<PAGE>
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8974
ALLIEDSIGNAL INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2640650
- ---------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
- ---------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (201)455-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of Each Exchange
Title of Each Class on Which Registered
- ---------------------------------------- --------------------------------------
Common Stock, par value $1 per share* New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Money Multiplier Notes due 1996-2000 New York Stock Exchange
9 7/8% Debentures due June 1, 2002 New York Stock Exchange
9.20% Debentures due February 15, 2003 New York Stock Exchange
Zero Coupon Serial Bonds due 1997-2009 New York Stock Exchange
9 1/2% Debentures due June 1, 2016 New York Stock Exchange
</TABLE>
- ------------
* The common stock is also listed for trading on the Amsterdam, Basle,
Frankfurt, Geneva, London, Paris and Zurich stock exchanges.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $13.4 billion at December 31, 1995.
There were 282,769,564 shares of Common Stock outstanding at December 31, 1995.
Documents Incorporated by Reference
-----------------------------------
Part I and II: Annual Report to Shareowners for the Year Ended December
31, 1995.
Part III: Proxy Statement for Annual Meeting of Shareowners to be held
April 22, 1996.
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
<PAGE>
ALLIEDSIGNAL INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Page(s) in
Form 10-K Heading(s) in Annual Report to Shareowners for Annual
Item No. Year Ended December 31, 1995 Report
- ---------------------------------- ------------------------------------------------------------ ------------
<S> <C> <C>
1. Business Note 23. Segment Financial Data ............................ 37
Note 24. Geographic Areas -- Financial Data ................ 38
Management's Discussion and Analysis ....................... 19
3. Legal Proceedings Note 19. Commitments and Contingencies ..................... 35
5. Market for the Regis- Note 25. Unaudited Quarterly Financial
trant's Common Equity Information ................................................ 38
and Related Stock- Selected Financial Data .................................... 39
holder Matters
6. Selected Financial Data Selected Financial Data .................................... 39
7. Management's Discussion and Management's Discussion and Analysis ....................... 19
Analysis of Financial
Condition and Results of
Operations
8. Financial Statements and Report of Independent Accountants .......................... 38
Supplementary Data Consolidated Statement of Income ........................... 26
Consolidated Statement of Retained Earnings ................ 26
Consolidated Balance Sheet ................................. 27
Consolidated Statement of Cash Flows ....................... 28
Notes to Financial Statements .............................. 29
</TABLE>
<TABLE>
<CAPTION>
Heading(s) in Proxy Statement for Page(s) in
Annual Meeting of Shareowners Proxy
to be held April 22, 1996 Statement
------------------------------------------------------------ ------------
<S> <C> <C>
10. Directors and Executive Election of Directors; Voting Securities ................... *
Officers of the Registrant
11. Executive Compensation Election of Directors -- Compensation of Directors;
Executive Compensation ..................................... *
12. Security Ownership of Certain Voting Securities .......................................... *
Beneficial Owners and
Management
</TABLE>
- ------------
* To be included in a definitive Proxy Statement to be filed with the
Securities and Exchange Commission not later than 120 days after December 31,
1995.
2
<PAGE>
<PAGE>
NOTE: AlliedSignal Inc. is sometimes referred to in this Report as the
Registrant and as the Company, and AlliedSignal Inc. and its consolidated
subsidiaries are sometimes referred to as the Company, as the context may
require.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C> <C>
Part I. 1 Business........................................................................................ 4
2 Properties...................................................................................... 14
3 Legal Proceedings............................................................................... 15
4 Submission of Matters to a Vote of Security Holders............................................. 15
Executive Officers of the Registrant............................................................... 15
Part II. 5 Market for the Registrant's Common Equity and Related Stockholder Matters....................... 16
6 Selected Financial Data......................................................................... 17
7 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 17
8 Financial Statements and Supplementary Data..................................................... 17
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 17
Part III. 10 Directors and Executive Officers of the Registrant............................................. 17(a)
11 Executive Compensation......................................................................... 17(a)
12 Security Ownership of Certain Beneficial Owners and Management................................. 17(a)
13 Certain Relationships and Related Transactions................................................. 18
Part IV. 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 18
Signatures.................................................................................................... 19
</TABLE>
- ------------
(a) These items are omitted since the Registrant will file with the Securities
and Exchange Commission a definitive Proxy Statement pursuant to Regulation
14A involving the election of directors not later than 120 days after
December 31, 1995. Certain other information relating to the Executive
Officers of the Registrant appears at pages 15 and 16 of this Report.
