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NORTHROP GRUMMAN CORPORATION
Offer to Exchange All Outstanding
7% Notes Due 2006
($400,000,000 principal amount outstanding)
For 7% Notes Due 2006
7 3/4% Debentures Due 2016
($300,000,000 principal amount outstanding)
For 7 3/4% Debentures Due 2016
7 7/8% Debentures Due 2026
($300,000,000 principal amount outstanding)
For 7 7/8% Debentures Due 2026
The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on July 17, 1996, unless extended.
Northrop Grumman Corporation (the "Company") hereby offers (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange $1,000 in principal amount of its (i) 7% Notes Due
2006 (the "New Notes") for each $1,000 in principal amount of its outstanding 7%
Notes Due 2006 (the "Old Notes"), (ii) 7 3/4% Debentures Due 2016 (the "New 2016
Debentures") for each $1,000 in principal amount of its outstanding 7 3/4%
Debentures Due 2016 (the "Old 2016 Debentures"), and (iii) 7 7/8% Debentures Due
2026 (the "New 2026 Debentures") for each $1,000 in principal amount of its
outstanding 7 7/8% Debentures Due 2026 (the "Old 2026 Debentures") (the Old
Notes, the Old 2016 Debentures and the Old 2026 Debentures are collectively
referred to herein as the "Old Securities"; the New Notes, the New 2016
Debentures and the New 2026 Debentures are collectively referred to herein as
the "New Securities"; and the Old Securities and the New Securities are
collectively referred to herein as the "Securities"). An aggregate principal
amount of $400,000,000 of Old Notes is outstanding, an aggregate principal
amount of $300,000,000 of Old 2016 Debentures is outstanding, and an aggregate
principal amount of $300,000,000 of Old 2026 Debentures is outstanding. See
"The Exchange Offer." For purposes of the Exchange Offer, "Eligible Holder"
shall mean the registered owner of any Old Security as reflected on the records
of The Chase Manhattan Bank (National Association), as registrar of the Old
Securities (in such capacity, the "Registrar"), or any person whose Old Security
is held of record by the depository of the Old Securities.
The Company will accept for exchange any and all Old Securities that are
validly tendered prior to 5:00 p.m., New York City time, on July 17, 1996 (as
such date may be extended, the "Expiration Date"). Tenders of Old Securities
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of the Old Securities being tendered for exchange. However,
the Exchange Offer is subject to certain customary conditions, which may be
waived by the Company, and to the terms and provisions of the Registration
Rights Agreement dated as of March 1, 1996 (the "Registration Rights Agreement")
among the Company, CS First Boston Corporation, J.P. Morgan Securities Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc
(collectively, the "Initial Purchasers"). The Old Securities may be tendered
only in multiples of $1,000. See "The Exchange Offer."________________________
(continued on following page)
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is June 17, 1996
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The Old Securities were issued in a transaction (the "Debt Offering")
pursuant to which the Company issued an aggregate of $1,000,000,000 principal
amount of the Old Securities to the Initial Purchasers on March 1, 1996 (the
"Closing Date") pursuant to a Purchase Agreement dated February 27, 1996 (the
"Purchase Agreement") among the Company and the Initial Purchasers. The
Initial Purchasers subsequently resold the Old Securities in reliance on Rule
144A under the Securities Act of 1933, as amended (the "Securities Act").
The Company and the Initial Purchasers also entered into the Registration
Rights Agreement pursuant to which the Company granted certain registration
rights for the benefit of the holders of the Old Securities. The Exchange
Offer is intended to satisfy certain of the Company's obligations under the
Registration Rights Agreement with respect to the Old Securities. See "The
Exchange Offer -- Purpose and Effect."
The Old Securities were issued under the Indenture, dated as of October 15,
1994 (the "Indenture"), among the Company and The Chase Manhattan Bank
(National Association), as trustee (in such capacity, the "Trustee"). The
New Securities will be issued under the Indenture. The New Notes, the New
2016 Debentures and the New 2026 Debentures shall constitute the same series
of Securities (as defined in the Indenture) as the Old Notes, the Old 2016
Debentures and the Old 2026 Debentures, respectively, under the Indenture
and, accordingly, will vote together, respectively, as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture. The form and terms of the New Securities
will be identical in all material respects to the form and terms of the Old
Securities, except that (i) the New Securities have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, (ii) holders of New Securities will not be entitled to Additional
Interest (as defined) otherwise payable under the terms of the Registration
Rights Agreement in respect of Old Securities held by such holders during any
period in which a Registration Default (as defined) is continuing and (iii)
holders of New Securities will not be, and upon the consummation of the
Exchange Offer, Eligible Holders of Old Securities will no longer be,
entitled to certain rights under the Registration Rights Agreement intended
for the holders of unregistered securities. The Exchange Offer shall be
deemed consummated upon the delivery by the Company to the Registrar under
the Indenture of New Securities in the same aggregate principal amount as the
aggregate principal amount of Old Securities of the corresponding series that
are validly tendered by holders thereof pursuant to the Exchange Offer. See
"The Exchange Offer -- Termination of Certain Rights" and "-- Book-Entry
Procedures for Tendering Old Securities" and "Description of New Securities."
The New Securities will bear interest from March 1, 1996. Eligible Holders
of Old Securities whose Old Securities are accepted for exchange will be deemed
to have waived the right to receive any payment in respect of interest on the
Old Securities accrued from March 1, 1996 to the date of the issuance of the New
Securities. Interest on the New Securities is payable semiannually on March 1
and September 1 of each year, commencing September 1, 1996 (each, an "Interest
Payment Date"), accruing from March 1, 1996 (i) with respect to the New Notes,
at a rate of 7% per annum, (ii) with respect to the New 2016 Debentures, at a
rate of 7 3/4% per annum, and (iii) with respect to the New 2026 Debentures, at
a rate of 7 7/8% per annum, to each person in whose name such New Security shall
have been registered at the close of business on the February 15 or August 15
(each, a "Regular Record Date") next preceding such Interest Payment Date. The
New Notes will mature on March 1, 2006, the New 2016 Debentures will mature on
March 1, 2016 and the New 2026 Debentures will mature on March 1, 2026. See
"Description of New Securities."
The New Securities will be unsecured and unsubordinated obligations of the
Company and will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of the Company. The New Securities will not be
redeemable.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that New Securities issued pursuant to the
Exchange Offer to an Eligible Holder in exchange for Old Securities of the
corresponding series may be offered for resale, resold and otherwise transferred
by such Eligible Holder (other than a broker-dealer who purchased Old Securities
directly from the Company for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the Eligible Holder is not an affiliate of the
Company, is acquiring the New Securities in the ordinary course of business and
is not participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Securities. Eligible Holders
wishing to accept the Exchange Offer must represent to the Company, as required
by the Registration Rights Agreement, that such conditions have been met. Each
broker-dealer that receives New Securities for its own account pursuant to the
Exchange Offer must acknowledge that it
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will deliver a prospectus in connection with any resale of such New Securities.
"The Exchange Offer-Resales of the New Securities." This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Securities received in exchange for Old
Securities where such Old Securities were acquired by such broker-dealer as a
result of market-making or other trading activities.
As of March 1, 1996, Cede & Co. ("Cede"), as nominee for The Depository
Trust Company, New York, New York ("DTC"), was the sole registered holder of the
Old Securities. The Company believes that none of DTC's participants is an
affiliate (as such term is defined in Rule 405 of the Securities Act) of the
Company. There has previously been only a limited secondary market, and no
public market, for the Old Securities. In addition, the Initial Purchasers have
advised the Company that they currently intend to make a market in the New
Securities; however, the Initial Purchasers are not obligated to do so and any
market making activities may be discontinued by any of the Initial Purchasers at
any time. Therefore, there can be no assurance that an active market for the
New Securities will develop. If such a trading market develops for the New
Securities, future trading prices will depend on many factors, including, among
other things, prevailing interest rates, the Company's results of operations and
the market for similar securities. Depending on such factors, the New
Securities may trade at a discount from their face value.
The Old Securities were issued originally in global form (the "Global Old
Securities"). The Global Old Securities were deposited with, or on behalf of,
DTC, as the initial depository with respect to the Old Securities (in such
capacity, the "Depository"). The Global Old Securities are registered in the
name of Cede, as nominee of DTC, and beneficial interests in the Global Old
Securities are shown on, and transfers thereof are effected only through,
records maintained by the Depository and its participants. The use of the
Global Old Securities to represent certain of the Old Securities permits the
Depository's participants, and anyone holding a beneficial interest in an Old
Security registered in the name of such participant, to transfer interests in
the Old Securities electronically in accordance with the Depository's
established procedures without the need to transfer a physical certificate. The
New Securities will also be issued initially as notes in global form (the
"Global New Securities," and together with the Global Old Securities, the
"Global Securities") and deposited with, or on behalf of, the Depository. After
the initial issuance of the Global New Securities, New Securities in
certificated form will be issued in exchange for a holder's proportionate
interest in the Global New Securities only as set forth in the Indenture.
The Company will not receive any proceeds from this Exchange Offer.
Pursuant to the Registration Rights Agreement, the Company will bear certain
registration expenses.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD SECURITIES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM JAMES C. JOHNSON, CORPORATE VICE PRESIDENT AND
SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JULY 12, 1996.
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TABLE OF CONTENTS
Page
----
FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . 5
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . 25
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA. . . . . . . . . . . . 27
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DESCRIPTION OF NEW SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 36
DESCRIPTION OF OTHER SENIOR DEBT . . . . . . . . . . . . . . . . . . . . . . 42
CERTAIN FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 42
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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FORWARD LOOKING STATEMENTS
THE FORWARD LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS,
CONCERNING, AMONG OTHER THINGS, FUTURE RESULTS OF OPERATIONS, DELIVERIES,
TRENDS, CASH FLOWS, MARKETS AND PROGRAMS ARE PROJECTIONS AND ARE NECESSARILY
SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES. ACTUAL OUTCOMES ARE DEPENDENT UPON
THE COMPANY'S SUCCESSFUL PERFORMANCE OF INTERNAL PLANS, GOVERNMENT CUSTOMERS'
BUDGETARY RESTRAINTS, CUSTOMER CHANGES IN SHORT RANGE AND LONG RANGE PLANS,
DOMESTIC AND INTERNATIONAL COMPETITION IN BOTH THE DEFENSE AND COMMERCIAL AREAS,
PRODUCT PERFORMANCE, CONTINUED DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS,
PERFORMANCE ISSUES WITH KEY SUPPLIERS AND SUBCONTRACTORS, GOVERNMENT IMPORT AND
EXPORT POLICIES, TERMINATION OF GOVERNMENT CONTRACTS, POLITICAL PROCESSES,
LEGAL, FINANCIAL AND GOVERNMENTAL RISKS RELATED TO INTERNATIONAL TRANSACTIONS
AND GLOBAL NEEDS FOR MILITARY AND COMMERCIAL AIRCRAFT AND ELECTRONIC SYSTEMS AND
SUPPORT, AS WELL AS OTHER ECONOMIC, POLITICAL AND TECHNOLOGICAL RISKS AND
UNCERTAINTIES.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) An Annual Report on Form 10-K for the year ended December 31, 1995;
(b) A Current Report on Form 8-K dated March 18, 1996, as amended on
Form 8-K/A dated May 31, 1996;
(c) A Quarterly Report on Form 10-Q for the quarter ended March 31,
1996; and
(d) All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") on or after the date of this Prospectus and prior to the
termination of the offering made hereby.
Any statement contained herein or in any documents incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-4 (together with
any amendments thereto, the "Registration Statement") with the Commission under
the Securities Act with respect to the New Securities. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement and reference is made to the
Registration Statement and the exhibits and schedules thereto for further
information with respect to the Company and the New Securities offered hereby.
This Prospectus contains summaries of the material terms and provisions of
certain documents and in each instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement. Each such summary
is qualified in its entirety by such reference.
The Company is subject to the reporting requirements of the Exchange
Act, and in accordance therewith is required to file reports and other
information with the Commission.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the transactions to which this
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Prospectus relates shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents. See
"Incorporation of Certain Documents by Reference." The Company will provide a
copy of any and all of such documents (exclusive of exhibits unless such
exhibits are specifically incorporated by reference therein) without charge to
each person to whom a copy of this Prospectus is delivered, upon written or oral
request to James C. Johnson, Corporate Vice President and Secretary, Northrop
Grumman Corporation, 1840 Century Park East, Los Angeles, California 90067,
(310) 553-6262.
The Registration Statement (including the exhibits and schedules
thereto) and the periodic reports and other information filed by the Company
with the Commission may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located
at 7 World Trade Center, 13th Floor, New York, New York 10048, and Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and its public reference facilities in New York, New York and
Chicago, Illinois, at prescribed rates. The Common Stock of the Company is
traded under the symbol "NOC" on the New York Stock Exchange. Proxy
statements, reports and other information filed by the Company with the
Commission and other information can be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005; and the
Pacific Stock Exchange, Inc., 233 South Beaudry Avenue, Los Angeles,
California 90012, and 301 Pine Street, San Francisco, California 94104, and
such information is also accessible through the Web site maintained by the
Commission (Web site address: http://www.sec.gov).
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SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data (including
financial statements, pro forma financial data and the notes thereto) included
elsewhere in this Prospectus or incorporated herein by reference.
THE COMPANY
Northrop Grumman Corporation (the "Company") is an advanced
technology aerospace and defense company operating primarily in two business
segments: electronics and systems integration and military and commercial
aircraft. Within the electronics and systems integration segment, the Company
is engaged in the design, development and manufacture of a wide variety of
complex electronic products such as airborne radar, surveillance and battle
management systems, electronic countermeasures, precision weapons,
antisubmarine warfare systems and air traffic control systems. Within the
military and commercial aircraft segment, the Company is engaged in the
design, development, manufacture and modification of military aircraft and
commercial aerostructures. The Company is also engaged in the design,
development and manufacture of information systems, marine propulsion and
power generation systems and a variety of other products and services.
Approximately three-fourths of the Company's revenues in 1996 are expected to
be generated from the U.S. Department of Defense (the "DOD"), with the
balance provided by contracts with commercial aerospace manufacturers, other
U.S. government agencies and various foreign customers.
The Company has a balance of programs in both the production and
development phases. While production programs generally involve less risk and
generate greater cash flow than development programs, development programs are
essential for future growth opportunities. Based on its backlog and business
mix, the Company believes that its cash flow from operations as compared to its
investment requirements will result in significant cash flow available for debt
reduction, dividends and other uses over the next several years.
Many of the Company's programs are among the principal programs for the
various branches of the U.S. military. The Company is the prime contractor on
the B-2 Stealth Bomber, the only strategic bomber currently in production; the
principal subcontractor on the F/A-18C/D Hornet, the U.S. Navy's primary
strike/attack aircraft, as well as on the next generation F/A-18E/F Super
Hornet; the prime contractor on the E-2C Hawkeye, the U.S. Navy's principal
early warning, command and control aircraft; the prime contractor for the
E-8 Joint STARS aircraft radar system, which will be the primary airborne ground
surveillance and battle management system for the U.S. Air Force and Army; the
prime contractor on the BAT "Brilliant" self-guided submunition under
development for the U.S. Army; the supplier of the APG-68 Fire Control Radar
used on the F-16, one of the most widely used fighter aircraft in the world; the
supplier of the ARSR-4 Long Range Radar, a three-dimensional air traffic control
radar system used by the U.S. Air Force and the U.S. Federal Aviation
Administration; and the supplier of the AN/APY-1, 2 surveillance radar which
provides real-time, all-altitude and beyond-the-horizon target detection,
identification and tracking for the E-3 AWACS surveillance aircraft.
The Company is also one of the world's leading manufacturers of
commercial aerostructures and components. The Company manufactures major
portions of the Boeing 747, 757 and 767 jetliners as well as significant
subassemblies and components for other commercial aircraft, including the
Boeing 777 jetliner.
