last three years resulting in employee separation costs
totalling $319 million, including pension and postretirement curtailment
costs. Other cost elements of these plans consisted of asset writedowns of
$40 million and costs for facility closure or rationalization of $40 million.
As of December 31, 1996, cash expenditures totalled $134 million for these
plans. Cash expenditures of $146 million and $19 million are projected for
1997 and 1998, respectively. Employee separation costs generally are paid
over a period of up to two years following the separation.
The annual savings expected from these restructuring initiatives approximates
$100 million for the 1996 plan, $40 million for the 1995 plan, and $35 million
for the 1994 plan. Cost savings realized approximated $80 million in 1996 and
$40 million in 1995. Because an announced closing of a major plant is scheduled
to occur later in 1997, the full benefit from these plans will not be realized
until 1998. Also, competitive pressures causing price compression in certain of
the Corporation's markets have absorbed a significant portion of the savings
achieved through restructuring actions.
Results of operations for the Corporation's Discontinued Operations included
restructuring actions, principally for the defense and electronic systems
business and Knoll, which resulted in costs totalling $2 million in 1996,
$52 million in 1995, and $52 million in 1994. These actions involved the
separation of approximately 1,400 employees and the exiting of various product
lines and closure of facilities.
In conjunction with the CBS acquisition, a plan was developed to integrate the
CBS headquarters and the radio and television operations with those of the
Corporation. The estimated cost for restructuring the CBS organization,
including separating employees and closing facilities, is $100 million, of
which $24 million had been spent as of year-end 1996. Total expenditures for
1997 and 1998 are anticipated to be $40 million and $25 million, respectively.
Restructuring costs associated with the integration of Group W are included in
the 1996 corporate restructuring plan discussed previously. No significant
restructuring costs are anticipated for the Infinity acquisition.
Cost reduction initiatives are undertaken when the expected benefits are
substantial in relation to the cost of the programs and are realizable in the
near term. The Corporation expects to continue to implement restructuring
initiatives as competitive conditions dictate in an ongoing effort to reduce
its overall cost structure and improve its competitiveness.
1994 PENSION SETTLEMENT LOSS
The Corporation's restructuring activities contributed to a high level of
lump-sum cash distributions from the Corporation's pension fund during 1994.
The magnitude of these cash distributions required that the Corporation apply
the provisions of Statement of Financial Accounting Standards (SFAS) No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and recognize a settlement loss of
$308 million. This noncash charge to income represents the pro rata portion of
unrecognized losses associated with the pension obligation that was settled.
Lump-sum cash distributions during 1996 and 1995 did not reach the threshold
for recognition of a settlement loss.
The settlement loss in 1994 did not affect shareholders' equity because the
decrease resulting from the income statement provision was fully offset by a
reduction in the charge to shareholders' equity related to the minimum pension
liability. See note 4 to the financial statements.
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<PAGE> 22
OTHER INCOME AND EXPENSES
Year-to-year fluctuations in other income and expenses were dramatic. A net
expense of $86 million was recorded in 1996 compared to income of $137 million
in 1995 and expense of $285 million in 1994.
In 1996, the net expense included an estimated loss of $152 million resulting
from a decision to sell certain miscellaneous non-strategic assets. A
$17 million gain from the sale of equity investments partially offset this loss.
Other income for 1995 of $137 million included a pre-tax gain of $115 million
from the sale of the Corporation's 62% interest in MICROS. The Corporation
recorded an additional $7 million provision for the estimated loss on
disposition of non-strategic businesses related to the disposition of Aptus,
Inc. (Aptus).
For 1994, other income and expense, which was a net expense of $285 million,
consisted primarily of the $308 million charge for the settlement of a
portion of the Corporation's pension obligation as discussed previously. The
Corporation recorded a $17 million provision for the estimated loss on
disposition of non-strategic businesses to reflect changes in estimates
related to previous divestiture decisions. These charges were partially offset
by a gain of $32 million from the sale of two radio stations.
INTEREST EXPENSE
Interest expense for Continuing Operations increased $220 million in 1996 due
to higher debt attributable to the CBS acquisition. The entire acquisition
price of $5.4 billion was financed with debt. The Corporation repaid
$3.6 billion of this debt in the first quarter of 1996 through proceeds from
the divestitures of Knoll and the defense and electronic systems business.
Average debt increased from $3,506 million in 1995 to $5,841 million in 1996.
On August 29, 1996, the Corporation prepaid $3.2 billion of debt under its
then-existing credit facility and replaced it with borrowings under a new
revolving credit facility with more favorable borrowing rates (see Revolving
Credit Facility). Weighted average interest rates were slightly lower in 1996
compared to 1995.
In conjunction with the presentation of Knoll and the defense and electronic
systems business as Discontinued Operations, interest expense on Continuing
Operations debt totalling $8 million in 1996, $48 million in 1995, and $37
million in 1994 was allocated to Discontinued Operations. See note 3 to the
financial statements.
INCOME TAXES
The Corporation's 1996 provision for income taxes in total was 92% of the
income before taxes and minority interest. The 1996 total provision of $399
million consisted of a $466 million benefit from Continuing Operations, $925
million expense from Discontinued Operations, and a $60 million benefit from
an extraordinary item.
The Corporation's 1995 provision for income taxes in total was 63% of the
income before taxes and minority interest. The 1995 total provision of $44
million consisted of $10 million from Continuing Operations and $34 million
from Discontinued Operations.
The Corporation's 1994 provision for income taxes in total was 45% of the income
before taxes and minority interest. The 1994 net provision totalled $71 million,
consisting of an $11 million benefit from Continuing Operations and an $82
million expense from Discontinued Operations.
The Corporation's tax provision or benefit has fluctuated dramatically from the
statutory tax of 35% of pre-tax income for 1996, 1995 and 1994. The items that
caused the fluctuations for Continuing Operations are set forth in note 6 to
the financial statements. Amortization of intangible assets has a significant
effect on the relationship between income taxes and pre-tax income. No tax
benefit is recognized on the goodwill amortization recorded as a result of the
CBS acquisition. In future years, the effect will be more dramatic because of
increased goodwill amortization that will result from the Infinity acquisition.
The net deferred tax asset at December 31, 1996 totalled $1,411 million. This
amount consisted of a net deferred tax asset of $1,591 million from Continuing
Operations partially offset by a net deferred tax liability of $180 million
from Discontinued Operations. The temporary differences that give rise to
deferred income taxes are shown in the Consolidated Deferred Income Taxes by
Source table in note 6 to the financial statements.
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<PAGE> 23
The three significant sources of the net deferred tax asset are: (i) the tax
effect of net operating loss carryforwards of $1,502 million, of which $1,401
million will expire by the year 2008 and the balance by 2010; (ii) the tax
effect of cumulative net temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes of $1,583 million representing future net income tax
deductions; and (iii) alternative minimum tax credit carryforwards of $252
million that have no expiration date. Of the net temporary difference of $1,583
million, approximately $1,027 million relates to a net pension obligation,
$1,285 million relates to an obligation for postretirement and postemployment
benefits, and $1,938 million relates to reserves for restructuring, litigation
and other matters. These are partially offset by temporary differences of
approximately $1,569 million and $637 million related primarily to FCC licenses
and to tax depreciation in excess of book depreciation, respectively.
Management believes that the Corporation will have sufficient future taxable
income to make it more likely than not that the net deferred tax asset will be
realized. In making this assessment, management considered the net losses
generated in recent years as aberrations caused in part by the liquidation of a
substantial portion of Financial Services assets and by other unusual actions.
The reversal of temporary differences may cause tax losses in future years.
Each tax-loss year would receive a new 15-year carryforward period. Under a
conservative assumption that all net cumulative temporary differences other
than net operating loss carryforwards had reversed in 1996, the Corporation
would have through the year 2011 to recover the tax asset. This would require
the Corporation to generate average annual taxable income of at least $230
million.
The following table shows a reconciliation of income or loss from Continuing
Operations before income taxes to taxable income from Continuing Operations:
RECONCILIATION OF PRE-TAX INCOME (LOSS) FROM CONTINUING OPERATIONS
TO U.S. FEDERAL TAXABLE INCOME (LOSS) (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
================================================================================
<S> <C> <C> <C>
Pre-tax income (loss) from
Continuing Operations $(1,298) $ 2 $ (10)
- --------------------------------------------------------------------------------
Permanent differences:
Foreign and Puerto Rico (191) (167) (136)
State income tax 114 - 4
Goodwill 130 26 16
Other (83) 9 (29)
- --------------------------------------------------------------------------------
Net permanent differences (30) (132) (145)
- --------------------------------------------------------------------------------
Temporary differences:
Pensions (49) (33) 270
Long-term contracts 87 (31) (57)
Depreciation (12) 92 14
Provision for restructuring
and other actions 932 154 (87)
Other (161) (59) 155
- --------------------------------------------------------------------------------
Net temporary differences 797 123 295
- --------------------------------------------------------------------------------
U.S. federal taxable income (loss) $ (531) $ (7) $ 140
================================================================================
</TABLE>
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 Accounting Principles Board (APB)
Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions."
The table on the following page summarizes each of the Corporation's segment
disposal plans as well as the assets remaining as of December 31, 1996:
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DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
PLAN DATE LINE OF BUSINESS REMAINING ASSETS
==================================================================================================================================
<S> <C> <C>
November 1996 CISCO Several businesses
March 1996 Environmental Services Several businesses
December 1995 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 and Control (DCBU) -
November 1992 Westinghouse Electric Supply Company (WESCO) Miscellaneous securities
==================================================================================================================================
</TABLE>
In December 1996, the Corporation completed the sale of its residential
security business, the largest component of the CISCO segment, for
approximately $425 million, including the assumption of certain liabilities by
the buyer. The gain realized on this sale was offset by estimated losses for
disposal of other businesses comprising this segment as well as additional
estimated losses for other components of Discontinued Operations. The remaining
businesses in this segment generally are expected to be divested during 1997.
In the first quarter of 1996, the Corporation recorded an after-tax charge of
$146 million for the estimated loss on disposal of the environmental services
businesses. In December 1996, an additional after-tax loss of $100 million for
disposal of these businesses was recognized for additional expected divestiture
costs but was offset by gains related to other components of Discontinued
Operations. Also in December 1996, the Corporation sold a portion of its
hazardous waste disposal business for $31 million. The remaining businesses are
generally expected to be divested during 1997.
In the first quarter of 1996, the Corporation completed the sale of Knoll and
its defense and electronic systems business for a combined after-tax gain of
$1.2 billion. The purchase price totalled $3.6 billion of cash plus the
assumption by the buyer of certain pension and postretirement liabilities
associated with the active employees of the defense and electronic systems
business. The net proceeds from these transactions were used to repay debt of
Continuing Operations.
In July 1995, the Corporation sold WCI for $430 million of cash and retained
approximately $125 million of mortgage notes receivable with maturities through
1997 and other securities. In addition, the buyer assumed $19 million of debt.
Concurrently, the Corporation invested $48 million for a 24% equity interest in
the new business. The Corporation is actively pursuing the divestiture of this
investment. The net cash proceeds from the divestiture of WCI were used to
repay debt of Discontinued Operations. A net loss of $76 million was recognized
on the disposal.
The exit from the Financial Services business involved the sale of the real
estate and corporate finance portfolios over a three-year period and the
liquidation of the leasing portfolio through the year 2015 in accordance with
contractual terms. The real estate and corporate finance portfolio investments
essentially have been liquidated.
In the first quarter of 1994, the Corporation completed the sale of DCBU for a
purchase price of $1.1 billion of cash and the assumption by the buyer of
certain liabilities. During the same quarter, the Corporation also sold WESCO
for a purchase price of approximately $340 million. The proceeds from the sale
of WESCO consisted of approximately $275 million of cash, approximately $50
million of first mortgage notes, and the remainder of stock and options of the
new company.
At December 31, 1996, 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
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.
Other than the leasing portfolio, the Corporation is actively pursuing the sale
of assets, which are generally expected to be divested within the next year.
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
will be transferred to Continuing Operations.
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<PAGE> 25
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 $672 million at December 31, 1996 is
adequate to cover future operating costs, estimated losses, and the remaining
divestiture costs associated with all discontinued businesses.
The following table presents sales and operating profit (loss) for Discontinued
Operations for each of the three years in the period ended December 31, 1996:
RESULTS OF OPERATIONS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
===============================================================================
<S> <C> <C> <C>
Sales of products and services:
DCBU and WESCO $ - $ - $ 319
Financial Services 26 31 41
WCI - 108 248
Defense and Electronic Systems 262 2,549 2,189
Knoll 90 621 562
Environmental Services 237 299 335
CISCO 337 361 314
Operating profit (loss):
DCBU and WESCO - - 4
Financial Services (16) (52) (204)
WCI - 29 69
Defense and Electronic Systems (11) 195 207
Knoll 9 60 (61)
Environmental Services (100) (56) (17)
CISCO (77) (1) 12
===============================================================================
</TABLE>
DCBU and WESCO
Operating results for 1994 included revenues and the operating profits of DCBU
for the month ended January 31, 1994 and of WESCO for the two months ended
February 28, 1994, their respective dates of sale.
FINANCIAL SERVICES
Operating results of Financial Services reflect the continued liquidation of
the portfolio investments. At December 31, 1996, portfolio investments totalled
$845 million, a decrease of $56 million from $901 million at year-end 1995.
Portfolio investments at December 31, 1996 and 1995, included $800 million and
$822 million, respectively, of receivables, and $45 million and $79 million,
respectively, of other portfolio investments. The receivables at year-end 1996
and 1995 consisted primarily of leasing receivables, while other portfolio
investments included real estate properties and investments in leasing and real
estate partnerships. With the divestiture of real estate and corporate finance
assets essentially completed, future operating results generally will reflect
the performance of the leasing portfolio.
Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1996 and 1995, 84% related to aircraft and 16% related to
cogeneration facilities.
WCI
Operating results for 1995 included revenues and the operating profit of WCI
until its sale in July 1995.
DEFENSE AND ELECTRONIC SYSTEMS
Operating results for 1996 included revenues and the operating loss of the
defense and electronic systems business until its sale on March 1, 1996.
Revenues for 1995 increased 16% to $2,549 million compared to 1994 as a result
of increased volume from the defense electronics operations, including the
Norden Systems acquisition, air traffic control, and mail processing systems.
Operating profit included restructuring charges of $49 million and $11 million
in 1995 and 1994, respectively. Excluding these charges in both years,
operating profit increased 12% in 1995 as a result of the higher revenues.
KNOLL
In 1996, revenues and the operating loss for Knoll represented its operating
results until its sale on February 29, 1996. In 1995, revenues increased 10% to
$621 million compared to 1994, reflecting increases in Knoll North America
orders.
Knoll's operating profit of $60 million for 1995 represented a dramatic
turnaround of this business. A major restructuring program, resulting in
restructuring charges totalling $40 million in 1994, was implemented beginning
in mid-1994 and was substantially completed in 1995. The results of this
program were evident in both the North American and European results for 1995.
Excluding these restructuring charges, Knoll's operating profit increased $81
million in 1995 compared to 1994. New products, strong sales across all product
lines, and quick delivery programs contributed to the improvement.
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<PAGE> 26
ENVIRONMENTAL SERVICES
In 1996, revenues for the environmental services businesses decreased $62
million, or 21%, primarily due to a downturn in commercial and government
activity. For 1995, sales decreased $36 million, or 11%, primarily as a result
of the sale of Aptus in March 1995.
The operating loss increased $44 million in 1996, primarily due to the decline
in sales and higher than anticipated waste disposal costs. For 1995, the
operating loss increased $39 million due to higher costs for disposal of
secondary waste.
The remaining businesses are expected to be divested in 1997.
CISCO
Sales in 1996 decreased $24 million, or 7%, compared to 1995. In 1995, sales
increased $47 million, or 15%, compared to 1994. The decrease in sales in 1996
was primarily attributable to contracts won in 1995, which did not recur in
1996, partially offset by increased market penetration in the communication and
residential security businesses.
The operating loss for 1996 of $77 million included $41 million for
restructuring activities and impaired asset writedowns, while the operating
loss for 1995 of $1 million included $3 million for restructuring. Excluding
special charges in all years, the operating loss increased $38 million in 1996
and $10 million in 1995. The decrease in operating profit in 1996 is primarily
the result of the decline in sales and higher strategic expenses. The decrease
in operating profit in 1995 is attributable primarily to reduced margins on
wireless communications contracts.
The Corporation is actively pursuing the disposition of the remaining
businesses in this segment and generally expects the disposals to be completed
within the next year.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
The Corporation continues to manage 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 December 31, 1996, the Corporation completed the acquisition of Infinity for
a purchase price of $4.7 billion consisting of $3.8 billion of equity and
$.9 billion of debt. The issuance of 183 million new common shares and the
conversion of Infinity stock options into approximately 22 million Westinghouse
stock options resulted in an increase to shareholders' equity of $3.8 billion.
In addition, the Corporation repaid $936 million of Infinity revolver debt by
replacing it with Westinghouse revolver debt.
On February 10, 1997, the Corporation announced an agreement to acquire two
major 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. 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.
In late 1995, the Corporation acquired CBS for $5.4 billion and financed the
entire purchase price with debt. In early 1996, the Corporation completed the
sales of Knoll and the defense and electronic systems business and repaid
approximately 65% of the acquisition debt.
The Corporation has and will continue to monetize non-strategic assets. In
1996, the Corporation adopted plans to exit its environmental services and
communication and information systems businesses. 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 million to
$400 million.
Total debt for the Corporation was $6.1 billion at December 31, 1996, a
decrease of $2.3 billion from December 31, 1995. Consistent with prior years,
the Corporation's indebtedness during the first half of 1997 is expected to
increase over year-end 1996 debt levels.
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<PAGE> 27
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, proceeds from sales of non-strategic
assets, cash and cash equivalents, availability under its credit facility,
borrowings from other sources, including funds from the capital markets, and
the issuance of additional capital stock.
OPERATING ACTIVITIES
The operating activities of Continuing Operations used $50 million of cash
during 1996, a decrease of $506 million from the amount provided in 1995. Major
factors contributing to the additional use of cash were higher interest
payments and certain contractual prepayments for program rights and program
development.
Interest payments for Continuing Operations during 1996 were $446 million
compared to $214 million during 1995. This increase was primarily attributable
to the higher debt associated with the CBS acquisition.
During 1996, CBS, in its drive to improve programming and ratings, successfully
negotiated several long-term contracts requiring the Corporation to make
prepayments for future program rights and program development.
Cash contributions to all of the Corporation's pension plans totalled $250
million in 1996. Cash contributions during 1995 totalled $315 million, which
was consistent with the 1994 cash contribution level. The 1996 decrease in the
amount of cash contributions is primarily a result of the divestiture of the
defense and electronic systems business and the assumption of certain pension
liabilities by the buyer. The Corporation's 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.
The operating activities of Discontinued Operations used $401 million of cash
during 1996, provided cash of $237 million during 1995, and used $102 million
during 1994. These cash flows consist primarily of cash provided by the
operations of the defense and electronic systems business, Knoll, and WCI,
offset by cash used in the operations of the environmental services businesses,
Financial Services, and the communication and information systems businesses,
and for divestiture costs associated with these transactions. The increase in
the use of cash during 1996 primarily related to the divestiture costs of Knoll
and the defense and electronic systems business as well as the cash use d in
the operations of these businesses through the date of their disposal and in
the operations of the environmental services and the communication and
information systems businesses.
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 and
the communication and information systems businesses. 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.
INVESTING ACTIVITIES
Investing activities provided $2.9 billion of cash during 1996 after using $4.3
billion of cash in 1995 and providing $1.4 billion in 1994. The sale of Knoll
and the defense and electronic systems business during 1996 for $3.6 billion
and the completion of the CBS acquisition in 1995 for $5.4 billion caused this
significant change.
Acquisitions of $1.1 billion completed during 1996 included the cash investment
associated with the repayment of Infinity debt, as well as purchases of two
Chicago radio stations, TeleNoticias, a 24-hour, Spanish-language news service,
several smaller businesses, and investments in several joint ventures primarily
in China. CBS was the only major acquisition in 1995. In 1994, acquisitions
included Norden Systems, which was divested with the defense and electronic
systems business; the KPIX-AM and FM radio stations in San Francisco; and a
minority interest in Group W radio for total cash expenditures of $109 million.
The Corporation completed the sales of Knoll and its defense and electronic
systems business in 1996, generating $3.6 billion of cash. Remaining 1996
divestiture cash proceeds resulted primarily from the sales of certain
non-strategic businesses, including Westinghouse Security Systems, the
residential security business; Wittnauer International, Inc., a marketer of
fine watches; WPRI,
27
<PAGE> 28
a Providence, Rhode Island television station acquired with CBS; and an
environmental services business. During 1995, divestitures generated cash
proceeds of $683 million and included the sale of the Corporation's WCI
segment, an interest in MICROS, Aptus, and several smaller businesses. During
1994, the Corporation sold DCBU and WESCO, two radio stations, and two
non-strategic businesses for total cash proceeds of $1.5 billion.
The Corporation generated $41 million of cash in 1996 through the continued
liquidation of assets of Financial Services representing the majority of the
remaining real estate portfolio investments. Cash proceeds from portfolio
investment liquidations in 1995 and 1994 totalled $362 million and $323
million, respectively. The remaining Financial Services assets, which
generally consist of the leasing portfolio, are expected to liquidate in
accordance with their contractual terms.
The Corporation's total capital expenditures declined in 1996 primarily because
of major divestitures of capital intensive businesses. Capital expenditures for
Continuing Operations remained relatively stable over the three-year period at
approximately $150 million to $200 million per year.
In 1996 and 1995, the Corporation generated $44 million and $305 million of
cash, respectively, through the sales of investments held in two trusts that
were established to fund executive benefit plans. The trust investments were
replaced with the Corporation's common stock.
The Corporation expects to continue to liquidate assets of Discontinued
Operations as well as its non-strategic assets.
FINANCING ACTIVITIES
Cash used by financing activities during 1996 totalled $2.4 billion compared to
cash provided of $3.5 billion in 1995 and cash used of $2.2 billion in 1994.
Financing cash outflows in 1996 included $3.6 billion of debt prepaid upon the
sales of Knoll and the defense and electronic systems business. Also in 1996,
the Corporation prepaid outstanding debt under its $7.5 billion credit facility
and replaced it with borrowings under a new $5.5 billion credit facility with
more favorable terms (see Revolving Credit Facility). Cash provided by
financing activities in 1995 included $5.4 billion of borrowings to finance the
CBS acquisition.
Total borrowings under the Corporation's $5.5 billion revolving credit facility
were $3.3 billion at year-end 1996 (see Revolving Credit Facility). These
borrowings were subject to a floating interest rate of 6.6% at December 31,
1996, 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 1996 included approximately $47 million for Series C
preferred stock, with the remaining $80 million representing common stock
dividends. Dividends paid in 1995 included approximately $47 million for
Series C preferred stock, $38 million for Series B preferred stock, which
converted to common stock in the third quarter of 1995, and approximately $74
million representing common stock dividends. Dividends paid during 1994
included those for the Series C preferred stock issued in March 1994, the
Series B preferred stock, and common stock.
In March 1994, the Corporation sold in a private placement depository shares
representing 3,600,000 shares of Series C preferred stock for net proceeds of
$505 million. These shares convert to common shares on or about June 1, 1997.
The Series B preferred stock, sold in June 1992, converted to 32,890,000 shares
of common stock on September 1, 1995.
As a result of the stock issued in conjunction with the Infinity acquisition
and the financing activities described above, the Corporation's net debt
decreased from 84% of consolidated net capitalization at December 31, 1995 to
50% at December 31, 1996.
At year-end 1996, 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 completed a new bank credit agreement with
a total commitment of $5.5 billion. Of this commitment, $4.0 billion became
available on the closing date of the credit agreement. The balance became
available on December 31, 1996, the closing date of the Infinity acquisition.
The new agreement was structured as a revolving credit facility with a bullet
maturity in five years. It contains more favorable terms than the previous
seven-year $7.5 billion facility, including lower borrowing rates and the
elimination of collateral, subsidiary guarantees, and mandatory prepayment
provisions.
28
<PAGE> 29
The unused capacity under the revolving credit facility equaled $2.2 billion at
December 31, 1996. Borrowing availability under the revolver is subject to
compliance with certain covenants, representations and warranties, including a
no material adverse change provision with respect to the Corporation taken as a
whole, restrictions on liens incurred, a maximum leverage ratio, minimum
interest coverage ratio, and minimum consolidated net worth. Certain of these
covenants become more restrictive over the term of the agreement. At December
31, 1996, the Corporation was in compliance with these covenants.
HEDGING ACTIVITIES
The Corporation enters into interest rate agreements to manage interest rate
risk associated with various debt instruments. No transactions were speculative
or leveraged. Given their nature, these agreements have been accounted for as
hedging transactions. The notional amount of interest rate exchange agreements
outstanding at December 31, 1996 was $130 million, with a weighted average
fixed rate paid of 8.91%, all of which was associated with long-term debt of
Continuing Operations. The average remaining maturity of these agreements was
slightly longer than two years.
The Corporation's credit exposure under these agreements is limited to the cost
of replacing an agreement in the event of non-performance by its counterparty.