3
<PAGE>
<PAGE>
PART I.
ITEM 1. BUSINESS
AlliedSignal Inc. (with its consolidated subsidiaries sometimes referred to
in this Report as the Company) was organized in the State of Delaware in 1985.
The Company is the successor to Allied Corporation, which was organized in the
State of New York in 1920.
The Company's operations are conducted under three business segments:
Aerospace, Automotive and Engineered Materials.
The Company's products are used by many major industries, including
electronics, motor vehicles, chemicals, textiles, construction, plastics,
housing, telecommunications, utilities, packaging, agriculture, military and
commercial aviation, and in the space program. The following is a description of
the Company's three business segments and their principal products and
activities.
AEROSPACE
The Aerospace segment is among the world's largest manufacturers and
suppliers of advanced technology products and services for the military,
commercial and general aviation, and space markets.
Aerospace's principal product lines are organized into four strategic
business units: AlliedSignal Engines (Engines), Aerospace Equipment Systems
(Equipment Systems), Government Electronic Systems (Electronic Systems) and
Commercial Avionics Systems (Avionics Systems).
The Company serves key military and commercial segments of the aviation,
defense and space markets with a broad array of systems, subsystems, components
and services. It designs, develops, manufactures, markets and services hundreds
of products found on all types of aircraft, from single-piston engine aircraft,
executive aircraft and wide-bodied 'jumbos' flown by the world's commercial
carriers, to trainers, transports, bombers, fighters and helicopters used by the
U.S. and other countries for national defense. The Company's global business
consists primarily of original equipment (OE) sales and an extensive aftermarket
business, including spare parts, maintenance and repair, and retrofitting.
Worldwide customers include the U.S. and foreign governments, all of the major
airframe and engine manufacturers, including Boeing, McDonnell Douglas, Lockheed
Martin, Airbus Industrie (Airbus), British Aerospace, Cessna, Fairchild,
Dassault, Gulfstream, Bombardier, Rockwell International, Pratt & Whitney,
General Electric (GE) and Rolls Royce, as well as the world's leading airlines.
Principal products, manufactured for military aircraft, civil air transport
and general aviation markets, include primary propulsion, consisting of
turboprop, turbofan, turbojet and turboshaft engines, and auxiliary power gas
turbine engines; environmental control systems, consisting of air conditioning,
cabin pressure and temperature controls; airborne weather avoidance and
collision avoidance radar systems; forward-looking windshear detection systems
and wing ice detection systems; aircraft communications -- both voice and data;
microwave landing systems; automatic flight control systems; pneumatic control
systems; engine and flight instruments; motion sensing and air data systems;
navigation and identification equipment, including identification of
friend-or-foe systems; flight data recorders; cockpit voice recorders; ground
proximity warning systems; electric power generating systems; fuel control
systems; aircraft wheels and brakes; brake control systems; test systems;
electromechanical and hydraulic systems and components; heat transfer equipment
and engine oil cooling systems. Other products include electronic cooling
systems and infrared radiation suppressors.
The Company also manufactures products for missiles, spacecraft defense
command, control communication and intelligence programs and oceanic
applications, primarily for defense markets. Products include cryptographic
equipment, radar proximity fuzes, space-pointing devices for deep space probes
and control systems for spacecraft, gyroscopes for tactical missiles and
military aircraft, antisubmarine warfare systems as well as field engineering
management and technical support services to the National Aeronautics and Space
Administration (NASA) and the U.S. Department of Energy (DOE).