STRATEGY
The Company intends to strengthen its position as a leader in the
aerospace and defense industry by pursuing the following strategies:
(i) focusing on segments of defense markets that are growing and where the
Company has premier technological capabilities, particularly in electronics and
electronics systems integration; and (ii) leveraging its airframe design
expertise and manufacturing strengths to remain a key competitor in military
aircraft and commercial aerostructures. The Company has been pursuing these
strategies since 1992 through both internal initiatives and acquisitions and, as
a result, enjoys leading positions
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in those market segments in which it chooses to compete. The Company's primary
objective in pursuit of these strategies is to maximize total return on
investment.
The Company is transforming itself from primarily an aircraft
designer/manufacturer to an electronics and systems integration company with a
leading airframe and aerostructures business. In early 1994, the Company
significantly expanded its electronics business with the acquisition of Grumman
Corporation ("Grumman"), a leading electronic systems integration company. In
March of 1996, the Company acquired the Electronics Systems Group of
Westinghouse Electric Corporation ("ESG"). ESG is a leading producer of
sophisticated electronics for defense, government and commercial applications.
As a result of these acquisitions, the Company expects that its electronics and
systems integration revenues will approximate 50% of total revenues in 1996 and
that this percentage will continue to increase in the future.
This strategic transformation positions the Company to meet the growing
needs of the DOD for more sophisticated electronics and integrated electronics
systems. Since the end of the Cold War, the DOD has recognized the necessity of
maintaining an effective fighting force with fewer defense dollars, thereby
placing a premium on sophisticated systems that provide long-range surveillance,
battle management and precision-strike capabilities. As military systems have
become more complex, integration of the electronic functions of the various
platforms, weapons and support systems has become increasingly important.
Budget constraints have also encouraged spending on program modifications,
upgrades and extensions rather than on new development programs, further
increasing demand for sophisticated electronics systems. As a technological
leader in designing, manufacturing and integrating the sophisticated electronics
systems that provide long-range surveillance, battle management and
precision-strike capabilities, the Company believes that it is well positioned
to serve the electronic systems market.
The Company has also strengthened its military and commercial aircraft
segment. In 1992, the Company acquired 49% of Vought Aircraft Company
("Vought"), a leading manufacturer of commercial and military aerostructures,
and in 1994 acquired the remaining 51% of Vought and the military aircraft
business of Grumman. These acquisitions and the Company's internal initiatives
have enabled the Company to establish a leading position in military aircraft
and commercial aerostructures. The Company believes that it will maintain this
leadership position as a result of its airframe design experience, including
stealth technology, as well as its cost-competitive manufacturing capabilities.
ACQUISITION OF ESG
On March 1, 1996, the Company completed the acquisition of ESG for
approximately $2.9 billion in cash (the "Acquisition"). For the year ended
December 31, 1995, ESG generated revenue of $2.6 billion. The Acquisition
was financed with a combination of bank borrowings and intermediate and
long-term notes and debentures. The business of ESG is now operated as the
Company's new Electronic Sensors and Systems Division ("ESSD").
ESSD is a leading supplier of electronic systems for defense, government
and commercial applications. It employs nearly 12,000 people worldwide at 15
operating locations, primarily in the United States. ESSD has a diversified
portfolio of programs with no single program accounting for more than 10% of
revenues in 1995. Approximately one-half of ESSD's 1995 revenues were
attributable to radar technology applied to surveillance, fire control, air
traffic control and other purposes. ESSD also designs and manufactures other
avionics products, electro-optical systems, undersea and marine products and
material handling systems.
The Acquisition represents a substantial step in the Company's continuing
transformation from an aircraft designer/manufacturer to a defense electronics
and systems integration company with a leading aircraft and aerostructures
business. The Acquisition enables the Company to serve a larger customer base,
domestically and internationally, and is expected to provide the opportunity to
achieve revenue growth and greater cash flow stability. The Acquisition will
also enable the Company to enhance its role on important programs such as E-8
Joint STARS and BAT, and to expand its business into the areas of air traffic
control and anti-submarine warfare systems.
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RECENT DEVELOPMENT
On June 7, 1996, the Company consummated an offering of 8,050,000
shares (including shares to cover over-allotments) of Common Stock of the
Company (the "Common Stock Offering") resulting in net proceeds to the
Company of approximately $492.6 million, which will be applied to repay a
portion of the Company's bank borrowings incurred to finance the Acquisition
in March 1996.
ISSUANCE OF THE OLD SECURITIES
The outstanding $400,000,000 principal amount of 7% Notes Due 2006 (the
"Old Notes"), $300,000,000 principal amount of 7 3/4% Debentures Due 2016 (the
"Old 2016 Debentures"), and $300,000,000 principal amount of 7 7/8% Debentures
Due 2026 (the "Old 2026 Debentures" and together with the Old Notes and Old 2016
Debentures, the "Old Securities") were sold by the Company to CS First Boston
Corporation, J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc (the "Initial Purchasers"), on March 1,
1996 (the "Closing Date") pursuant to a Purchase Agreement, dated February 27,
1996 (the "Purchase Agreement"), among the Company and the Initial Purchasers.
The Initial Purchasers subsequently resold the Old Securities in reliance on
Rule 144A under the Securities Act and other available exemptions under the
Securities Act (the "Debt Offering"). The Company and the Initial Purchasers
also entered into the Registration Rights Agreement, dated as of March 1, 1996
(the "Registration Rights Agreement"), pursuant to which the Company granted
certain registration rights for the benefit of the holders of the Old
Securities. The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement with respect to the Old
Securities. See "-- The Exchange Offer" and "The Exchange Offer--Purpose and
Effect."
THE EXCHANGE OFFER
The Exchange Offer . . . . . . . . . The Company is offering, upon the terms
and subject to the conditions set forth
herein and in the accompanying letter of
transmittal (the "Letter of
Transmittal"), to exchange (the
"Exchange Offer") $1,000 principal
amount of (i) New Notes for each $1,000
in principal amount of Old Notes,
(ii) New 2016 Debentures for each $1,000
in principal amount of Old 2016
Debentures, and (iii) New 2026
Debentures for each $1,000 in principal
amount of Old 2026 Debentures. As of
the date of this Prospectus,
$1,000,000,000 in aggregate principal
amount of the Old Securities is
outstanding. Cede is the sole
registered holder of the Old Securities.
The New Notes, the New 2016 Debentures
and the New 2026 Debentures shall
constitute the same series of Securities
(as defined in the Indenture) as the Old
Notes, the Old 2016 Debentures and the
Old 2026 Debentures, respectively. See
"The Exchange Offer -- Terms of the
Exchange Offer" and "Description of New
Securities -- General".
Expiration Date. . . . . . . . . . . 5:00 p.m., New York City time, on
July 17, 1996, as the same may be
extended. See "The Exchange Offer --
Expiration Date; Extensions;
Amendments."
Conditions of the
Exchange Offer . . . . . . . . . . . The Exchange Offer is not conditioned
upon any minimum principal amount of Old
Securities being tendered for exchange.
However, the Exchange Offer is subject
to certain customary conditions,
including (i) no legal or governmental
action is
-9-
<PAGE>
pending or threatened with respect to
the Exchange Offer which, in the
judgment of the Company, would make it
inadvisable to proceed with the Exchange
Offer, (ii) no statute, rule or
regulation with respect to the Exchange
Offer has been enacted which, in the
judgment of the Company, would make it
inadvisable to proceed with the Exchange
Offer, (iii) no banking moratorium or
similar event or international calamity
involving the United States has
occurred, and (iv) no governmental
approval deemed necessary by the Company
to the Exchange Offer has been denied.
The Company expects that the foregoing
conditions will be satisfied. All such
conditions may be waived by the Company.
See "The Exchange Offer -- Conditions of
the Exchange Offer."
Termination of
Certain Rights . . . . . . . . . . . Pursuant to the Registration Rights
Agreement, Eligible Holders of Old
Securities (i) have rights to receive
Additional Interest during any period in
which a Registration Default is
continuing and (ii) have certain rights
intended for the holders of unregistered
securities. "Additional Interest"
means, during the period in which a
Registration Default is continuing
pursuant to the terms of the
Registration Rights Agreement, an
increase in the annual percentage rate
which the Old Securities bear equal to
0.50%. Holders of New Securities
generally will not be and, upon
consummation of the Exchange Offer,
Eligible Holders of Old Securities will
no longer be, entitled to (i) the right
to receive Additional Interest or
(ii) certain other rights under the
Registration Rights Agreement intended
for holders of unregistered securities.
See "The Exchange Offer -- Termination
of Certain Rights" and "Book-Entry
Procedures for Tendering Old
Securities."
Accrued Interest . . . . . . . . . . The New Notes will bear interest at a
rate equal to 7% per annum from March 1,
1996, the New 2016 Debentures will bear
interest at a rate equal to 7 3/4% per
annum from March 1, 1996, and the New
2026 Debentures will bear interest at a
rate equal to 7 7/8% per annum from
March 1, 1996. Eligible Holders whose
Old Securities are accepted for exchange
will be deemed to have waived the right
to receive any payment in respect of
interest on the Old Securities accrued
from March 1, 1996 to the date of
issuance of the New Securities.
Book-Entry Procedures
for Tendering
Old Securities . . . . . . . . . . . Each Eligible Holder of Old Securities
wishing to accept the Exchange Offer
must comply with the book-entry transfer
procedures as provided for herein for
effecting a tender of Old Securities and
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions
contained herein and therein, and mail
or otherwise deliver such Letter of
Transmittal, or such facsimile, together
with any other required documentation,
to The Chase Manhattan Bank (National
Association), as Exchange Agent, at the
address set forth herein and therein.
See "The Exchange Offer -- Book-Entry
Procedures for Tendering Old
Securities."
-10-
<PAGE>
By executing the Letter of Transmittal,
each Eligible Holder will represent to
the Company that, among other things,
(i) the New Securities to be acquired
in connection with the Exchange Offer
by the Eligible Holder of the Old
Securities are being acquired by the
Eligible Holder in the ordinary course
of business of the Eligible Holder,
(ii) the Eligible Holder is not
participating, does not intend to
participate, and has no arrangement or
understanding with any person to
participate, in the distribution of the
New Securities, and (iii) the Eligible
Holder is not an "affiliate", as defined
under Rule 405 of the Securities Act, of
the Company except as otherwise
disclosed to the Company in writing.
See "The Exchange Offer -- Book-Entry
Procedures for Tendering Old Securities."
Special Procedures for
Beneficial Owners. . . . . . . . . . Any beneficial owner whose Old
Securities are registered in the name of
a broker, dealer, commercial bank, trust
company or other nominee and who wishes
to tender such Old Securities in the
Exchange Offer should contact such
registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on
such owner's own behalf, such owner
must, prior to completing and executing
the Letter of Transmittal and delivering
his Old Securities, either make
appropriate arrangements to register
ownership of the Old Securities in such
owner's name or obtain a properly
completed bond power from the registered
holder. The transfer of registered
ownership may take considerable time and
may not be able to be completed prior to
the Expiration Date.
Guaranteed Delivery
Procedures . . . . . . . . . . . . . Eligible Holders of Old Securities who
cannot deliver a Letter of Transmittal
or any documents required by the Letter
of Transmittal to the Exchange Agent
prior to the Expiration Date (or
complete the procedure for book-entry
transfer on a timely basis), may
undertake the foregoing according to the
guaranteed delivery procedures set forth
in the Letter of Transmittal. See "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of Old
Securities and Delivery
of New Securities. . . . . . . . . . Upon satisfaction or waiver of all
conditions of the Exchange Offer, the
Company will accept any and all Old
Securities that are properly tendered in
the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration
Date. The New Securities issued
pursuant to the Exchange Offer will be
delivered promptly after acceptance of
the Old Securities of the corresponding
series. See "The Exchange Offer --
Acceptance of Old Securities for
Exchange; Delivery of New Securities."
Withdrawal Rights. . . . . . . . . . Tenders of Old Securities may be
withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer -- Withdrawal Rights."
-11-
<PAGE>
The Exchange Agent . . . . . . . . . The Chase Manhattan Bank (National
Association) is the exchange agent (in
such capacity, the "Exchange Agent").
The address and telephone number of the
Exchange Agent are set forth in "The
Exchange Offer -- The Exchange Agent;
Assistance."
Fees and Expenses. . . . . . . . . . All expenses incident to the Company's
consummation of the Exchange Offer and
compliance with the Registration Rights
Agreement will be borne by the Company.
See "The Exchange Offer -- Fees and
Expenses."
Resale of the
New Securities . . . . . . . . . . . Based on interpretations by the staff of
the Commission set forth in no-action
letters issued to third parties, the
Company believes that New Securities
issued pursuant to the Exchange Offer to
an Eligible Holder in exchange for Old
Securities of the corresponding series
may be offered for resale, resold and
otherwise transferred by such Eligible
Holder (other than (i) a broker-dealer
who purchased the Old Securities
directly from the Company for resale
pursuant to Rule 144A under the
Securities Act or any other available
exemption under the Securities Act, or
(ii) a person that is an affiliate of
the Company within the meaning of
Rule 405 under the Securities Act),
without compliance with the registration
and prospectus delivery provisions of
the Securities Act, provided that the
Eligible Holder is acquiring the New
Securities in the ordinary course of
business and is not participating, and
has no arrangement or understanding with
any person to participate, in a
distribution of the New Securities.
Each broker-dealer that receives New
Securities for its own account in
exchange for Old Securities, where such
Old Securities were acquired by such
broker-dealer as a result of market
making or other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any resale
of such New Securities. See "The
Exchange Offer -- Resale of the New
Securities" and "Plan of Distribution."
Certain Federal Tax
Considerations . . . . . . . . . . . The exchange pursuant to the Exchange
Offer will generally not be a taxable
event for federal income tax purposes.
See "Certain Federal Tax
Considerations."
Use of Proceeds. . . . . . . . . . . There will be no cash proceeds payable
to the Company from the issuance of the
New Securities pursuant to the Exchange
Offer. The net proceeds to the Company
from the sale of the Old Securities were
approximately $982.8 million. Such
proceeds were used to pay a portion of
the cash purchase price for the
Acquisition.
Rights of Dissenting
Holders of Old
Securities . . . . . . . . . . . . . Holders of Old Securities do not have
any appraisal or dissenters' rights
under the Delaware General Corporation
Law in connection with the Exchange
Offer.
-12-
<PAGE>
Federal and State
Regulatory
Requirements . . . . . . . . . . . . Other than compliance with state
securities or "blue sky" laws, there are
no federal or state regulatory
requirements that must be met prior to
consummation of the Exchange Offer.
Certain Consequences of
Failure to Exchange
Old Securities . . . . . . . . . . . Upon consummation of the Exchange Offer,
holders of Old Securities which remain
outstanding will not be entitled to any
rights to have such Old Securities
registered under the Securities Act or
to any similar rights under the
Registration Rights Agreement (subject
to certain limited exceptions). The
Company currently does not intend to
register under the Securities Act any
Old Securities which remain outstanding
after consummation of the Exchange Offer
(subject to such limited exceptions, if
applicable). The New Notes, the New
2016 Debentures and the New 2026
Debentures shall constitute the same
series of securities as the Old Notes,
the Old 2016 Debentures and the Old 2026
Debentures, respectively, under the
Indenture and, accordingly, will vote
together, respectively, as a single class
for purposes of determining whether
holders of the requisite percentage in
outstanding principal amount thereof
have taken certain actions or exercised
certain rights under the Indenture. See
"Description of the New Securities --
General." The Registration Rights
Agreement provides, among other things,
that if the Exchange Offer is not
consummated within 30 business days
after a registration statement with
respect to the Exchange Offer is first
declared effective by the Commission,
the interest rate borne by the Old
Securities will increase by 0.50% per
annum until the Exchange Offer is
consummated. See "The Exchange Offer --
Termination of Certain Rights".