To minimize this risk, the Corporation selects high credit quality
counterparties. At December 31, 1996, the Corporation had no net credit
exposure under its interest rate exchange agreements.
For 1996, outstanding interest rate exchange agreements resulted in a net
increase in interest expense of Continuing Operations of approximately $5
million with a de minimis impact on the average borrowing rate. In 1995,
outstanding interest rate agreements resulted in a net increase in the average
borrowing rate for Continuing Operations of 0.2% and a net decrease in the
average borrowing rate of Discontinued Operations of 0.2%. Corresponding
interest expense for 1995 increased approximately $6 million for Continuing
Operations and decreased approximately $1 million for Discontinued Operations.
The Corporation continually monitors its economic exposure to changes in
foreign exchange rates and enters into foreign exchange forward or option
contracts to hedge its transaction exposure when appropriate. As a result, the
Corporation's unhedged foreign exchange exposure is not significant.
Furthermore, changes in foreign exchange rates, whether favorable or
unfavorable, are not expected to have a significant impact on the Corporation's
financial results or operating activities.
With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52,
"Foreign Currency Translation," the combined total sales for those operations
were less than 0.5% of the Corporation's sales for 1996.
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. See note 17
to the financial statements.
In the second quarter of 1996, the Corporation and its external consultants
completed a study to evaluate the Corporation's environmental remediation
strategies. Based on the costs associated with the most probable alternative
remediation strategy for each of its approximately 90 sites, including the
sites located in Bloomington, Indiana, the Corporation has an accrued liability
of $466 million. This amount includes $175 million that was recognized in the
second quarter of 1996. Depending on the remediation alternatives ultimately
selected, the costs related to these sites could differ from the amounts
currently accrued. The accrued liability, measured in current dollars, includes
$345 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. The Corporation recognizes
changes in estimates as new remediation requirements are defined or as more
information becomes available.
29
<PAGE> 30
Annual environmental costs include approximately $6 million for estimated
future environmental closure costs at operating sites and approximately $6
million related to current management of hazardous waste and pollutants.
Capital expenditures for environmental compliance, which totalled $8 million in
1996, may vary from year to year.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that
complying with existing government regulations will not materially impact the
Corporation's financial position, liquidity or results of operations.
LEGAL MATTERS
The Corporation is defending a number of lawsuits on various matters. See note
17 to the financial statements. The Corporation recorded special charges for
litigation matters during 1996 and 1995 of $486 million and $236 million,
respectively. These amounts represent management's best estimate of incremental
costs associated with potential settlements.
Since 1993, the Corporation has entered into agreements to resolve ten
litigation claims in connection with alleged tube degradation in steam
generators sold by the Corporation as components for nuclear steam supply
systems. These agreements generally require the Corporation to provide certain
products and services at prices discounted at varying rates. Certain of these
discounts will impact future operating results primarily over the next nine
years.
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries. The Corporation was neither a manufacturer
nor a producer of asbestos and is oftentimes dismissed from these lawsuits on
this basis. In court actions resolved, the Corporation has prevailed in the
vast majority of these claims and has resolved others through settlement. The
Corporation is reimbursed for a substantial portion of its current costs and
settlements through its insurance carriers. The Corporation has provided for
its share of estimated costs associated with outstanding claims; however, it
cannot reasonably estimate costs for unasserted asbestos claims.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the Corporation's pending cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation has meritorious defenses to the litigation referenced in note
17 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.
30
<PAGE> 31
REPORT OF MANAGEMENT
The Corporation has prepared the consolidated financial statements and related
financial information included in this report. Management has the primary
responsibility for the financial statements and other financial information and
for ascertaining that the data fairly reflect the financial position, results
of operations, and cash flows of the Corporation. The financial statements
were prepared in accordance with generally accepted accounting principles
appropriate in the circumstances, and necessarily include amounts that are
based on best estimates and judgments with appropriate consideration given to
materiality. Financial information included elsewhere in this report is
presented on a basis consistent with the financial statements.
The Corporation maintains a system of internal accounting controls, supported
by adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Corporation. Limitations exist in any system of internal accounting
controls based on the recognition that the cost of the system should not exceed
the benefits derived. Westinghouse believes its system of internal accounting
controls, augmented by its corporate auditing function, appropriately balances
the cost/benefit relationship.
The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fair financial reporting. They
regularly evaluate elements of the internal control structure and perform such
tests and procedures as they deem necessary to express an opinion on the
fairness of the financial statements.
The Board of Directors pursues its responsibility for the Corporation's
financial statements through its Audit Review Committee composed of directors
who are not officers or employees of the Corporation. The Audit Review
Committee meets regularly with the independent auditors, management, and the
corporate auditors. The independent auditors and the corporate auditors have
direct access to the Audit Review Committee, with and without the presence of
management representatives, to discuss the scope and results of their audit
work and their comments on the adequacy of internal accounting controls and the
quality of financial reporting.
We believe that the Corporation's policies and procedures, including its system
of internal accounting controls, provide reasonable assurance that the
financial statements are prepared in accordance with the applicable securities
laws and with a corresponding standard of business conduct.
31
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF WESTINGHOUSE ELECTRIC CORPORATION
We have audited the accompanying consolidated balance sheet of Westinghouse
Electric Corporation and subsidiaries as of December 31, 1996, and the related
consolidated statements of income and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Westinghouse
Electric Corporation and subsidiaries as of December 31, 1996, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
January 29, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF WESTINGHOUSE ELECTRIC CORPORATION
In our opinion, the accompanying consolidated financial statements appearing on
pages 33 through 62 of this Annual Report on Form 10-K present fairly, in all
material respects, the financial position of Westinghouse Electric Corporation
and its subsidiaries at December 31, 1995, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Corporation's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of the Corporation and its subsidiaries for any period subsequent to
December 31, 1995.
Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 12, 1996 except for the
restatements discussed in notes 1 and 3, for
which the dates are March 31, 1996 and November 31, 1996
32
<PAGE> 33
CONSOLIDATED STATEMENT OF INCOME (in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
==========================================================================================================================
<S> <C> <C> <C>
Service sales $ 5,204 $ 2,398 $ 2,084
Product sales 3,245 3,201 3,126
- --------------------------------------------------------------------------------------------------------------------------
Sales of services and products 8,449 5,599 5,210
- --------------------------------------------------------------------------------------------------------------------------
Cost of services sold (3,015) (1,412) (1,193)
Cost of products sold (2,805) (2,444) (2,316)
- --------------------------------------------------------------------------------------------------------------------------
Costs of services and products sold (5,820) (3,856) (3,509)
- --------------------------------------------------------------------------------------------------------------------------
Restructuring, litigation and other matters (notes 1, 17 and 20) (979) (319) (19)
Marketing, administration and general expenses (2,406) (1,323) (1,273)
- --------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) (756) 101 409
- --------------------------------------------------------------------------------------------------------------------------
Other income and expenses, net (note 19) (86) 137 (285)
Interest expense (456) (236) (134)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations before income taxes
and minority interest in income of consolidated subsidiaries (1,298) 2 (10)
Income tax benefit (expense) (note 6) 466 (10) 11
Minority interest in income of consolidated subsidiaries (6) (11) (9)
- --------------------------------------------------------------------------------------------------------------------------
Loss from Continuing Operations (838) (19) (8)
- --------------------------------------------------------------------------------------------------------------------------
Discontinued Operations, net of income taxes (notes 1 and 3):
Income (loss) from operations (57) 110 85
Estimated gain (loss) on disposal of Discontinued Operations 1,018 (76) -
- --------------------------------------------------------------------------------------------------------------------------
Income from Discontinued Operations 961 34 85
- --------------------------------------------------------------------------------------------------------------------------
Extraordinary item:
Loss on early extinguishment of debt (93) - -
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 30 $ 15 $ 77
==========================================================================================================================
Earnings (loss) per common share (note 15):
Continuing Operations $ (1.89) $ (.13) $ (.15)
Discontinued Operations 2.17 .08 .22
Extraordinary item (.21) - -
- --------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share $ .07 $ (.05) $ .07
==========================================================================================================================
Cash dividends per common share $ .20 $ .20 $ .20
==========================================================================================================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
33
<PAGE> 34
CONSOLIDATED BALANCE SHEET (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
===================================================================================================
<S> <C> <C>
ASSETS:
Cash and cash equivalents (note 1) $ 220 $ 196
Customer receivables (note 7) 1,561 1,431
Inventories (note 8) 783 839
Uncompleted contracts costs over related billings (note 8) 686 542
Program rights 431 301
Deferred income taxes (note 6) 817 544
Prepaid and other current assets 289 257
- ---------------------------------------------------------------------------------------------------
Total current assets 4,787 4,110
Plant and equipment, net (note 9) 1,866 1,908
FCC licenses, net (note 10) 2,199 1,242
Goodwill, net (note 10) 8,776 5,244
Other intangible and noncurrent assets (note 10) 2,261 2,152
Net assets of Discontinued Operations (note 3) - 1,950
- ---------------------------------------------------------------------------------------------------
Total assets $19,889 $16,606
===================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt (note 11) $ 497 $ 306
Current maturities of long-term debt (note 13) 4 330
Accounts payable 887 796
Uncompleted contracts billings over related costs (note 8) 334 318
Other current liabilities (note 12) 2,578 2,112
- ---------------------------------------------------------------------------------------------------
Total current liabilities 4,300 3,862
Long-term debt (note 13) 5,149 7,226
Pension liability (note 4) 1,069 1,426
Other noncurrent liabilities (note 14) 3,619 2,573
- ---------------------------------------------------------------------------------------------------
Total liabilities 14,137 15,087
- ---------------------------------------------------------------------------------------------------
Contingent liabilities and commitments (note 17)
Minority interest in equity of consolidated subsidiaries 10 11
Shareholders' equity (note 15):
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,
609 million and 426 million shares issued) 609 426
Capital in excess of par value 5,376 1,848
Common stock held in treasury (546) (720)
Minimum pension liability adjustment (note 4) (796) (1,220)
Cumulative foreign currency translation adjustments 11 (11)
Retained earnings 1,084 1,181
- ---------------------------------------------------------------------------------------------------
Total shareholders' equity 5,742 1,508
- ---------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $19,889 $16,606
===================================================================================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
34
<PAGE> 35
CONSOLIDATED STATEMENT OF CASH FLOWS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
=======================================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities of Continuing Operations:
Loss from Continuing Operations $ (838) $ (19) $ (8)
Adjustments to reconcile loss from Continuing Operations
to net cash provided (used) by operating activities:
Depreciation and amortization 405 193 180
Pension settlement loss - - 308
Noncash restructuring charges 65 6 -
Losses (gains) on asset dispositions 135 (114) (11)
Other noncash provisions and accounting adjustments (21) 212 -
Changes in assets and liabilities, net of effects of
acquisitions and divestitures of businesses:
Receivables, current and noncurrent 38 215 (173)
Inventories (82) 5 (79)
Progress payments net of costs on uncompleted contracts (128) (282) (218)
Accounts payable 61 109 132
Deferred and current income taxes 125 (19) (244)
Program rights (148) - -
Other assets and liabilities 338 150 161
- -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by operating activities of Continuing Operations (50) 456 48
- -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by operating activities of Discontinued
Operations (note 3) (401) 237 (102)
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Business acquisitions (1,110) (5,411) (109)
Business divestitures 4,124 683 1,462
Liquidation of assets of Financial Services 41 362 323
Asset fundings of Financial Services - - (86)
Capital expenditures (note 21) (206) (290) (259)
Asset liquidations of trust investments 44 305 -
Other - 15 22
- -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by investing activities 2,893 (4,336) 1,353
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Bank revolver borrowings 21,067 7,480 9,143
Bank revolver repayments (18,122) (8,294) (11,079)
Net reduction in other short-term debt (403) (416) (599)
Repayments of long-term debt (5,012) (9) (81)
Long-term borrowings - 5,009 16
Sale of equity securities - - 505
Treasury stock reissued 174 89 58
Debt issue costs (12) (176) (15)
Dividends paid (127) (159) (153)
Other - 1 2
- -----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing activities (2,435) 3,525 (2,203)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 7 (118) (904)
Cash and cash equivalents at beginning of period (notes 1 and 3) 226 344 1,248
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period (notes 1 and 3) $ 233 $ 226 $ 344
=======================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid--Continuing Operations $ 446 $ 214 $ 134
Interest paid--Discontinued Operations 52 139 259
- -----------------------------------------------------------------------------------------------------------------------
Total interest paid $ 498 $ 353 $ 393
- -----------------------------------------------------------------------------------------------------------------------
Income taxes (refunded) paid $ (34) $ 61 $ 123
=======================================================================================================================
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements and include descriptions of noncash transactions.
35
<PAGE> 36
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Westinghouse
Electric Corporation (Westinghouse) and its subsidiary companies (together, the
Corporation) after elimination of intercompany accounts and transactions.
Investments in joint ventures and other companies in which the Corporation does
not control but has the ability to exercise significant management influence
over operating and financial policies are accounted for by the equity method.
Certain previously reported amounts have been reclassified to conform to the
1996 presentation.
SEPARATION PLAN
On November 13, 1996, the Corporation announced that the Board of Directors had
approved, subject to certain conditions, a plan to separate the Corporation's
industries and technology businesses from its media businesses. This separation
is expected to be effected by way of a tax-free dividend to shareholders,
forming a publicly-traded company to be called Westinghouse Electric Company
(WELCO). The plan also provides that Thermo King Corporation, Westinghouse's
transport temperature control company, will conduct a public offering of up to
20% of its common stock and will become a majority-owned subsidiary of WELCO.
If the separation is completed, shares of WELCO common stock will be
distributed on a pro rata basis to the shareholders of record of Westinghouse
common stock as of a date to be determined.
As currently contemplated, after the separation, Westinghouse (Media Company)
will consist primarily of CBS Inc., Group W Satellite Communications Company
and Infinity Broadcasting Corporation (Infinity), and WELCO will consist
primarily of Power Systems, Thermo King, and Government Operations. Also, 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, and WELCO will assume most of the unfunded pension obligation and
other non-debt obligations generated by the Corporation's industrial businesses
in earlier years. For segment financial information, see note 21 to the
financial statements.
Completion of the separation is subject to a number of conditions, including a
favorable ruling from the Internal Revenue Service that the transaction will
not be taxable for U.S. federal income tax purposes to Westinghouse or its
shareholders and the registration of the WELCO common stock under the
Securities Exchange Act of 1934.
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.
DISCONTINUED OPERATIONS
In November 1996, the Corporation adopted a plan to exit its Communication &
Information Systems (CISCO) segment, and in March 1996, adopted a plan to exit
its environmental services line of business included in its former Government &
Environmental Services segment. These businesses were reclassified as
Discontinued Operations in 1996.
In December 1995, the Corporation announced a plan to divest its defense and
electronic systems business and The Knoll Group (Knoll), its office furniture
unit. In July 1995, the Corporation sold WCI Communities, Inc. (WCI), its land
development subsidiary. The Corporation's defense and electronic systems
business represented a separate major line of business that comprised
approximately 90% of the former Electronic Systems segment. These businesses
were reclassified as Discontinued Operations in 1995.
The Corporation previously classified as Discontinued Operations its
Distribution and Control Business Unit (DCBU), Westinghouse Electric Supply
Company (WESCO) and its Financial Services business in conjunction with a 1992
plan to exit these businesses.
As a result, certain financial information previously issued has been restated
to give effect to the classification of these businesses as discontinued
operations in accordance with Accounting Principles Board (APB) Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." See note 3 to the financial statements.
REVENUE RECOGNITION
Sales are recorded primarily as products are shipped, services are rendered, or
advertisements are broadcast. The percentage-of-completion method of accounting
is used for major power generation projects with a cycle time in excess of one
year and major nuclear fuel and related equipment orders.
36
<PAGE> 37
AMORTIZATION OF INTANGIBLE ASSETS
Identifiable intangible assets related to the Corporation's media businesses
primarily include Federal Communications Commission (FCC) licenses, which are
limited as to availability and have historically appreciated in value with the
passage of time. Identifiable intangible assets and goodwill are amortized
using the straight-line method over their estimated lives but not in excess of
40 years.
For the Corporation's industries and technology businesses, goodwill and other
acquired intangible assets are amortized using the straight-line method over
their estimated lives but not in excess of 40 years for assets acquired prior
to January 1, 1994 and not in excess of 15 years for assets acquired after
December 31, 1993.
CASH AND CASH EQUIVALENTS
The Corporation considers all investment securities with a maturity of three
months or less when acquired to be cash equivalents. All cash and temporary
investments are placed with high credit quality financial institutions, and the
amount of credit exposure to any one financial institution is limited. At
December 31, 1996 and 1995, cash and cash equivalents included restricted funds
of $11 million and $20 million, respectively.
INVENTORIES
Inventories are stated at the lower of standard cost, which approximates actual
cost on a first-in, first-out (FIFO) basis or market. The elements of cost
included in inventories are direct labor, direct material, and certain
overheads including factory depreciation. Long-term contracts in process
include costs incurred plus estimated profits on contracts accounted for using
the percentage-of-completion method.
PLANT AND EQUIPMENT
Plant and equipment assets are recorded at cost and depreciated over their
estimated useful lives. Depreciation is generally computed on the straight-line
method based on useful lives of 27.5 to 60 years for buildings, 20 years for
land improvements, 3 to 10 years for office equipment, and 3 to 12 years for
machinery and transportation equipment. Leasehold improvements are amortized
over the terms of the respective leases. Expenditures for additions and
improvements are capitalized, and costs for repairs and maintenance are charged
to operations as incurred. The Corporation limits capitalization of newly
acquired assets to those assets with cost in excess of $1,500.
PROGRAM RIGHTS
Costs incurred in connection with the production of, or the purchase of rights
to, programs to be broadcast within one year are classified as current assets
while costs of those programs to be broadcast subsequently are considered
noncurrent. Program costs are amortized as the respective programs are
broadcast. Program rights are carried at the lower of cost less accumulated
amortization or estimated net realizable value.
ENVIRONMENTAL COSTS
The Corporation expenses or capitalizes, if appropriate under the Corporation's
capitalization policy, environmental expenditures that relate to current
operations. Expenditures that do not extend the service lives of assets or
otherwise benefit future years are expensed. The Corporation records
liabilities when environmental assessments or remedial efforts are probable,
and the costs can be reasonably estimated. Such estimates are adjusted if
necessary as new remediation requirements are defined or as more information
becomes available.
The Corporation accrues over their estimated remaining useful lives the
anticipated future costs of environmental closure activities and
decommissioning of nuclear licensed sites.
OFF-BALANCE SHEET HEDGING
DEBT INSTRUMENTS
The Corporation has entered into interest rate and currency exchange agreements
to manage exposure to fluctuations in interest and foreign exchange rates.
Interest rate exchange agreements generally involve the exchange of interest
payments without exchange of the underlying principal amounts. The Corporation
does not enter into speculative or leveraged derivative transactions.
The differentials paid or received on interest rate swap agreements are accrued
and recognized as adjustments to interest expense. Gains and losses realized
upon early settlement of these agreements are deferred and amortized to
interest expense over the term of the original agreement if the underlying
hedged debt instrument remains outstanding or expensed immediately if the
underlying hedged instrument is settled. At December 31, 1996 and 1995, the
Corporation had no deferred gains or losses from terminated interest rate swaps
recorded on its balance sheet.
37
<PAGE> 38
FOREIGN EXCHANGE
The Corporation's foreign exchange policy includes matching purchases and sales
in national currencies when possible and hedging unmatched transactions when
appropriate. In accordance with this policy, the Corporation enters into
various foreign exchange agreements to hedge receivables or payables. These
agreements may be either foreign exchange forward or option contracts.
Gains and losses on foreign currency contracts offset gains and losses
resulting from currency fluctuations inherent in the underlying transactions.
Gains and losses on contracts that hedge specific foreign currency commitments
are deferred and recognized in net income in the period in which the
transaction is consummated. The notional value of these contracts at December
31, 1996 was $149 million.
In limited cases, foreign exchange contracts may be used to hedge anticipated
cash flows. Realized and unrealized gains and losses on these contracts are
included in the determination of net income. The notional value of these
contracts at December 31, 1996 was $22 million.
EXTRAORDINARY ITEM
In 1996, the Corporation extinguished prior to maturity $6.8 billion of debt
under the then-existing $7.5 billion credit facility. These prepayments
represented all outstanding borrowings under this facility. As a result of the
early extinguishment of debt and the write-off of related debt issue costs, the
Corporation recognized an extraordinary loss of $93 million, net of a tax
benefit of $60 million, in 1996. See notes 11 and 13 to the financial
statements.
ESTIMATES
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 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.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
During the first quarter of 1996, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS 121 did not have a material effect on the results of Continuing
Operations.
Subsequent to the acquisition of an intangible or other long-lived asset, the
Corporation continually evaluates whether later events and circumstances
indicate the remaining estimated useful life of that asset may warrant revision
or that the remaining carrying value of such an asset may not be recoverable.
If definitive cash flows are not available for a specific intangible or other
long-lived asset, the Corporation evaluates recoverability of the specific
business to which the asset relates. When factors indicate that an intangible
or other long-lived asset should be evaluated for possible impairment, the
Corporation uses an estimate of the related asset's undiscounted future cash
flows over the remaining life of that asset in measuring recoverability. If
such an analysis indicates that impairment has in fact occurred, the
Corporation writes down the book value of the intangible or other long-lived
asset to its fair value.
STOCK-BASED COMPENSATION
On January 1, 1996, the Corporation adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS 123 allows entities to continue to measure
compensation cost for stock-based awards using the intrinsic value based method
of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and to provide pro forma net income and pro forma earnings per
share disclosures as if the fair value based method defined in SFAS 123 had
been applied. The Corporation has elected to continue to apply the provisions
of APB 25 and provide the pro forma disclosure provisions of SFAS 123. See
note 16 to the financial statements.
NOTE 2: ACQUISITIONS
On June 20, 1996, the Corporation executed a merger agreement with Infinity,
whereby each issued and outstanding share of Infinity common stock was to be
converted into 1.71 shares of Westinghouse common stock.
The acquisition was consummated on December 31, 1996, and was accounted for
under the purchase method. Accordingly, the purchase price was allocated to
assets
38
<PAGE> 39
acquired and liabilities assumed based on their estimated fair values as of the
date of acquisition. The purchase price of $4.7 billion includes $3.8 billion
of equity and $.9 billion of debt. The equity includes the issuance of 183
million shares of Westinghouse common stock at a value of $18.875 per share,
based on the closing price of the stock on June 19, 1996 (the last trading day
prior to the execution of the merger agreement), the conversion of Infinity
options into options to acquire approximately 22 million Westinghouse common
shares based on the fair value of the options, and transaction costs. The debt
represents $936 million of Infinity debt that Westinghouse repaid immediately
prior to closing.
The excess of the consideration paid over the estimated fair value of the net
assets acquired, totalling $3.6 billion, was recorded as goodwill and is being
amortized on a straight-line basis over 40 years.
On November 24, 1995, pursuant to the terms of a merger agreement, the
Corporation acquired CBS Inc. (CBS) for a purchase price of approximately
$5.4 billion. The acquisition was financed by borrowings under a $7.5 billion
credit agreement executed in September 1995.
This acquisition was accounted for under the purchase method. The excess of the
consideration paid over the estimated fair value of net assets acquired,
totalling $4.8 billion, was recorded as goodwill and is being amortized on a
straight-line basis over 40 years.
The estimated fair values of assets acquired and liabilities assumed are
summarized in the table below:
FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED (in millions)
<TABLE>
<CAPTION>
INFINITY CBS
AT DEC. 31, 1996 AT NOV. 24, 1995
============================================================================
<S> <C> <C>
Receivables $ 180 $ 643
Program rights - 301
Investments 107 233
Assets held for sale 70 -
Plant and equipment 39 777
Identifiable intangible assets:
FCC licenses 996 994
Film library and other 277 162
Goodwill 3,630 4,794
Other assets 31 25
Liabilities for talent, program
rights and similar contracts - (716)
Debt (149) (850)
Deferred income taxes (328) (270)
Pension, postretirement and
postemployment benefits - (244)
Accrued restructuring costs - (100)
Other liabilities (146) (398)
- ----------------------------------------------------------------------------
Total purchase price $4,707 $5,351
============================================================================
</TABLE>
The Corporation's Consolidated Statement of Income for the years ended December
31, 1996 and 1995 include the operating results of CBS from November 24, 1995.
The operating results of Infinity will be included beginning January 1, 1997.
The following unaudited pro forma information combines the consolidated results
of operations of the Corporation with those of CBS and Infinity as if these
acquisitions had occurred at the beginning of 1995. The pro forma results give
effect to certain purchase accounting adjustments, including additional
depreciation expense resulting from a step-up in the basis of fixed assets,
additional amortization expense from goodwill and other identified intangible
assets, increased interest expense from acquisition debt, related income tax
effects, and the issuance of additional shares in connection with the Infinity
acquisition.