In October 1994 the Company completed the purchase of the Lycoming Turbine
Engine Division of Textron Inc. (Lycoming Engine). The acquisition extended the
Company's turbine engine product
4
<PAGE>
<PAGE>
offerings into the 50- to 115-seat regional aircraft market and in helicopters
and other commercial and military applications. Lycoming Engine had 1994 sales
of $550 million.
In January 1996, the Company completed the acquisition of Northrop Grumman
Corporation's precision products business based in Norwood, Massachusetts. The
business, which has annual sales of approximately $39 million, manufactures
inertial and sensor products for military and space markets. In addition, the
Company sold its military landing gear business to Coltec Industries' Menasco
unit.
The Company is affected by the level of expenditures for defense and space
programs and the level of production of commercial and general aviation
aircraft. The Company's aerospace products are sold directly to the U.S. and
foreign governments, aircraft manufacturers and commercial airlines, and to
dealers and distributors of general aviation products.
Moderate growth in the Company's commercial business for aerospace products
is expected, over the long term, to mitigate a reduction in U.S. defense
spending. Moreover, aerospace sales are not dependent on any one key defense
program or commercial customer. However, contract awards by aircraft
manufacturers, some of which are discussed below, can be canceled or reduced if
aircraft orders are cut back. The products and services are sold in competition
with those of a large number of other companies, some of which have substantial
financial resources and significant technological capabilities. Among those
companies that compete with several of the segment's product areas are GE,
Honeywell, Rockwell International, Sundstrand, United Technologies and B.F.
Goodrich.
Sales to the U.S. government, acting through its various departments and
agencies and through prime contractors, amounted to $1,806 million for 1995 and
$1,886 million for 1994, which amounts include sales to the Department of
Defense of $1,205 million in 1995 and $1,300 million in 1994. Approximately 54%
and 59% of sales to the U.S. government in 1995 and 1994, respectively, were
made under fixed-price contracts in which the Company agrees to perform the
contract for a fixed price and retains for itself any benefits of cost savings
or must bear the burden of cost overruns.
Government contracts are generally terminable by the government at will.
Upon termination, the contractor is normally entitled to reimbursement for
allowable costs and to an allowance for profit. However, if the contract is
terminated because of the contractor's default, the contractor may not recover
all of its costs and may be liable for any excess costs incurred by the
government in procuring undelivered items from another source.
The Company, as are other government contractors, is subject to government
investigations of business practices and compliance with government procurement
regulations. Although such regulations provide that a contractor may be
suspended or debarred from government contracts under certain circumstances, and
the outcome of pending government investigations cannot be predicted with
certainty, management is not presently aware of any such investigation which it
expects will have a material adverse effect on the Company.
Orders for certain products sold to general and commercial aviation
customers mainly consist of relatively short-term and frequently renewed
commitments. Government procurement agencies generally issue contracts covering
relatively long periods of time. Total backlog for products and services for
both government and commercial contracts was $4,523 million at December 31, 1995
and $4,730 million at December 31, 1994 of which U.S. and foreign government
orders were $1,871 million and $1,803 million for the respective years. The
Company anticipates that approximately $3,010 million of the total 1995 backlog
will be filled during 1996.
The Aerospace segment's international operations consist primarily of
exporting U.S. manufactured products, performance of services, operating
aircraft repair and overhaul facilities and licensing activities. The principal
manufacturing facility outside of the U.S. is in Canada.
In 1995, as in the prior year, world defense spending continued to decline.
However, most major U.S. and international airlines operated in an improving
economic environment. The modest turnaround that began in the second half of
1993, continued in 1994 and strengthened significantly in 1995. The regional
airlines experienced strong growth while the high-end corporate aviation market
showed moderate growth.