Following consummation of the Exchange
Offer, the Old Securities will not be
entitled to any increase in the interest
rate thereon. The New Securities will
not be entitled to any such increase in
the interest rate thereon.
-13-
<PAGE>
DESCRIPTION OF NEW SECURITIES
The form and terms of each series of the New Securities will be identical
in all material respects to the form and terms of the Old Securities of the
corresponding series, except that (i) the New Securities have been registered
under the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, (ii) holders of the New Securities will not be entitled to
Additional Interest and (iii) holders of the New Securities will not be, and
upon consummation of the Exchange Offer, Eligible Holders of the Old Securities
will no longer be, entitled to certain rights under the Registration Rights
Agreement intended for the holders of unregistered securities, except in limited
circumstances. See "Exchange Offer -- Termination of Certain Rights." The
Exchange Offer shall be deemed consummated upon the occurrence of the delivery
by the Company to the Registrar under the Indenture of the New Securities in the
same aggregate principal amount as the aggregate principal amount of Old
Securities of the corresponding series that are tendered by holders thereof
pursuant to the Exchange Offer. See "The Exchange Offer -- Termination of
Certain Rights" and "Procedures for Tendering Old Securities," and "Description
of New Securities."
Maturity . . . . . . . . . . . . . . New Notes - March 1, 2006
New 2016 Debentures - March 1, 2016
New 2026 Debentures - March 1, 2026
Interest . . . . . . . . . . . . . . 7% Notes Due 2006 - 7% per annum
7 3/4% Debentures Due 2016 - 7 3/4% per
annum
7 7/8% Debentures Due 2026 - 7 7/8% per
annum
Interest on the New Securities is
payable semi-annually in arrears,
calculated on the basis of a 360-day
year consisting of twelve 30-day months
Interest Payment Dates . . . . . . . March 1 and September 1, commencing on
September 1, 1996.
Redemption . . . . . . . . . . . . . The New Securities are not redeemable.
Ranking. . . . . . . . . . . . . . . The New Securities will be unsecured and
unsubordinated obligations of the
Company and will rank equally and
ratably with all other unsecured and
unsubordinated indebtedness of the
Company.
Certain Covenants. . . . . . . . . . The Indenture under which the New
Securities will be issued will contain
certain covenants with respect to the
Company and its subsidiaries, including,
among other things, limitations on
liens, sale and leaseback arrangements
and debt of the Company's subsidiaries.
Absence of a Public Market
for the New Securities . . . . . . . The New Securities are new issues of
securities with no established market.
Accordingly, there can be no assurance
as to the development or liquidity of
any market for the New Securities. The
Initial Purchasers have advised the
Company that they currently intend to
make a market in the New Securities.
However, none of the Initial Purchasers
is obligated to do so, and any market
making with respect to the New
Securities may be discontinued at any
time without notice. The Company does
not intend to apply for listing of the
New Securities on a securities exchange.
-14-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical financial data with respect to the
five years ended December 31, 1995, have been derived from and are qualified
by reference to the audited consolidated financial statements and notes
thereto filed by the Company with the Commission which are incorporated
herein by reference. The data for the three months ended March 31, 1996 and
1995 are unaudited but, in the opinion of management, reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of the results of operations and financial position for such periods.
Operating results for the three months ended March 31, 1996 may not be
indicative of the results that may be expected for the year ending December
31, 1996, or any future period. All such summary historical financial data
should be read in conjunction with "Selected Consolidated Financial Data"
included or incorporated by reference herein. The summary pro forma data for
December 31, 1995 and March 31, 1996 and the periods then ended have been
derived from the "Unaudited Pro Forma Condensed Combined Financial Data"
included herein which are based upon the historical consolidated financial
statements of the Company and the historical combined financial statements of
ESG which are also incorporated herein by reference, adjusted to give effect
to the Acquisition using the purchase method of accounting. The pro forma
Operating Data for the year ended December 31, 1995 and the three months
ended March 31, 1996 give effect to the Acquisition as if it had occurred as
of January 1, 1995. The pro forma Balance Sheet Data give effect to the
Acquisition as if it had occurred on December 31, 1995. See also "Available
Information," "Incorporation of Certain Documents by Reference" and
"Unaudited Pro Forma Condensed Combined Financial Data."
<TABLE>
<CAPTION>
PRO FORMA FOR FISCAL YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales. . . . . . . . . . . . . . . . . . $9,158 $6,818 $6,711 $5,063 $5,550 $5,694
Cost of sales
Operating costs. . . . . . . . . . . . . . 7,230 5,319 5,477 4,385 4,877 4,817
Administrative and general expenses. . . . 1,283 963 753 485 455 531
Special termination benefits . . . . . . . 282
Restructuring charges. . . . . . . . . . . 51
------ ------ ------ ------ ------ ------
Operating margin . . . . . . . . . . . . . . 594 536 199 193 218 346
Other, net . . . . . . . . . . . . . . . . . (5) 9 (31) 13 5
Interest expense, net. . . . . . . . . . . . (346) (136) (103) (36) (43) (69)
------ ------ ------ ------ ------ ------
Income before income taxes and cumulative
effect of accounting principle changes . . 243 409 65 170 180 277
Federal and foreign income taxes . . . . . . 107 157 30 74 59 9
------ ------ ------ ------ ------ ------
Income before cumulative effect of accounting
principle changes. . . . . . . . . . . . . 136 252 35 96 121 268
Cumulative effect of accounting principle
changes. . . . . . . . . . . . . . . . . . (67)
------ ------ ------ ------ ------ ------
Net income . . . . . . . . . . . . . . . . . $ 136 $ 252 $ 35 $ 96 $ 121 $ 201
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Earnings per share before cumulative
effect of accounting principle changes . . $2.75 $5.11 $.72 $1.99 $2.56 $5.69
Cumulative effect of accounting principle
changes, per share . . . . . . . . . . . . (1.43)
------ ------ ------ ------ ------ ------
Earnings per share . . . . . . . . . . . . . $ 2.75 $ 5.11 $ .72 $ 1.99 $ 2.56 $ 4.26
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . $9,646 $5,455 $6,047 $2,939 $3,162 $3,128
Net working capital. . . . . . . . . . . . 321 357 467 481 354 611
Total debt . . . . . . . . . . . . . . . . 4,344 1,372 1,934 160 510 550
Shareholders' equity . . . . . . . . . . . 1,459 1,459 1,290 1,322 1,254 1,182
Other Data:
Capital expenditures . . . . . . . . . . . $188 $133 $134 $135 $123 $118
Depreciation and amortization. . . . . . . 471 283 269 214 160 171
Funded order backlog . . . . . . . . . . . 13,433 9,947 12,173 6,919 7,175 8,561
Ratio of Earnings to Fixed Charges . . . . 1.6 3.5 1.5 4.2 3.8 3.8
Dividends per share. . . . . . . . . . . . $1.60 $1.60 $1.60 $1.60 $1.20 $1.20
Weighted average shares
outstanding (in millions) . . . . . . . 49.4 49.4 49.2 48.1 47.2 47.1
</TABLE>
-15-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
(UNAUDITED)
PRO FORMA
1996 1996 1995
--------- -------- ----------
($ IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Operating Data:
Net sales.................................................................. $ 1,850 $ 1,603 $ 1,617
Cost of sales
Operating costs.......................................................... 1,476 1,273 1,299
Administrative and general expenses...................................... 231 191 201
--------- -------- ----------
Operating margin........................................................... 143 139 117
Interest expense, net...................................................... (81) (46) (34)
Other, net................................................................. 8 9 5
--------- -------- ----------
Income before income taxes................................................. 70 102 88
Federal and foreign income taxes........................................... 29 41 34
--------- -------- ----------
Net income................................................................. $ 41 $ 61 $ 54
--------- -------- ----------
--------- -------- ----------
Earnings per share......................................................... $ .83 $ 1.23 $ 1.10
--------- -------- ----------
--------- -------- ----------
Balance Sheet Data:
Total assets............................................................... $ 9,495 $ 6,090
Net working capital........................................................ 339 469
Total debt................................................................. 4,201 1,787
Shareholders' equity....................................................... 1,505 1,326
Other Data:
Capital expenditures....................................................... $ 41 $ 45
Depreciation and amortization.............................................. 71 67
Funded order backlog....................................................... 12,543 11,477
Ratio of Earnings to Fixed Charges......................................... 1.8 2.9 3.1
Dividends per share........................................................ $ .40 $ .40
Weighted average shares outstanding (in millions).......................... 49.6 49.3
</TABLE>
-16-
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Securities were sold by the Company to the Initial Purchasers on
March 1, 1996, pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Securities in reliance on Rule 144A and other
available exemptions under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Rights Agreement, pursuant to
which the Company agreed, with respect to the Old Securities and subject to the
Company's determination that the Exchange Offer is permitted under applicable
law, to (i) cause to be filed, on or prior to May 15, 1996, a registration
statement with the Commission under the Securities Act concerning the Exchange
Offer, and (ii) use all reasonable efforts (a) to cause such registration
statement to be declared effective by the Commission as soon as practicable and
(b) to cause the Exchange Offer to remain open for a period of not less than the
minimum period required under applicable federal and state securities laws, but
in no event less than 20 Business Days (as defined). This Exchange Offer is
intended to satisfy the Company's exchange offer obligations under the
Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions
set forth herein and in the accompanying Letter of Transmittal, to exchange
$1,000 in principal amount of (i) New Notes for each $1,000 in principal amount
of Old Notes, (ii) New 2016 Debentures for each $1,000 in principal amount of
Old 2016 Debentures, and (iii) New 2026 Debentures for each $1,000 in principal
amount of Old 2026 Debentures. The Company will accept for exchange any and all
Old Securities that are validly tendered on or prior to 5:00 p.m. New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Securities being tendered for exchange.
However, the Exchange Offer is subject to certain customary conditions which may
be waived by the Company, and to the terms and provisions of the Registration
Rights Agreement. See "-- Conditions of the Exchange Offer."
Old Securities may be tendered only in multiples of $1,000. Subject to
the foregoing, Eligible Holders may tender less than the aggregate principal
amount represented by the Old Securities held by them, provided that they
appropriately indicate this fact pursuant to the procedures for book-entry
transfer.
As of the date of this Prospectus, $1,000,000,000 in aggregate principal
amount of the Old Securities is outstanding. Cede is the sole registered holder
of the Old Securities. The Company has fixed the close of business on
June 14, 1996, as the record date (the "Record Date") for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially. Only an Eligible Holder of the Old Securities (or
such Eligible Holder's legal representative or attorney-in-fact) may participate
in the Exchange Offer. There will be no fixed record date for determining
Eligible Holders of the Old Securities entitled to participate in the Exchange
Offer. The Company believes that, as of the date of this Prospectus, no such
Eligible Holder is an affiliate (as defined in Rule 405 under the Securities
Act) of the Company.
The Company shall be deemed to have accepted validly tendered Old
Securities when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
Eligible Holders of Old Securities and for the purposes of receiving the New
Securities from the Company.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be July 17, 1996 at 5:00 p.m., New York City
time, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
-17-
<PAGE>
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, (ii) to extend the Exchange Offer, (iii) if any of
the conditions set forth below under "Conditions of the Exchange Offer" shall
not have been satisfied, to terminate the Exchange Offer, by giving oral or
written notice of such delay, extension, or termination to the Exchange Agent,
and (iv) to amend the terms of the Exchange Offer in any manner. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendments by means of
a prospectus supplement that will be distributed to the registered holders of
the Old Securities.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount
of the Old Securities being tendered for exchange. However, notwithstanding any
other provisions of the Exchange Offer, the Company shall not be required to
accept for exchange, or to issue the New Securities in exchange for, any Old
Securities, if any of the following events shall occur, which occurrence, in the
reasonable judgment of the Company and regardless of the circumstances
(including any action by the Company) giving rise to any such events, makes
it inadvisable to proceed with the Exchange Offer:
(i) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (a) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof or (b) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Securities pursuant to the Exchange Offer or which, in the judgment
of the Company, might result in the holders of the New Securities having
obligations with respect to resales and transfers of New Securities that
are greater than those described in "-- Resales of the New Securities" or
which would otherwise in the judgment of the Company make it inadvisable to
proceed with the Exchange Offer; provided, however, that the Company will
use reasonable efforts to modify or amend the Exchange Offer or to take
such other reasonable steps in order to effectuate the Exchange Offer;
(ii) any statute, rule, regulation, order or injunction shall be
sought, proposed, introduced, enacted, promulgated or deemed applicable to
the Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any domestic or foreign government or governmental authority, or
any action shall have been taken, proposed or threatened by any domestic or
foregoing government or governmental authority that, in the judgment of the
Company, might directly or indirectly result in any of the consequences
referred to in clauses (i)(a) or (i)(b) above or which, in the judgment of
the Company, might result in the holders of the New Securities having
obligations with respect to resales and transfers of New Securities that
are greater than those described in "-- Resales of the New Securities" or
which would otherwise in the judgment of the Company make it inadvisable to
proceed with the Exchange Offer, provided, however, that the Company will
use reasonable efforts to modify or amend the Exchange Offer or to take
such other reasonable steps in order to effectuate the Exchange Offer;
(iii) there shall have occurred (a) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States or any limitation by any governmental agency or authority
which adversely affects the extension of credit or (b) a commencement of
wars, armed hostilities or other similar international calamity directly or
indirectly involving the United States, or, in the event any of the
foregoing exist at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof; or
(iv) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable judgement, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable judgement that any of the
conditions set forth above are not satisfied, the Company may (i) refuse to
accept any Old Securities theretofore or thereafter tendered by the tendering
holders, (ii) extend the Exchange Offer and retain all Old Securities
tendered prior to the Expiration Date, subject however, to the rights of
Eligible Holders to withdraw such Old Securities as described in
"--Withdrawal Rights", or (iii) waive such unsatisfied conditions with
respect to the Exchange
-18-
<PAGE>
Offer and accept all validly tendered Old Securities which have not been
withdrawn. If such waiver constitutes a material change to the Exchange Offer,
the Company will promptly disclose such waiver by means of a public announcement
and a prospectus supplement that will be distributed to the registered holders.
The Company expects that the foregoing conditions will be satisfied.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company in whole or in part at any time and from time to time
in its reasonable judgement. The failure by the Company at any time to
exercise any of the foregoing rights shall not be deemed a waiver of such
rights and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Company
concerning the events described above will be final and binding upon all
parties.
TERMINATION OF CERTAIN RIGHTS
The Registration Rights Agreement provides that in the event of
Registration Default (as defined below), Eligible Holders of Old Securities are
entitled to receive Additional Interest (as defined below). A "Registration
Default" with respect to the Exchange Offer shall occur if (i) a registration
statement with respect to the Exchange Offer has not been filed with the
Commission by May 15, 1996 or any shelf registration statement required by the
Registration Rights Agreement is not filed with the Commission on or prior to
the date specified in the Registration Rights Agreement, (ii) a registration
statement with respect to the Exchange Offer is not declared effective by the
Commission by July 1, 1996 or any shelf registration statement required by the
Registration Rights Agreement is not declared effective by the Commission on or
prior to the date specified in the Registration Rights Agreement, (iii) the
Company has not consummated the Exchange Offer within 30 Business Days after the
registration statement with respect thereto is first declared effective by the
Commission, or (iv) a shelf registration statement or registration statement
with respect to the Exchange Offer, as specified in the Registration Rights
Agreement, is declared effective but thereafter ceases to be effective or usable
for its intended purpose during the periods specified in the Registration Rights
Agreement without being succeeded immediately by a post-effective amendment to
such registration statement that cures such failure and that is itself declared
effective immediately. "Additional Interest" means an increase in the annual
percentage rate which the Old Securities bear equal to 0.50%. The Exchange Offer
shall be deemed consummated upon the delivery by the Company to the Registrar
under the Indenture of New Securities in the same aggregate principal amount as
the aggregate principal amount of Old Securities of the corresponding series
that are validly tendered by holders thereof pursuant to the Exchange Offer.