PRO FORMA RESULTS (Unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995
================================================================
<S> <C> <C>
Sales $9,200 $9,286
Interest expense (537) (814)
Loss from Continuing Operations (856) (548)
Loss per common share--
Continuing Operations (1.35) (.96)
=================================================================
</TABLE>
This pro forma financial information is presented for comparative purposes
only and is not necessarily indicative of the operating results that actually
would have occurred had the CBS and Infinity acquisitions been consummated
on January 1, 1995. In addition, these results are not intended to be a
projection of future results and do not reflect any synergies that might be
achieved from combined operations.
NOTE 3: DISCONTINUED OPERATIONS
In November 1996, the Corporation adopted a plan to exit its CISCO segment. The
sale of the residential security business, the largest component of this
segment, was completed in December 1996 for approximately $425 million,
including the assumption of certain liabilities by the buyer. The gain realized
on this sale was offset by estimated losses for disposal of other businesses
comprising this segment as well as additional estimated losses for other
components of Discontinued Operations.
In March 1996, the Corporation adopted a plan to exit its environmental
services line of business. During the first quarter of 1996, the Corporation
recorded an after-tax charge of $146 million for the estimated loss on
disposal. In December 1996, an additional after-tax loss of approximately
$100 million for disposal of these businesses was recognized for additional
expected divestiture costs but was offset by gains related to other components
of Discontinued Operations.
39
<PAGE> 40
In December 1995, the Corporation announced its intention to sell Knoll and
its defense and electronic systems business and use the proceeds to reduce the
debt incurred for the acquisition of CBS. During 1996, the Corporation completed
the sales of these businesses and recognized a combined after-tax gain of $1.2
billion. The cash proceeds from these transactions, which totalled $3.6 billion,
were used to repay debt of Continuing Operations. In addition, the buyer of the
Corporation's defense and electronic systems business assumed certain pension
and postretirement benefit liabilities associated with the active employees of
the business.
In July 1995, the Corporation sold WCI, its land development business, for
$430 million of cash and retained approximately $125 million of mortgage notes
receivable with maturities through 1997 and other securities. In addition, the
buyer assumed $19 million of debt. Concurrently, the Corporation invested
$48 million for a 24% equity interest in the new business. The Corporation is
actively pursuing the divestiture of this investment. The net cash proceeds
from the divestiture of WCI were used to repay debt of Discontinued Operations.
A net loss of $76 million was recognized on the disposal.
In November 1992, the Corporation announced a plan that included exiting
Financial Services through the disposition of its $9 billion asset portfolios
and the sales of DCBU, its distribution and control business, and WESCO, its
electric supply business. The disposition of Financial Services assets involved
the sale of the real estate and corporate finance portfolios over a three-year
period and the liquidation of the leasing portfolio in accordance with
contractual terms, which extend through 2015. The sales of DCBU and WESCO
for proceeds in excess of $1.1 billion and approximately $340 million,
respectively, were completed in 1994. Liquidation of the real estate and
corporate finance portfolios of Financial Services has been essentially
completed.
The assets and liabilities of Discontinued Operations have been separately
classified on the 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>
AT DECEMBER 31 1996 1995
==============================================================================
<S> <C> <C>
Assets:
Cash and cash equivalents $ 13 $ 30
Customer receivables 90 512
Inventories 32 268
Uncompleted contracts costs
over related billings - 192
Plant and equipment, net 96 677
Portfolio investments 845 901
Deferred income taxes (note 6) - 423
Other assets 342 955
- ------------------------------------------------------------------------------
Total assets--Discontinued Operations 1,418 3,958
- ------------------------------------------------------------------------------
Liabilities:
Accounts payable 79 206
Uncompleted contracts billings
over related costs 10 125
Other current liabilities 49 440
Short-term debt (note 11) 5 84
Current maturities of long-term debt (note 13) 2 265
Liability for estimated loss on disposal 672 212
Deferred income taxes (note 6) 180 -
Postretirement benefits liability (note 5) - 108
Pension liability (note 4) - 398
Other noncurrent liabilities 4 13
Long-term debt (note 13) 417 157
- ------------------------------------------------------------------------------
Total liabilities--Discontinued Operations 1,418 2,008
- ------------------------------------------------------------------------------
Net assets of Discontinued Operations $ - $1,950
==============================================================================
</TABLE>
At December 31, 1996, 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
WCI, other miscellaneous securities, the leasing portfolio, and deferred income
taxes. Liabilities also include 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 within the next year. 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
40
<PAGE> 41
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 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 is adequate to cover future operating
costs, estimated losses, and the remaining divestiture costs associated with
all discontinued businesses. The adequacy of this liability is evaluated each
quarter.
INVENTORIES
Inventories of Discontinued Operations consisted of the following:
INVENTORIES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==========================================================================
<S> <C> <C>
Raw materials $ 6 $ 47
Work in process 4 283
Finished goods 16 38
- --------------------------------------------------------------------------
26 368
Long-term contracts in process 2 269
Progress payments to subcontractors 3 53
Recoverable engineering and
development costs 5 214
- --------------------------------------------------------------------------
36 904
Inventoried costs related to contracts
with progress billing terms (4) (636)
- --------------------------------------------------------------------------
Inventories $32 $ 268
==========================================================================
</TABLE>
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==========================================================================
<S> <C> <C>
Costs included in inventories $ - $ 571
Progress billings on contracts - (379)
- --------------------------------------------------------------------------
Uncompleted contracts costs
over related billings $ - $ 192
==========================================================================
Progress billings on contracts $14 $ 190
Costs included in inventories (4) (65)
- --------------------------------------------------------------------------
Uncompleted contracts billings
over related costs $10 $ 125
==========================================================================
</TABLE>
Substantially all inventories at December 31, 1995 related to long-term
contracts. Inventoried costs do not exceed realizable values.
PORTFOLIO INVESTMENTS
Portfolio investments of $845 million at December 31, 1996 included $800
million of leasing receivables and $43 million of investments in leasing
partnerships. At December 31, 1995, portfolio investments of $901 million
included $820 million of leasing receivables, $45 million of investments in
leasing partnerships, and $34 million of real estate properties. Other
portfolio investments totalled $2 million at December 31, 1996 and 1995.
Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1996 and 1995, 84% related to aircraft and 16% related to
co-generation facilities. The components of the Corporation's net investment
in leases at December 31, 1996 and 1995 are as follows:
NET INVESTMENT IN LEASES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==========================================================================
<S> <C> <C>
Rental payments receivable (net of principal
and interest on nonrecourse loans) $ 737 $ 775
Estimated residual value of leased assets 366 373
Unearned and deferred income (303) (328)
- ---------------------------------------------------------------------------
Investment in leases (leasing receivables) 800 820
Deferred taxes and deferred investment
tax credits arising from leases (575) (584)
- ---------------------------------------------------------------------------
Investment in leases, net $ 225 $ 236
===========================================================================
</TABLE>
At December 31, 1996 and 1995, deferred investment tax credits totalled
$21 million and $23 million, respectively. These deferred investment tax
credits are amortized over the contractual terms of the respective leases.
Contractual maturities for the Corporation's leasing rental payments receivable
at December 31, 1996 are as follows:
CONTRACTUAL MATURITIES FOR LEASING RENTAL PAYMENTS RECEIVABLE (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996 YEAR OF MATURITY
- --------------------------------------------------------------------------------
AFTER
TOTAL 1997 1998 1999 2000 2001 2001
================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Leasing $737 $43 $45 $44 $58 $63 $484
================================================================================
</TABLE>
In accordance with APB 30, the consolidated financial statements reflect the
operating results of Discontinued Operations separately from Continuing
Operations. Interest expense on Continuing Operations debt totalling $8
million, $48 million, and $37 million for 1996, 1995 and 1994, respectively,
was allocated to Discontinued Operations based on the ratio of the net assets
of Knoll and the defense and electronic systems business to the sum of total
consolidated net assets plus consolidated debt. Summarized operating results of
Discontinued Operations appear on the following page:
41
<PAGE> 42
OPERATING RESULTS OF DISCONTINUED OPERATIONS--1996 AND 1995 MEASUREMENT DATES
(in millions)
<TABLE>
<CAPTION>
DEFENSE AND
ENVIRONMENTAL ELECTRONIC
CISCO SERVICES WCI SYSTEMS KNOLL TOTAL
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Sales of products and services $337 $237 $ - $ 262 $ 90 $ 926
Loss before income taxes (77) (101) - (19) (59) (256)
Income tax benefit (expense) 7 33 - - (4) 36
Net loss prior to measurement date (46) (11) - - - (57)
Operating losses after measurement date charged
to liability for estimated loss on disposal (24) (57) - (19) (63) (163)
YEAR ENDED DECEMBER 31, 1995
Sales of products and services $361 $299 $108 $2,549 $621 $3,938
Income (loss) before income taxes 11 (52) 23 163 30 175
Income tax benefit (expense) (4) 20 (8) (57) (16) (65)
Net income (loss) prior to measurement date 7 (32) 15 106 14 110
YEAR ENDED DECEMBER 31, 1994
Sales of products and services $314 $335 $248 $2,189 $562 $3,648
Income (loss) before income taxes 13 (20) 71 187 (84) 167
Income tax benefit (expense) (6) 8 (26) (68) 10 (82)
Net income (loss) prior to measurement date 7 (12) 45 119 (74) 85
====================================================================================================================
</TABLE>
OPERATING RESULTS OF DISCONTINUED OPERATIONS--NOVEMBER 1992 MEASUREMENT DATE
(in millions)
<TABLE>
<CAPTION>
FINANCIAL DCBU &
SERVICES WESCO TOTAL
===========================================================================
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Sales of products and services $ 26 $ - $ 26
Net loss (16) - (16)
YEAR ENDED DECEMBER 31, 1995
Sales of products and services $ 31 $ - $ 31
Net loss (52) - (52)
YEAR ENDED DECEMBER 31, 1994
Sales of products and services $ 41 $319 $ 360
Net income (loss) (204) 4 (200)
============================================================================
</TABLE>
Operating cash flows from Discontinued Operations are presented separately from
operating cash flows from Continuing Operations in the consolidated financial
statements. Total operating cash flows from Discontinued Operations consist of
the following:
CASH FLOWS FROM OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
===========================================================================
<S> <C> <C> <C>
Financial Services $ 3 $(81) $(187)
DCBU and WESCO - - (170)
WCI - 18 113
Knoll and Defense and
Electronic Systems (328) 306 167
Environmental Services
and CISCO (76) (6) (25)
- ---------------------------------------------------------------------------
Cash provided (used) by
operating activities $(401) $237 $(102)
===========================================================================
</TABLE>
The cash flows presented above include cash flows from the operations of the
businesses as well as payments for disposition-related costs.
42
<PAGE> 43
NOTE 4: PENSIONS
The Corporation has a number of defined benefit pension plans covering
substantially all employees. Most plan benefits are based on either years of
service and compensation levels at the time of retirement or a formula based on
career earnings. Pension benefits are paid primarily from trusts funded by the
Corporation and employee contributions. The Corporation funds its qualified
U.S. pension plans at amounts equal to or greater than the minimum funding
requirements of the Employee Retirement Income Security Act of 1974.
Substantially all plan assets are invested in equity and fixed income
securities. The Corporation also participates in various multi-employer,
union-administered defined benefit plans that cover certain broadcast
employees as a result of the acquisition of CBS. Pension expense related to
these plans for 1996 was $10 million and for 1995 was not material.
NET PERIODIC PENSION COST (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
================================================================================
<S> <C> <C> <C>
Service cost $ 70 $ 53 $ 79
Interest cost on projected
benefit obligation 371 391 404
Amortization of unrecognized
net obligation 25 35 36
Amortization of unrecognized
prior service cost (benefit) (7) (11) 6
Amortization of unrecognized
net loss 108 68 112
- --------------------------------------------------------------------------------
567 536 637
- --------------------------------------------------------------------------------
Return on plan assets:
Actual return on plan assets (437) (584) (18)
Deferred gain (loss) 90 245 (385)
- --------------------------------------------------------------------------------
Recognized return on plan assets (347) (339) (403)
- --------------------------------------------------------------------------------
Net periodic pension cost $ 220 $ 197 $ 234
================================================================================
</TABLE>
The Corporation's restructuring activities contributed to a high level of
lump-sum cash distributions from the Corporation's pension fund during 1994.
The magnitude of these cash distributions required that the Corporation apply
the provisions of SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits,"
and recognize a settlement loss of $308 million in 1994. This noncash charge to
income represents the pro rata portion of unrecognized losses associated with
the pension obligation that was settled. The recognition of this settlement
loss in 1994 reduced the amortization of unrecognized net loss included in
net periodic pension cost in subsequent years.
SIGNIFICANT PENSION PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
1996 1995 1994
================================================================================
<S> <C> <C> <C>
Discount rate:
Periodic pension cost 6.75% 8.5% 7.25%
Pension benefit obligation 7.75% 6.75% 8.5%
Compensation increase rate 4% 4% 4%
Long-term rate of return
on plan assets 9.5% 9.75% 9.75%
================================================================================
</TABLE>
Based on the requirements of SFAS No. 87, "Employers' Accounting for Pensions,"
the Corporation adjusts the discount rate to reflect current and expected-to-be
available interest rates on high quality fixed income investments at the end of
each year.
The table on the following page sets forth the funded status of the defined
benefit plans and amounts recognized in the Corporation's balance sheet at
December 31, 1996 and 1995:
43
<PAGE> 44
FUNDED STATUS--PENSION PLANS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
<S> <C> <C> <C> <C>
====================================================================================================================================
Actuarial present value of benefit obligation:
Vested $(693) $(3,875) $(561) $(4,944)
Nonvested (47) (265) (31) (328)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (740) (4,140) (592) (5,272)
Effect of projected future compensation levels (116) (198) (122) (261)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date (856) (4,338) (714) (5,533)
Plan assets at fair value 879 3,051 730 3,407
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 23 (1,287) 16 (2,126)
Unrecognized net (gain) loss (1) 1,402 25 2,120
Prior service cost (benefit) not yet recognized in net
periodic pension cost 9 (86) - (95)
Unrecognized net (asset) obligation (11) 128 - 161
- ------------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost 20 157 41 60
Minimum pension liability - (1,246) - (1,925)
- ------------------------------------------------------------------------------------------------------------------------------------
Pension asset (liability) included in consolidated balance sheet $ 20 $(1,089) $ 41 $(1,865)
====================================================================================================================================
</TABLE>
At December 31, 1996 and 1995, included in the balance sheet of Continuing and
Discontinued Operations are the following pension assets and liabilities:
BALANCE SHEET STATUS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
- --------------------------------------------------------------------------------
NET PENSION INTANGIBLE NET PENSION INTANGIBLE
LIABILITY ASSET LIABILITY ASSET
================================================================================
<S> <C> <C> <C> <C>
Continuing Operations $(1,069) $40 $(1,426) $63
Discontinued Operations - - (398) 3
- --------------------------------------------------------------------------------
Total $(1,069) $40 $(1,824) $66
================================================================================
</TABLE>
Included in plan assets at December 31, 1996 are 5,612,600 shares of the
Corporation's common stock having a market value of $112 million. Dividends
paid by the Corporation during 1996 on shares held by the pension fund totalled
$1 million.
During 1996 and 1995, respectively, the Corporation contributed $250 million
and $315 million of cash to its pension plans.
The accumulated benefit obligation in excess of assets at December 31, 1996
decreased $776 million compared to December 31, 1995. This decrease represents
the net effect of numerous factors but was driven primarily by the change in
the discount rate assumption from 6.75% to 7.75% and by the sale of the
Corporation's defense and electronic systems business.
The Corporation sponsors various non-qualified supplemental pension plans that
provide additional benefits to certain employees and are paid from the
Corporation's assets held in rabbi trusts. For financial reporting purposes,
these plans are treated as non-funded pension plans. The unfunded accumulated
benefit obligation under these plans included in the table above at December 31,
1996 and 1995 was $260 million and $286 million, respectively.
For financial reporting purposes, a pension plan is considered unfunded when
the fair value of plan assets is less than the accumulated benefit obligation.
When that is the case, a minimum pension liability is recognized for the sum of
the unfunded amount plus any prepaid pension cost. In recognizing such a
liability, an intangible asset is usually recorded up to the sum of the prior
service cost not yet recognized and the unrecognized transition obligation.
When the liability to be recognized is greater than the intangible asset limit,
a charge is made to shareholders' equity for the difference, net of any tax
effects.
At December 31, 1996, a minimum pension liability of $1,246 million was
recognized for the sum of the unfunded amount of $1,089 million plus the
prepaid pension cost of $157 million. An intangible asset of $40 million and
a charge to shareholders' equity of $1,206 million, which was reduced to
$796 million due to deferred tax effects of $4 10 million, offset the pension
liability. As a result of the year-end 1996 remeasurement, shareholders' equity
was increased by $424 million from December 31, 1995.
At December 31, 1995, a minimum pension liability of $1,925 million was
recognized for the sum of the unfunded amount of $1,865 million plus the
prepaid pension cost of $60 million. An intangible asset of $66 million and
a charge to shareholders' equity of $1,859 million, which was reduced to
$1,220 million due to deferred tax effects of $639 million, offset the
pension liability. As a result of the year-end 1995 remeasurement,
shareholders' equity was decreased by $258 million from December 31, 1994.
44
<PAGE> 45
NOTE 5: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, AND POSTEMPLOYMENT BENEFITS
The Corporation has postretirement plans that provide defined medical, dental
and life insurance benefits for eligible retirees and dependents.
The components of net periodic postretirement benefit cost follow:
NET PERIODIC POSTRETIREMENT BENEFIT COST (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
============================================================================
<S> <C> <C> <C>
Service cost $ 11 $ 13 $ 20
Interest cost on accumulated
postretirement benefit obligation 97 100 93
Amortization of unrecognized net
(gain) loss 4 (4) 4
Recognized return on plan assets (5) (1) (1)
- ----------------------------------------------------------------------------
Net periodic postretirement
benefit cost $107 $108 $116
============================================================================
</TABLE>
The assumptions used to develop the net periodic postretirement benefit cost
and the present value of benefit obligations are shown below:
SIGNIFICANT POSTRETIREMENT BENEFIT PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995 1994
==============================================================================
<S> <C> <C> <C>
Discount rate 7.75% 6.75% 8.5%
Health care cost trend rates 10%* 10.5%* 11%*
Compensation increase rate 4% 4% 4%
Long-term rate of return
on plan assets 7% 7% 7%
==============================================================================
</TABLE>
*At December 31, 1996, the rate was assumed to decrease ratably to 6% in 2004,
decrease to 5.75% in 2005 and remain at that level thereafter. At December 31,
1995, the rate was assumed to decrease ratably to 5% in 2006, decrease to 4.75%
in 2007 and remain at that level thereafter. At December 31, 1994, the rate was
assumed to decrease ratably to 6.5% in 2003 and remain at that level
thereafter.
Net periodic postretirement benefit cost is determined using the assumptions as
of the beginning of the year. The funded status is determined using the
assumptions as of the end of the year.
The funded status and amounts recognized in the Corporation's balance sheet at
December 31, 1996 and 1995 were as follows:
FUNDED STATUS--POSTRETIREMENT BENEFITS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==================================================================
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $(1,099) $(1,215)
Fully eligible, active plan participants (61) (40)
Other active plan participants (245) (352)
- ------------------------------------------------------------------
Total accumulated postretirement
benefit obligation (1,405) (1,607)
Unrecognized net loss 152 257
Unrecognized prior service benefit (33) (45)
Plan assets at fair value 68 72
- ------------------------------------------------------------------
Accrued postretirement benefit cost $(1,218) $(1,323)
==================================================================
</TABLE>
The accrued postretirement benefit cost for Discontinued Operations at December
31, 1995 was $108 million, which is included in the net assets of Discontinued
Operations at that date. These liabilities were assumed by the buyers of the
Corporation's defense and electronic systems business and Knoll.
The funded assets consist primarily of interest-bearing securities. The effect
of a 1% annual increase in the assumed health care cost trend rates would
increase the accumulated postretirement benefit obligation by approximately $27
million and would increase net periodic postretirement benefit cost by
approximately $3 million.
Certain of the Corporation's non-U.S. subsidiaries have private and
government-sponsored plans for retirees. The cost for these plans is not
significant to the Corporation.
The Corporation provides certain postemployment benefits to former or inactive
employees and their dependents during the time period following employment but
before retirement. At December 31, 1996 and 1995, the Corporation's liability
for postemployment benefits totalled $67 million and $81 million, respectively.
The liability for postemployment benefits included in the net assets of
Discontinued Operations was $2 million at December 31, 1995.
45
<PAGE> 46
NOTE 6: INCOME TAXES
Income tax expense (benefit) included in the consolidated financial statements
follows:
COMPONENTS OF CONSOLIDATED INCOME TAX EXPENSE (BENEFIT) (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
========================================================================
<S> <C> <C> <C>
Continuing Operations $(466) $10 $(11)
Discontinued Operations 925 34 82
Extraordinary item (60) - -
- ------------------------------------------------------------------------
Income tax expense $ 399 $44 $ 71
========================================================================
</TABLE>
INCOME TAX EXPENSE (BENEFIT) FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
========================================================================
<S> <C> <C> <C>
Current:
Federal $(653) $ 2 $(77)
State (116) 1 6
Foreign 32 22 28
- ------------------------------------------------------------------------
Total current income tax
expense (benefit) (737) 25 (43)
- ------------------------------------------------------------------------
Deferred:
Federal 269 (30) 54
State 2 (1) (10)
Foreign - 16 (12)
- ------------------------------------------------------------------------
Total deferred income tax
expense (benefit) 271 (15) 32
- ------------------------------------------------------------------------
Income tax expense (benefit) $(466) $ 10 $(11)
========================================================================
</TABLE>
CONSOLIDATED INCOME TAX EXPENSE (BENEFIT) (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
========================================================================
<S> <C> <C> <C>
Current:
Federal $ 88 $ 18 $ 18
State 52 7 24
Foreign 27 27 28
- ------------------------------------------------------------------------
Total current income tax expense 167 52 70
- ------------------------------------------------------------------------
Deferred:
Federal 234 (21) 28
State (10) (2) (13)
Foreign 8 15 (14)
- ------------------------------------------------------------------------
Total deferred income tax
expense (benefit) 232 (8) 1
- ------------------------------------------------------------------------
Income tax expense $399 $ 44 $ 71
========================================================================
</TABLE>
In addition to the amounts in the tables above, during 1996, 1995 and 1994,
$229 million of income tax expense, $138 million of income tax benefit, and
$132 million of income tax expense, respectively, were recorded in
shareholders' equity as part of the pension liability adjustment. See note 4 to
the financial statements.
The foreign portion of income or loss before income taxes and minority interest
in income of consolidated subsidiaries included in the consolidated statement
of income was income of $32 million in 1996 and $128 million in 1995 and a loss
of $34 million in 1994. Such income or loss consisted of profits and losses
generated from foreign operations, both Continuing and Discontinued, that can
be subject to both U.S. and foreign income taxes.
Deferred federal income taxes have not been provided on cumulative
undistributed earnings from foreign subsidiaries totalling $476 million at
December 31, 1996, which have been reinvested for an indefinite time. It is not
practicable to determine the income tax liability that would result were such
earnings repatriated.
Income from Continuing Operations includes income of certain manufacturing
operations in Puerto Rico, which are eligible for tax credits against U.S.
federal income tax and partially exempt from Puerto Rican income tax under
grants of industrial tax exemptions. These tax exemptions provided net tax
benefits of $17 million in 1996, $17 million in 1995, and $14 million in 1994.
The exemptions will expire at various dates from 2002 through 2007.
Deferred income taxes result from temporary differences in the financial bases
and tax bases of assets and liabilities. The types of differences that give
rise to significant portions of deferred income tax liabilities or assets are
shown in the following table:
CONSOLIDATED DEFERRED INCOME TAXES BY SOURCE (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
=================================================================
<S> <C> <C>
Deferred tax assets:
Provision for expenses and losses $ 1,352 $ 1,133
Long-term contracts in process 38 41
Minimum pension liabilities 360 474
Operating losses and carryforwards 796 1,405
Postretirement and postemployment
benefits 450 590
Other 276 170
- -----------------------------------------------------------------
Total deferred tax assets 3,272 3,813
Valuation allowance (52) (98)
- -----------------------------------------------------------------
Net deferred tax asset 3,220 3,715
- -----------------------------------------------------------------
Deferred tax liabilities:
Accelerated depreciation and amortization (992) (814)
Leasing activities (575) (584)
Other (242) (129)
- -----------------------------------------------------------------
Total deferred tax liabilities (1,809) (1,527)
- -----------------------------------------------------------------
Deferred income taxes, net asset $ 1,411 $ 2,188
=================================================================
</TABLE>
The valuation allowance for deferred taxes reflects foreign tax credits not
anticipated to be utilized and operating loss carryforwards of certain foreign
subsidiaries. The net balance of deferred income taxes is intended to offset
income taxes on future taxable income expected to be earned by the
Corporation's Continuing Operations.
46
<PAGE> 47
At December 31, 1996, for federal income tax purposes, there were regular tax
net operating loss carryforwards of $1,401 million that expire by the year 2008
and $101 million that expire by the year 2010. At December 31, 1996, for
alternative minimum tax purposes, there were loss carryforwards of $783 million
that expire by the year 2008 and alternative minimum tax credit carryforwards
of $252 million that have no expiration date. At December 31, 1996, there were
$54 million of net operating loss carryforwards attributable to foreign
subsidiaries. Of this total, approximately $17 million has no expiration date.