Aerospace received a number of significant contracts during 1995.
5
<PAGE>
<PAGE>
The Company's flight safety systems were chosen by several major airlines.
Singapore Airlines selected the Company's flight safety and data management
avionics for its 67 Boeing 747-400 and Airbus A340-300E aircraft in a contract
with a potential sales value of more than $20 million. Scandinavian Airlines and
Continental Airlines became the first two customers for the Company's
Electro-Thermal Ice Protection System on their MD-80 aircraft. Southwest
Airlines selected Avionics Systems to supply a complete package of avionics,
including forward-looking windshear detection systems, and Equipment Systems to
provide maintenance for wheels and brakes in contracts with a combined potential
sales value of $175 million.
Engine's new TFE731-40 turbofan engine was chosen by Dassault for its new
Falcon 50EX business jet. Engines was also selected to provide TPE331-14-GR/HR
turboprop engines for 69 Jetstream 41 aircraft ordered by Trans States Airlines
Inc. and SA Airlink of South Africa; the contract, including spares and service,
has a potential sales value of $220 million. Engines was chosen to supply
TFE731-5BR turbofan engines for the new Raytheon Hawker 800XP aircraft in a
contract with a potential sales value of $300 million. Engines and Avionics
Systems received a contract with a potential sales value of $240 million for the
LF-507 engines and avionics for the Avro RJ-85 aircraft chosen by Sabena
Airlines and Swissair. Equipment Systems was selected by GE Aircraft Engines to
supply the start system for the CF34-8C.
In military markets, Electronic Systems won several key awards. Northrop
Grumman selected Electronic Systems to be the sole supplier of the navigation
system for the U.S. Army's brilliant anti-armor submunition program; the
contract has a potential sales value of $200 million. McDonnell Douglas
Helicopter Systems selected the Company to provide multipurpose displays for its
AH-64D Longbow Apache advanced attack helicopter in a contract with a sales
potential in excess of $300 million. Equipment Systems will provide the turbine
cooling valve for Pratt & Whitney's F119 engine, currently under development to
power the twin-engine F-22 Advanced Tactical Fighter; the award has a potential
sales value of more than $12 million. Equipment Systems also was awarded a
contract having a potential sales value of $20 million by the U.S. Navy (USN) to
provide F-18 wheel and brake spare parts and contracts for various valve systems
on the Seawolf and New Attack submarines. Raytheon Aircraft selected Avionics
Systems to supply avionics for the new U.S. Air Force (USAF)/USN Joint Primary
Aircraft Training System aircraft. The USN/Marine Corps selected Avionics
Systems' new flat-panel, color liquid crystal displays to replace up to 700
mechanical horizontal situation indicators in its H46 helicopters.
In the general aviation market, the Company received several significant
contracts. Engine's new RE100 Auxiliary Power Unit (APU) was selected by Learjet
as the standard option for its new Lear 45 business jet. Equipment Systems
received a contract to supply the air conditioning system for Cessna's new
Citation Excel turbofan aircraft. Avionics Systems was selected by Cessna to be
the exclusive supplier of avionics for the rebirth of the single-piston-engine
aircraft.
A number of airlines selected Equipment Systems for their wheels and brakes
for new aircraft, including: Japan Air System for wheels and brakes for its new
fleet of Boeing 777 aircraft in a contract with potential sales valued at $54
million; Egyptair for wheels and carbon brakes for the airline's new Airbus
A340s and Boeing 777s; and Shandong Airlines for wheels and brakes for its new
Boeing 737 aircraft. The Company was also chosen by McDonnell Douglas to
assemble and deliver an integrated landing system, including wheels and brakes,
for its new MD-95 twin-jet aircraft.