ACCRUED INTEREST ON THE OLD SECURITIES
The New Securities will bear interest from March 1, 1996. Eligible Holders
of Old Securities whose Old Securities are accepted for exchange will be deemed
to have waived the right to receive any payment in respect of interest on the
Old Securities accrued from March 1, 1996 to the date of the issuance of the New
Securities. Interest on the New Securities is payable semiannually on each
Interest Payment Date, commencing September 1, 1996, accruing from March 1, 1996
(i) with respect to the New Notes, at a rate of 7% per annum, (ii) with respect
to the New 2016 Debentures, at a rate of 7 3/4% per annum, and (iii) with
respect to the New 2026 Debentures, at a rate of 7 7/8% per annum, to each
person in whose name such New Security shall have been registered at the close
of business on the each Regular Record Date next preceding such Interest Payment
Date.
BOOK-ENTRY PROCEDURES FOR TENDERING OLD SECURITIES
The tender of an Eligible Holder's Old Securities as set forth below and
the acceptance thereof by the Company will constitute a binding agreement
between the tendering Eligible Holder and the Company upon the terms and subject
to the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. The Exchange Agent will establish an account with respect to the
Old Securities at The Depository Trust Company ("Book-Entry Transfer Facility")
for purposes of the Exchange Offer within two business days after the date of
this Prospectus. Any financial institution that is a participant in the Book-
Entry Transfer Facility's system may make book-entry delivery of the Old
Securities by causing such facility to transfer Old Securities into the Exchange
Agent's account in accordance with such facility's procedure for such transfer.
Even though delivery of Old Securities may be effected through book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility,
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees, or an Agent's
Message (as defined below) in connection with a book-entry transfer, and other
documents required by the Letter of Transmittal, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth on
the back cover of this Prospectus before the Expiration Date, or the guaranteed
delivery
-19-
<PAGE>
procedure set forth below must be followed. Delivery of the Letter of
Transmittal and any other required documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent. The term "Agent's Message"
means a message transmitted by the Book-Entry Transfer Facility to, and received
by, the Exchange Agent and forming a part of a book-entry confirmation, which
states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Old Securities that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Company may enforce
such agreement against such participant.
THE METHOD OF DELIVERY OF OLD SECURITIES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE ELIGIBLE HOLDER. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT THE ELIGIBLE HOLDER USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
In the event that a signature on a Letter of Transmittal or a notice of
withdrawal, as the case may be, is required to be guaranteed, such guarantee
must be by a firm which is a member of a registered national securities exchange
or the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or
otherwise be an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions").
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of the Old Securities (a "Beneficial Owner") whose Old
Securities are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to tender Old Securities in the
Exchange Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Securities,
make appropriate arrangements to register ownership of the Old Securities in
such Beneficial Owner's name. Beneficial Owners should be aware that the
transfer of registered ownership may take considerable time.
In connection with each book-entry transfer, each participant will
represent to the Company that, among other things (i) the New Securities to be
acquired in connection with the Exchange Offer by such participant are being
acquired by such participant in the ordinary course of business of such
participant (ii) such participant is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the New Securities, (iii) such participant
acknowledges and agrees that any person participating in the Exchange Offer for
the purpose of distributing the New Securities must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Securities acquired by such person and
cannot rely on the position of the staff of the Commission set forth in
no-action letters that are discussed herein under "-- Resales of New
Securities," (iv) that if such participant is a broker-dealer that acquired Old
Securities as a result of market making or other trading activities, it will
deliver a prospectus in connection with any resale of New Securities acquired in
the Exchange Offer, (v) such participant understands that a secondary resale
transaction described in clause (iii) above should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K of the Commission, and (vi) such
participant is not an "affiliate", as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing.
GUARANTEED DELIVERY PROCEDURES
Eligible Holders who cannot deliver Letters of Transmittal or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis), may undertake the foregoing according to the guaranteed delivery
-20-
<PAGE>
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
(i) such delivery must be made by or through an Eligible Institution and a
Notice of Guaranteed Delivery (as defined in the Letter of Transmittal) must be
signed by such Eligible Holder, (ii) on or prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Holder and the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Eligible Holder, stating that the delivery is being made thereby
and guaranteeing that, within three (3) business days after the date of delivery
of the Notice of Guaranteed Delivery, the duly executed Letter of Transmittal
and any other required documents will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) such properly completed and executed
documents required by the Letter of Transmittal in proper form for transfer (or
confirmation of a book-entry transfer of such Old Securities into the Exchange
Agent's account at DTC) must be received by the Exchange Agent within three (3)
business days after the Expiration Date. Any Eligible Holder who wishes to
comply with the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery and Letter of
Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF NEW SECURITIES
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Company will accept any and all Old Securities that are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration
Date. The New Securities issued pursuant to the Exchange Offer will be
delivered promptly after acceptance of the Old Securities of the corresponding
series. For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Securities, when, as, and if the Company has given
oral or written notice thereof to the Exchange Agent.
In all cases, issuances of New Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of confirmation of a book-entry transfer of
such Old Securities into the Exchange Agent's account at the Depository, a
properly completed and duly executed Letter of Transmittal and all other
required documents; provided, however, that the Company reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange
Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Securities may be withdrawn by delivery of a written
notice to the Exchange Agent, at its address set forth on the back cover page of
this Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) identify the Old
Securities to be withdrawn, and (ii) specify the name and number of the account
at the Depository to be credited with the withdrawn Old Securities and otherwise
comply with the procedures of the Depository. Any questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, in its sole discretion. The Old Securities so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Securities which have been tendered by
book-entry transfer into the Exchange Agent's account at the Depository pursuant
to the book-entry transfer procedures described above will be credited to an
account maintained with the Depository for the Old Securities as soon as
practicable after such withdrawal. Properly withdrawn Old Securities may be
retendered by following one of the procedures described under "The Exchange
Offer -- Book-Entry Procedures for Tendering Old Securities" at any time on or
prior to the Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
The Chase Manhattan Bank (National Association) is the Exchange Agent. All
executed Letters of Transmittal and other related documents should be directed
to the Exchange Agent. Questions and requests for assistance and requests for
additional copies of the Prospectus, the Letter of Transmittal and other related
documents should be addressed to the Exchange Agent as follows:
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<PAGE>
BY HAND, REGISTERED OR CERTIFIED MAIL OR OVERNIGHT COURIER:
The Chase Manhattan Bank (National Association)
Institutional Trust Group
Chase MetroTech Center
3rd Floor
Brooklyn, New York 11245
BY FACSIMILE:
(718) 242-5885
BY TELEPHONE:
(718) 242-7287
FEES AND EXPENSES
All expenses incident to the Company's consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will be borne by the
Company, including, without limitation: (i) all registration and filing fees
(including, without limitation, fees and expenses of compliance with state
securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for the New Securities in a form
eligible for deposit with DTC and of printing Prospectuses), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) reasonable fees and disbursements of not more than one counsel for
the Eligible Holders of a majority in principal amount of Old Securities,
(vi) fees and disbursements of independent certified public accountants and
(vii) internal expenses of the Company (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties).
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
ACCOUNTING TREATMENT
The New Securities will be recorded at the same carrying value as the Old
Securities, as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss will be recognized by the Company for
accounting purposes. The expenses of the Exchange Offer will be amortized over
the term of the New Securities.
RESALES OF THE NEW SECURITIES
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that the New
Securities issued pursuant to the Exchange Offer to an Eligible Holder in
exchange for Old Securities may be offered for resale, resold and otherwise
transferred by such Eligible Holder (other than (i) a broker-dealer who
purchased Old Securities directly from the Company for resale pursuant to
Rule 144A under the Securities Act or any other available exemption under the
Securities Act, or (ii) a person that is an affiliate of the Company (within the
meaning of Rule 405 under the Securities Act)) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the Eligible Holder is acquiring the New Securities in the ordinary course
of business and is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of the New Securities. The
Company has not requested or obtained an interpretive letter from the Commission
staff with respect to this Exchange Offer, and the Company and the Eligible
Holders are not entitled to rely on interpretive advice provided by the staff to
other persons, which advice was based on the facts and conditions represented in
such letters. However, the Exchange Offer is being conducted in a manner
intended to be consistent with the facts and conditions represented in such
letters. If any Eligible Holder acquires New Securities in the Exchange Offer
for the purpose of distributing or participating in a distribution of the New
Securities, such Eligible Holder cannot rely on the position of the staff of the
Commission enunciated in MORGAN STANLEY & CO., INCORPORATED (available June 5,
1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), or
interpreted in the Commission's letter to SHEARMAN AND STERLING (available
July 2, 1993), or similar no-action or interpretive letters and must comply with
the
-22-
<PAGE>
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available. Each broker-dealer that receives New
Securities for its own account in exchange for Old Securities, where such Old
Securities were acquired by such broker-dealer as a result of market making or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. See "Plan of Distribution."
-23-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as at
March 31, 1996. The following table is not adjusted to reflect the Common
Stock Offering in June 1996. See "The Company -- Recent Development."
<TABLE>
<CAPTION>
As of March 31, 1996
---------------------
($ in millions)
<S> <C>
Current portion of long-term debt. . . . . . . . . . . . . . 250
Long term debt:
Bank term loans and revolving credit facility (a) . . . . 2,350
8 5/8% Notes due 2004 . . . . . . . . . . . . . . . . . . 350
7% Notes due 2006 . . . . . . . . . . . . . . . . . . . . 400
7 3/4% Debentures due 2016. . . . . . . . . . . . . . . . 300
9 3/8% Debentures due 2024. . . . . . . . . . . . . . . . 250
7 7/8% Debentures due 2026. . . . . . . . . . . . . . . . 300
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1
------
Total long-term debt . . . . . . . . . . . . . . . . . 3,951
------
Total debt . . . . . . . . . . . . . . . . . . . . . . 4,201
Shareholders' equity:
Preferred stock, 10,000,000 shares authorized;
none issued
Common stock (b), 200,000,000 shares authorized;
49,632,060 shares issued (c). . . . . . . . . . . . . 276
Retained earnings . . . . . . . . . . . . . . . . . . . . 1,241
Unfunded pension losses, net of taxes . . . . . . . . . . (12)
------
Total shareholders' equity . . . . . . . . . . . . . . 1,505
------
Total capitalization. . . . . . . . . . . . . . . . $5,706
------
------
</TABLE>
_____________________
(a) Amended bank credit facility consisting of a $1.8 billion revolving
credit facility expiring March 2002 and two term loan facilities
aggregating $2 billion ($500 million due March 1998 and $1.5 billion due
in quarterly installments of $62.5 million through March 2002), the
proceeds of which, together with $1 billion of institutionally placed
notes and debentures, were utilized to finance the Acquisition.
(b) Includes an equal number of Common Stock Purchase Rights.
(c) Excludes 3,959,423 shares of Common Stock reserved for issuance pursuant
to outstanding options and rights granted under the Company's stock plans.
-24-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated financial
data for the Company for each of the periods indicated which have been
derived from, and are qualified by reference to, the audited consolidated
financial statements and notes thereto filed by the Company with the
Commission which are incorporated herein by reference. The data for the three
months ended March 31, 1996 and 1995 are unaudited but, in the opinion of
management, reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results of operations
and financial position for such periods. Operating results for the three
months ended March 31, 1996 may not be indicative of the results that may be
expected for the year ending December 31, 1996, or any future period. See
also "Available Information," "Incorporation of Certain Documents by
Reference" and "Unaudited Pro Forma Condensed Combined Financial Data."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, For Fiscal Year Ended December 31,
---------------- ---------------------------------------------
1996(b) 1995 1995 1994(a) 1993 1992 1991
------- ------ ------ ------- ------ ------ ------
(UNAUDITED) ($ in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales . . . . . . . . . . . . . . . . . . . . $ 1,603 $1,617 $ 6,818 $ 6,711 $5,063 $5,550 $5,694
Cost of sales
Operating costs . . . . . . . . . . . . . . . . 1,273 1,299 5,319 5,477 4,385 4,877 4,817
Administrative and general expenses . . . . . . 191 201 963 753 485 455 531
Special termination benefits. . . . . . . . . . 282
------- ------ ------- ------- ------ ------ ------
Operating margin . . . . . . . . . . . . . . . . . . . 139 117 536 199 193 218 346
Other, net . . . . . . . . . . . . . . . . . . . . . . 9 5 9 (31) 13 5
Interest expense, net . . . .. . . . . . . . . . . . . (46) (34) (136) (103) (36) (43) (69)
------- ------ ------- ------- ------ ------ ------
Income before income taxes and cumulative
effect of accounting principle changes. . . . . . 102 88 409 65(b) 170 180 277
Federal and foreign taxes . .. . . . . . . . . . . . . 41 34 157 30 74 59 9
------- ------ ------- ------- ------ ------ ------
Income before cumulative effect of accounting
principle changes . . . . . . . . . . . . . . . . 61 54 252 35 96 121 268
Cumulative effect of accounting principle changes. . . (67)(c)
------- ------ ------- ------- ------ ------ ------
Net income . . . . . . . . . . . . . . . . . . . . . . $ 61 $ 54 $ 252 $ 35 $ 96 $ 121 $ 201
------- ------ ------- ------- ------ ------ ------
------- ------ ------- ------- ------ ------ ------
Earnings per share before cumulative effect
of accounting principle changes . . . . . . . . . $ 1.23 $ 1.10 $ 5.11 $ .72 $ 1.99 $ 2.56 $ 5.69
Cumulative effect of accounting principle
changes, per share. . . . . . . . . . . . . . . . (1.43)(c)
------- ------ ------- ------- ------ ------ --------
Earnings per share . . . . . . . . . . . . . . . . . . $ 1.23 $ 1.10 $ 5.11 $ .72 $ 1.99 $ 2.56 $ 4.26
------- ------ ------- ------- ------ ------ ------
------- ------ ------- ------- ------ ------ ------
Balance Sheet Data:
Total assets. . . . . . . . . . . . . . . . . . . $ 9,495 $6,090 $ 5,455 $ 6,047 $2,939 $3,162 $3,128
Net working capital . . . . . . . . . . . . . . . 339 469 357 467 481 354 611
Total debt (d). . . . . . . . . . . . . . . . . . 4,201 1,787 1,372 1,934 160 510 550
Shareholders' equity. . . . . . . . . . . . . . . 1,505 1,326 1,459 1,290 1,322 1,254 1,182
Other Data:
Net cash provided by operating activities . . . . $ 230 $ 191 $ 744 $ 441 $ 380 $284 $609
Capital expenditures. . . . . . . . . . . . . . . 41 45 133 134 135 123 118
Depreciation and amortization . . . . . . . . . . 71 67 283 269 214 160 171
Funded order backlog. . . . . . . . . . . . . . . 12,543 11,477 9,947 12,173 6,919 7,175 8,561
Ratio of Earnings to Fixed Charges (e). . . . . . 2.9 3.1 3.5 1.5 4.2 3.8 3.8
Dividends per share . . . . . . . . . . . . . . . $ .40 $ .40 $ 1.60 $ 1.60 $ 1.60 $ 1.20 $ 1.20
Weighted average shares outstanding (in millions) 49.6 49.3 49.4 49.2 48.1 47.2 47.1
</TABLE>
-25-
<PAGE>
- --------------------
(a) Includes Grumman Corporation data from April 1994 and Vought Aircraft
Company data from August 1994.
(b) Includes ESSD data from March 1, 1996.