The remaining amount will expire not later than 2003. A valuation allowance
has been established for $15 million of the deferred tax benefit related to
those loss carryforwards for which it is considered likely that the benefit
will not be realized.
INCOME TAX EXPENSE (BENEFIT) FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
========================================================================
<S> <C> <C> <C>
Federal income tax expense
(benefit) at statutory rate $(454) $ 1 $ (3)
Increase (decrease) in tax
resulting from:
Income taxes of prior years - 11 6
Amortization of goodwill 46 9 6
Interest on prior years' federal
income tax, net of federal effect - - (12)
State income tax, net of
federal effect (73) (1) (4)
Lower tax rate on income of
foreign sales corporations (9) (3) (5)
Lower tax rate on net income
of Puerto Rican operations (17) (17) (14)
Gain on sale of stock of
subsidiary and affiliate - 12 -
Valuation allowance for
deferred taxes (14) (2) (4)
Loss of foreign tax credit 3 3 8
Foreign rate differential (12) (10) (8)
Nondeductible expenses 8 6 6
Dividends from foreign
investments 8 2 7
Other differences, net 48 (1) 6
- ------------------------------------------------------------------------
Income tax expense (benefit)
from Continuing Operations $(466) $ 10 $(11)
========================================================================
</TABLE>
The federal income tax returns of the Corporation and its wholly owned
subsidiaries are settled through the year ended December 31, 1989. The
Corporation has reached an agreement with the Internal Revenue Service
regarding intercompany pricing adjustments applicable to operations in Puerto
Rico for the years 1990 through 1992 and a tentative agreement for 1993.
Management believes that adequate provisions for taxes have been made through
December 31, 1996.
NOTE 7: CUSTOMER RECEIVABLES
Customer receivables at December 31, 1996 included $120 million representing
the sales value of material under long-term contracts not billed to the
customer. Billings will occur upon shipment of major components of the
contract. Collection of these receivables is expected to be substantially
completed within one year.
Allowances for doubtful accounts of $33 million and $32 million at December 31,
1996 and 1995, respectively, were deducted from customer receivables. The
Corporation performs ongoing credit evaluations of its customers and generally
does not require collateral.
NOTE 8: INVENTORIES AND COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
INVENTORIES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==============================================================
<S> <C> <C>
Raw materials $ 127 $ 85
Work in process 493 419
Finished goods 125 123
- --------------------------------------------------------------
745 627
Long-term contracts in process 986 995
Progress payments to subcontractors 45 21
Recoverable engineering and
development costs 68 52
- --------------------------------------------------------------
1,844 1,695
Inventoried costs related to contracts
with progress billing terms (1,061) (856)
- --------------------------------------------------------------
Inventories $ 783 $ 839
==============================================================
</TABLE>
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==============================================================
<S> <C> <C>
Costs included in inventories $ 841 $ 729
Progress billings on contracts (155) (187)
- --------------------------------------------------------------
Uncompleted contracts costs
over related billings $ 686 $ 542
==============================================================
Progress billings on contracts $ 554 $ 445
Costs included in inventories (220) (127)
- --------------------------------------------------------------
Uncompleted contracts billings
over related costs $ 334 $ 318
==============================================================
</TABLE>
Raw materials, work in process, and finished goods included contract-related
costs of $525 million at December 31, 1996 and $367 million at December 31,
1995. Substantially all costs in long-term contracts in process, progress
payments to subcontractors, and recoverable engineering and development costs
were contract-related.
Inventories other than those related to long-term contracts are generally
realized within one year. Inventoried costs do not exceed realizable values.
47
<PAGE> 48
NOTE 9: PLANT AND EQUIPMENT
PLANT AND EQUIPMENT (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==============================================================
<S> <C> <C>
Land and buildings $ 1,068 $ 929
Machinery and equipment 2,391 2,398
Construction in progress 146 165
- --------------------------------------------------------------
Plant and equipment, at cost 3,605 3,492
Accumulated depreciation (1,739) (1,584)
- --------------------------------------------------------------
Plant and equipment, net $ 1,866 $ 1,908
==============================================================
</TABLE>
For the years ended December 31, 1996, 1995, and 1994, depreciation expense
totalled $225 million, $159 million, and $161 million, respectively. Of these
amounts, $160 million, $113 million, and $115 million, respectively, were
included in costs of products and services, and $65 million, $46 million, and
$46 million, respectively, were included in marketing, administration and
general expenses.
NOTE 10: OTHER INTANGIBLE AND NONCURRENT ASSETS
OTHER INTANGIBLE AND NONCURRENT ASSETS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
==============================================================
<S> <C> <C>
Deferred income taxes (note 6) $ 774 $1,221
Other intangible assets 425 152
Intangible pension asset (note 4) 40 63
Deferred charges 39 231
Joint ventures and other affiliates 232 68
Noncurrent receivables 384 161
Program rights 142 21
Other 225 235
- --------------------------------------------------------------
Other intangible and noncurrent assets $2,261 $2,152
==============================================================
</TABLE>
Other intangible assets are shown in the preceding table net of accumulated
amortization of $34 million at December 31, 1996 and $23 million at December
31, 1995.
FCC licenses and goodwill are shown on the balance sheet net of accumulated
amortization of $252 million at December 31, 1996 and $87 million at December
31, 1995.
Joint ventures and other affiliates include investments in companies over which
the Corporation exercises significant influence but does not control.
NOTE 11: SHORT-TERM DEBT
In August 1996, the Corporation replaced its $7.5 billion credit facility with
a new $5.5 billion credit facility with a consortium of lenders under more
favorable terms. The $5.5 billion credit facility provides for short-term money
market loans and revolver borrowings. Borrowing rates under the current
facility are determined at the time of each borrowing and are based generally
on a floating rate index, the London Interbank Offer Rate (LIBOR), plus a
margin based on the Corporation's senior unsecured debt rating and leverage.
The cost of the facility includes commitment fees, which are based on the
unutilized facility and vary with the Corporation's debt ratings. For financial
reporting purposes, revolver borrowings are classified as long term. See note
13 to the financial statements.
There are no compensating balance requirements under this facility.
SHORT-TERM DEBT (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 DURING THE YEAR
- -------------------------------------------------------------------------------
COMPOSITE MAX. OUT- AVG. OUT- WEIGHTED
BALANCE RATE STANDING STANDING AVG. RATE
===============================================================================
<S> <C> <C> <C> <C> <C>
1996
Credit facility $295 7.6% $ 440 $264 6.5%
Short-term foreign
bank loans 76 4.5% 119 51 5.5%
Other 131 7.4% 253 72 6.3%
- -------------------------------------------------------------------------------
Total short-term debt 502
Short-term debt--
Discontinued Operations (5)
- -------------------------------------------------------------------------------
Short-term debt-
Continuing Operations $497
===============================================================================
1995
Credit facility $263 7.2% $1,039 $809 6.8%
Short-term foreign
bank loans 17 6.8% 100 75 5.8%
Other 110 7.1% 183 42 6.0%
- -------------------------------------------------------------------------------
Total short-term debt 390
Short-term debt--
Discontinued Operations (84)
- -------------------------------------------------------------------------------
Short-term debt--
Continuing Operations $306
===============================================================================
</TABLE>
48
<PAGE> 49
Average outstanding borrowings for Continuing Operations were determined based
on daily amounts outstanding for the credit facilities and on monthly balances
outstanding for short-term foreign bank loans.
NOTE 12: OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
=========================================================================
<S> <C> <C>
Accrued employee compensation $ 248 $ 241
Income taxes currently payable 189 176
Liabilities for talent and program rights 308 254
Accrued product warranty 59 57
Accrued restructuring costs 184 150
Liability for business dispositions 79 93
Accrued interest and insurance 210 202
Accrued expenses 875 800
Environmental liabilities 62 47
Other 364 92
- -------------------------------------------------------------------------
Other current liabilities $2,578 $2,112
=========================================================================
</TABLE>
NOTE 13: LONG-TERM DEBT
LONG-TERM DEBT (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
=============================================================================
<S> <C> <C>
Term Loans I & II $ - $5,000
Revolver (note 11) 3,050 -
8 3/8% notes due 2002 348 348
7 7/8% debentures due 2023 325 325
7 3/4% notes due 1996 - 300
6 7/8% notes due 2003 275 275
8 5/8% debentures due 2012 273 273
8 7/8% notes due 2001 250 250
8 7/8% notes due 2014 150 150
7 5/8% notes due 2002 150 150
10 3/8% debentures due 2002 149 -
7 3/4% notes due 1999 125 125
7 1/8% notes due 2023 97 97
8 7/8% debentures due 2022 92 92
Medium-term notes due through 2001 234 436
Other 54 157
- -----------------------------------------------------------------------------
5,572 7,978
Current maturities--Continuing Operations (4) (330)
Current maturities--Discontinued Operations (2) (265)
- -----------------------------------------------------------------------------
Total long-term debt 5,566 7,383
- -----------------------------------------------------------------------------
Long-term debt--Discontinued Operations (417) (157)
- -----------------------------------------------------------------------------
Long-term debt--Continuing Operations $5,149 $7,226
=============================================================================
</TABLE>
Included in the previous table is $149 million of debentures issued by
Infinity. The Corporation has given irrevocable notice to Infinity noteholders
of the Corporation's intent to call the debentures. Also included in the
previous table is senior debt of $464 million and $491 million at December 31,
1996 and 1995, respectively, issued by CBS prior to the acquisition.
At December 31, 1996, medium-term notes had interest rates ranging from 7.9% to
9.4%, with an average interest rate of 9.0% and an average remaining maturity
of two years.
In 1996, the Corporation entered into a new $5.5 billion credit facility to
replace its $7.5 billion credit facility. See note 11 to the financial
statements. The prepayment of Term Loans I & II under the previous facility
resulted in a $93 million after-tax extraordinary loss from a write-off of
deferred financing fees for the early extinguishment of debt.
The CBS 8-7/8% debentures due 2022 may be redeemed after June 1, 2002 at
specified redemption prices. Except for these debentures, the revolver
borrowings, and the $149 million of debentures assumed in connection with the
acquisition of Infinity, the remaining long-term debt outstanding at December
31, 1996 may not be redeemed prior to maturity.
To manage interest costs on its debt, the Corporation has entered into various
types of interest rate exchange agreements. A summary of the notional amounts
and maturity characteristics of the agreements outstanding at December 31, 1996
and 1995 is presented in the table below:
CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS (in millions)
<TABLE>
<CAPTION>
YEAR OF MATURITY
- ----------------------------------------------------------------------------------------------------------
FIXED RATE SWAPS
(PAY FIXED) TOTAL 1996 1997 1998 1999 2000
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Notional amount
at Dec. 31, 1996 $ 130 - - $50 $55 $25
Weighted average
fixed rate paid 8.91% - - 8.73% 8.86% 9.36%
- ----------------------------------------------------------------------------------------------------------
Notional amount
at Dec. 31, 1995 $3,208 $3,078 - $50 $55 $25
Weighted average
fixed rate paid 5.68% 5.54% - 8.73% 8.86% 9.36%
==========================================================================================================
</TABLE>
49
<PAGE> 50
For Discontinued Operations, an interest rate swap with a notional amount of
$74 million at December 31, 1995 matured in February 1996.
The Corporation has a shelf registration for debt securities with an unused
amount of $400 million as of December 31, 1996.
The scheduled maturities of long-term debt outstanding at December 31, 1996 for
each of the next five years are as follows:
SCHEDULED MATURITIES OF LONG-TERM DEBT (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996 YEAR OF MATURITY
- ---------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
===================================================================================================
<S> <C> <C> <C> <C> <C>
Continuing Operations $4 $ 59 $314 $ 1 $2,958
Discontinued Operations 2 96 45 11 264
- ---------------------------------------------------------------------------------------------------
Total long-term debt $6 $155 $359 12 $3,222
===================================================================================================
</TABLE>
NOTE 14: OTHER NONCURRENT LIABILITIES
OTHER NONCURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
=============================================================================
<S> <C> <C>
Postretirement benefits (note 5) $1,218 $1,215
Postemployment benefits (note 5) 67 79
Accrued restructuring costs 94 8
Liability for business dispositions 87 19
Liabilities for talent and program rights 51 47
Accrued expenses 1,112 661
Environmental liabilities 404 237
Other 586 307
- -----------------------------------------------------------------------------
Other noncurrent liabilities $3,619 $2,573
=============================================================================
</TABLE>
NOTE 15: SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY (in millions)
<TABLE>
<CAPTION>
1996 1995 1994
==============================================================================================
<S> <C> <C> <C>
Preferred stock:
Balance at January 1 $ 4 $ 12 $ 8
Series B preferred shares converted - (8) -
Series C preferred shares issued - - 4
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ 4 $ 4 $ 12
- ----------------------------------------------------------------------------------------------
Common stock:
Balance at January 1 $ 426 $ 393 $ 393
Shares issued 183 33 -
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ 609 $ 426 $ 393
- ----------------------------------------------------------------------------------------------
Capital in excess of par value:
Balance at January 1 $ 1,848 $ 1,932 $ 1,475
Series B preferred shares converted - (25) -
Series C preferred shares issued - - 501
Shares issued under various
compensation and benefit plans (42) (55) (37)
Shares issued under dividend
reinvestment plan (3) (4) (7)
Shares issued under Infinity
merger agreement 3,573 - -
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ 5,376 $ 1,848 $ 1,932
- ----------------------------------------------------------------------------------------------
Common stock held in treasury:
Balance at January 1 $ (720) $ (870) $ (972)
Shares issued under various
compensation and benefit plans 161 139 87
Shares issued under dividend
reinvestment plan 13 11 15
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ (546) $ (720) $ (870)
- ----------------------------------------------------------------------------------------------
Minimum pension liability:
Balance at January 1 $(1,220) $ (962) $(1,215)
Pension liability adjustments,
net of deferred taxes (note 4) 424 (258) 253
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ (796) $(1,220) $ (962)
- ----------------------------------------------------------------------------------------------
Cumulative foreign currency
translation adjustments:
Balance at January 1 $ (11) $ (15) $ (28)
Currency translation activity 22 4 13
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ 11 $ (11) $ (15)
- ----------------------------------------------------------------------------------------------
Retained earnings:
Balance at January 1 $ 1,181 $ 1,325 $ 1,401
Net income 30 15 77
Dividends paid (127) (159) (153)
- ----------------------------------------------------------------------------------------------
Balance at December 31 $ 1,084 $ 1,181 $ 1,325
- ----------------------------------------------------------------------------------------------
Shareholders' equity $ 5,742 $ 1,508 $ 1,815
==============================================================================================
</TABLE>
50
<PAGE> 51
On December 31, 1996, the Corporation issued 183,002,086 shares of common stock
for the acquisition of Infinity. The common stock was issued at a price of
$18.875 per share, which was the closing price on June 19, 1996, the last
trading day prior to the execution of the merger agreement. The issuance of the
common stock and the conversion of outstanding Infinity options into options to
acquire 22,226,484 Westinghouse common shares resulted in an increase in
capital in excess of par value of $3,573 million, net of registration costs.
On September 1, 1995, the Corporation's 8,222,500 shares of Series B Conversion
Preferred Stock (Series B Preferred), outstanding since 1992, mandatorily
converted into 32,890,000 shares of common stock.
In March 1994, the Corporation sold, in a private placement, 36,000,000
depository shares (the $1.30 Depository Shares) at $14.44 per share. Each of
the $1.30 Depository Shares represents ownership of one-tenth of a share of the
Corporation's $1.00 par value Series C Conversion Preferred Stock (Series C
Preferred) and entitles the owner to all of the proportionate rights,
preferences and privileges of the Series C Preferred. A total of 3,600,000
Series C Preferred shares was deposited, all of which were outstanding at
December 31, 1996, 1995 and 1994.
The net proceeds to the Corporation, after commissions, fees and out-of-pocket
expenses, totalled $505 million. As a result, the par value of Series C
Preferred was established for $4 million, and capital in excess of par was
increased by $501 million.
The annual dividend rate for each $1.30 Depository Share is $1.30 (equivalent
to $13.00 for each Series C Preferred), payable quarterly in arrears on the
first day of March, June, September and December. Dividends are cumulative and
must be declared by the Board of Directors to be payable. Payments commenced on
June 1, 1994.
Each $1.30 Depository Share will automatically convert into one share of common
stock on June 1, 1997 unless called on May 30, 1997 by the Corporation or
converted at any time prior to June 1, 1997 by the holder. Conversion will also
occur upon certain mergers, consolidations or similar extraordinary
transactions involving the Corporation or in certain other events.
COMMON SHARES (shares in thousands)
<TABLE>
<CAPTION>
ISSUED IN TREASURY OUTSTANDING
================================================================================
<S> <C> <C> <C>
Balance at January 1, 1994 393,080 40,904 352,176
Shares issued for dividend
reinvestment plan - (621) 621
Shares issued for employee plans - (3,975) 3,975
Other - (20) 20
- --------------------------------------------------------------------------------
Balance at December 31, 1994 393,080 36,288 356,792
- --------------------------------------------------------------------------------
Shares issued for dividend
reinvestment plan - (450) 450
Shares issued for employee plans - (5,886) 5,886
Shares issued for conversion of
Series B Preferred 32,890 - 32,890
- --------------------------------------------------------------------------------
Balance at December 31, 1995 425,970 29,952 396,018
- --------------------------------------------------------------------------------
Shares issued for dividend
reinvestment plan - (1,071) 1,071
Shares issued for employee plans - (6,254) 6,254
Shares issued under Infinity
merger agreement 183,002 - 183,002
- --------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 608,972 22,627 586,345
================================================================================
</TABLE>
Of the common stock held in treasury at December 31, 1996, 21,606,897 shares
were held by the Corporation's rabbi trusts for the payment of benefits under
executive benefit plans.
Earnings (loss) per common share was computed by dividing income or loss
available to common shareholders by the weighted average number of common
shares outstanding during the year plus the weighted average common stock
equivalents. Common stock equivalents consist of shares subject to stock
options, shares potentially issuable under deferred compensation programs, and
as discussed below, the Series B Preferred.
Prior to their conversion, the Series B Preferred were considered common stock
equivalents at a rate of four Series B Preferred to one common share. Because
such treatment has an anti-dilutive effect on earnings per share for 1995 and
1994, these common stock equivalent shares were excluded from weighted average
shares outstanding, and the dividend requirement was deducted from net income
in computing earnings available to common shareholders. The common shares
issued upon conversion of the Series B Preferred were included in weighted
average shares outstanding from the conversion date, September 1, 1995. As of
December 31, 1996, there were no Series B Preferred outstanding.
51
<PAGE> 52
Consistent with prevalent practice at the time of issuance, the Series C
Preferred were considered outstanding common stock at a rate of ten Series C
Preferred to one common share for the computation of earnings per share. If the
Series C Preferred had been treated as common stock equivalents for the
calculation of earnings per share, the Corporation's 1996, 1995 and 1994
per-share results would have been losses of $.04, $.18, and $.02, respectively.
The weighted average number of common shares used for computing earnings or
loss per share was 443,399,000 in 1996; 410,138,000 in 1995; and 383,736,000 in
1994.
On December 29, 1995, the Board of Directors adopted a shareholder rights plan
providing for the distribution of one right for each share of common stock
outstanding on January 9, 1996. The rights become exercisable only in the
event, with certain exceptions, that an acquiring party accumulates 15% or more
of the Corporation's voting stock or a party announces an offer to acquire 30%
or more of the voting stock. The rights have an exercise price of $64 per share
and expire on January 9, 2006. Upon the occurrence of certain events, holders
of the rights will be entitled to purchase either Westinghouse preferred shares
or shares in an acquiring entity at half of market value. The Corporation is
entitled to redeem the rights at a value of $.01 per right at any time until
the tenth day following the acquisition of a 15% position in its voting stock.
NOTE 16: STOCK-BASED COMPENSATION PLANS
At December 31, 1996, the Corporation had five stock-based compensation plans,
which are described below.
The 1993 and 1991 Long-Term Incentive Plans (1993 and 1991 Plans) provide for
the granting of stock options, restricted stock, and other performance awards
to employees of the Corporation. At December 31, 1996 and 1995, approximately
15.3 million and 11.1 million shares, respectively, had been authorized for
awards under the 1993 Plan. Shares available for awards under the 1993 Plan at
December 31, 1996 and 1995 totalled 3,097,093 and 3,249,228, respectively. At
December 31, 1996 and 1995, a total of 21.5 million and 16.5 million shares,
respectively, had been authorized for awards under the 1991 Plan. Shares
available for awards under the 1991 Plan at December 31, 1996 and 1995
totalled 3,393,578 and 3,407,931, respectively.
The Deferred Compensation and Stock Plan for Directors (Director Plan) provides
for the granting of stock options, restricted stock, and other awards to
non-employee directors of the Corporation. At December 31, 1996 and 1995,
600,000 and 500,000 shares, respectively, had been authorized for awards under
the Director Plan. Shares available for awards under the Director Plan at
December 31, 1996 and 1995 totalled 470,859 and 406,806, respectively.
In 1996 and 1995, the Corporation granted 49,174 and 17,000 shares,
respectively, of restricted stock to employees and directors with
weighted-average grant date fair values of $18.41 and $14.88, respectively,
under the 1993, 1991, and Director Plans. The vesting periods of these shares
vary with a weighted average vesting period of two years for both 1996 and
1995 grants.
With the acquisition of Infinity, the Corporation assumed the Infinity
Broadcasting Corporation Stock Option Plan (Infinity Plan). The outstanding
options under this Plan as well as certain other one-time awards were converted
to options for Westinghouse common stock on December 31, 1996. The converted
options are included in the subsequent table as awards assumed in 1996. These
options have exercise prices ranging from $.0002 to $19.66. No additional
grants will be made under the Infinity Plan.
Stock options are also outstanding under the 1984 Long-Term Incentive Plan
(1984 Plan); however, no additional grants are permitted under that Plan.
Under the 1993, 1991, and 1984 Plans, the options were granted for terms of 10
years or less and generally become exercisable in whole or in part after the
commencement of the second year of the term. Under the Infinity Plan, the
options generally were granted for terms of 10 years and become exercisable
ratably over a five-year period.
Generally, options outstanding under the 1993, 1991, Director, and 1984 Plans,
except those granted during 1996, were exercisable at December 31, 1996.
Options granted during 1996 under these Plans generally will become exercisable
in 1997. Under the Infinity Plan, approximately 17 million of the awards
assumed were exercisable at December 31, 1996.
Of the options granted by the Corporation in 1995, 2,423,060 were performance
stock options. The vesting of these options was contingent on attainment of
specific performance targets. One-half of these options terminated in January
1996 because the performance target for 1995 was not met. The remaining
performance options terminated in January 1997 because the performance target
for 1996 was not met.
52
<PAGE> 53
STOCK OPTION INFORMATION (shares in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 28,384 $17.41 20,504 $18.66 16,082 $20.70
Options granted 10,990 19.09 8,945 14.17 5,079 11.89
Options exercised (1,728) 13.22 (481) 11.75 (24) 10.40
Options forfeited (1,750) 15.93 (584) 16.15 (633) 16.59
Options expired (306) 27.41 - - - -
Awards assumed (Infinity) 22,226 5.18 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 57,816 $13.15 28,384 $17.41 20,504 $18.66
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31 41,251 $12.07 18,456 $18.92 - -
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
FAIR VALUE EXERCISE PRICE FAIR VALUE EXERCISE PRICE
====================================================================================================================================
<S> <C> <C> <C> <C>
Options granted:
Exercise price equaled
grant date stock price $7.41 $18.86 $5.95 $14.31
Exercise price exceeded
grant date stock price 5.92 20.74 4.81 18.67
====================================================================================================================================
</TABLE>
STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1996 (shares in thousands)
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF OPTIONS AT WEIGHTED AVERAGE REMAINING CONTRACTUAL EXERCISABLE AT EXERCISE PRICE
EXERCISE PRICES DECEMBER 31, 1996 EXERCISE PRICE LIFE (IN YEARS) DECEMBER 31, 1996 OF EXERCISABLE
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
$.0002- 4.99 12,158 $ 0.74 3.2 11,523 $ 0.66
5- 9.99 5,823 7.01 7.5 3,519 7.05
10-14.99 10,505 13.19 8.0 8,864 13.09
15-19.99 22,572 17.13 7.8 11,901 16.11
20-29.99 5,559 25.84 5.0 4,245 27.42
30-36.53 1,199 34.60 2.3 1,199 34.60
- --------------------------------------------------------------------------------------------------------------------------
TOTAL 57,816 41,251
==========================================================================================================================
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively; risk-free interest
rates of 6.1% and 7.2%; expected dividend yields of 1.1% and 1.4%; expected
volatility of 30% and 31%; and expected lives of 7.4 years and 7.3 years.
The Corporation accounts for its stock-based compensation plans under APB 25.
For stock options granted, the option price is not less than the market value
of shares on the grant date; therefore, no compensation cost has been
recognized for stock options granted.