(c) The Financial Accounting Standards Board's (FASB) accounting standard
No. 106 EMPLOYER'S ACCOUNTING FOR POST-RETIREMENT BENEFITS OTHER THAN
PENSIONS was adopted by the Company in 1991. The liability representing
previously unrecognized costs of $145 million for all years prior to 1991
was recorded as of January 1, 1991, with an after-tax effect on earnings of
$88 million. In 1991 the Company adopted the FASB standard No. 109
ACCOUNTING FOR INCOME TAXES and recorded, as of January 1, 1991, a benefit
of $21 million.
(d) Total debt includes long-term, short-term and current portion of long-term
debt.
(e) The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. Earnings consist of income before income taxes,
and in 1991, the net cumulative effect of changes in accounting principles,
plus fixed charges. Fixed charges consist of interest on all indebtedness,
amortization of debt issuance costs and other fees and the portion of
rental expense deemed to be representative of interest.
-26-
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial
statements reflect the ESG acquisition and are based upon the historical
financial statements of the Company and ESG for the period indicated,
combined and adjusted to give effect to the ESG acquisition using the
purchase method of accounting. The unaudited pro forma condensed combined
statement of financial position gives effect to the ESG acquisition as if it
had occurred on December 31, 1995. The unaudited pro forma condensed combined
statements of income give effect to the ESG acquisition as if it had occurred
on January 1, 1995. The pro forma adjustments are described in the
accompanying notes.
The purchase price has been allocated to the assets and liabilities
acquired based upon preliminary estimates of their respective fair values.
The liabilities acquired include contingent liabilities of the type normally
associated with the conduct of the business including product warranty,
employee, environmental and litigation claims. As to certain contingent
liabilities, the Company's exposure has been limited, above certain
thresholds, by indemnification from or a participation agreement with the
seller up to limits that the Company believes, based on its investigations
and negotiations to date, will not be exceeded as the liabilities are settled
or otherwise satisfied. Based upon available information, the Company
expects that those contingent liabilities for which loss provisions have not
been included in the purchase price adjustment will not have a material
adverse impact on the Company's results of operations or financial position.
The Company does not presently anticipate that the changes to the purchase
price allocation presented will be material. The unaudited pro forma
financial information does not give effect to any synergies or cost savings
that the Company may realize as a result of the ESG acquisition. The Company
is compiling data to determine those business areas and facilities that do
not fit in its long-term strategy and intends to complete this process by
December 31, 1996. During the remainder of 1996, the estimates of fair value
for other assets and liabilities will be refined and changes, if any, will be
reflected in the Company's periodic Exchange Act filings for 1996.
The unaudited pro forma condensed combined financial statements are not
necessarily indicative of the results of operations or financial position of
the combined company that would have occurred had the ESG acquisition
occurred on the dates indicated above, nor are they necessarily indicative of
future operating results or financial position.
The unaudited pro forma condensed combined financial statements
should be read in conjunction with the audited consolidated financial
statements, including the notes thereto, of the Company in its Annual Report
on Form 10-K for the year ended December 31, 1995 and of ESG contained in the
Company's Current Report on Form 8-K/A dated May 31, 1996, and the unaudited
consolidated financial statements, including the notes thereto, of the
Company in its Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996, which are incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
-27-
<PAGE>
PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
Northrop Pro Forma Pro Forma
Grumman ESG Adjustments Combined
------- --- ----------- --------
($ in millions)
<S> <C> <C> <C> <C>
Cash and cash equivalents . . . . . . . .. . . . . . . . . . $18 $4 $ $22
Accounts receivable. . . . . . . . . . . . . . . . . . . . . 1,197 462 66 (c) 1,725
Inventoried costs. . . . . . . . . . . . . . . . . . . . . . 771 182 (85)(a)(c) 868
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 25 136 (121)(a) 40
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 61 14 75
------ ------ ------ ------
Total current assets . . . . . . . . . . . . . . . . . . . . 2,072 798 (140) 2,730
Property, plant and equipment, net . . . . . . . . . . . . . 1,176 404 112 (a) 1,692
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . 1,403 119 1,946 (a) 3,468
Other purchased intangibles. . . . . . . . . . . . . . . . . 356 646 (a) 1,002
Prepaid pension cost, intangible pension
asset and benefit trust fund. . . . . . . . . . . . . . . 99 19 (19)(b) 99
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 255 173 76 (a)(b) 504
Investments in and advances to affiliates
and sundry assets. . . . . . . . . . . . . . . . . . . . 94 12 45 (a) 151
------ ------ ------ ------
$5,455 $1,525 $2,666 $9,646
------ ------ ------ ------
------ ------ ------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . $65 $ $ (65)(a) $
Current portion of long-term debt. . . . . . . . . . . . . . 144 188 (a) 332
Trade accounts payable . . . . . . . . . . . . . . . . . . . 360 105 465
Accrued employees' compensation. . . . . . . . . . . . . . . 203 203
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 528 528
Other current liabilities. . . . . . . . . . . . . . . . . . 415 443 23 (a) 881
------ ------ ------ ------
Total current liabilities. . . . . . . . . . . . . . . . . . 1,715 548 146 2,409
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 1,163 2,849 (a) 4,012
Accrued retiree benefits . . . . . . . . . . . . . . . . . . 1,048 648 (40)(b) 1,656
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 31 31
Other liabilities and deferred gain. . . . . . . . . . . . . 39 15 25 (a) 79
Shareholders' equity
Common stock . . . . . . . . . . . . . . . . . . . . . . 272 272
Retained earnings. . . . . . . . . . . . . . . . . . . . 1,187 314 (314)(a) 1,187
------ ------ ------ ------
1,459 314 (314) 1,459
------ ------ ------ ------
$5,455 $1,525 $2,666 $9,646
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
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<PAGE>
PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Northrop Pro Forma Pro Forma
Grumman ESG Adjustments Combined
-------- --- --------------- ---------
($ in millions, except per share data)
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . $6,818 $2,554 $(214)(c)(h) $9,158
Cost of Sales
Operating costs. . . . . . . . . . . . . . . . . . . . . . 5,319 1,997 (86)(c)(d)(h) 7,230
Administrative and general expenses. . . . . . . . . . . . 963 320 1,283
Restructuring charges. . . . . . . . . . . . . . . . . . . 51 51
------ ------ ------ ------
Operating margin . . . . . . . . . . . . . . . . . . . . . . 536 186 (128) 594
Interest expense, net. . . . . . . . . . . . . . . . . . . . (136) (210)(e) (346)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 9 (14) (5)
------ ------ ------ ------
Income before income taxes . . . . . . . . . . . . . . . . . 409 172 (338) 243
Federal and foreign income taxes . . . . . . . . . . . . . . 157 65 (115)(f) 107
------ ------ ------ ------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $252 $107 $(223) $136
------ ------ ------ ------
------ ------ ------ ------
Earnings per share . . . . . . . . . . . . . . . . . . . . . $5.11 $2.75
------ ------
------ ------
Weighted average shares outstanding
(in millions). . . . . . . . . . . . . . . . . . . . . . . . 49.4 49.4
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
NORTHROP PRO FORMA PRO FORMA
GRUMMAN(g) ESG(g) ADJUSTMENTS COMBINED
------- ------ --------------- ---------
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............................................................... $1,603 $ 259 $ (12)(h) $1,850
Cost of sales...........................................................
Operating costs..................................................... 1,273 194 9 (d)(h) 1,476
Administrative and general expenses................................. 191 40 231
------- ------ ------ ---------
Operating margin........................................................ 139 25 (21) 143
Interest expense, net................................................... (46) (35)(e) (81)
Other, net.............................................................. 9 (1) 8
------- ------ ------ ---------
Income before income taxes.............................................. 102 24 (56) 70
Federal and foreign income taxes........................................ 41 8 (20)(f) 29
------- ------ ------ ---------
Net income.............................................................. $ 61 $ 16 $ (36) $ 41
------- ------ ------ ---------
------- ------ ------ ---------
Earnings per share...................................................... $ 1.23 $ .83
------- ---------
------- ---------
Weighted average shares outstanding (in millions)....................... 49.6 49.6
</TABLE>
-29-
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Adjustments to record $3 billion in loans obtained to finance the
acquisition of ESG, and to assign the purchase price to assets acquired
and liabilities assumed. The allocation of the purchase price to assets
and liabilities is based upon preliminary estimates of their respective
fair values. The Company is compiling data to determine the final
allocation of the purchase price, which process will be completed by
December 31, 1996. The Company does not presently anticipate material
changes in the purchase price allocations.
(b) Adjustment to record the preliminary estimate of ESG retiree benefits
liabilities in excess of the market value of related assets at December
31, 1995. The Company is reviewing the actuarial data relative to the ESG
retiree benefit plans and based on the results of the review the liability
may be adjusted.
(c) Adjustment to reflect a change in the method of recognizing contract
revenue from the milestone method applied by ESG to conform with the
Company's method of revenue recognition, the cost-to-cost type of
percentage of completion, on similar type contracts (adjustment for the
year ended December 31, 1995: net sales -- $113 million; operating
costs -- $103 million).
(d) Adjustment to amortize goodwill over a 40-year period on a
straight-line basis and other purchased intangibles on a straight-line
basis over periods ranging from 1 to 10 years, with a combined weighted
average life of 33 years which results in amortization for the twelve-month
period ended December 31, 1995 of $118 million and amortization for the
three-month period ended March 31, 1996 of $21 million.
(e) Adjustment to record interest expense on $3 billion of borrowings
incurred in connection with the acquisition of ESG at an average annual
effective interest rate of 7%. A change of 1/8% in the assumed annual
interest rate on the variable rate debt of approximately $2 billion would
change the annual interest expense by approximately $2.5 million.
(f) Adjustment to record the income tax effects of pretax pro forma adjustments.
(g) Northrop Grumman data includes one month of combined operations of
Northrop Grumman and ESG. ESG data reflects operations for the two
months ended February 29, 1996.
(h) Adjustment to eliminate intercompany sales between ESG and the Company
(for the year ended December 31, 1995: net sales -- $101 million; for the
three months ended March 31, 1996: net sales -- $12 million).
-30-
<PAGE>
THE COMPANY
GENERAL
Northrop Grumman Corporation (the "Company") is an advanced technology
aerospace and defense company operating primarily in two business segments:
electronics and systems integration and military and commercial aircraft.
Within the electronics and systems integration segment, the Company is
engaged in the design, development and manufacture of a wide variety of
complex electronic products such as airborne radar, surveillance and battle
management systems, electronic countermeasures, precision weapons,
antisubmarine warfare systems and air traffic control systems. Within the
military and commercial aircraft segment, the Company is engaged in the
design, development, manufacture and modification of military aircraft and
commercial aerostructures. The Company is also engaged in the design,
development and manufacture of information systems, marine propulsion and
power generation systems and a variety of other products and services.
Approximately three-fourths of the Company's revenues in 1996 are expected to
be generated from the U.S. Department of Defense (the "DOD"), with the
balance provided by contracts with commercial aerospace manufacturers, other
U.S. government agencies and various foreign customers.
On March 1, 1996, the Company completed the acquisition of the
Electronic Systems Group of Westinghouse Electric Corporation which is now
the Company's Electronic Sensors and Systems Division ("ESSD"). ESSD is a
leading supplier of electronics systems for defense, government and
commercial applications. This acquisition further enhances the Company's
electronics and systems integration capabilities, broadens the Company's
product offerings and provides growth opportunities in key defense and
commercial markets. See "-- Acquisition of ESG" and "-- Divisions --
Electronic Sensors and Systems Division."
In 1992 the Company acquired a 49% interest in Vought Aircraft Company
("Vought"), a leading manufacturer of commercial and military aerostructures.
In 1994 the Company acquired Grumman Corporation ("Grumman") and the
remaining portion of Vought. With Grumman, the Company acquired a premier
supplier of electronic surveillance and electronic systems integration
products as well as military aircraft.
The Company has a balance of programs in both the production and
development phases. While production programs generally involve less risk
and generate greater cash flow than development programs, development
programs are essential for future growth opportunities. Based on its backlog
and business mix, the Company believes that its cash flow from operations as
compared to its investment requirements will result in significant cash flow
available for debt reduction, dividends and other uses over the next several
years.
Many of the Company's programs are among the principal programs for
the various branches of the U.S. military. The Company is the prime
contractor on the B-2 Stealth Bomber, the only strategic bomber currently in
production; the principal subcontractor on the F/A-18C/D Hornet, the U.S.
Navy's primary strike/attack aircraft, as well as on the next generation
F/A-18E/F Super Hornet; the prime contractor on the E-2C Hawkeye, the U.S.
Navy's principal early warning, command and control aircraft; the prime
contractor for the E-8 Joint STARS aircraft radar system, which will be the
primary airborne ground surveillance and battle management system for the
U.S. Air Force and Army; the prime contractor on the BAT "Brilliant"
self-guided submunition under development for the U.S. Army; the supplier of
the APG-68 Fire Control Radar used on the F-16, one of the most widely used
fighter aircraft in the world; the supplier of the ARSR-4 Long Range Radar, a
three- dimensional air traffic control radar system used by the U.S. Air
Force and the U.S. Federal Aviation Administration; and the supplier of the
AN/APY-1, 2 surveillance radar which provides real-time, all-altitude and
beyond-the-horizon target detection, identification and tracking for the E-3
AWACS surveillance aircraft.
The Company is also one of the world's leading manufacturers of
commercial aerostructures and components. The Company manufactures major
portions of the Boeing 747, 757 and 767 jetliners, as well as significant
subassemblies and components for other commercial aircraft, including the
Boeing 777 jetliner.
The Company was founded in 1939 and reincorporated in 1985 in
Delaware. The Company's executive offices are located at 1840 Century Park
East, Los Angeles, California 90067 and its telephone number is (310)
553-6262.
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<PAGE>
STRATEGY
The Company intends to strengthen its position as a leader in the
aerospace and defense industry by pursuing the following strategies: (i)
focusing on segments of defense markets that are growing and where the
Company has premier technological capabilities, particularly in electronics
and electronics systems integration; and (ii) leveraging its airframe design
expertise and manufacturing strengths to remain a key competitor in military
aircraft and commercial aerostructures. The Company has been pursuing these
strategies since 1992 through both internal initiatives and acquisitions and,
as a result, enjoys leading positions in those market segments in which it
chooses to compete. The Company's primary objective in pursuit of these
strategies is to maximize total return on investment.
The Company is transforming itself from being primarily an aircraft
designer/manufacturer to an electronics and systems integration company with
a leading airframe and aerostructures business. In early 1994, the Company
significantly expanded its electronics business with the acquisition of
Grumman. In March of 1996, the Company acquired ESG, a leading producer of
sophisticated electronics for defense, government and commercial
applications. As a result of these acquisitions, the Company expects that its
electronics and systems integration revenues will approximate nearly 50% of
total revenues in 1996 and that this percentage will continue to increase in
the future.
This strategic transformation positions the Company to meet the
growing needs of the DOD for more sophisticated electronics and integrated
electronics systems. Since the end of the Cold War, the DOD has recognized
the necessity of maintaining an effective fighting force with fewer defense
dollars, thereby placing a premium on sophisticated systems that provide
long-range surveillance, battle management and precision-strike capabilities.
As military systems have become more complex, integration of the electronic
functions of the various platforms, weapons and support systems has become
increasingly important. Budget constraints have also encouraged spending on
program modifications, upgrades and extensions rather than on new development
programs, further increasing demand for sophisticated electronics systems.
As a technological leader in designing, manufacturing and integrating the
sophisticated electronics systems that provide long-range surveillance,
battle management and precision-strike capabilities, the Company believes
that it is well positioned to serve the electronic systems market.
The Company has also strengthened its military and commercial aircraft
segment. In 1992, the Company acquired 49% of Vought and in 1994 acquired
Grumman and the remaining 51% of Vought. These acquisitions and the Company's
internal initiatives have enabled the Company to establish a leading position
in military aircraft and commercial aerostructures. The Company believes
that it will maintain this leadership position as a result of its airframe
design experience, including stealth technology, as well as its
cost-competitive manufacturing capabilities.
ACQUISITION OF ESG
On March 1, 1996, the Company completed the acquisition of ESG for
approximately $2.9 billion in cash (the "Acquisition"). For the year ended
December 31, 1995, ESG generated revenue of $2.6 billion. The Acquisition
was financed with a combination of bank borrowings and intermediate and
long-term notes and debentures. The business of ESG is now operated as the
Company's new Electronic Sensors and Systems Division ("ESSD").
ESSD is a leading supplier of electronic systems for defense,
government and commercial applications. It employs nearly 12,000 people
worldwide at 15 operating locations, primarily in the United States. ESSD
has a diversified portfolio of programs with no single program accounting for
more than 10% of revenues in 1995. Approximately one-half of ESSD's 1995
revenues were attributable to radar technology applied to surveillance, fire
control, air traffic control and other purposes. ESSD also designs and
manufactures other avionics products, electro-optical systems, undersea and
marine products and material handling systems.
The Acquisition represents a substantial step in the Company's
continuing transformation from an aircraft designer/manufacturer to an
electronics and systems integration company with a leading aircraft and
aerostructures business. The Acquisition enables the Company to serve a
larger customer base, domestically and internationally, and is expected to
provide the opportunity to achieve revenue growth and greater cash flow
stability. The Acquisition will also enable the Company to enhance its role
on important programs such
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<PAGE>
as E-8 Joint STARS and BAT, and to expand its business into the areas of air
traffic control and anti-submarine warfare systems.
DIVISIONS
The Company is organized into five operating divisions: Military
Aircraft Systems Division; Electronic Sensors and Systems Division;
Electronics and Systems Integration Division; Commercial Aircraft Division;
and Data Systems and Services Division. In addition, the Company's Advanced
Technology and Development Center provides product development and technology
functions for all of the operating divisions, drawing on technologies and
skills in each of the divisions.
MILITARY AIRCRAFT SYSTEMS DIVISION
The Military Aircraft Systems Division is responsible for the
development and manufacture of several types of military aircraft. The
Company is the prime contractor for the B-2, a strategic, long-range, large
payload bomber with advanced stealth technology that is capable of operating
at both high and low altitudes. The B-2 is able to penetrate the most
sophisticated air-defenses and is capable of responding more quickly, from
greater distances and with more accurate firepower than any other U.S.
aircraft.
The Company is currently under contract to provide 20 operational and
one test B-2 aircraft. All 21 aircraft are fully funded. To date, the
Company has delivered six test aircraft and 11 of 15 production aircraft. At
least five out of the six test aircraft will be refurbished to an operational
configuration and delivered to the U.S. Air Force. The Clinton Administration
has announced its intent, and the Company has been asked to provide a
proposal, to refurbish the remaining test aircraft for subsequent delivery to
the U.S. Air Force as an operational vehicle. The U.S. Air Force currently
operates a squadron of 10 B-2s at Whiteman Air Force Base in Missouri. In
addition, the B-2 program is expected to generate maintenance and support
revenues upon completion of production. While the Company continues to seek
funding for additional B-2s, there is no assurance that such funding will be
available.
The Company is the prime or principal subcontractor on all of the U.S.
Navy's carrier-based fighter, attack and early warning aircraft, including
the F/A-18. For more than two decades the Company has been teamed with prime
contractor McDonnell Douglas on the F/A-18 program. The F/A-18C/D Hornet is
the U.S. Navy's primary strike/attack aircraft and is deployed by the Navy
from aircraft carriers and by the Marines from air bases. In total, more
than 1,300 F/A-18 Hornets have been delivered to the U.S. and to certain
foreign governments. The Company produces approximately 40% of each
F/A-18C/D Hornet, including the center and aft fuselage, twin vertical tails
and all associated subsystems. The Company is also the principal
subcontractor on the U.S. Navy's newest combat aircraft, the F/A-18E/F Super
Hornet, which successfully completed its first test flight in November 1995.
The F/A-18E/F Super Hornet has greater range and payload, more powerful
engines and more advanced avionics and weapon systems than the F/A-18C/D
Hornet. The Company will also produce approximately 40% of each F/A-18E/F
Super Hornet. The first production deliveries are scheduled to begin in 1999,
with initial operating capability expected in 2001.
Modification and enhancement of existing airborne platforms has become
an important part of the military aircraft market. With U.S. and foreign
defense planners seeking modern systems at affordable costs, upgrading
existing aircraft can be an attractive alternative to the purchase of new
aircraft. The Company provides a broad array of aircraft upgrade,
modification, overhaul and support services for several operational aircraft,
including the F-5, T-38, F-14, C-2 and A-10. The Company is also responsible
for remanufacturing Boeing 707 aircraft as the platform for the Company's E-8
Joint STARS program, for structural enhancements of the EA-6B Prowler and for
airframe upgrades of the E-2C Hawkeye.
ELECTRONIC SENSORS AND SYSTEMS DIVISION
The Electronic Sensors and Systems Division ("ESSD") represents the
acquired business of ESG. ESSD has a diversified portfolio of programs with
no single program accounting for more than 10% of revenues in 1995.
Approximately one-half of ESSD's 1995 revenues were attributable to radar
technology applied to surveillance, fire control, air traffic control and
other purposes. ESSD also designs and manufactures other avionics products,
electro-optical systems, underseas and marine products and material handling
systems.
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<PAGE>
With its state-of-the-art surveillance and imaging technologies, ESSD
has gained significant positions on a wide variety of high priority platforms
for the DOD and certain foreign governments. ESSD produces radars and
electronics for military aircraft and battlespace management systems,
including those for the F-16 fighter, Apache Longbow helicopter, B-1B bomber,
C-130 transport and E-3 AWACS and E-8 Joint STARS surveillance aircraft.
ESSD's products are also present on numerous development programs such
as the F-22 fighter and the Comanche helicopter. Should budget pressures
force the stretch-out of these next generation programs, ESSD is expected to
benefit from an increased demand for electronic upgrades and retrofits to
existing aircraft. For example, ESSD is currently providing mid-life fire
control radar upgrades for the F-16.
ESSD is also a leading supplier of air traffic control radars to the
U.S. Federal Aviation Administration and to countries in Europe, the Middle
East, Africa, Asia and South America. ESSD is the prime contractor on the
ASR-9 terminal radar system which detects and displays aircraft and weather
conditions simultaneously, helping air traffic controllers guide aircraft
through traffic-dense regions surrounding airports. The international air
traffic control market is expected to increase significantly, due in large
part to the growth of international air traffic and infrastructure
development in Asia and Eastern Europe. The Company believes that ESSD is
well positioned to benefit from this anticipated growth in the international
air traffic control market. ESSD also develops electronic countermeasures,
tactical communication equipment, space products and underseas and marine
technologies, including anti-submarine combat systems, surface ship
propulsion and power generation equipment.
International sales are also an increasingly important component of
ESSD's military electronics business. The F-16 radar system, ESSD's longest
running program, is installed in the F-16s of 23 countries. In addition to
the F-16, many other DOD weapon systems with ESSD subsystems, such as the E-3
AWACS surveillance aircraft and the AH-64 Apache helicopter, have been sold
internationally.
ELECTRONICS AND SYSTEMS INTEGRATION DIVISION
The Electronics and Systems Integration Division manages major
electronics systems programs. The Company is the overall systems integrator
and prime contractor for the E-8 Joint STARS, the U.S. military's primary
airborne radar system which is designed to provide real-time detection,
location, classification and tracking of hostile moving and stationary ground
targets. The surveillance capabilities of the E-8 Joint STARS will enable it
to be a critical part of future battle management systems. The E-8 Joint
STARS program is in limited production and funding has been approved for the
first six E-8 Joint STARS production aircraft (designated the E-8C). One
aircraft has been delivered, a second is expected to be delivered in 1996 and
the remaining four aircraft are scheduled to be delivered in 1997 and 1998.
The Company believes that U.S. government support for the E-8 Joint STARS
program is strong, due in part to successful tests and operational activity
of prototype aircraft in combat conditions in the Persian Gulf and Bosnia.
The U.S. government has approved the sale of E-8 Joint STARS aircraft to
NATO, although no such purchases have been committed to or funded.
The Company is the prime contractor for the E-2C Hawkeye, the U.S.
Navy's principal early warning, command and control aircraft. The E-2C
Hawkeye is designed for missions such as air defense, strike control, air
traffic control and search and rescue. The U.S. Navy recently received
approval for a program of 36 E-2C aircraft, of which seven are under contract
for delivery during 1997 and 1998. The Company is also involved with the
Navy's upgrade program for existing E-2C aircraft. In response to upgraded
threat capabilities, the U.S. Navy continues to plan additional E-2C avionics
improvements including data processing and capacity increases, passive
detection systems, radar anti-jamming improvements, tactical program updates
and jam resistant communication systems.
The Company is the prime contractor on the BAT "Brilliant" self-guided
submunition program under development for the U.S. Army. This weapon may be
carried by a variety of air vehicles and is designed to autonomously locate,
attack and destroy tanks, armored vehicles and other mobile targets by using
acoustic and infrared sensors working in combination with a high speed
onboard computer. Prototype manufacture began in 1992, and the BAT is now in
a testing phase to verify that the system meets all established requirements.
-34-
<PAGE>
COMMERCIAL AIRCRAFT DIVISION
The Commercial Aircraft Division is one of the world's leading
suppliers of aerostructures, as well as a major supplier of aircraft
components for commercial and military use. The Company manufactures the
fuselage and the tail section for the Boeing 747, the tail section for the
Boeing 757 and 767, various other components for the Boeing 757, 767 and 777
and major subassemblies (including the tail section) for the McDonnell
Douglas C-17 military transport. In April 1995, the Company entered into an
agreement with Boeing to continue production of the major sections of the
747, 757 and 767 aircraft into the next century. The Company also produces
wings for the new Gulfstream V ("G-V") business jet program and components
for other aircraft. The G-V's first flight was in November 1995, and aircraft
deliveries to customers are expected to begin in January 1997.
While the Company's commercial aircraft deliveries declined in 1995
compared to 1994, the three leading jet-airliner manufacturers collectively
recorded substantially increased orders for new aircraft in 1995 compared to
1994. Boeing, the Company's largest customer for commercial aerostructures,
announced in December 1995 and March 1996, planned increases in production
rates for 1996 and 1997 for its 747, 767 and 777 models and a return to
current levels of production in the second quarter of 1997 for its 757 model
following a reduction in the fourth quarter of 1996. The Boeing labor strike,
settled in January 1996, will cause some deliveries scheduled for 1996 to be
made in 1997. The Company has made substantial investments in productivity
improvements and capital equipment to further improve its competitive
position in the growing commercial aerostructure marketplace.
DATA SYSTEMS AND SERVICES DIVISION
The Data Systems and Services Division provides data processing system
services for external customers as well as the Company's various divisions.
Included among these services are space station program support services,
flight simulator maintenance services and the development of data processing
systems for a wide variety of U.S. Government entities and applications. The
Division also provides operational and support services to U.S. Air Force
bases, an area of potential growth if the U.S. Government increases the
outsourcing of maintenance and support activities.
RECENT DEVELOPMENT
On June 7, 1996, the Company consummated an offering of 8,050,000
shares (including shares to cover over-allotments) of Common Stock of the
Company resulting in net proceeds to the Company of approximately $492.6
million, which will be applied to repay a portion of the Company's bank
borrowings incurred to finance the Acquisition in March 1996.
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<PAGE>
DESCRIPTION OF NEW SECURITIES
The Old Securities were issued and the New Securities will be issued under
the Indenture, dated as of October 15, 1994 (the "Indenture"), between the
Company and The Chase Manhattan Bank (National Association), as trustee (the
"Trustee"), a copy of which will be made available to prospective purchasers of
the New Securities upon request. Upon the issuance of the New Securities, the
Indenture will be subject to and governed by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by, reference to the provisions of the Indenture,
including the definitions of certain terms contained therein and those terms
made part of the Indenture by reference to the Trust Indenture Act.
GENERAL
The New Securities will be issued pursuant to the Indenture and will be
limited to an aggregate principal amount of $1,000,000,000, consisting of
$400,000,000 principal amount of New Notes, $300,000,000 principal amount of
New 2016 Debentures and $300,000,000 principal amount of New 2026 Debentures.
The New Notes, the New 2016 Debentures and the New 2026 Debentures shall
constitute the same series of Securities (as defined in the Indenture) as the
Old Notes, the Old 2016 Debentures and the Old 2026 Debentures, respectively,
under the Indenture and, accordingly, will vote together, respectively, as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding principal amount thereof have taken certain actions
or exercised certain rights under the Indenture. The New Securities will
bear interest from March 1, 1996. Eligible Holders of Old Securities whose
Old Securities are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from March 1, 1996 to the date of the issuance of the New Securities.
Interest on the New Securities is payable semiannually on each Interest
Payment Date, commencing September 1, 1996, accruing from March 1, 1996 (i)
with respect to the New Notes, at a rate of 7% per annum, (ii) with respect
to the New 2016 Debentures, at a rate of 7 3/4% per annum, and (iii) with
respect to the New 2026 Debentures, at a rate of 7 7/8% per annum, to each
person in whose name such New Security shall have been registered at the
close of business on the each Regular Record Date next preceding such
Interest Payment Date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. The New Notes will mature on March
1, 2006, the New 2016 Debentures will mature on March 1, 2016 and the New
2026 Debentures will mature on March 1, 2026. The New Securities will be
issued in fully registered form, without coupons, in denominations of $1,000
and any integral multiple of $1,000 in excess thereof.
The Indenture does not limit the aggregate principal amount of debt
securities that may be issued thereunder, and the Indenture provides that debt
securities, including the New Securities, may be issued thereunder from time to
time in one or more series. The Indenture does not contain any provisions that
would limit the ability of the Company to incur indebtedness or require the
maintenance of financial ratios or specified levels of net worth or liquidity.
However, the provisions of the Indenture do (i) provide that neither the Company
nor any Restricted Subsidiary (as defined) will subject certain of its property
or assets to any mortgage or other encumbrance unless the debt securities,
including the New Securities, issued under the Indenture are secured equally and
ratably with such other indebtedness thereby secured, (ii) contain certain
limitations on the entry into certain sale and leaseback arrangements and
(iii) contain certain limitations on the issuance of certain indebtedness by
Restricted Subsidiaries. In addition, the Indenture does not contain any
provisions which would require the Company to repurchase or redeem or otherwise
modify the terms of any of the New Securities upon a change in control or other
events involving the Company which may adversely affect the creditworthiness of
the New Securities. See "-- Certain Covenants."
SINKING FUND
The New Securities will not be entitled to the benefit of any sinking fund.
REDEMPTION
The New Securities may not be redeemed prior to maturity.
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<PAGE>
BOOK-ENTRY, DELIVERY AND FORM
Each series of New Securities will be issued in the form of a Global
Security (a "Global Security"). Each Global Security will be deposited with, or
on behalf of, The Depository Trust Company (the "Depositary") and registered in
the name of the Depositary or its nominee. Except as set forth below, each
Global Security may be transferred, in whole or in part, only to the Depositary
or another nominee of the Depositary. Investors may hold their beneficial
interest in a Global Security directly through the Depositary if they are
participants in such system or indirectly through organizations which are
participants in such system.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities of its participating organizations
("participants") and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in such
securities through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (which may include the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representative) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodian relationship with a
participant, either directly or indirectly. The Depositary agrees with and
represents to its participants that it will administer its book-entry system in
accordance with its rules and by-laws and requirements of law.