Had compensation cost for these plans been determined under the provisions of
SFAS 123, the Corporation's net income and earnings per share would have been
reduced to the following pro forma amounts:
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
================================================================================
<S> <C> <C> <C> <C>
Net income (loss)
(in millions) $30 $ (8) $ 15 $ (4)
Earnings (loss) per
common share .07 (.02) (.05) (.09)
================================================================================
</TABLE>
53
<PAGE> 54
NOTE 17: CONTINGENT LIABILITIES AND COMMITMENTS
URANIUM SETTLEMENTS
In the late seventies, the Corporation provided for the estimated future costs
for the resolution of all uranium supply contract suits and related litigation.
The remaining uranium reserve balance includes assets required for certain
settlement obligations and reserves for estimated future costs. The reserve
balance at December 31, 1996, is deemed adequate considering all facts and
circumstances known to management. The future obligations require providing the
remainder of the fuel deliveries through 2013. The supply of equipment and
services is essentially complete. Variances from estimates that may occur are
considered in determining if an adjustment of the liability is necessary.
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 steam generator lawsuit remains.
The Corporation is also a party to five tolling agreements with utilities or
utility plant owners' groups that 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 discussions.
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. In 1996, the United States Court of Appeals
for the Third Circuit affirmed the dismissal of the derivative claim and
affirmed in part and reversed in part the dismissal of the class action claims.
Those class action claims that were not dismissed by the Third Circuit have
been remanded to the lower court for further proceedings.
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 December 31, 1996, the
Corporation had approximately 103,000 claims outstanding against it.
In court actions that have been resolved, the Corporation has prevailed in the
vast 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 previously, 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.
54
<PAGE> 55
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.
In the second quarter of 1996, the Corporation and its external consultants
completed a study to evaluate the Corporation's environmental remediation
strategies. 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 $466 million, of which $175 million
was recognized in the second quarter of 1996. Depending on the remediation
alternatives ultimately selected, the costs related to these sites could differ
from the amounts currently accrued. The accrued liability includes $345 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
during periods of up to 30 years.
OTHER
The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters, the Corporation has estimated its remaining reasonably possible costs
and determined them to be immaterial.
The Corporation currently manages under contract several government-owned
facilities that, among other things, are engaged in the remediation of
hazardous and nuclear wastes. To date, under the terms of the contracts, the
Corporation is not responsible for costs associated with environmental
liabilities, including environmental cleanup costs, except under certain
circumstances associated with the willful misconduct or lack of good faith of
its managers or their failure to exercise prudent business judgment. There are
currently no material claims for which the Corporation believes it is
responsible.
The Corporation has or will have responsibilities for environmental closure
activities or decommissioning of nuclear licensed sites. The Corporation has
estimated that the total potential cost to be incurred for these actions is
approximately $91 million, of which $23 million was accrued at December 31,
1996. The Corporation's policy is to accrue these costs over the estimated life
of the individual facilities, which in most cases approximates 20 years. The
anticipated annual costs currently being accrued are $6 million.
Capital expenditures related to environmental compliance in 1996 and 1995
totalled $8 million and $6 million, respectively. Operating expenses that are
recurring and associated with managing hazardous waste and pollutants in
ongoing operations totalled $6 million in 1996 and 1995.
55
<PAGE> 56
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that
complying with existing government regulations will not materially impact the
Corporation's financial position, liquidity or results of operations.
FINANCING COMMITMENTS
CONTINUING OPERATIONS
In the ordinary course of business, standby letters of credit and surety bonds
are issued on behalf of the Corporation related to performance obligations
primarily under contracts with customers.
The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sports events. These contracts
permit the broadcast of such properties for various periods ending no later
than April 2002. As of December 31, 1996, the Corporation was committed to make
payments under such broadcasting contracts, along with commitments for talent
contracts, of $3,601 million.
The Corporation's other commitments consist primarily of those for the purchase
of plant and equipment totalling approximately $54 million at December 31,
1996.
DISCONTINUED OPERATIONS
At December 31, 1996, Financial Services commitments, consisting primarily of
guarantees, totalled $38 million compared to $45 million at year-end 1995. The
remaining commitments have fixed expiration dates from 1997 through 2002.
Management expects these commitments to expire unfunded.
NOTE 18: LEASES
The Corporation has commitments under operating leases for certain machinery
and equipment and facilities used in various operations. Rental expense for
Continuing Operations in 1996, 1995 and 1994 was $130 million, $95 million and
$105 million, respectively. These amounts include immaterial amounts for
contingent rentals. Rental expense included sublease income totalling $11
million, $17 million and $16 million for 1996, 1995 and 1994, respectively.
Additionally, the Corporation's transit advertising business has franchise
rights entitling it to display advertising on buses, taxis, trains, bus
shelters, terminals and phone kiosks. Under most of these franchise agreements,
the franchiser is entitled to receive the greater of a percentage of the
relevant advertising revenues, net of advertising agency fees, or a specified
guaranteed minimum annual payment.
MINIMUM RENTAL PAYMENTS--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
GUARANTEED MINIMUM
AT DECEMBER 31, 1996 LEASE OBLIGATIONS FRANCHISE PAYMENTS
========================================================================
<S> <C> <C>
1997 $ 95 $120
1998 76 106
1999 68 97
2000 69 59
2001 53 17
Subsequent years 189 10
- ------------------------------------------------------------------------
Minimum rental payments $550 $409
========================================================================
</TABLE>
NOTE 19: OTHER INCOME AND EXPENSES, NET
OTHER INCOME AND EXPENSES, NET (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
============================================================================
<S> <C> <C> <C>
Interest on securities $ 9 $ 11 $ 12
Miscellaneous interest income 33 7 4
Gain (loss) on disposition
of other assets (135) 121 28
Operating results--
non-consolidated affiliates 9 3 (2)
Foreign currency transaction and
high-inflation translation effect (13) (8) (6)
Estimated loss on disposition
of non-strategic businesses - (7) (17)
Pension settlement loss (note 4) - - (308)
Other 11 10 4
- ----------------------------------------------------------------------------
Other income and expenses, net $ (86) $137 $(285)
============================================================================
</TABLE>
The net loss on disposition of assets for 1996 includes an estimated loss of
$152 million resulting from a decision to sell certain miscellaneous
non-strategic assets and a gain of $17 million from the sale of equity
investments. The gain on disposition of other assets for 1995 includes a gain
of $115 million from the sale of the Corporation's 62% interest in MICROS
Systems, Inc. The gain on disposition of other assets for 1994 includes a gain
of $32 million from the sale of two California radio stations.
56
<PAGE> 57
NOTE 20: RESTRUCTURING, LITIGATION AND OTHER MATTERS
The Corporation has undertaken a number of 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.
RESTRUCTURING, LITIGATION AND OTHER MATTERS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
===========================================================
<S> <C> <C> <C>
Restructuring $273 $ 83 $19
Litigation matters 486 236 -
Impairment of assets 15 - -
Environmental remediation
activities 175 - -
Other 30 - -
- -----------------------------------------------------------
Total $979 $319 $19
===========================================================
</TABLE>
In recent years, the Corporation has restructured many of its businesses and
its corporate headquarters in an effort to reduce its cost structure 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.
A summary of restructuring charges by business segment follows:
RESTRUCTURING COSTS BY SEGMENT (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
===========================================================
<S> <C> <C> <C>
Media $ 41 $ - $ (2)
Power Systems 181 44 21
Thermo King 6 - -
Government Operations 8 - -
Corporate & Other 37 39 -
- -----------------------------------------------------------
Total $273 $83 $19
===========================================================
</TABLE>
Generally, separated employees received benefits under the Corporation's
Employee Security and Protection Plan or similar arrangements, including layoff
income benefits, permanent job separation benefits, retraining and/or
outplacement assistance. The amount included for these benefits in the
restructuring charge represents the incremental cost of such benefits over
those amounts previously accrued under SFAS No. 112, "Employers' Accounting for
Postemployment Benefits."
Based on the Corporation's current estimates, summarized below are the
restructuring costs for Continuing Operations:
RESTRUCTURING COSTS BY CATEGORY OF EXPENDITURE (dollars in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
================================================================
<S> <C> <C> <C>
Number of employee separations 2,617 1,071 490
- ----------------------------------------------------------------
Employee separation costs $ 191 $ 77 $ 37
Pension and postretirement
curtailment costs 14 - -
Asset writedowns 37 3 -
Facility closure/
rationalization costs 37 3 -
Adjustments of prior plans (6) - (18)
- ----------------------------------------------------------------
Total charge to operations $ 273 $ 83 $ 19
================================================================
</TABLE>
Of the employee separations in the 1996 plans, nearly 50% were completed at
December 31, 1996. For the 1995 and 1994 plans, 85% and 100%, respectively,
were completed at December 31, 1996. The majority of the remaining separations
are expected to be completed in 1997. Employee separation costs generally are
paid over a period of up to two years following the separation.
In connection with the acquisition of CBS, the Corporation developed a
restructuring plan to integrate the operations of CBS with those of the
Corporation and eliminate duplicate CBS facilities and functions. The cost of
that plan, which approximated $100 million, was recorded in connection with the
purchase.
The following is a reconciliation of the restructuring liability for Continuing
Operations:
RECONCILIATION OF RESTRUCTURING LIABILITY (in millions)
<TABLE>
<S> <C>
==============================================================
Balance at January 1, 1994 $ 211
Provision for restructuring 19
Cash expenditures (129)
Noncash expenditures (20)
- --------------------------------------------------------------
Balance at December 31, 1994 81
- --------------------------------------------------------------
Provision for restructuring 83
CBS acquisition plan 100
Cash expenditures (101)
Noncash expenditures (5)
- --------------------------------------------------------------
Balance at December 31, 1995 158
- --------------------------------------------------------------
Provision for restructuring 273
Cash expenditures (104)
Noncash expenditures (49)
- --------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $ 278
==============================================================
</TABLE>
57
<PAGE> 58
Additional restructuring costs totalling $2 million in 1996, $52 million in
1995, and $52 million in 1994 were included in the results of Discontinued
Operations primarily for the separation of approximately 1,400 employees and
the exiting of various product lines and facilities.
NOTE 21: SEGMENT INFORMATION
Westinghouse is a global corporation operating in the principal business areas
of television and radio broadcasting, cable programming, chemical and nuclear
materials management, transport temperature control, and power generation
systems. The Corporation's continuing businesses are aligned for reporting
purposes into the following four segments: Media, Power Systems, Thermo King,
and Government Operations. Results of international activities, including
manufacturing, export sales, and foreign licensee income, are included in the
financial information of the segment that has operating responsibility.
Media provides a variety of communications services consisting primarily of
commercial broadcasting, program production, and distribution. It operates the
CBS Television Network, a programming provider for approximately 200
affiliates. It sells advertising time to radio, television and cable
advertisers through national and local sales organizations. Media currently
owns and operates 14 television broadcasting stations and 79 radio stations
including those acquired with Infinity. Media also provides programming and
distribution services to the cable television industry. Group W Satellite
Communications (GWSC) provides sports programming; the marketing and
advertising for two country music entertainment networks; and a 24-hour,
Spanish-language news service. The two country music entertainment networks are
expected to be acquired in 1997. See note 23 to the financial statements. GWSC
is currently developing a new cable channel, Eye on People.
The Power Systems segment designs, develops, manufactures and services nuclear
and fossil-fueled power generation systems and is a leading supplier of reload
nuclear fuel to the global electric utility market.
Thermo King is a leading supplier of mobile temperature control equipment for
trucks, trailers and seagoing containers, as well as air conditioning for
buses.
The Government Operations segment includes the management and operation of
several government-owned facilities for the U.S. Department of Energy (DOE) and
the U.S. Army, and support for the U.S. naval nuclear reactors program.
The Corporate & Other segment includes corporate activities that are managed
for the benefit of the entire Corporation.
Segment sales of products and services include products that are transferred
between segments, generally at inventoried cost plus a margin. Segment
operating profit or loss consists of sales of products and services less
segment operating expenses, which include costs of products and services,
marketing, administration and general expenses, depreciation and amortization,
and restructuring costs.
Segment operating profit for 1996, 1995, and 1994 included special charges
consisting of costs for restructuring, litigation, and other matters (see note
20 to the financial statements) as follows:
SPECIAL CHARGES INCLUDED IN SEGMENT OPERATING PROFIT (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
====================================================================
<S> <C> <C> <C>
Media $ 41 $ - $(2)
- --------------------------------------------------------------------
Industries & Technology:
Power Systems 614 280 21
Thermo King 6 - -
Government Operations 8 - -
- --------------------------------------------------------------------
Total Industries & Technology 628 280 21
Corporate & Other 438 39 -
- --------------------------------------------------------------------
Total $1,107 $319 $19
====================================================================
</TABLE>
58
<PAGE> 59
SALES OF PRODUCTS AND SERVICES AND OPERATING PROFIT BY SEGMENT (in millions)
<TABLE>
<CAPTION>
SALES OF PRODUCTS AND SERVICES OPERATING PROFIT (LOSS)
- -------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 1996 1995 1994 1996 1995 1994
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Media $4,145 $1,016 $ 650 $ 310 $ 212 $ 197
- -------------------------------------------------------------------------------------------------------
Industries & Technology:
Power Systems 3,078 3,000 2,930 (575) (207) 165
Thermo King 1,013 1,065 877 180 176 135
Government Operations 121 155 133 63 81 77
- -------------------------------------------------------------------------------------------------------
Total Industries & Technology 4,212 4,220 3,940 (332) 50 377
Corporate & Other 133 393 674 (734) (161) (165)
Intersegment Sales (41) (30) (54) - - -
- -------------------------------------------------------------------------------------------------------
Total $8,449 $5,599 $5,210 $(756) $ 101 $ 409
=======================================================================================================
</TABLE>
OTHER SEGMENT FINANCIAL INFORMATION (in millions)
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS DEPRECIATION AND AMORTIZATION CAPITAL EXPENDITURES
- --------------------------------------------------------------------------------------------------------------------------------
AT OR FOR THE YEAR ENDED DECEMBER 31 1996 1995 1994 1996 1995 1994 1996 1995 1994
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Media $14,194 $ 8,889 $ 794 $277 $ 57 $ 31 $ 93 $ 32 $ 35
- --------------------------------------------------------------------------------------------------------------------------------
Industries & Technology:
Power Systems 2,596 2,667 2,465 93 93 95 72 101 87
Thermo King 400 381 354 15 15 13 20 23 19
Government Operations 60 99 83 3 1 2 2 2 2
- --------------------------------------------------------------------------------------------------------------------------------
Total Industries & Technology 3,056 3,147 2,902 111 109 110 94 126 108
Corporate & Other 2,639 2,620 2,974 17 27 39 1 21 21
- --------------------------------------------------------------------------------------------------------------------------------
Total Continuing Operations 19,889 14,656 6,670 405 193 180 188 179 164
Discontinued Operations 1,418 3,958 5,168 71 124 140 18 111 95
- --------------------------------------------------------------------------------------------------------------------------------
Total $21,307 $18,614 $11,838 $476 $317 $320 $206 $290 $259
================================================================================================================================
</TABLE>
Corporate & Other assets in the table above are not identifiable to operating
segments and principally include cash and cash equivalents, deferred income
taxes, plant and equipment associated with corporate headquarters, and certain
noncurrent receivables.
The increase in identifiable assets of Continuing Operations in 1996 and 1995
reflects the acquisitions of Infinity and CBS, respectively.
Included in income from Continuing Operations is income of subsidiaries located
outside the United States. These subsidiaries reported net income of $70
million in 1996, $81 million in 1995, and $15 million in 1994. Subsidiaries
located outside the United States comprised 5% of total assets of Continuing
Operations in 1996, 5% in 1995, and 17% in 1994. Subsidiaries located outside
the United States comprised 2% of total liabilities of Continuing Operations in
1996, 2% in 1995, and 5% in 1994.
The following table reflects selected financial information based on the
geographic area where the sale originated:
FINANCIAL INFORMATION BY GEOGRAPHIC AREA (in millions)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31 1996 1995 1994
====================================================================
<S> <C> <C> <C>
Sales of products and services
from Continuing Operations:
U.S. $ 7,533 $ 4,685 $4,412
Outside the U.S. 916 914 798
- --------------------------------------------------------------------
Sales of products and services $ 8,449 $ 5,599 $5,210
- --------------------------------------------------------------------
Operating profit (loss) from
Continuing Operations:
U.S. $ (856) $ (15) $ 358
Outside the U.S. 100 116 51
- --------------------------------------------------------------------
Operating profit (loss) $ (756) $ 101 $ 409
- --------------------------------------------------------------------
Segment identifiable assets of
Continuing Operations:
U.S. $18,816 $13,943 $5,547
Outside the U.S. 1,073 713 1,123
- --------------------------------------------------------------------
Segment identifiable assets $19,889 $14,656 $6,670
====================================================================
</TABLE>
The Corporation sells products manufactured domestically to customers
throughout the world using domestic divisions and subsidiaries doing business
primarily outside the United States. Generally, products manufactured outside
the United States are sold outside the United States.
59
<PAGE> 60
SALES OF PRODUCTS AND SERVICES SOLD OUTSIDE THE U.S. (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
AMOUNT % OF SALES AMOUNT % OF SALES AMOUNT % OF SALES
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Subsidiaries outside the U.S.:
Europe, Africa, Middle East $ 550 6.5% $ 568 10.1% $ 486 9.3%
Canada 273 3.2% 256 4.6% 227 4.4%
All other 93 1.1% 90 1.6% 85 1.6%
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 916 10.8% $ 914 16.3% $ 798 15.3%
============================================================================================================================
U.S. exports:
Europe, Africa, Middle East $ 331 3.9% $ 310 5.5% $ 399 7.7%
Asia-Pacific 709 8.4% 802 14.3% 508 9.8%
Latin America 288 3.4% 112 2.0% 166 3.2%
Canada 41 0.5% 48 0.9% 53 1.0%
- ----------------------------------------------------------------------------------------------------------------------------
Total $1,369 16.2% $1,272 22.7% $1,126 21.7%
============================================================================================================================
</TABLE>
Purchases by the U.S. Government and its agencies accounted for 3%, 6% and 6%
of sales of products and services from Continuing Operations for 1996, 1995 and
1994, respectively. Sales to the utility segment accounted for 26% of sales of
products and services from Continuing Operations during 1996, 34% in 1995 and
40% in 1994.
RESEARCH AND DEVELOPMENT BY CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994
=================================================================
<S> <C> <C> <C>
Westinghouse-sponsored:
Power Systems $ 29 $ 40 $ 66
Other 13 14 20
Customer-sponsored:
Power Systems 73 66 47
Other 26 45 52
- -----------------------------------------------------------------
Total research and development
expenditures $141 $165 $185
=================================================================
</TABLE>
NOTE 22: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by the
Corporation using the best available market information and appropriate
valuation methodologies. However, considerable judgment is necessary in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amounts that the
Corporation could realize in a current market exchange or the value that
ultimately will be realized by the Corporation upon maturity or disposition.
Additionally, because of the variety of valuation techniques permitted under
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
comparability of fair values among entities may not be meaningful. The use of
different market assumptions or estimation methodologies may have a material
effect on the estimated fair value amounts.
60
<PAGE> 61
FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED CONTRACT CARRYING ESTIMATED CONTRACT
AMOUNT FAIR VALUE AMOUNT AMOUNT FAIR VALUE AMOUNT
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 220 $ 220 $ - $ 196 $ 196 $ -
Investments in marketable securities 48 47 - 55 55 -
Noncurrent customer and other receivables 384 377 - 161 150 -
LIABILITIES:
Short-term debt 497 497 - 306 306 -
Current maturities of long-term debt 4 4 - 330 330 -
Long-term debt 5,149 5,147 - 7,226 7,239 -
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Interest rate swap agreements:
Unrealized losses - (7) - - (14) -
Foreign currency exchange contracts:
Unrealized gains (losses) - (4) - - 4 -
Letters of credit - - 522 - - 503
======================================================================================================================
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS--DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED CONTRACT CARRYING ESTIMATED CONTRACT
AMOUNT FAIR VALUE AMOUNT AMOUNT FAIR VALUE AMOUNT
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 13 $ 13 $ - $ 30 $ 30 $ -
Noncurrent customer and other receivables 29 27 - 109 108 -
Portfolio investments:
Real estate 2 2 - 35 16 -
Corporate finance - 1 - 1 (1) -
LIABILITIES:
Short-term debt 5 5 - 84 84 -
Current maturities of long-term debt 2 2 - 265 341 -
Long-term debt 417 423 - 157 164 -
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Interest rate and currency exchange
agreements:
Unrealized gains - - - - 72 -
Letters of credit - - 94 - - 317
======================================================================================================================
</TABLE>
61
<PAGE> 62
The following methods and assumptions were used to estimate the fair value of
financial instruments for which it was practicable to estimate that value.
CASH AND CASH EQUIVALENTS
The carrying amount for cash and cash equivalents approximates fair value.
INVESTMENTS IN MARKETABLE SECURITIES
The fair value of investments in marketable securities is based on quoted
market prices.
NONCURRENT CUSTOMER AND OTHER RECEIVABLES
The fair value of noncurrent customer and other receivables is estimated by
discounting the expected future cash flows at interest rates commensurate with
the creditworthiness of the customers and other third parties.
PORTFOLIO INVESTMENTS
At December 31, 1996 and 1995, the fair value of portfolio investments was
determined using financial information prepared by independent third parties,
discounted cash flow projections, financial statements for investee companies
and letters of intent or other asset sale agreements.
SHORT-TERM DEBT
The carrying amount of the Corporation's borrowings under credit facilities and
other arrangements approximate fair value.
LONG-TERM DEBT
The fair value of long-term debt has been estimated using quoted market prices
or discounted cash flow methods based on the Corporation's current borrowing
rates for similar types of borrowing arrangements with comparable terms and
maturities.
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS
The fair value of interest rate and currency exchange agreements is the amount
that the Corporation would receive or pay to terminate the agreements, based on
quoted market prices or discounted cash flow methods, considering current
interest rates, currency exchange rates and remaining maturities.
FINANCING COMMITMENTS
Most of the unfunded commitments relate to, and are inseparable from, specific
portfolio investments. When establishing the fair value for those portfolio
investments, consideration was given to the related financing commitments.
FOREIGN CURRENCY EXCHANGE CONTRACTS
The fair value of foreign exchange contracts is based on quoted market prices
to terminate the contracts.
NOTE 23: SUBSEQUENT EVENT (Unaudited)
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 closing price of the Corporation's
stock during a trading period just prior to closing the transaction, subject to
certain limits on the total number of shares to be issued and certain
termination rights under the merger agreement. This 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.
62
<PAGE> 63
QUARTERLY FINANCIAL INFORMATION
(Unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
1996 QUARTER ENDED 1995 QUARTER ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MARCH 31(a) DEC. 31 SEPT. 30 JUNE 30 MARCH 31
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of services and products $2,451 $1,967 $2,148 $1,883 $1,870 $1,215 $1,374 $1,140
Gross margin 766 677 762 424 643 357 417 326
Restructuring, litigation,
and other matters (150) - (175) (654) (200) (114) (5) -
Operating profit (loss) (2) 90 (30) (814) 27 (46) 89 31
Other income and expenses, net 27 25 8 (146) 14 124 1 (2)
Income (loss) from
Continuing Operations (32) 6 (89) (723) (54) 20 26 (11)
Income (loss) from
Discontinued Operations (b) (2) (4) - 967 47 (72) 33 26
Extraordinary loss - (30) - (63) - - - -
Net income (loss) (34) (28) (89) 181 (7) (52) 59 15
Earnings (loss) per
common share:
Continuing Operations (.07) .01 (.20) (1.65) (.13) .03 .04 (.06)
Discontinued Operations (.01) (.01) - 2.20 .11 (.18) .08 .07
Extraordinary loss - (.06) - (.14) - - - -
Earnings (loss) per
common share (.08) (.06) (.20) .41 (.02) (.15) .12 .01
Dividends per common share .05 .05 .05 .05 .05 .05 .05 .05
New York Stock Exchange
market price per share:
High 21-1/8 19 20-1/8 21 17-7/8 15-1/2 16-3/8 16
Low 17 15-3/8 17-3/8 16-5/8 13-3/8 12-5/8 13-7/8 12-1/8
====================================================================================================================================
</TABLE>
(a)Reported results for Continuing Operations include the impact of a one-time
accounting adjustment involving the application of accounting principles
related to long-term contracts. Sales were reduced by $180 million and
operating profit was reduced by $128 million for this modification.
(b)Includes a net gain of $1,018 million from disposals of business segments in
the first quarter of 1996 and a net loss of $76 million from a disposal in
the third quarter of 1995.
63
<PAGE> 64
FIVE-YEAR SUMMARY SELECTED FINANCIAL AND STATISTICAL DATA
(Unaudited, dollars in millions except per-share amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Sales of services and products $ 8,449 $ 5,599 $ 5,210 $ 5,158 $ 5,281
Operating profit (loss) (756) 101 409 6 468
Other income and expenses, net (86) 137 (285) (75) (32)
Interest expense (456) (236) (134) (164) (169)
Income (loss) from Continuing
Operations before income taxes
and minority interest (1,298) 2 (10) (233) 267
Income tax benefit (expense) 466 (10) 11 71 (82)
Income (loss) from Continuing
Operations (838) (19) (8) (171) 180
Income (loss) from Discontinued
Operations 961 34 85 (99) (1,236)
Extraordinary loss (93) - - - -
Cumulative effect of changes
in accounting principles - - - (56) (338)
Net income (loss) 30 15 77 (326) (1,394)
- -------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
Continuing Operations $ (1.89) $ (.13) $ (.15) $ (.63) $ .44
Discontinued Operations 2.17 .08 .22 (.28) (3.57)
Extraordinary loss (.21) - - - -
Cumulative effect of changes
in accounting principles - - - (.16) (.98)
Earnings (loss) per
common share .07 (.05) .07 (1.07) (4.11)
Dividends per common share .20 .20 .20 .40 .72
- -------------------------------------------------------------------------------------------------------------------------------
Total assets:
Continuing Operations $19,889 $14,656 $ 6,670 $ 6,905 $ 6,229
Discontinued Operations 1,418 3,958 5,168 7,616 11,696
Total assets 21,307 18,614 11,838 14,521 17,925
Long-term debt:
Continuing Operations 5,149 7,226 1,865 1,869 1,314
Discontinued Operations 417 157 589 663 1,629
Total debt:
Continuing Operations 5,650 7,862 2,497 2,500 2,800
Discontinued Operations 424 506 1,240 3,850 7,133
Shareholders' equity 5,742 1,508 1,815 1,062 2,235
- -------------------------------------------------------------------------------------------------------------------------------
Average common and common
equivalent shares outstanding 443,399,290 410,137,941 383,736,249 352,901,670 346,103,408
Market price range per share $21-1/8-15-3/8 $17-7/8-12-1/8 $15-1/4-10-7/8 $17-1/8-12-3/4 $20-7/8-9-3/4
Market price at year end 19-7/8 16-3/8 12-1/4 14-1/8 13-3/8
Common shareholders at year end 127,802 125,962 125,376 125,806 127,559
Average number of employees 59,275 77,813 84,399 103,063 109,050
===============================================================================================================================
</TABLE>
Previously reported amounts have been restated to segregate the results of
Discontinued Operations from Continuing Operations.
64
<PAGE> 65
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Part of the information concerning executive officers required by this item
is set forth in Part I pursuant to General Instruction G to Form 10-K and part
is incorporated herein by reference to "Security Ownership" in the Proxy
Statement.
The information as to directors is incorporated herein by reference to
"Election of Directors" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference
to pages 17 through 34 of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
the information required by this item is incorporated herein by reference
to "Security Ownership" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference
to "Transactions Involving Directors and Executive Officers" in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS
The financial statements required by this item are listed under Part II,
Item 8, which list is incorporated herein by reference.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for Westinghouse Electric
Corporation and the Reports of Independent Auditors and Accountants thereon are
included in Part IV of this report:
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Reports of Independent Auditors and Accountants on Financial Statement 68-69
Schedule
For the three years ended December 31, 1996: Schedule II -- Valuation 70
and Qualifying Accounts
</TABLE>
Other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
(A)(3) EXHIBITS
<TABLE>
<S> <C> <C>
(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) Amendment to Restated Articles.
</TABLE>
65
<PAGE> 66
<TABLE>
<S> <C> <C>
(c) 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.
(d) Amendments to Bylaws.
(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 amended to 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.
(e*) The Deferred Compensation and Stock Plan for Directors, as amended to
November 1, 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*) 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.
(o*) CBS Bonus Supplemental Executive Retirement Plan, as amended to November 15,
1995.
</TABLE>
* Identifies management contract or compensatory plan or arrangement.
66
<PAGE> 67
<TABLE>
<S> <C> <C>
(11) Computation of Per Share Earnings
(12)(a) Computation of Ratio of Earnings to Fixed Charges
(12)(b) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends
(21) Subsidiaries of the Registrant
(23)(a) Consent of Independent Auditors
(23)(b) Consent of Independent Accountants
(24) Powers of Attorney and Extract of Resolutions of Board of Directors
(27) Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K
A Current Report on Form 8-K (Items 5 and 7) dated November 4, 1996 filing
a press release concerning the Corporation's earnings for the third quarter of
1996.
A Current Report on Form 8-K (Items 5 and 7) dated November 13, 1996 filing
two press releases announcing the plan to spin-off the Corporation's industrial
businesses, the elimination of 1,100 positions and a charge of approximately
$125 million to cover severance programs.
A Current Report on Form 8-K (Items 5 and 7) dated December 31, 1996 filing
a press release announcing the completion of the merger of R Acquisition Corp.
into Infinity Broadcasting Corporation, which as a result became a wholly-owned
subsidiary of Westinghouse.
67
<PAGE> 68
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Westinghouse Electric Corporation
Under date of January 29, 1997, we reported on the consolidated balance
sheet of Westinghouse Electric Corporation and subsidiaries as of December 31,
1996, and the related consolidated statements of income and cash flows for the
year then ended, which are included in the 1996 Annual Report on Form 10-K. In
connection with our audit of the aforementioned consolidated financial
statements, we have also audited the related 1996 financial statement schedule
included in the 1996 Annual Report on Form 10-K. The financial statement
schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audit.
In our opinion, the 1996 financial statement schedule, when considered in
relation to the basic 1996 consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
January 29, 1997
68
<PAGE> 69
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Westinghouse Electric Corporation
Our audits of the consolidated financial statements referred to in our
report dated February 12, 1996 except for the restatements discussed in notes 1
and 3, for which the dates are March 31, 1996 and November 13, 1996, appearing
on page 32 of this Form 10-K of Westinghouse Electric Corporation (which report
and consolidated financial statements are included in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 12, 1996, except for the
restatements discussed in notes 1
and 3, for which the dates are
March 31, 1996 and November 13, 1996.
69
<PAGE> 70
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995 1994
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Customer receivables from Continuing Operations--allowance for
doubtful accounts:
Balance at beginning of year.................................... $ 32 $ 47 $ 48
Charged to costs and expenses................................... 14 5 8
Charged to the allowance........................................ (13) (25) (9)
Other........................................................... -- 5 --
---- ---- ----
Balance at end of year(a).................................. $ 33 $ 32 $ 47
==== ==== ====
Deferred income taxes--valuation allowance:
Balance at beginning of year.................................... $ 98 $101 $ 90
Charged (credited) to costs and expenses........................ 3 (3) 11
Reduction due to business divestitures.......................... (49) -- --
---- ---- ----
Balance at end of year..................................... $ 52 $ 98 $101
==== ==== ====
</TABLE>
- ---------
(a) At December 31, 1996, 1995 and 1994, all amounts were classified as current.
<PAGE> 71
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 19th day of
March, 1997.
WESTINGHOUSE ELECTRIC CORPORATION
By: /s/ Carol V. Savage
------------------------------
Carol V. Savage
Vice President and
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature and Title
-------------------
Frank C. Carlucci, Director
Robert E. Cawthorn, Director
Gary M. Clark, Vice Chairman, President
and Director
George H. Conrades, Director
William H. Gray, III, Director
Michael H. Jordan, Chairman and Chief
Executive Officer
(principal executive officer)
and Director
Mel Karmazin, Chairman and Chief By: /s/ Carol V. Savage
Executive Officer, CBS Radio, -----------------------
and Director Carol V. Savage
Dr. David K.P. Li, Director Attorney-In-Fact
David T. McLaughlin, Director March 19, 1997
Richard R. Pivirotto, Director
Fredric G. Reynolds, Executive Vice
President and Chief Financial
Officer (principal financial officer)
Carol V. Savage, Vice President and Chief
Accounting Officer (principal
accounting officer)
Raymond W. Smith, Director
Dr. Paula Stern, Director
Robert D. Walter, Director
Original powers of attorney authorizing Carol V. Savage and certain others,
individually, to sign this report on behalf of the listed directors and officers
of the Corporation and a certified copy of resolutions of the Board of Directors
of the Corporation authorizing Carol V. Savage and certain others to sign on
behalf of the Corporation have been filed with the Securities and Exchange
Commission and are included as Exhibit 24 to this report.
<PAGE> 1
Exhibit (3)(b)
(a) EXHIBITS
(3)(b) Amendments to Restated Articles
Section A of Article FIFTH of the Restated Articles of Incorporation of
the Corporation was amended and restated in its entirety as follows:
FIFTH: A. The total number of shares of all classes of stock which the
Company shall have authority to issue is 1,125,000,000 consisting of: (1)
25,000,000 shares of Preferred Stock, par value $1.00 per share ("Preferred
Stock"); and (2) 1,100,000,000 shares of Common Stock, Par value $1.00 per
share ("Common Stock").
<PAGE> 1
Exhibit (3)(d)
(a) EXHIBITS
(3)(d) Amendments to Bylaws
Article II of the By-laws of the Corporation was amended to reduce the
minimum number of members of standing Board committees from three to two.
Article IV was amended to delete references to a Controller and to officer
compensation.
The last sentence of the second paragraph of Article IX was amended and
restated in its entirety to read as follows:
"Procedures for withdrawal of moneys from accounts other than disbursing
accounts shall be established from time to time by the Treasurer."
"Article X. - Controller" was deleted in its entirety, Articles XI, XII,
XIII and XIV were renumbered as Articles X, XI, XII and XIII, and "Article
XXII. - Rights" was renumbered as "Article XIV. - Rights."
Article XI (renumbered Article X) was amended to delete references to the
Controller and Assistant Controller(s).
Article XVI was amended and restated in its entirety to read as follows:
"ARTICLE XVI
Certain Issues of Stock
The Company may from time to time issue shares of its stock and may
create and issue (whether or not in connection with the issuance of any of
its shares or other securities) option rights or securities having
conversion or option rights entitling the holders thereof to purchase or
acquire shares, option rights, securities having conversion or option
rights, or obligations, of any class or series, or assets of the Company,
or to purchase or acquire from the Company shares, option rights,
securities having conversion or option rights, or obligations, of any
class or series owned by the Company and issued by any other person. Such
shares, rights or securities may be issued to directors, officers
(including assistant officers) or employees of the Company or any of its
subsidiaries or to such other persons as the Company may determine
appropriate."
<PAGE> 1
Exhibit (10)(e)
DEFERRED COMPENSATION AND STOCK PLAN
FOR DIRECTORS
(AS AMENDED AS OF NOVEMBER 1, 1996)
SECTION 1. INTRODUCTION
1.1 Establishment. Westinghouse Electric Corporation, a Pennsylvania
corporation (the "Company"), has established the Deferred Compensation and
Stock Plan for Directors as amended as of April 24, 1996 (the "Plan") for those
directors of the Company who are neither officers nor employees of the Company.
The Plan provides, among other things, for the payment of specified portions of
the Annual Director's Fee in the form of Stock Options and Restricted Stock and
for the payment of the Annual Committee Chair's Fee in the form of Restricted
Stock, and the opportunity for the Directors to defer receipt of all or a part
of their cash compensation. Unless otherwise provided for herein, the term
Company includes Westinghouse Electric Corporation and its subsidiaries.
1.2 Purposes. The purposes of the Plan are to encourage the Directors to
own shares of the Company's stock and thereby to align their interests more
closely with the interests of the other shareholders of the Company, to
encourage the highest level of Director performance, and to provide a financial
incentive that will help attract and retain the most qualified Directors.
SECTION 2. DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Annual Committee Chair's Fee" means the annual amount established
from time to time by the Board as the annual fee to be paid to Directors for
their services as chairs of standing committees of the Board.
(b) "Annual Director's Fee" means the annual amount (which may be
prorated for a Director serving less than a full calendar year, as in the case
of a Director who will be retiring or not standing for reelection at the annual
meeting of shareholders or a Director joining the Board after the beginning of
the year) established from time to time by the Board as the annual fee to be
paid to Directors for their services as directors.
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(c) "Attendance Percentage" for a Director with respect to a
particular Grant Year means the percentage of the aggregate of all meetings of
the Board and committees of which the Director was a member held during the
Grant Year (or, for Directors who are elected after the beginning of the Grant
Year, Directors who retire at the annual meeting of shareholders (as described
in the Company's By-laws) held during the Grant Year, Directors who do not
stand for reelection at the annual meeting of shareholders held during the
Grant Year, or Directors who die during the Grant Year, the aggregate of all
such meetings held for the portion of the Grant Year during which the Director
served as a director), excluding any meeting not attended because of illness,
which were attended by the Director. In the event that a Director ceases to be
a director at any time during the Grant Year for any reason other than
retirement at the annual meeting of shareholders, not standing for reelection
at the annual meeting of shareholders, or death, all meetings held during the
Grant Year of the Board and committees of which he was a member at the time of
termination of service will continue to be included as meetings when
calculating the Attendance Percentage.
(d) "Board" means the Board of Directors of the Company.
(e) "Cash Account" means the account established by the Company in
respect of each Director pursuant to Section 6.3 hereof and to which deferred
cash compensation has been or will be credited pursuant to the Plan.
(f) "Cause" means any act of (a) fraud or intentional
misrepresentation or (b) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any of its direct or indirect majority-owned
subsidiaries.
(g) "Change in Control" shall have the meaning assigned to it in
Section 9.2 hereof.
(h) "Committee" means the Compensation Committee of the Board or any
successor established by the Board.
(i) "Common Stock Equivalent" means a hypothetical share of Stock
which shall have a value on any date equal to the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange on that date, except as otherwise provided under Section 9.1.
(j) "Common Stock Equivalent Award" means an award of Common Stock
Equivalents granted to a Director pursuant to Section 5 of the Plan prior to
its amendment as of April 26, 1995.
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(k) "Debenture" means a hypothetical debenture of the Company that has
a face value of $100, bears interest at a rate equal to the ten-year U.S.
Treasury Bond rate (prior to January 1, 1995, the seven-year U.S. Treasury Bond
rate) in effect the week prior to the regular January meeting of the Board (or,
if no such meeting is held, the week prior to the first trading day of the New
York Stock Exchange in February) in the year in respect of which deferred
amounts are earned, and is convertible into Stock at a conversion rate
determined by dividing $100 by the mean of the high and low prices of the Stock
as reported by the composite tape of the New York Stock Exchange on the date
the Debenture is credited to the Deferred Debenture Account pursuant to Section
6.3 hereof.
(l) "Deferred Debenture Account" means the account established by the
Company in respect of each Director pursuant to Section 6.3 hereof and to which
has been or will be credited Debentures and other amounts pursuant to the Plan.
(m) "Deferred Stock Account" means the account established by the
Company in respect of each Director pursuant to Section 5.2 hereof and to which
has been or will be credited Common Stock Equivalents pursuant to the Plan.
(n) "Director" means a member of the Board who is neither an officer
nor an employee of the Company. For purposes of the Plan, an employee is an
individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Internal Revenue Code, and an officer is an
individual elected or appointed by the Board or chosen in such other manner as
may be prescribed in the By-laws of the Company to serve as such.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(p) "Fair Market Value" means the mean of the high and low prices of
the 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 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.
(q) "Grant Date" means, as to a Stock Option Award, the date of grant
pursuant to Section 7.1 and as to a Restricted Stock Award, the date of grant
pursuant to Section 8.1.
(r) "Grant Year" means, as to a particular award, the calendar year in
which the award was granted.
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(s) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time.
(t) "Restricted Stock" means shares of Stock awarded to a Director
pursuant to Section 8 and subject to certain restrictions in accordance with
the Plan.
(u) "Restricted Stock Award" means an award of shares of Restricted
Stock granted to a Director pursuant to Section 8 of the Plan.
(v) "Stock" means the common stock, $1.00 par value, of the Company.
(w) "Stock Option" means a non-statutory stock option to purchase
shares of Stock for a purchase price per share equal to the Exercise Price (as
defined in Section 7.2(a)) in accordance with the provisions of the Plan.
(x) "Stock Option Award" means an award of Stock Options granted to a
Director pursuant to Section 7 of the Plan.
(y) "Stock Option Value" means the value of a Stock Option for one
share of Stock on the relevant date as determined by an outside firm selected
by the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
SECTION 3. PLAN ADMINISTRATION
(a) The Plan shall be administered by the Committee. The members of
the Committee shall be members of the Board appointed by the Board, and any
vacancy on the Committee shall be filled by the Board.
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 concerning the operations of the Plan.
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(b) Subject to the limitations of the Plan, the Committee shall have
the sole and complete authority: (i) to impose such limitations, restrictions
and conditions upon such awards as it shall deem appropriate; (ii) to interpret
the Plan and to adopt, amend and rescind administrative guidelines and other
rules and regulations relating to the Plan; and (iii) to make all other
determinations and to take all other actions necessary or advisable for the
implementation and administration of the Plan. Notwithstanding the foregoing,
the Committee shall have no authority, discretion or power to select the
Directors who will receive awards pursuant to the Plan, determine the awards to
be granted pursuant to the Plan, the number of shares of Stock to be issued
thereunder or the price thereof or the time at which such awards are to be
granted, establish the duration and nature of awards or alter any other terms
or conditions specified in the Plan, except in the sense of administering the
Plan subject to the provisions 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 Company shall be the sponsor of the Plan. All expenses
associated with the Plan shall be borne by the Company.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. 600,000 shares of Stock are authorized for issuance
under the Plan in accordance with the provisions of the Plan, subject to
adjustment and substitution as set forth in this Section 4. This authorization
may be increased from time to time by approval of the Board and, if such
approval is required, by the shareholders of the Company. The Company shall at
all times during the term of the Plan retain as authorized and unissued Stock
at least the number of shares from time to time required under the provisions
of the Plan, or otherwise assure itself of its ability to perform its
obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to a
Common Stock Equivalent Award, a Stock Option Award, a Restricted Stock Award
or a Debenture and which are forfeited, any shares of Stock that for any other
reason are not issued to a Director, and any shares of Stock tendered by a
Director to pay the Exercise Price of a Stock Option shall automatically become
available again for use under the Plan if Rule 16b-3 under the Exchange Act, as
such rule may be amended, or any successor rule, and interpretations thereof by
the Securities and Exchange Commission or its staff permit such share
replenishment.
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4.3 Adjustments Upon Changes in Stock. If there shall be any change in the
Stock of the Company, through merger, consolidation, division, share exchange,
combination, reorganization, recapitalization, stock dividend, stock split,
spinoff, split up, dividend in kind or other change in the corporate structure
or distribution to the shareholders, appropriate adjustments may be made by the
Committee (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 which may be issued under the Plan. Appropriate adjustments may
also be made by the Committee in the terms of any awards or Debentures under
the Plan to reflect such changes and to modify any other terms of outstanding
awards on an equitable basis as the Committee in its discretion determines.
SECTION 5. COMMON STOCK EQUIVALENT AWARDS
5.1 Grants of Common Stock Equivalent Awards. Common Stock Equivalents
equal to a fixed number of shares of Stock were granted automatically to
Directors on a formula basis under Section 5.1 of the Plan prior to its
amendment as of April 26, 1995. All Common Stock Equivalents granted pursuant
to Section 5.1 prior to its amendment as of April 26, 1995 shall be subject to
adjustment as provided in Section 4.3.
5.2 Deferred Stock Account. A Deferred Stock Account has been established
for each Director elected prior to the annual meeting of shareholders held in
1995. The Deferred Stock Account shall consist of compensation in the form of
Common Stock Equivalents which have been awarded to the Director hereunder by
the Company plus Common Stock Equivalents credited to the Deferred Stock
Account in respect of dividends and other distributions on the Stock pursuant
to Sections 5.3 and 5.4.
5.3 Hypothetical Investment. Compensation awarded hereunder in the form of
Common Stock Equivalents is assumed to be a hypothetical investment in shares
of Stock, and will be subject to adjustment to reflect stock dividends, splits
and reclassifications and as otherwise set forth in Section 4.3.
5.4 Hypothetical Dividends. Dividends and other distributions on Common
Stock Equivalents shall be deemed to have been paid as if such Common Stock
Equivalents were actual shares of Stock issued and outstanding on the
respective record or distribution dates. Common Stock Equivalents shall be
credited to the Deferred Stock Account in respect of cash dividends and any
other securities or property issued on the Stock in connection with
reclassifications, spinoffs and the like on the basis of the value of the
dividend or other asset distributed and the value of the Common Stock
Equivalents on the date of the announcement of the dividend or asset
distribution, all at the same time and in the same amount as dividends or other
distributions are paid or issued on the Stock. Such Common Stock Equivalents
shall be subject to adjustment as provided in Section 4.3. Fractional shares
shall be credited to a Director's Deferred Stock Account cumulatively but the
balance of shares of Common Stock Equivalents in a Director's Deferred Stock
Account shall be rounded to the next highest whole share for any payment to
such Director pursuant to Section 5.6.
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5.5 Statement of Account. A statement will be sent to each Director as to
the balance of his Deferred Stock Account at least once each calendar year.
5.6 Payment of Deferred Stock. Upon termination of services as a Director,
the balance of the Director's Deferred Stock Account shall be paid to such
Director in Stock in January of the year following the year of termination of
services as a director on the basis of one share of Stock for each Common Stock
Equivalent in such Director's Deferred Stock Account.
5.7 Payments to a Deceased Director's Estate. In the event of a Director's
death before the balance of his Deferred Stock Account is fully paid to him,
payment of the balance of the Director's Deferred Stock Account shall then be
made to the beneficiary designated by the Director pursuant to Section 5.8, or
to his estate in the absence of such a beneficiary designation, in the time and
manner selected by the Committee. The Committee may take into account the
application of any duly appointed administrator or executor of a Director's
estate and direct that the balance of the Director's Deferred Stock Account be
paid to his estate in the manner requested by such application.
5.8 Designation of Beneficiary. A Director may designate a beneficiary in
a form approved by the Committee.
SECTION 6. DEFERRAL OF COMPENSATION
6.1 Amount of Deferral. A Director may elect to defer receipt of all or a
specified portion of the cash compensation otherwise payable to the Director
for services rendered to the Company as a director.
6.2 Manner of Electing Deferral. A Director shall make elections permitted
hereunder by giving written notice to the Company in a form approved by the
Committee. The notice shall include: (i) the percentage of cash compensation to
be deferred; which amount must be stated in whole increments of five percent;
and (ii) the time as of which deferral is to commence.
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6.3 Accounts. A Cash Account and a Deferred Debenture Account has been or
shall be established for each Director electing to defer hereunder. Each Cash
Account shall be credited with the amounts deferred on the date such
compensation is otherwise payable and shall be debited with the amount of any
such compensation forfeited in accordance with applicable Board policy. Such
deferred amounts shall accrue interest from time to time at a rate equal to the
ten-year U.S. Treasury Bond rate (prior to January 1, 1995, the seven-year U.S.
Treasury Bond rate) in effect the week prior to the regular January meeting of
the Board (or, if no such meeting is held, the week prior to the first trading
day of the New York Stock Exchange in February) in the year in respect of which
such deferred amounts are earned until the last trading day of the New York
Stock Exchange prior to the regular January meeting of the Board (or, if no
such meeting is held, until the first trading day of February) in the year
following the year in respect of which deferred amounts are earned, at which
time such deferred amounts, including interest, shall be invested in Debentures
and credited to the Deferred Debenture Account. Deferred amounts shall be
credited to the Deferred Debenture Account only in $100 amounts. Fractional
amounts of $100 shall remain in the Cash Account and continue to accrue
interest.
6.4 Time for Electing Deferral. Any election to (i) defer cash
compensation, (ii) alter the portion of such amounts deferred, or (iii) revoke
an election to defer such amounts, must be made no later than six months prior
to the time such compensation is earned by the Director or, if permitted by the
rules under Section 16 of the Exchange Act, no later than six months prior to
the time such deferred compensation is invested in Debentures and credited to
the Deferred Debenture Account pursuant to Section 6.3. An election to commence
a deferral may be made at any time in accordance with the procedures set forth
in Section 6.2. Any election so made shall remain in effect beginning six
months from the date of election until the Director ceases to be a director or
six months from the date the Director elects in writing to change his election.
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6.5 Payment of Deferred Amounts. Payments from a Deferred Debenture
Account shall be made in five consecutive annual installments beginning in the
January following the Director's termination of service. Payments from a
Deferred Debenture Account shall consist of accumulated interest on the
Debentures (which amount shall only be payable in cash) plus the greater value
of (i) the face value of the Debentures or (ii) the shares of Stock into which
the Debentures are convertible. In the event the value of the payment is
determined by the amount referred to in clause (i), payment shall be made in
cash. In the event such value is determined by clause (ii), such payment shall
be made in Stock, other than the value of fractional shares which will be paid
in cash.
6.6 Payments to a Deceased Director's Estate. In the event of a Director's
death before the balance of his Cash Account or Deferred Debenture Account is
fully paid to him, payment of the balance of the Cash Account or Deferred
Debenture Account shall then be made to the beneficiary designated by the
Director pursuant to Section 6.7, or to his estate in the absence of such
beneficiary designation, in the time and manner selected by the Committee. The
Committee may take into account the application of any duly appointed
administrator or executor of a Director's estate and direct that the balance of
the Director's Cash Account or Deferred Debenture Account be paid to his estate
in the manner requested by such application.