Upon issuance of a Global Security in respect of each series of New
Securities, the Depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of the New Securities
represented by such Global Security to the accounts of participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of the New Securities. Ownership of
beneficial interests in such Global Security will be shown on, and the transfer
of such ownership interests will be effected only through, records maintained by
the Depositary for such Global Security (with respect to interests of
participants) and on the records of participants (with respect to interests of
persons holding through participants). The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to transfer or
pledge beneficial interests in Global Securities.
So long as the Depositary, or its nominee, is the registered holder and
owner of a Global Security, the Depositary or such nominee, as the case may be,
will be considered the sole owner and holder of such New Securities for all
purposes of such New Securities. Except as set forth below, owners of
beneficial interests in a Global Security will not be entitled to have such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of certificated New Securities represented by such
Global Security in definitive form and will not be considered the owners or
holders of New Securities represented by such Global Security. Accordingly,
each person owning a beneficial interest in a Global Security must rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder of New Securities under such Global Security.
The Company understands that under existing industry practice, in the event an
owner of a beneficial interest in a Global Security desires to take any action
under the Indenture, the Depositary would authorize the participants to take
such action and that the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payment of principal of and interest on the New Securities represented by
Global Securities registered in the name of and held by the Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner and holder of the Global Securities. The Company expects
that the Depositary or its nominee, upon receipt of any of principal or interest
in respect of a Global Security, will credit participants' accounts with
payments in amount proportionate to their respective beneficial interest in the
principal amount of such Global Security as shown on the records of the
Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such
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Global Securities held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants. The Company will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global
Securities for any New Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depositary and its participants or the
relationship between such participants and the owners of beneficial interests in
the Global Securities owning through such participants.
CERTIFICATED SECURITIES
The New Securities represented by the Global Securities are exchangeable
for certificated New Securities in definitive form of like tenor as such Global
Securities in denominations of U.S. $1,000 and integral multiples thereof if
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security or if at any time the Depositary
ceases to be a clearing agency registered under the Exchange Act, (ii) the
Company in its discretion at any time determines not to have all of the New
Securities represented by the Global Securities or (iii) a default entitling the
holders of the New Securities to accelerate the maturity thereof has occurred
and is continuing. Any New Security that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated New Securities issuable in
authorized denominations and registered in such names as the Depositary shall
direct. Subject to the foregoing, the Global Securities are not exchangeable,
except for a Global Security or Global Securities of the same aggregate
denomination to be registered in the name of the Depositary or its nominee.
EVENTS OF DEFAULT
The following events constitute Events of Default under the Indenture:
(a) failure to pay principal of or any premium on any Security of that series
when due, whether at maturity or otherwise; (b) failure to pay any interest on
any Security of that series when due, and such failure continues for 30 days;
(c) failure to perform any other covenant or agreement of the Company in the
Indenture or in such Security (other than a covenant or agreement included in
the Indenture solely for the benefit of a series other than that series),
continued for 90 days after written notice has been given by the Trustee, or by
the Holders of at least 10% in principal amount of the Outstanding Securities of
that series, as provided in the Indenture; and (d) certain events in bankruptcy,
insolvency or reorganization. (Section 501)
If an Event of Default (other than an Event of Default described in
clause (d) above) with respect to the Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities of that
series by notice as provided in the Indenture may declare the principal amount
of the Securities of that series to be due and payable immediately. If an Event
of Default described in clause (d) above with respect to the Securities of any
series at the time Outstanding shall occur, the principal amount of all the
Securities of that series will automatically, and without any action by the
Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
that series may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal (or other specified amount), have been cured or waived as provided in
the Indenture. (Section 502) For information as to waiver of defaults, see
"-- Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603) Subject
to such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Securities of that series.
(Section 512)
No Holder of a Security of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such Holder had
previously given to the Trustee written notice of a continuing Event of Default
with
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respect to the Securities of that series, (ii) the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities of that series have
made written request, and such Holder or Holders have offered reasonable
indemnity to the Trustee to institute such proceeding as trustee, and (iii) the
Trustee has failed to institute such proceeding, and has not received from the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request, within
60 days after such notice, request and offer. (Section 507) However, such
limitations do not apply to a suit instituted by a Holder of a Security for the
enforcement of payment of the principal of or any premium or interest on such
Security on or after the applicable due date specified in such Security.
(Section 508)
The Company is required to furnish to the Trustee annually a statement by
certain of its officers as to whether or not the Company, to their knowledge, is
in default in the performance or observance of any of the terms, provisions and
conditions of the Indenture and, if so, specifying all such known defaults.
(Section 1004)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Securities
under the Indenture, may consolidate with or merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, any Person, and
may permit any Person to merge into, or convey, transfer or lease its properties
and assets substantially as an entirety to, the Company, PROVIDED (i) that any
successor Person must be a corporation, partnership, trust or other entity
organized and validly existing under the laws of any domestic jurisdiction and
must assume the Company's obligations on the Securities and under the Indenture,
(ii) that after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing and (iii) that certain other
conditions are met. Upon any consolidation or merger into any other Person or
any conveyance, transfer or lease of the Company's assets substantially as an
entirety to any Person, the successor Person will succeed to, and be substituted
for, the Company under the Indenture, and the Company, except in the case of a
lease, will be relieved of all obligations and covenants under the Indenture and
the Securities to the extent it was the predecessor Person. (Article Eight)
CERTAIN COVENANTS
LIMITATIONS ON LIENS. The Company covenants in the Indenture that it will
not create, incur, assume or guarantee, and will not permit any Restricted
Subsidiary to create, incur, assume or guarantee, any indebtedness for borrowed
money ("Debt") secured by a mortgage, security interest, pledge, charge or
similar encumbrance ("Mortgages") upon any Principal Property of the Company or
any Restricted Subsidiary or upon any shares of stock or indebtedness of any
Restricted Subsidiary without equally and ratably securing the Securities and
other outstanding debt securities issued pursuant to the Indenture. The
foregoing restriction, however, does not apply to (a) Mortgages on property,
shares of stock or indebtedness of any corporation existing at the time such
corporation becomes a Restricted Subsidiary; (b) Mortgages on property existing
at the time of acquisition of such property by the Company or a Restricted
Subsidiary or Mortgages to secure the payment of all or any part of the purchase
price of such property upon the acquisition of such property by the Company or
any Restricted Subsidiary or to secure any Debt incurred prior to, at the time
of, or within 180 days after, the acquisition, completion of construction
(including improvements on an existing property) or commencement of full
operation of such property for the purpose of financing all or any part of the
purchase price thereof, or construction of improvements thereon; (c) Mortgages
to secure Debt of a Restricted Subsidiary owed to the Company or another
Restricted Subsidiary; (d) Mortgages existing at the date of the Indenture;
(e) Mortgages on property of a corporation existing at the time such corporation
is merged into or consolidated with the Company or a Restricted Subsidiary or at
the time of a sale, lease, or other disposition of the properties of a
corporation as an entirety or substantially as an entirety to the Company or a
Restricted Subsidiary; (f) Mortgages on property of the Company or a Restricted
Subsidiary in favor of the United States of America or any State thereof, or any
department, agency, instrumentality or political subdivision thereof, to secure
any payments, including advance or progress payments, pursuant to any contract
or statute or to secure any indebtedness incurred or guaranteed for the purpose
of financing all or any part of the purchase price or the cost of construction
of the property subject to such Mortgages (including, but not limited to,
Mortgages incurred in connection with pollution control bonds, industrial
revenue bonds or similar financings); or (g) extensions, renewals or
replacements of any mortgage referred to in the foregoing clauses (a)
through (f). (Section 1009)
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Notwithstanding the restrictions outlined in the preceding paragraph, the
Company or any Restricted Subsidiary is permitted to create, incur, assume or
guarantee any Debt secured by a Mortgage without equally and ratably securing
the Securities and the other outstanding debt securities issued pursuant to the
Indenture, PROVIDED that after giving effect thereto, the aggregate amount of
all debt (other than the Securities and the other outstanding debt securities
issued pursuant to the Indenture) so secured by Mortgages (not including
Mortgages permitted under clauses (a) through (g) above) does not exceed the
greater of $300,000,000 or 10% of Consolidated Net Tangible Assets.
(Section 1009)
SALE AND LEASEBACK ARRANGEMENTS. The Company covenants in the Indenture
that it will not, nor will it permit any Restricted Subsidiary to, enter into
any arrangement with any person that provides for the leasing to the Company or
any Restricted Subsidiary of Principal Property (other than any such transaction
involving a lease for a term of not more than three years or any such
transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries) which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such person, unless either (a) the
Company or such Restricted Subsidiary would be entitled to create, incur, assume
or guarantee Debt secured by a Mortgage on such Principal Property at least
equal in amount to the Attributable Debt with respect to such arrangement,
without equally and ratably securing the Securities and the other outstanding
debt securities issued pursuant to the Indenture, pursuant to the limitation in
the Indenture on liens, PROVIDED that such Attributable Debt shall thereupon be
deemed to be Debt subject to the provisions of the second paragraph under
"-- Certain Covenants -- Limitations on Liens" above or (b) the Company shall
apply an amount equal to the greater of the net proceeds of such sale or the
Attributable Debt with respect to such arrangement to the retirement of Debt of
the Company or any Restricted Subsidiary that by its terms matures at or is
extinguishable or renewable at the option of the obliger to a date more than
twelve months after the creation of such Debt. (Section 1010)
FUNDED DEBT OF RESTRICTED SUBSIDIARIES. The Company covenants in the
Indenture that no Restricted Subsidiary may issue, assume or guarantee any
Funded Debt unless the aggregate amount of all Funded Debt of all Restricted
Subsidiaries (excluding Funded Debt permitted by clauses (i) through (v) below)
does not exceed 10% of Consolidated Net Tangible Assets. Such limitation will
not apply to (i) any Funded Debt owed to the Company or any other Restricted
Subsidiary; (ii) Funded Debt existing on October 15, 1994, and extensions,
renewals or replacements thereof; (iii) Funded Debt secured by a Mortgage
permitted as described in clauses (a) through (g) under "-- Certain Covenants --
Limitations on Liens" above; (iv) any guaranty by a Restricted Subsidiary of
Funded Debt of the Company incurred in connection with the acquisition of such
Restricted Subsidiary; and (v) Funded Debt of a corporation outstanding at the
time such corporation first becomes a Restricted Subsidiary. (Section 1011)
DEFINITIONS. The term "Consolidated Net Tangible Assets" shall mean, as of
any particular time, the aggregate amount of assets (less applicable reserves
and other properly deductible items) after deducting therefrom (a) all current
liabilities except for (i) notes and loans payable, (ii) current maturities of
long-term debt, (iii) current maturities of obligations under capital leases and
(iv) deferred income taxes and (b) all goodwill, tradenames, trademarks,
patents, unamortized debt discount and expenses (to the extent included in said
aggregate amount of assets) and other like intangibles, all as set forth on the
most recent quarterly or annual consolidated balance sheet of the Company and
its consolidated Subsidiaries and computed in accordance with generally accepted
accounting principles.
The term "Funded Debt" shall mean any Debt (indebtedness for money
borrowed) or guaranty thereof, whether or not secured, maturing by its terms
more than one year from the date of its creation, including any Debt or guaranty
thereof renewable or extendable at the option of the obligor to a date more than
one year from the date of original issuance thereof, but excluding any portion
of such Debt or guarantee which is included in current liabilities.
The term "Restricted Subsidiary" shall mean any subsidiary of the Company
except any subsidiary substantially all the assets of which are located, or
substantially all of the business of which is carried on, outside of the
United States of America, or any subsidiary substantially all of the assets of
which consists of stock or other securities of such a subsidiary. (Section 101)
The term "Principal Property" shall mean any manufacturing plant or
manufacturing facility which is (i) owned by the Company or any Restricted
Subsidiary and (ii) located within the continental United States
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of America, except any such plant which, in the opinion of the Board of
Directors, is not of material importance to the total business conducted by the
Company and the Restricted Subsidiaries taken as a whole.
The term "Attributable Debt" when used in connection with a sale and
leaseback transaction referred to above shall mean, at the time of
determination, the lesser of (a) the fair value of such property (as determined
by the Board of Directors of the Company) or (b) the present value (discounted
at the rate implicit in the terms of the relevant lease) of the obligation of
the lessee for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee under the Indenture, only with the consent of the Holders of a
majority in aggregate principal amount of each series of the outstanding
Securities issued under the Indenture and affected by such modification or
amendment; PROVIDED, HOWEVER, that no such modification or amendment may,
without the consent of each Holder of such Security affected thereby, (a) change
the Stated Maturity of the principal of, or any installment of principal of or
interest on, any such Security, (b) reduce the principal amount of, or any
premium or interest on, any such Security, (c) reduce the amount of principal of
a Security payable upon acceleration of the maturity thereof, (d) change the
place or currency of payment of principal of, or any premium or interest on, any
such Security, (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Security, (f) reduce the percentage in
principal amount of Outstanding Securities of any series, the consent of whose
Holders is required for modification or amendment of the Indenture, (g) reduce
the percentage in principal amount of Outstanding Debt Securities of any series
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults or (h) modify such provisions with respect to
modification and waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Securities
of any series may waive compliance by the Company with certain restrictive
provisions of the Indenture and, if applicable, such Securities. (Section 1008)
The Holders of a majority in principal amount of the Outstanding Securities of
any series may waive any past default under the Indenture, except a default in
the payment of principal, premium or interest and certain covenants and
provisions of the Indenture and, if applicable, such Securities which may not be
amended without the consent of the Holder of each Outstanding Security of such
series affected. (Section 513)
OUTSTANDING SECURITIES
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken any
direction, notice, consent, waiver or other action under the Indenture and, if
applicable, such Securities, as of any date, Securities for whose payment or
redemption money has been deposited or set aside in trust for the Holders and
those that have been fully defeased, will not be deemed to be Outstanding. In
addition, Securities owned by the Company or any of its Affiliates will not be
deemed to be Outstanding. (Section 101)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (A) to defease and
be discharged from any and all its obligations with respect to such Securities
and except for the obligations to exchange or register the transfer of such
Securities, to replace temporary or mutilated, destroyed, lost or stolen
Securities, to maintain an office or agency with respect to the Securities and
to hold moneys for payment in trust) ("defeasance") or (B) to be released from
its obligations with respect to such Securities concerning restrictive covenants
which are subject to covenant defeasance ("covenant defeasance"), and the
occurrence of certain Events of Default, which are described above in clause (d)
(with respect to such restrictive covenants) and clause (e) under "-- Events of
Default" shall no longer be an Event of Default, in each case, upon deposit with
the Trustee (or other qualifying trustee), in trust for such purpose, money or
U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and interest on such
Securities.
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As a condition to defeasance or covenant defeasance, the Company must
deliver to the Trustee an Opinion of Counsel (as specified in the Indenture) to
the effect that Holders of such Securities will not recognize gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
or covenant defeasance had not occurred. The Company may exercise its
defeasance option with respect to such Securities notwithstanding its prior
exercise of its covenant defeasance option. If the Company exercises its
defeasance option, payment of such Securities may not be accelerated by
reference to the covenants noted under clause (B) above. In the event the
Company omits to comply with its remaining obligations with respect to such
Securities under the Indenture after exercising its covenant defeasance option
and such Securities are declared due and payable because of the occurrence of
any Event of Default, the amount of money and U.S. Government Obligations on
deposit in the defeasance trust may be insufficient to pay amounts due on the
Securities of such series at the time of the acceleration resulting from such
Event of Default. However, the Company will remain liable in respect of such
payments. (Article Thirteen)
DESCRIPTION OF OTHER SENIOR DEBT
In October 1994, the Company issued $350 million of 8.625% notes due 2004
(the "2004 Notes") and $250 million of 9.375% debentures due 2024 (the "2024
Debentures") pursuant to a public offering. The net proceeds of this offering
were used to prepay $600 million of indebtedness under the Company's
then-existing term loan facility. The 2004 Notes may not be redeemed by the
Company prior to maturity. The 2024 Debentures may not be redeemed by the
Company prior to October 15, 2004, and thereafter are subject to redemption at
the Company's option. There is no provision for a sinking fund for the 2004
Notes or the 2024 Debentures.