6.7 Designation of Beneficiary. A Director may designate a beneficiary in
a form approved by the Committee.
SECTION 7. STOCK OPTION AWARDS
7.1 Grants of Stock Option Awards.
(a) Stock Options for a fixed number of shares of Stock were granted
automatically to Directors on a formula basis under Section 7.1(a) of the Plan
prior to its amendment as of April 24, 1996.
(b) Prior to the amendment of the Plan as of April 24, 1996, Stock
Options for a fixed number of shares of Stock were granted automatically on a
formula basis under Section 7.1(b) of the Plan to Directors serving as chairs
of standing committees of the Board.
(c) Beginning with the calendar year 1996, each Director will receive
one-fourth of the value of his Annual Director's Fee in the form of a Stock
Option Award. Such Stock Options shall be granted automatically each year on
the last Wednesday in January of such year to each Director in office on such
Grant Date. If a person is elected to the Board at any time after the last
Wednesday in January of a given calendar year (beginning with 1996) but before
the end of that calendar year, whether by action of the shareholders of the
Company or the Board, such person upon becoming a Director shall be granted
automatically one-fourth of the value of his Annual Director's Fee for that
calendar year in the form of a Stock Option Award on the last Wednesday of the
calendar month in which such person becomes a Director (or in the next
following calendar month if such election occurs after the last Wednesday of
the month). The total number of shares of Stock subject to any such Stock
Option Award will be the number of shares determined by dividing the amount of
the Annual Director's Fee to be paid in the form of a Stock Option Award by the
Stock Option Value on the Grant Date, rounded up to the nearest whole share.
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(d) All Stock Options granted pursuant to Section 7.1 (whether before
or after amendment of the Plan as of April 24, 1996) shall be subject to
adjustment as provided in Section 4.3.
7.2 Terms and Conditions of Stock Options. Stock Options granted under the
Plan shall be subject to the following terms and conditions:
(a) Exercise Price. The purchase price per share at which a Stock
Option may be exercised ("Exercise Price") shall be determined as follows: on
any Grant Date, (1) Stock Options for two-thirds of the option shares granted
on the Grant Date shall have an Exercise Price per share equal to 100% of Fair
Market Value on the Grant Date, and (2) Stock Options for the remaining
one-third of the option shares granted on the Grant Date shall have an Exercise
Price per share equal to 125% of Fair Market Value on the Grant Date.
(b) Exercisability. Subject to the terms and conditions of the Plan
and of the agreement referred to in Section 7.2(j), a Stock Option may be
exercised in whole or in part upon notice of exercise to the Company, (1) as to
any Stock Option granted on or prior to January 1, 1996, commencing on the
first day after the Grant Date and until it terminates, and (2) as to any Stock
Option granted after January 1, 1996 that vests as provided in Section 7.2(c),
commencing on January 1 of the calendar year next following the Grant Year.
During a Director's lifetime, a Stock Option may be exercised only by the
Director or the Director's guardian or legal representative.
(c) Vesting of Stock Option Awards. Stock Options granted on or prior
to January 1, 1996 vest immediately on grant. Stock Options granted after
January 1, 1996 will vest on January 1 of the calendar year next following the
Grant Year (the "Option Vesting Date") if the Director has an Attendance
Percentage of at least seventy-five percent (75%) for the Grant Year. In the
event that a Director has an Attendance Percentage of less than seventy-five
percent (75%) for a Grant Year, Stock Options granted in that Grant Year for a
number of shares equal to the Director's Attendance Percentage for that year
multiplied by the total number of option shares granted for that year (rounded
up to the nearest whole share) will vest on the Option Vesting Date, and Stock
Options granted in that Grant Year as to the remaining option shares will be
forfeited and will terminate as of the Option Vesting Date. Notwithstanding
anything to the contrary herein, (1) in the event that a director is removed
from office for Cause, all outstanding Stock Options will be forfeited
immediately as of the time the grantee is so removed from office, and (2) upon
the occurrence of a Change in Control, all outstanding Stock Options will vest
and become immediately exercisable.
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(d) Mandatory Holding of Stock. Except as otherwise provided in
Section 7.5 or Section 10, any Stock acquired on exercise of a Stock Option
must be held by the grantee for a minimum of (1) three years from the date of
exercise, (2) two years from the date the grantee ceases to be a director of
the Company, or (3) until the occurrence of a Change in Control, whichever
first occurs (the "Option Shares Holding Period").
(e) Option Term. The term of a Stock Option (the "Option Term") shall
be the period of (1) ten years from its Grant Date, or (2) until the Option
Vesting Date for a Stock Option that does not vest as provided in Section
7.2(c), or (3) until the time the Stock Option is forfeited as provided in
Section 7.2(c)(1) in the event a director is removed from office for Cause, or
(4) until the date the Stock Option ceases to be exercisable as provided in
Section 7.2(h), whichever is earlier.
(f) Payment of Exercise Price. Stock purchased on exercise of a Stock
Option must be paid for as follows: (1) in cash or by check (acceptable to the
Company), bank draft or money order payable to the order of the Company, (2)
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
per share multiplied by the number of shares as to which the Stock Option is
being exercised (the "Aggregate Exercise Price"); (3) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the Aggregate Exercise Price, or (4) by a
combination of the permissible forms of payment; provided, however, that any
portion of the Exercise Price representing a fraction of a share must be paid
in cash and no share of Stock held for less than six months may be delivered in
payment of the Aggregate Exercise Price.
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(g) Rights as a Shareholder. The holder of a Stock Option will not
have any of the rights of a shareholder with respect to any shares of Stock
subject to the Stock Option until such shares are issued by the Company
following the exercise of the Stock Option.
(h) Termination of Eligibility. If a grantee ceases to be a Director
for any reason, any outstanding Stock Options shall be exercisable according to
the following provisions:
(1) If a grantee ceases to be a director for any reason other than
removal for Cause or death, any outstanding Stock Options held by such grantee
which are vested or which thereafter vest shall be exercisable by the grantee
in accordance with their terms at any time prior to the expiration of the
Option Term;
(2) If a grantee is removed from office as a director of the Company
for Cause, any outstanding vested Stock Options held by such grantee shall be
exercisable by the grantee in accordance with their terms at any time prior to
the earlier of (a) the time the grantee is so removed from office and (b) the
expiration of the Option Term; and
(3) Following the death of a grantee while a director or after the
grantee ceased to be a director for any reason other than removal for Cause,
any Stock Options that are outstanding and exercisable by such grantee at the
time of death or which thereafter vest shall be exercisable in accordance with
their terms by the person or persons entitled to do so under the grantee's
will, by a properly designated beneficiary in the event of death, or by the
person or persons entitled to do so under the applicable laws of descent and
distribution at any time prior to the earlier of (a) the expiration of the
Option Term and (b) two years after the date of death.
(i) Termination of Stock Option. A Stock Option shall terminate on the
earlier of (1) exercise of the Stock Option in accordance with the terms of the
Plan, and (2) expiration of the Option Term as specified in Sections 7.2(e) and
7.2(h).
(j) Stock Option Agreement. All Stock Options will be confirmed by an
agreement, or an amendment thereto, which shall be executed on behalf of the
Company by the Chief Executive Officer, the President or any Vice President and
by the grantee.
(k) General Restrictions.
(1) The obligation of the Company to issue Stock pursuant to Stock
Options under the Plan shall be subject to the condition that, if at any time
the Company shall determine that (a) the listing, registration or qualification
of shares of Stock upon any securities exchange or under any state or federal
law, or (b) the consent or approval of any government or regulatory body is
necessary or desirable, then such Stock shall not be issued unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free from any conditions not acceptable to the Company.
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(2) Shares of Stock for use under the provisions of this Section 7
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 shall determine, and a registration statement under the Securities
Act of 1933 with respect to such shares shall have become, and be, effective.
Subject to the foregoing provisions of this Section 7.2 and the other
provisions of the Plan, any Stock Option granted under the Plan shall be
subject to such restrictions and other terms and conditions, if any, as shall
be determined by the Committee, in its discretion, and set forth in the
agreement referred to in Section 7.2(j), or an amendment thereto; provided,
however, that in no event shall the Committee or the Board have any power or
authority which would cause transactions pursuant to the Plan to cease to be
exempt from the provisions of Section 16(b) of the Exchange Act pursuant to
Rule 16b-3, as such rule may be amended, or any successor rule.
7.3 Annual Statement. A statement will be sent to each Director as to the
status of his Stock Options at least once each calendar year.
7.4 Designation of a Beneficiary. A Director may designate a beneficiary
to hold and exercise outstanding Stock Options in accordance with the Plan in
the event of the Director's death.
7.5 Holding Period Applicable to a Deceased Grantee's Estate. As long as
at least six months have elapsed since the Grant Date, a properly designated
beneficiary, or a person holding a Stock Option under a deceased grantee's will
or under the applicable laws of descent or distribution, exercising a Stock
Option in accordance with Section 7.2(h) will not be subject to the Holding
Period with respect to shares of Stock received on exercise of a Stock Option.
SECTION 8. RESTRICTED STOCK AWARDS.
8.1 Grants of Restricted Stock Awards.
(a) Beginning with the calendar year 1996, each Director will receive
one-fourth of the value of his Annual Director's Fee in the form of a
Restricted Stock Award. Such Restricted Stock shall be granted automatically
each year on the last Wednesday in January of such year to each Director in
office on such Grant Date. If a person is elected to the Board at any time
after the last Wednesday in January of a given calendar year (beginning with
1996) but before the end of that calendar year, whether by action of the
shareholders of the Company or the Board, such person upon becoming a Director
shall be granted automatically one-fourth of the value of his Annual Director's
Fee for that calendar year in the form of a Restricted Stock Award on the last
Wednesday in the calendar month in which such person becomes a Director (or in
the next following calendar month if said election occurs after the last
Wednesday of the month).
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(b) Beginning with the calendar year 1996, each Director who is the
chair of a standing committee of the Board will receive the full value of his
Annual Committee Chair's Fee in the form of a Restricted Stock Award. Such
Restricted Stock shall be granted automatically each year immediately following
the annual meeting of shareholders and the organization meeting of the Board
related to such annual meeting of shareholders, beginning with the annual
meeting of shareholders and related organization meeting held in 1996, to each
Director who is elected at such organization meeting to serve as the chair of a
standing committee of the Board.
(c) The total number of shares of Stock representing any such
Restricted Stock Award will be the number of shares determined by dividing the
amount of the Annual Director's Fee or the Annual Committee Chair's Fee, as the
case may be, to be paid in the form of a Restricted Stock Award by the Fair
Market Value of a share of Stock on the Grant Date, rounded up to the nearest
whole share.
(d) Restricted Stock granted pursuant to Section 8.1 shall be subject
to adjustment as provided in Section 4.3.
8.2 Terms and Conditions of Restricted Stock. Restricted Stock granted
under the Plan shall be subject to the following terms and conditions:
(a) Restriction Period. Restricted Stock will be subject to a
Restriction Period ("Restriction Period") beginning on the Grant Date and
continuing through December 31 of the Grant Year.
(b) Vesting.
(1) Except as set forth in Section 8.2(b)(3), a Director's right to
ownership in shares of Restricted Stock granted to a Director pursuant to
Section 8.1(a) will vest on the January 1 immediately following the expiration
of the Restriction Period for such shares (the "Restricted Stock Vesting Date")
if the Director has an Attendance Percentage of at least seventy-five percent
(75%) for the Grant Year. In the event that a Director has an Attendance
Percentage of less than seventy-five percent (75%) for a Grant Year, a number
of shares of Restricted Stock equal to the Director's Attendance Percentage for
the Grant Year multiplied by the total number of shares of Restricted Stock
granted pursuant to Section 8.1(a) during the Grant Year (rounded up to the
nearest whole share) will vest on the Restricted Stock Vesting Date and the
remaining shares of Restricted Stock granted pursuant to Section 8.1(a) during
the Grant Year will be forfeited as of the Restricted Stock Vesting Date.
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(2) Except as set forth in Section 8.2(b)(3) below, a Director's right
to ownership in shares of Restricted Stock granted to a committee chair
pursuant to Section 8.1(b) will vest on the Restricted Stock Vesting Date.
(3) Notwithstanding anything to the contrary herein, (i) in the event
that a director is removed from office for Cause prior to the Restricted Stock
Vesting Date, all of said Director's shares of Restricted Stock that have not
yet vested will be forfeited immediately as of the time the grantee is so
removed from office and the Company will have the right to complete the blank
stock power described below with respect to such shares, and (ii) upon the
occurrence of a Change in Control, all shares of Restricted Stock that have not
yet vested will immediately vest.
(c) Issuance of Shares. On the Grant Date, a certificate representing
the shares of Restricted Stock will be registered in the Director's name and
deposited by the Director, together with a stock power endorsed in blank, with
the Company. Subject to the transfer restrictions set forth in Section 8.2(d)
and to the last sentence of this Section 8.2(c), the Director as owner of
shares of Restricted Stock will have the rights of the holder of such
Restricted Stock during the Restriction Period. Following expiration of the
Restriction Period, on the Restricted Stock Vesting Date, vested shares of
Restricted Stock will be redelivered by the Company to the Director and
non-vested shares of Restricted Stock will be forfeited and the Company will
have the right to complete the blank stock power with respect to such shares.
For shares of Restricted Stock granted prior to the effective date of the Plan
as set forth in Section 14, no certificate will be issued, such shares will not
be issued and outstanding, and the Director will not have any of the rights of
an owner of the shares until such effective date has occurred.
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(d) Transfer Restrictions; Mandatory Holding of Stock. Except as
otherwise provided in Section 8.5 or Section 10, shares of Restricted Stock are
not transferable during the Restriction Period. Once the Restriction Period
lapses and shares vest, except as otherwise provided in Section 8.5 or Section
10, shares acquired as a Restricted Stock Award must be held by the grantee for
a minimum of: (1) three years from the Grant Date, (2) two years from the date
the grantee ceases to be a director of the Company, or (3) until the occurrence
of a Change of Control, whichever first occurs (the "Restricted Shares Holding
Period").
(e) Restricted Stock Agreement. All Restricted Stock Awards will be
confirmed by an agreement, or an amendment thereto, which will be executed on
behalf of the Company by the Chief Executive Officer, the President or any Vice
President and by the grantee.
(f) General Restriction.
(1) The obligation of the Company to issue shares of Restricted Stock
under the Plan shall be subject to the condition that, if at any time the
Committee shall determine that (a) the listing, registration or qualification
of shares of Restricted Stock upon any securities exchange or under any state
or federal law, or (b) the consent or approval of any government or regulatory
body is necessary or desirable, then such Restricted Stock shall not be issued
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free from any conditions not acceptable to the
Company.
(2) Shares of Stock for use under the provisions of this Section 8
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 shall determine, and a registration statement under the Securities
Act of 1933 with respect to such shares shall have become, and be, effective.
Subject to the foregoing provisions of this Section 8.2 and the other
provisions of the Plan, any shares of Restricted Stock granted under the Plan
shall be subject to such restrictions and other terms and conditions, if any,
as shall be determined by the Committee, in its discretion, and set forth in
the agreement referred to in Section 8.2(e), or an amendment thereto; provided,
however, that in no event shall the Committee or the Board have any power or
authority which would cause transactions pursuant to the Plan to cease to be
exempt from the provisions of Section 16(b) of the Exchange Act under Rule
16b-3, as such rule may be amended, or any successor rule.
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8.3 Annual Statement. A statement will be sent to each Director as to the
status of his Restricted Stock at least once each calendar year.
8.4 Designation of a Beneficiary. A Director may designate a beneficiary
to hold shares of Restricted Stock in accordance with the Plan in the event of
the Director's death.
8.5 Holding Period Applicable to a Deceased Grantee's Estate. As long as
at least six months have elapsed since the Grant Date, a properly designated
beneficiary, or a person holding shares of Restricted Stock under a deceased
grantee's will or under the applicable laws of descent or distribution, will
not be subject to the Restricted Shares Holding Period with respect to such
shares of Restricted Stock.
SECTION 9. CHANGE IN CONTROL
9.1 Settlement of Compensation. In the event of a Change in Control of the
Company as defined herein, (a) to the extent not already vested, all Stock
Option Awards, Restricted Stock Awards and other benefits hereunder shall be
vested immediately; and (b) the value of all unpaid benefits and deferred
amounts shall be paid in cash to PNC Bank, National Association, the trustee
pursuant to a trust agreement dated as of June 22, 1995, as amended from time
to time, or any successor trustee, or otherwise on such terms as the Committee
may prescribe or permit. For purposes of this Section 9.1, the value of
deferred amounts shall be equal to the sum of (i) the value of all Common Stock
Equivalent Awards then held in such Director's Deferred Stock Account (the
value of which shall be based upon the highest price of the Stock as reported
by the composite tape of the New York Stock Exchange during the 30 days
immediately preceding the Change in Control), (ii) the value of the Director's
Cash Account, and (iii) the greater value of (x) the cash amount equal to the
face value of the Debentures plus cash equal to accrued interest or (y) the
number of shares of Stock into which the Debentures are convertible (the value
of which shall be based upon the highest price of the Stock as reported by the
composite tape of the New York Stock Exchange during the 30 days immediately
preceding the Change in Control), plus cash equal to accrued interest.
9.2 Definition of Change in Control. A Change in Control shall mean the
occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of the Company's Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's 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 Company; or
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(b) the shareholders of the Company shall approve of any plan or
proposal for the liquidation or dissolution of the Company, or
(c) (i) any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity shall purchase any Stock of the
Company (or securities convertible into the Company's 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 Stock (or securities
convertible into 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 Company or any benefit plan sponsored by the Company or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent or more of the combined
voting power of the Company'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 is approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such two-year
period.
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SECTION 10. ASSIGNABILITY
The right to receive payments or distributions hereunder (including
any "derivative security" issued pursuant to the Plan, as such term is defined
by the rules promulgated under Section 16 of the Exchange Act), any shares of
Restricted Stock granted hereunder during the Restriction Period, and any Stock
Options granted hereunder shall not be transferable or assignable by a Director
other than by will, by the laws of descent and distribution, to a properly
designated beneficiary in the event of death, or pursuant to a domestic
relations order as defined by Section 414(p)(1)(B) of the Internal Revenue Code
or the rules thereunder that satisfies Section 414(p)(1)(A) of the Internal
Revenue Code or the rules thereunder. In addition, Stock acquired on exercise
of a Stock Option shall not be transferable prior to the end of the applicable
Option Shares Holding Period, if any, set forth in Sections 7.2(d) and 7.5, and
Stock acquired as Restricted Stock shall not be transferable prior to the end
of the applicable Restricted Shares Holding Period, if any, set forth in
Sections 8.2(d) and 8.5, in either case other than by will, by transfer to a
properly designated beneficiary in the event of death, by the applicable laws
of descent and distribution or pursuant to a domestic relations order as
defined by Section 414(p)(1)(B) of the Internal Revenue Code or the rules
thereunder that satisfies Section 414(p)(1)(A) of the Internal Revenue Code or
the rules thereunder.
SECTION 11. RETENTION; WITHHOLDING OF TAX
11.1 Retention. Nothing contained in the Plan or in any Stock Option Award
or Restricted Stock Award granted under the Plan shall interfere with or limit
in any way the right of the Company to remove any Director from the Board
pursuant to the Restated Articles of Incorporation and the By-laws of the
Company, nor confer upon any Director any right to continue in the service of
the Company.
11.2 Withholding of Tax. To the extent required by applicable law and
regulation, each Director must arrange with the Company for the payment of any
federal, state or local income or other tax applicable to any payment or any
delivery of Stock hereunder before the Company shall be required to make such
payment or issue (or, in the case of Restricted Stock, deliver) such shares
under the Plan.
SECTION 12. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan, provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
shareholders if shareholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements and provided further, that,
unless otherwise permitted by the rules under Section 16 of the Exchange Act,
no amendment or modification shall be made more than once every six months that
would change the amount, price, or timing of the Common Stock Equivalent
Awards, Stock Option Awards or Restricted Stock Awards hereunder, other than to
comport with changes in the Internal Revenue Code, the Employment Retirement
Income Security Act of 1974, as amended, or the rules promulgated thereunder.
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SECTION 13. REQUIREMENTS OF LAW
13.1 Federal Securities Law Requirements. Implementation and
interpretations of, transactions pursuant to, the Plan shall be subject to all
conditions required under Rule 16b-3, as such rule may be amended, or any
successor rule, to qualify such transactions for any exemption from the
provisions of Section 16(b) of the Exchange Act available under that rule, or
any successor rule.
13.2 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
SECTION 14. EFFECTIVE DATE OF APRIL 24, 1996 AMENDMENT.
This Plan shall be effective on the date on which the April 24, 1996
amendment to the Deferred Compensation and Stock Plan for Directors is approved
by the common shareholders of the Company. Automatic grants of Stock Options
and Restricted Stock to Directors for Annual Director's Fees will begin on
January 31, 1996 but are subject to such shareholder approval, and, in the case
of Restricted Stock Awards, said shares shall not be issued and outstanding
until such approval is obtained. In the event that the April 24, 1996 amendment
is not so approved, the Deferred Compensation and Stock Plan for Directors as
in effect prior to the amendment shall remain in full force and effect, and the
automatic grants made on January 31, 1996 shall be null and void.
This Plan shall not preclude the adoption by appropriate means of any
other compensation or deferral plan for directors.
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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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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. In making this selection and in
determining the form and amount of Awards, the Committee may give consideration
to the functions and responsibilities of the Eligible Person, his or her past,
present and potential contributions to the Company and other factors deemed
relevant by the Committee.
1.4 Types of Awards under Plan
Awards ("Awards") under the Plan may be in the form of any one or more of
the following: (i) Non-statutory Stock Options ("NSOs" or "Options"), as
described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited
Stock Appreciation Rights ("Limited Rights"), as described in Article III,
(iii) Performance Awards ("Performance Awards") as described in Article IV, and
(iv) Restricted Stock ("Restricted Stock") as described in Article V.
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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.
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.
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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 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.
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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 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.
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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 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.
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(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
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.
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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."
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.
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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.
ARTICLE VI
DEFERRAL OF PAYMENTS
6.1 Deferral of Amounts
If the Committee makes a determination to designate Awards or, from time
to time, groups or types of Awards, eligible for deferral hereunder, a
Participant may, subject to such terms and conditions and within such limits as
the Committee may from time to time establish, elect to defer the receipt of
amounts due to him or her under the Plan. Amounts so deferred are referred to
herein as "Deferred Amounts." The Committee may also permit amounts now or
hereafter deferred or available for deferral under any present or future
incentive compensation program or deferral arrangement of the Company to be
deemed Deferred Amounts and to become subject to the provisions of this
Article. Awards which are so deferred will be deemed to have been awarded in
cash and the cash deferred as Deferred Amounts.
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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.
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.
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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 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,
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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 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.
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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 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.
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(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.
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.
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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 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.
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.
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(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.
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Exhibit (10)(n)
CBS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended Through November 15, 1995
1. PURPOSE The purpose of this Supplemental Executive Retirement Plan
("the Plan") (combining the former CBS Supplemental Executive
Retirement Plan, SERP #2 and CBS Excess Benefit Plan) is to provide
to certain key employees of CBS Inc. ("CBS") a benefit supplemental to
those retirement or termination benefits which they are entitled to
receive under the CBS Pension Plan and to benefit CBS by making it
more attractive to such employees to remain with CBS.
2. ELIGIBILITY The persons eligible to participate in the Plan
("Participants") are those employees of CBS and its subsidiaries who
are designated by the Deferred Additional Compensation Plan
Subcommittee of the Retirement Plans Committee of the Board of
Directors of CBS (the Committee), and whose benefit under the CBS
Pension Plan, is limited by reason of the limitation on benefits or
compensation which may be taken into account under Internal Revenue
Code Section 415, or under Internal Revenue Code Section 401(a)(17),
or any successor provision.
3. COMPUTATION OF BENEFIT The retirement or termination or death benefit
payable to a Participant under the Plan shall be equal to the excess,
if any, of (A) the Participant's retirement or termination or death
benefit under the CBS Pension Plan determined by disregarding the
benefit or compensation limitation otherwise imposed by Internal
Revenue Code Sections 415 and 401(a)(17), or any successor provisions,
over (B) the Participant's retirement or termination or death benefit
payable under the CBS Pension Plan, taking into account such benefit
or compensation limitations. In the case of any benefits payable to a
Participant under this Plan, any amount payable other than at normal
retirement age (as determined under the CBS Pension Plan) shall be
reduced in accordance with the provisions utilized under the CBS
Pension Plan.
4. PAYMENT OF BENEFIT Any benefit under the Plan, including any
applicable death benefit, shall be paid to the Participant, or on
behalf of such Participant, at the same time and in the same form and
manner as the benefit under the CBS Pension Plan, except:
A. no Participant shall be entitled to receive a lump-sum
payment of a Plan benefit unless the monthly life annuity payment
would be $50 or less, in which case the benefit shall be paid as a
single sum cash payment. If the Participant has elected a lump sum
option under the CBS Pension Plan, the Participant must elect an
alternative payment option under the Plan. A Participant may change
this option at any time prior to retirement. If no option is elected,
the Qualified Joint and Survivor Annuity option under the CBS Pension
Plan shall apply with respect to married Participants, and the Single
Life Annuity option under the CBS Pension Plan shall apply with
respect to unmarried Participants, and
B. any active employee who has already attained age 70-1/2 prior
to 1995, and has not yet begun to receive distributions under the
Plan, shall begin receiving distributions on or before April 1, 1996,
and must elect a payment option prior to January 1, 1996, in
accordance with procedures established by the Committee.
C. if a Participant names as his beneficiary a trust, payments
may be made to the trust/beneficiary solely in installment payments
for one of the following periods: (i) 10 years; (ii) 15 years; or
(iii) if the trust duration is expected to be less than 10 years, the
duration of the trust. For the purpose of determining the amount of
the annual installment payments to be made to the trust/beneficiary,
any amounts due under the Plan shall first be determined as a lump sum
value as of the participant's date of death, using the actuarial
factors under the CBS Pension Plan. Such amount then shall be
converted to an actuarially
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equivalent installment amount at an assumed interest rate equal to the
rate stated in Appendix A of the CBS Pension Plan.
5. NONFORFEITURE OF BENEFIT The amount of the benefit accrued under the
Plan by any Participant immediately before any (i) withdrawal of
approval as a Participant by the Committee granted under Section 2
hereof or (ii) termination or amendment pursuant to Section 8 hereof
shall not be reduced by reason of any such event.
6. NON ASSIGNABILITY OF BENEFITS Except as otherwise required by law,
neither any benefit payable hereunder nor the right to receive any
future benefit under this Plan may be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered, or subjected to any charge
or legal process, and if any attempt is made to do so, or a person
eligible for any benefits under this Plan becomes bankrupt, the
interest under this Plan of the person affected may be terminated by
the Committee which, in its sole discretion may cause the same to be
held or applied for the benefit of one or more of the dependents of
such person or make any other disposition of such benefits that it
deems appropriate.
7. FUNDING The Plan shall be maintained as an unfunded plan which is not
intended to meet the qualification requirements of Section 401 of the
Internal Revenue Code. Establishment of the Plan will not create, in
favor of any Participant, any right or lien in or against any of the
assets of CBS. Payments under the Plan shall be made in cash from the
general funds of CBS and no special or separate fund shall be
established and no segregation of assets shall be made to assure the
payment of benefits hereunder. Nothing in this Plan, and no action
taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between CBS
and any participant or any other person, and CBS's promise to make
payments hereunder shall at all times remain unfunded as to any
Participant.
8. TERMINATION; AMENDMENT CBS may, at any time, by resolution of its
Board of Directors, terminate or amend the Plan in such respects as it
shall deem advisable, provided, however, that except to the extent
required to comply with any changes in applicable law, this Plan may
not be suspended, amended, otherwise modified, or terminated without
the consent of each affected Participant during the following periods
of time: (i) a period of two years after the "Effective Time," as such
term is defined under the Agreement and Plan of Merger among
Westinghouse Electric Corporation, Group W Acquisition Corp. and CBS
Inc., (ii) a period of five (5) years after the Effective Time for all
Participants who have attained the age of fifty and who have not
attained age fifty-five at the Effective Time, and (iii) at any time
following the Effective Time for all Participants who have attained
age fifty-five at the Effective Time.
9. OPERATION AND ADMINISTRATION The Plan shall be administered by the
Committee. The Committee shall have the authority, in its absolute
discretion, to exclude from the coverage of the Plan employees who
would otherwise be eligible to be Participants, and to include in the
coverage of the Plan employees who would not otherwise be eligible to
be Participants. The Committee's decision in all matters involving the
interpretation and application of the Plan shall be final and binding.
The Committee will establish such procedures and requirement, as it
shall deem necessary to administer the Plan.
10. APPLICABLE LAW All questions pertaining to the construction, validity,
and effect of this Plan shall be determined in accordance with the
laws of the State of New York, to the extent not pre-empted by Federal
law.
11. LIMITATION OF RIGHTS This Plan is a voluntary undertaking on the part
of CBS. Neither the establishment of the Plan nor the payment of any
benefits hereunder, nor any action of CBS, the Committee, or its
designee shall be held or construed to be a contract of
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employment between CBS and any Participant, or to confer upon any
person any legal right to be continued in the employ of CBS. CBS
expressly reserves the right to discharge, discipline, or otherwise
terminate the employment of any Participant at any time. Participation
in this Plan gives no right or claim to any benefits beyond those
which are expressly provided herein and all rights and claims
hereunder are limited as set forth in this Plan.
12. SEVERABILITY In the event any provision of this Plan shall be held
illegal or invalid, or would serve to invalidate the Plan, that
provision shall be deemed to be null and void, and the Plan shall be
construed as if it did not contain that provision.
13. HEADING, GENDER AND NUMBER The headings to the Articles and Sections
of this Plan are inserted for reference only, and are not to be taken
as limiting or extending the provisions hereof. Unless the context
clearly indicates to the contrary, in interpreting this Plan, the
masculine shall include the feminine, and the singular shall include
the plural.
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Exhibit (10)(o)
CBS BONUS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended Through November 15, 1995
1. PURPOSE The purpose of this Supplemental Executive Retirement Plan
("the Plan") (formerly the CBS Supplemental Executive Retirement Plan,
SERP #1) is to provide to certain key employees of CBS Inc. ("CBS") a
benefit supplemental to those retirement or termination benefits which
they are entitled to receive under the CBS Pension Plan and to benefit
CBS by making it more attractive to such employees to remain with CBS
and by deterring such employees from engaging, after termination of
employment, in activities competitive to those of CBS.
2. ELIGIBILITY The persons eligible to participate in the Plan
("Participants") are those employees of CBS and its subsidiaries who
are Participants in the CBS Pension Plan and whose participation in
the Plan has been expressly approved by the Deferred Additional
Compensation Plan Subcommittee of the Retirement Plans Committee of
the Board of Directors of CBS ("the Committee").
3. COMPUTATION OF BENEFIT
A. The retirement or termination benefit payable to a
Participant under the Plan shall be equal to the accrual percentage
otherwise provided in Section 3.02(b) of the CBS Pension Plan (or any
successor provision), which, as of January 1, 1995 is 1.7 percent,
multiplied by the Eligible Amount, as defined in Subparagraph B of
this Section 3, and multiplied by the number of years of the
Participant's continuous employment period, up to a maximum of 35
years.
B. The Eligible Amount shall be:
(1) in the case of a Participant who has been
designated by the CBS Board of Directors, 100 percent of such
Participant's cash awards under an annual CBS Plan for additional
compensation (currently the Executive Compensation Incentive Plan),
and
(2) in the case of all other Participants, 50
percent of such Participant's cash awards under such an additional
compensation plan.
C. In the case of any benefits payable to a Participant under
this Plan, any amount payable other than at normal retirement age (as
determined under the CBS Pension Plan) shall be reduced in accordance
with the provisions utilized under the CBS Pension Plan.
4. PAYMENT OF BENEFIT Any retirement or termination benefit under the
Plan shall be paid to the Participant, and if applicable, the
Participant's designated beneficiary, at the same time and in the same
form and manner as the benefit under the CBS Pension Plan, except:
A. No Participant shall be entitled to receive a lump sum
payment of a Plan benefit unless the monthly life annuity payments
would be $50 or less, in which case the benefit shall be paid as a
single sum cash payment. If the Participant has elected the lump-sum
option under the CBS Pension Plan, the Participant must elect an
alternative payment option under the Plan. A Participant may change
this option at any time prior to retirement. If no option is elected,
the Qualified Joint and Survivor Annuity option under the CBS Pension
Plan shall apply with respect to married Participants, and the Single
Life Annuity option under the CBS Pension Plan shall apply with
respect to unmarried Participants.
-1-
<PAGE> 2
B. Any active employee who has attained age 70-1/2 prior to
1995, and has not begun to receive distributions under the Plan, shall
begin receiving distributions by April 1, 1996, and must elect a
payment option prior to January 1, 1996, in accordance with procedures
established by the Committee.
C. No benefit shall be payable from the Plan on account
of the death of a Participant prior to his or her retirement or
termination date.
D. If a Participant names as his beneficiary a trust,
payments may be made to the trust/beneficiary solely in installment
payments for one of the following periods: (i) 10 years; (ii) 15
years; or (iii) if the trust duration is expected to be less than 10
years, the duration of the trust. For the purpose of determining the
amount of the annual installment payments to be made to the
trust/beneficiary, any amounts due under the Plan shall first be
determined as a lump sum value as of the participant's date of death,
using the actuarial factors under the CBS Pension Plan. Such amount
then shall be converted to an actuarially equivalent installment
amount at an assumed interest rate equal to the rate stated in
Appendix A of the CBS Pension Plan.
5. FORFEITURE OF BENEFIT Any retirement or termination benefit under the
Plan shall be paid to
A. Any Participant who terminates employment with CBS
prior to attaining age 55 with ten or more years of service, shall
forfeit any benefit accrued under the Plan.
B. If, without the written consent of the Committee, any
Participant, at any time during the period following the termination
of his employment, engages in the operation or management of a
business, whether as owner, partner, officer, employee, or otherwise,
having a net worth in excess of $5,000,000, which at such time is in
competition with its subsidiaries, any and all amounts which otherwise
thereafter would be due the Participant under the Plan shall be
forfeited.
The determination as to whether a Participant is engaged in the
operation or management of business having a net worth in excess of
$5,000,000 and which is in competition with CBS or any of its
subsidiaries shall be made by the Committee in its absolute
discretion, and the decision of the Committee with respect thereto,
including its determination of the time at which the participation in
such competitive business commenced, shall be conclusive. In
determining whether or not to give its consent under this section 6(B)
the Committee shall give consideration to the circumstances under
which the employment of the Participant terminated and, if such
termination resulted primarily from circumstances not within the
control of the Participant, the Committee shall grant such consent
unless the Committee shall find that there are compelling reasons for
not doing so.
No Participant shall be required to repay any benefits paid to him
prior to the date on which the Participant shall have received written
notice that the Committee shall have determined that the Participant
has engaged in the operation or management of a business having a net
worth in excess of $5,000,000 and which is in competition with CBS or
any of its subsidiaries.
6. NONFORFEITURE OF BENEFIT The amount of the benefit accrued under the
Plan by any Participant immediately before any (i) withdrawal of
approval as a Participant by the Committee granted under Section 2
hereof, (ii) withdrawal of entitlement to 100 percent of a
Participant's cash awards under an annual CBS plan for additional
compensation granted under section 3(B)(1) hereof or (iii) termination
or amendment pursuant to Section 10 hereof shall not be reduced by
reason of any such event.
-2-
<PAGE> 3
7. NONASSIGNABILITY OF BENEFITS Except as otherwise required by law,
neither any benefit payable hereunder nor the right to receive any
future benefit under this Plan may be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered, or subjected to any charge
or legal process, and if any attempt is made to do so, or a person
eligible for any benefits under this Plan becomes bankrupt, the
interest under this Plan of the person affected may be terminated by
the Committee which, in its sole discretion, may cause the same to be
held or applied for the benefit of one or more of the dependents of
such person or make any other disposition of such benefits that it
deems appropriate.
8. FUNDING The Plan shall be maintained as an unfunded plan which is not
intended to meet the qualification requirements of Section 401 of the
Internal Revenue Code. Establishment of the Plan will not create, in
favor of any Participant, any right or lien in or against any of the
assets of CBS. Payments under the Plan shall be made in cash from the
general funds of CBS and no special or separate fund shall be
established and no segregation of assets shall be made to assure the
payment of benefits hereunder. Nothing in this Plan, and no action
taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between CBS
and any Participant or any other person, and CBS's promise to make
payments hereunder shall at all times remain unfunded as to any
Participant.
9. TERMINATION; AMENDMENT CBS may, at any time, by resolution of its
Board of Directors, terminate or amend the Plan in such respects as it
shall deem advisable, provided, however, that except to the extent
required to comply with any changes in applicable law, this Plan may
not be suspended, amended, otherwise modified, or terminated without
the consent of each affected Participant during the following periods
of time: (i) a period of two years after the "Effective Time," as such
term is defined under the Agreement and Plan of Merger among
Westinghouse Electric Corporation, Group W Acquisition Corp. and CBS
Inc., (ii) a period of five (5) years after the Effective Time for all
Participants who have attained the age of fifty and who have not
attained age fifty-five at the Effective Time, and (iii) at any time
following the Effective Time for all Participants who have attained
age fifty-five at the Effective Time.
10. OPERATION AND ADMINISTRATION The Plan shall be administered by the
Committee. The Committee shall have the authority, in its absolute
discretion, to exclude from the coverage of the Plan employees who
would not otherwise be eligible to be Participants, and to include in
the coverage of the Plan employees who would not otherwise be eligible
to be Participants. The Committee's decision in all matters involving
the interpretation and application of the Plan shall be final and
binding. The Committee shall establish such procedures and
requirements as it shall deem necessary and appropriate to administer
the Plan.
11. APPLICABLE LAW All questions pertaining to the construction, validity,
and effect of this Plan shall be determined in accordance with the
laws of the State of New York, to the extent not pre-empted by Federal
law.
12. LIMITATION OF RIGHTS This Plan is a voluntary undertaking on the part
of CBS. Neither the establishment of the Plan nor the payment of any
benefits hereunder, nor any action of CBS, the Committee, or its
designee shall be held or construed to be a contract of employment
between CBS and any Participant, or to confer upon any person any
legal right to be continued in the employ of CBS. CBS expressly
reserves the right to discharge, discipline, or otherwise terminate
the employment of any Participant at any time. Participation in this
Plan gives no right or claim to any benefits beyond those which are
expressly provided herein and all rights and claims hereunder are
limited as set forth in this Plan.
-3-
<PAGE> 4
13. SEVERABILITY In the event any provision of this Plan shall be held
illegal or invalid, or would serve to invalidate the Plan, that
provision shall be deemed to be null and void, and the Plan shall be
construed as if it did not contain that provision.
14. HEADINGS, GENDER AND NUMBER The headings to the Articles and Sections
of this Plan are inserted for reference only, and are not to be taken
as limiting or extending the provisions hereof. Unless the context
clearly indicates to the contrary, in interpreting this Plan, the
masculine shall include the feminine, and the singular shall include
the plural.
15. INCAPACITY If the Committee or its designee shall determine that a
Participant, terminated Participant, or any other person entitled to a
benefit under this Plan (the "Recipient") is unable to care for his
affairs because of illness, accident, or mental or physical
incapacity, or because the Recipient is a minor, the Committee or its
designee may direct that any benefit payment due the Recipient be paid
to his duly appointed legal representative; or if no such
representative is appointed, to the Recipient's spouse, child, parent,
or other blood relative, or to a person with whom the Recipient
resides or who has incurred expense on behalf of the Recipient. Any
such payment so made shall be a complete discharge of the liabilities
of the Plan with respect to the Recipient.
16. BINDING EFFECT AND RELEASE All persons accepting benefits under this
Plan shall be deemed to have consented to the terms of this Plan. Any
final payment or distribution to any person entitled to benefits under
the Plan shall be in full satisfaction of all claims against the Plan,
the Committee or its designee and CBS arising by virtue of this Plan.
-4-
<PAGE> 1
EXHIBIT (11)
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
EQUIVALENT SHARES:
Average shares outstanding.................... 400,512,154 369,612,697 354,580,674
Additional shares due to:
Stock options............................... 6,887,136 4,525,244 3,964,508
Series C preferred shares................... 36,000,000 36,000,000 25,191,067
----------- ----------- -----------
Total equivalent shares.................. 443,399,290 410,137,941 383,736,249
=========== =========== ===========
ADJUSTED EARNINGS (IN MILLIONS):
Loss from Continuing Operations............... $ (838) $ (19) $ (8)
Less: Series B preferred stock dividends...... -- 34 50
----------- ----------- -----------
Adjusted loss from Continuing Operations...... (838) (53) (58)
Income from Discontinued Operations........... 961 34 85
Extraordinary item............................ (93) -- --
----------- ----------- -----------
Adjusted net income (loss) for earnings per
share....................................... $ 30 $ (19) $ 27
=========== =========== ===========
EARNINGS (LOSS) PER SHARE:
From Continuing Operations.................... $ (1.89) $ (0.13) $ (0.15)
From Discontinued Operations.................. 2.17 0.08 0.22
Extraordinary item............................ (.21) -- --
----------- ----------- -----------
Earnings (loss) per share (a)............ $ 0.07 $ (0.05) $ 0.07
=========== =========== ===========
</TABLE>
- ---------
(a) For earnings per share using an alternative treatment for the Series C
Preferred Shares, see note 15 to the financial statements included in Part
II, Item 8 of this report.
<PAGE> 1
EXHIBIT (12)(A)
WESTINGHOUSE ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
minority interest............................ $(1,298) $ 2 $ (10) $(233) $ 267
Less: Equity in income (loss) of 50 percent or
less owned affiliates........................ 9 3 (2) (3) (1)
Add: Fixed charges............................. 484 254 155 186 200
------- ----- ----- ----- -----
Earnings as adjusted........................... $ (823) $ 253 $ 147 $ (44) $ 468
======= ===== ===== ===== =====
Fixed charges:
Interest expense.......................... $ 456 $ 236 $ 134 $ 164 $ 169
Rental expense............................ 28 18 21 22 31
------- ----- ----- ----- -----
Total fixed charges............................ $ 484 $ 254 $ 155 $ 186 $ 200
======= ===== ===== ===== =====
Ratio of earnings to fixed charges............. (a) (a) (a) (a) 2.34x
======= ===== ===== ===== =====
</TABLE>
- ---------
(a) Additional income before income taxes and minority interest necessary to
attain a ratio of 1.00x for 1996, 1995, 1994 and 1993 would be $1,307
million, $1 million, $8 million, and $230 million, respectively.
<PAGE> 1
EXHIBIT (12)(B)
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
minority interest............................ $(1,298) $ 2 $ (10) $(233) $ 267
Less: Equity in income (loss) of 50 percent or
less owned affiliates........................ 9 3 (2) (3) (1)
Add: Combined fixed charges and preferred
dividends.................................... 557 378 287 258 240
------- ----- ----- ----- -----
Earnings as adjusted........................... $ (750) $ 377 $ 279 $ 28 $ 508
======= ===== ===== ===== =====
Combined fixed charges and preferred dividends:
Interest expense.......................... $ 456 $ 236 $ 134 $ 164 $ 169
Rental expense............................ 28 18 21 22 31
Pre-tax earnings required to cover
preferred dividend requirements (b)..... 73 124 132 72 40
------- ----- ----- ----- -----
Total combined fixed charges and
preferred dividends.......................... $ 557 $ 378 $ 287 $ 258 $ 240
======= ===== ===== ===== =====
Ratio of earnings to combined fixed charges and
preferred dividends.......................... (a) (a) (a) (a) 2.12x
======= ===== ===== ===== =====
</TABLE>
- ---------
(a) Additional income before income taxes and minority interest necessary to
attain a ratio of 1.00x for 1996, 1995, 1994 and 1993 would be $1,307
million, $1 million, $8 million, and $230 million, respectively.
(b) Dividend requirement divided by 100% minus the effective income tax rate or
the statutory rate, whichever is more appropriate.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Included in the financial statements of the Corporation are consolidated
subsidiaries owned, directly or indirectly, more than 50% by the Corporation.
Equity in undistributed earnings of nonconsolidated subsidiaries and affiliated
companies 20% to 50% owned is also included in the results of operations of the
Corporation. Listed below are certain of these subsidiaries of the Corporation.
The remaining subsidiaries and affiliated companies not listed below, when
considered in the aggregate, would not constitute a significant subsidiary.
<TABLE>
<CAPTION>
INCORPORATED VOTING POWER
UNDER LAWS OWNED BY
NAME OF IMMEDIATE PARENT
- -------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
Infinity Broadcasting Corporation Delaware 100%
Safe Sites of Colorado L.L.C. Delaware 65%
Thermo King Corporation Delaware 100%
Westinghouse Canada, Inc. Canada 100%
Westinghouse CBS Holding Company, Inc. Delaware 100%
CBS Inc. New York 100%
Westinghouse Holdings Corporation Delaware 100%
Westinghouse de Puerto Rico, Inc. Delaware 100%
Westinghouse Electric S.A. Switzerland 100%
Westinghouse International Technology Corporation Delaware 100%
Westinghouse World Investment Corporation Delaware 100%
Westinghouse Foreign Sales Corporation Barbados 100%
Westinghouse Industry Products International Company Delaware 100%
Westinghouse Savannah River Company, Inc. Delaware 100%
West Valley Nuclear Service Company Delaware 100%
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in each prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-30729,
33-41417, 33-41475, and 33-51298), and on Form S-8 (Nos. 2-92085, 33-44044,
33-45365, 33-46779, 33-51445, 33-51579, 33-53815 and 33-53819, 33-62043,
33-62045, 333-12583, 333-12589, 333-12591 and 333-13219) of Westinghouse
Electric Corporation of our report dated January 29, 1997 appearing on page 32
of this Form 10-K. We also consent to the incorporation by reference of our
report on the financial statement schedule, which appears on page 68 of this
Form 10-K.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
March 18, 1997
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-30729,
33-41417, 33-41475, and 33-51298), and on Form S-8 (Nos. 2-92085, 33-44044,
33-45365, 33-46779, 33-51445, 33-51579, 33-53815, 33-53819, 33-62043, 33-62045,
333-12583, 333-12589, 333-12591 and 333-13219) of Westinghouse Electric
Corporation of our report dated February 12, 1996 except for the restatements
discussed in notes 1 and 3 for which the dates are March 31, 1996 and November
13, 1996, appearing on page 32 of this Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 69 of this Form 10-K.
Price Waterhouse LLP
Pittsburgh, Pennsylvania
March 18, 1997
<PAGE> 1
Exhibit (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 15th day of March, 1997.
/S/ FRANK C. CARLUCCI
--------------------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ ROBERT E. CAWTHORN
--------------------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ GARY M. CLARK
--------------------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 17th day of March, 1997.
/S/ GEORGE H. CONRADES
--------------------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 19th day of March, 1997.
/S/ WILLIAM H. GRAY III
--------------------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ MICHAEL H. JORDAN
--------------------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 16th day of March, 1997.
/S/ MEL KARMAZIN
--------------------------------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ DAVID K. P. LI
--------------------------------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ DAVID T. MCLAUGHLIN
--------------------------------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 15th day of March, 1997.
/S/ RICHARD R. PIVIROTTO
--------------------------------
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ FREDRIC G. REYNOLDS
--------------------------------
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 18th day of March, 1997.
/S/ CAROL V. SAVAGE
--------------------------------
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 17th day of March, 1997.
/S/ RAYMOND W. SMITH
--------------------------------
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 14th day of March, 1997.
/S/ PAULA STERN
--------------------------------
<PAGE> 15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended
December 31, 1996, hereby constitutes and appoints Michael H. Jordan, Gary M.
Clark, Fredric G. Reynolds, Louis J. Briskman, Carol V. Savage, Claudia E. Morf
and Angeline C. Straka his/her true and lawful attorneys-in-fact and agents,
and each of them, with full power to act without the others, for him/her and in
his/her name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K and any and all amendments thereto, with power where
appropriate to affix the corporate seal of said Corporation thereto and to
attest said seal, and to file said Form 10-K and any and all other documents in
connection therewith, with the Securities Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and necessary
to be done in and about the premises as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 19th day of March, 1997.
/S/ ROBERT D. WALTER
--------------------------------
<PAGE> 16
EXTRACT FROM MINUTES OF MEETING OF THE
BOARD OF DIRECTORS OF
WESTINGHOUSE ELECTRIC CORPORATION
HELD ON JANUARY 29, 1997
-----------------------
RESOLVED, that the Chief Executive Officer of the Company, its Vice
Chairman and President, its Executive Vice President and Chief Financial
Officer, its Senior Vice President and General Counsel, its Vice President and
Chief Accounting Officer, its Vice President and Treasurer, and its Vice
President, Secretary and Associate General Counsel are, and each of them with
full power to act without the others hereby is, authorized to prepare, or cause
to be prepared, and to execute the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and the Company's Quarterly Reports on Form 10-Q
for 1997, as well as any and all other reports specified under the regulations
of the Securities and Exchange Commission, and any and all amendments thereto,
on behalf of and as attorneys for the Company and to file said Forms 10-K and
10-Q and other reports, and any and all amendments thereto, with all exhibits
thereto and any and all other documents in connection therewith, with the
Securities and Exchange Commission on behalf of, and as attorneys for, the
Company; and
RESOLVED, that any action or actions taken by any officer of the Company
prior to the date of the foregoing resolution adopted by this Board of
Directors that are within the authority conferred thereby are hereby ratified,
confirmed and approved.
-----------------------
I, C. L. McADAMS, Assistant Secretary of Westinghouse Electric
Corporation, DO HEREBY CERTIFY that the foregoing is a true and correct copy of
resolutions adopted at a meeting of the Board of Directors of said Company held
on January 29, 1997, at which meeting a quorum was present and which
resolutions are still in full force and effect.
<PAGE> 17
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said Company.
Dated: March 18, 1997
/s/ C. L. McADAMS
-------------------------
Assistant Secretary
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