In connection with the closing of the Acquisition, the Company entered into
The Second Amended and Restated Credit Agreement with The Chase Manhattan Bank
(National Association), Chemical Bank, Bank of America, NT & SA and a syndicate
of other banks (collectively, the "Banks") which provides for borrowings of up
to $3.8 billion (the "New Bank Credit Facilities") which replaced its prior
credit agreement (the "Prior Credit Agreement"). The New Bank Credit Facilities
consist of two term loan facilities and a revolving credit facility with
aggregate commitments of $500 million, $1.5 billion and $1.8 billion,
respectively (each referred to respectively as "Term Loan Facility I", "Term
Loan Facility II" and the "Revolving Credit Facility"). Borrowings under the
New Bank Credit Facilities along with the net proceeds of the offering of the
Old Securities were used to finance the Acquisition and pay related expenses, to
refinance outstanding debt under the Prior Credit Agreement and to finance the
continuing operations of the Company. Term Loan Facility I will mature two
years from the date on which the initial loans are made (the "Credit Facilities
Closing Date"). Both Term Loan Facility II and the Revolving Credit Facility
will mature six years from the Credit Facilities Closing Date. The New Bank
Credit Facilities contain a covenant requiring the Company to issue for cash,
prior to the maturity date of Term Loan Facility I, not less than $500 million
of subordinated debt or equity. Borrowings under the New Bank Credit Facilities
will bear interest, at the option of the Company, at various rates of interest,
including a Base Rate Option and a LIBOR Option (equal to the London Interbank
Offered Rate), plus in each case an incremental margin based on the Company's
leverage ratio and credit rating level. The incremental margin for LIBOR
borrowings under Term Loan Facility I and Term Loan Facility II varies from
0.50% to 0.625%, assuming the Company retains an investment grade credit rating.
The incremental margin for LIBOR borrowings under the Revolving Credit Facility
varies from 0.35% to 0.425%, assuming the Company retains an investment grade
credit rating. The New Bank Credit Facilities also provide for a facility fee
on the daily aggregate amount of commitments under the Revolving Credit Facility
(whether or not utilized). The facility fee is also based on the Company's
leverage ratio and credit rating level and varies from 0.15% to 0.20%, assuming
the Company retains an investment grade credit rating.
CERTAIN FEDERAL TAX CONSIDERATIONS
The following is a general discussion of the material United States federal
income tax consequences applicable to the exchange of Old Securities for New
Securities, and the ownership and disposition of New Securities, by United
States Holders (as defined below) who exchange Old Securities for New Securities
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pursuant to the Exchange Offer, as well as the principal United States federal
income and estate tax consequences of the ownership of New Securities by Foreign
Holders (as defined below) who acquire New Securities pursuant to the Exchange
Offer. This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect or proposed on the date hereof and all of which are subject to change at
any time, possibly with retroactive effect, and to different interpretations.
In particular, the discussion is based in part on certain proposed regulations
issued in December 1992 concerning the tax treatment of exchanges and
modifications of debt instruments (the "1992 Proposed Regulations"). The 1992
Proposed Regulations are proposed to be effective for modifications made to debt
instruments more than 30 days after such regulations are issued as final
regulations. Until issued as final (or temporary) regulations, such regulations
are not binding on the Internal Revenue Service ("IRS") and could be withdrawn,
replaced or modified at any time, possibly with retroactive effect. This
discussion does not address the tax consequences to subsequent purchasers of New
Securities or to persons who purchased Old Securities from an initial holder at
a price other than the face amount of such New Security, and is limited to
holders that hold the New Securities as capital assets within the meaning of
section 1221 of the Code. This discussion also does not address the tax
consequences to nonresident aliens or foreign corporations that are subject to
United States federal income tax on a net basis on income realized with respect
to a New Security because such income is effectively connected with the conduct
of a U.S. trade or business. Such holders are generally taxed in a similar
manner to United States Holders; however, certain special rules apply.
Moreover, this discussion does not address all of the tax consequences that may
be relevant to particular purchasers in light of their personal circumstances,
or to certain types of purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
have hedged a risk of owning New Securities).
The following discussion is a general summary only, and expresses the
opinion of Sheppard, Mullin, Richter & Hampton LLP, as to material federal
income tax consequences to Holders who exchange Old Securities for New
Securities pursuant to the Exchange Offer. No ruling or other guidance from
the IRS has been or will be sought with respect to any of the matters
discussed herein, and there can be no assurance that the IRS will not take a
view that would lead to federal income tax consequences that differ from
those described herein. The tax treatment applicable to particular Holders
may vary depending upon such Holders' particular circumstances. The
discussion is for general information only and does not constitute tax advice.
HOLDERS EXCHANGING OLD SECURITIES FOR NEW SECURITIES ARE URGED TO CONSULT
THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE
OF OLD SECURITIES FOR NEW SECURITIES AND THE CONSEQUENCES OF THE OWNERSHIP AND
DISPOSITION OF NEW SECURITIES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX
LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, AS WELL AS WITH RESPECT TO THE
POSSIBLE EFFECTS OF ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS OR
INTERPRETATIONS THEREOF.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of an Old
Security or a New Security, as appropriate, that is, for United States federal
income tax purposes, (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof or (c) an
estate or trust the income of which is subject to United States federal income
taxation regardless of source.
EXCHANGE OF OLD SECURITIES FOR NEW SECURITIES
The exchange by a United States Holder of an Old Security for a New
Security will not constitute a taxable exchange of the Old Security if the terms
of the New Security (including the interest rate) are identical to the terms of
the Old Security. Under the 1992 Proposed Regulations, even if the terms of the
New Security were not identical to the terms of the Old Security as a result of
the exchange as described under "The Exchange Offer," the exchange of the Old
Security for the New Security would not be treated as a taxable exchange, as
such change would occur pursuant to the original terms of the Old Security.
Accordingly, in the absence of any change in law or the modification or
withdrawal of the 1992 Proposed Regulations, the Company intends to take the
position that in the circumstances described in the preceding sentence, the
exchange of an Old Security for a New Security pursuant to the Exchange Offer
will not constitute a taxable exchange of the Old Security.
Assuming the exchange of an Old Security for a New Security pursuant to the
Exchange Offer is not treated as a taxable exchange for federal income tax
purposes, the New Security received by a United States Holder would be treated
as a continuation of the Old Security in the hands of such holder. As a result,
there should be no federal income tax consequences to United States Holders
exchanging Old Securities for New Securities pursuant to the Exchange Offer, and
a United States Holder should have the same adjusted basis
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and holding period in the New Securities immediately after the exchange as it
had in the Old Securities immediately before the exchange.
PAYMENT OF INTEREST ON NEW SECURITIES
Interest paid or payable on a New Security will be taxable to a United
States Holder as ordinary interest income, generally as received or accrued, in
accordance with such holder's method of accounting for federal income tax
purposes.
SALE, EXCHANGE OR RETIREMENT OF NEW SECURITIES
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a New Security, a United States Holder will generally recognize
taxable gain or loss equal to the difference between the sum of cash plus the
fair market value of all other property received on such disposition (except to
the extent such cash or property is attributable to accrued but unpaid interest,
which will be taxable as ordinary income) and such holder's adjusted tax basis
in the New Security. A United States Holder's adjusted tax basis in a New
Security generally will equal the cost to such holder of the Old Security
exchanged for such New Security, reduced by any principal payments received by
such holder on the New Security.
Gain or loss recognized on the disposition of a New Security generally will
be capital gain or loss and will be long-term capital gain or loss if, at the
time of such disposition, the United States Holder's holding period for the New
Security (which would include such holder's holding period in the Old Security
exchanged therefor) is more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
"Backup" withholding and information reporting requirements apply to
certain payments of principal, premium, if any, and interest on a New Security,
and to payments of the proceeds of the sale or redemption of New Securities
before maturity, to certain non-corporate United States Holders. The Company,
its agent, a broker, the Trustee or any paying agent, as the case may be, will
be required to withhold from any payment that is subject to backup withholding a
tax equal to 31% of such payment if a United States Holder fails to furnish its
taxpayer identification number (social security or employer identification
number), to certify that such number is correct, to certify that such holder is
not subject to backup withholding, or to otherwise comply with the applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules from a payment to a United States Holder will be
allowed as a credit against such holder's United States federal income tax
liability, and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
UNITED STATES TAXATION OF FOREIGN HOLDERS OF NEW SECURITIES
PAYMENT OF INTEREST ON NEW SECURITIES
In general, payments of interest received by any holder that is not a
United States Holder (a "Foreign Holder") will not be subject to a United States
federal withholding tax, provided that (a)(i) the holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (ii) the holder is not a controlled
foreign corporation that is related to the Company actually or constructively
through stock ownership and (iii) either (x) the beneficial owner of the New
Security, under penalties of perjury, provides the Company or its agent with the
beneficial owner's name and address and certifies that it is not a United States
Holder on IRS Form W-8 (or a suitable substitute form) or (y) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") holds the New Security and certifies to the Company or its agent
under penalties of perjury that such a Form W-8 (or a suitable substitute) has
been received by it from the beneficial owner or qualifying intermediary and
furnishes the Company a copy thereof or (b) the Foreign Holder is entitled to
the benefits of an income tax treaty under which the interest on the New
Securities is exempt from United States withholding tax and the Foreign Holder
or such Holder's agent provides a properly executed IRS Form 1001 claiming the
exemption. Payments of interest not exempt from U.S. federal withholding tax as
described above will be subject to such withholding tax at a rate of 30%
(subject to reduction under an applicable income tax treaty).
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SALE, EXCHANGE OR RETIREMENT OF NEW SECURITIES
A Foreign Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain realized
on the sale, exchange, redemption, retirement at maturity or other disposition
of New Securities, unless the Foreign Holder is an individual who is present in
the United States for a period or periods aggregating 183 or more days in the
taxable year of the disposition and certain other conditions are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current Treasury regulations, backup withholding and information
reporting on IRS Form 1099 do not apply to payments made by the Company or a
paying agent to Foreign Holders if the certification described under "United
States Taxation of Foreign Holders of New Securities--Payment of Interest on New
Securities" is received, provided that the payor does not have actual knowledge
that the holder is a United States Holder. If any payments of principal and
interest are made to the beneficial owner of a New Security by or through the
foreign office of a foreign custodian, foreign nominee or other foreign agent of
such beneficial owner, or if the foreign office of a foreign "broker" (as
defined in applicable United States Treasury Department regulations) pays the
proceeds of the sale of a New Security or a coupon to the seller thereof, backup
withholding and information reporting will not apply. Information reporting
requirements (but not backup withholding) will apply, however, to payments by a
foreign office of a broker that is a United States person, that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, or that is a "controlled foreign corporation"
(generally, a foreign corporation controlled by certain United States
shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a Foreign Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Payment by a United States office of a broker is subject to both
backup withholding at a rate of 31% and information reporting unless the holder
certifies under penalties of perjury that it is a Foreign Holder, or otherwise
establishes an exemption. A Foreign Holder may obtain a refund of, or a credit
against such holder's U.S. federal income tax liability for, any amounts
withheld under the backup withholding rules, provided the required information
is furnished to the IRS.
In addition, in certain circumstances interest on a New Security owned by a
Foreign Holder will be required to be reported annually on IRS Form 1042-S, in
which case such form will be filed with the IRS and furnished to the Foreign
Holder.
The foregoing description of the procedures for withholding tax on interest
payments and associated backup withholding and information reporting rules are
subject to change by future regulations.
NEW PROPOSED REGULATIONS
On April 22, 1996, the United States Treasury Department published
proposed regulations concerning withholding, backup withholding and
information reporting in respect of United States source interest and other
portfolio income paid to Foreign Holders. The new proposed regulations would
combine most forms (Forms W-8, 1001, 4224, 8709) into a single form (form W-8),
unify and clarify certification procedures and reliance standards for
withholding agents and intermediaries, and adopt new procedures for Foreign
Holders that are partnerships. If adopted, the regulations generally would
be effective for payments made after December 31, 1997.
FEDERAL ESTATE TAXES
Subject to applicable estate tax treaty provisions, New Securities held at
the time of death (or theretofore transferred subject to certain retained rights
or powers) by an individual who at the time of death is a Foreign Holder will
not be included in such holder's gross estate for United States federal estate
tax purposes provided that the individual does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote.
PLAN OF DISTRIBUTION
Each broker-dealer that holds Old Securities that were acquired for its own
account as a result of market making or other trading (other than Old Securities
acquired directly from the Company), may exchange Old Securities for New
Securities in the Exchange Offer. However, any such broker-dealer may be deemed
to be an "underwriter" within the meaning of such term under the Securities Act
and must, therefore, acknowledge that it will deliver a prospectus in connection
with any resale of New Securities received in the Exchange Offer. This
prospectus delivery requirement may be satisfied by the delivery by such broker-
dealer of this Prospectus, as it may be amended or supplemented from time to
time. The Company has agreed to make this Prospectus, as amended or
supplemented, available to any broker-dealer who receives New Securities in the
Exchange Offer for use in connection with any such sale promptly upon request.
The Company will not receive any proceeds from any sales of New Securities by
broker-dealers. Any resale of
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New Securities by broker-dealers may be made directly to a purchaser or to or
through brokers or dealers who may receive compensation in the form of
commissions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Securities and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. Pursuant to the Registration Rights Agreement, the Company has agreed to
pay all expenses incident to the Exchange Offer other than commissions or
concessions of any brokers or dealers and will indemnify Eligible Holders
(including any broker-dealer) against certain liabilities, including liabilities
under the Securities Act.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995, 1994, 1993, 1992 and 1991, and for each of the five years in the
period ended December 31, 1995 incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The combined financial statements of Electronic Systems (a unit
of Westinghouse Electric Corporation) incorporated in this Prospectus by
reference to the Current Report on Form 8-K/A of the Company dated May 31,
1996 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given upon the authority of said
firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the New Securities offered hereby will be passed upon for
the Company by Sheppard, Mullin, Richter & Hampton LLP, Los Angeles, California.
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All tendered Old Securities, executed Letters of Transmittal and other
related documents should be directed to the Exchange Agent. Questions and
requests for assistance and requests for additional copies of the Prospectus,
the Letter of Transmittal and other related documents should be addressed to the
Exchange Agent as follows:
BY HAND, REGISTERED OR CERTIFIED MAIL
OR OVERNIGHT CARRIER:
The Chase Manhattan Bank
(National Association)
Institutional Trust Group
Chase MetroTech Center
3rd Floor
Brooklyn, New York 11245
BY FACSIMILE:
(718) 242-5885
BY TELEPHONE:
(718) 242-7287
(Originals of all documents submitted by facsimile should be sent promptly
by hand, overnight courier, or registered or certified mail)
No dealer, salesperson or other person is authorized in connection with any
offering made hereby to give any information or to make any representation not
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or by the Initial Purchasers. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
offered hereby, nor does it constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby to any person in any
jurisdiction in which it is unlawful to make such an offer or solicitation to
such person. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstance create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
Offer to Exchange All Outstanding
7% Notes Due 2006
($400,000,000 principal amount outstanding)
For 7% Notes Due 2006
7 3/4% Debentures Due 2016
($300,000,000 principal amount outstanding)
For 7 3/4% Debentures Due 2016
7 7/8% Debentures Due 2026
($300,000,000 principal amount outstanding)
For 7 7/8% Debentures Due 2026
NORTHROP GRUMMAN
CORPORATION
___________________________
P R O S P E C T U S
___________________________
June 17, 1996