In the helicopter market, McDonnell Douglas chose the Company's Bendix/King
and Global Wulfsberg avionics for its new Explorer helicopter in a contract with
a sales potential of $50 million. Light Helicopter Turbine Engine Company, a
partnership with the Allison Engine Company, signed a contract with Hindustan
Aeronautics Ltd. to provide CTS800 commercial turboshaft engines for a new
advanced light helicopter. Projections of 300 helicopters could result in more
than $150 million in engine sales.
AlliedSignal Technical Services Corp. (ATSC) received a contract with a
$200 million sales potential from the USAF to provide maintenance, engineering
services and modifications to the Air Force Satellite Control Network.
6
<PAGE>
<PAGE>
Equipment Systems received a contract from Bombardier Aerospace-North
America to provide the integrated electrical power system for the new
deHavilland Dash 8 Series 400 regional aircraft. McDonnell Douglas selected
Avionics Systems to supply liquid crystal displays as part of a field upgrade
program to retrofit the electro-mechanical flight instruments on the DC-8, DC-9,
DC-10 and MD-80 aircraft.
The Company was also awarded a number of significant contracts in 1994.
Aerospace was awarded several significant contracts related to Boeing's new
737-700 program totaling about $3 billion in potential sales over the life of
the program. The most significant of these awards included the Company's
designation as the sole supplier of APUs for this new family of aircraft; the
contract has a sales potential of $2 billion. Equipment Systems won contracts
for the environmental control and bleed air systems with a sales potential of
$370 million. GE's Aircraft Engines unit awarded contracts to Equipment Systems
for the main fuel control and the air turbine start system for its CFM56-7
engine on the new 737 program with a combined sales potential of $260 million.
Southwest Airlines awarded a contract with a sales potential of $225 million to
Equipment Systems for wheels and brakes on its new Boeing 737-700 fleet.
Equipment Systems was also awarded a contract for the engine nose cowl anti-ice
valve with a sales potential of $22 million.
The Company has received contracts for the MD-95. Equipment Systems will
supply the environmental control systems and Avionics Systems will provide the
communications and navigational systems on a supplier-furnished-equipment basis.
The combined sales potential of the two contracts is more than $500 million.
Aero Vodochody of Czechoslovakia selected International Turbine Engines
Corp., a joint venture between Engines and the Aero Industry Development Center
of the Republic of China (Taiwan), to supply F124-GA-100 engines for its L-159
light attack/advanced trainer aircraft. The sales potential of the contract is
$290 million. Aero Vodochody also chose a Rockwell-AlliedSignal team to supply
the avionics suite for its L-159 program; Electronic Systems is responsible for
supplying and integrating selected avionics subsystems. Lockheed Martin Aircraft
Services awarded a contract to Electronic Systems to upgrade the integrated
cockpit displays and mission avionics in A-4M SkyHawk tactical fighters sold by
the U.S. government to the Republic of Argentina's Air Force.
Engines received an order to supply the Garrett Turbine Compressor Power
180C engine for up to 750 ground carts for the USAF for the San Antonio Air
Logistics Center's Large Aircraft Start System. The contract has a sales
potential of $75 million.
Electronic Systems received a contract with a sales potential of $200
million to produce an inertial measurement unit for Northrop Grumman's Brilliant
Anti-Tank Weapon.
The USAF's Philips Laboratory awarded Equipment Systems a contract to
develop a turbopump. This contract has sales potential of about $5 million and
is considered strategically significant because it positions Equipment Systems
for entry into the turbopump market.
Two important APU maintenance service agreements (MSA) were awarded during
the year. Southwest Airlines, for its fleet of 737 aircraft, awarded a contract
with a sales potential of $100 million to the Company and Alaska Airlines
selected the Company to service its APUs with a sales potential of $7.6 million.
The Australian Civil Aviation Authority awarded a contract for $9 million
to Electronic Systems to provide a parallel approach radar monitor (PARM) for
Sydney's airport; it will be the third airport in the world and the first
outside the U.S. with a PARM.
The Company was also awarded new contracts in general aviation in 1994.
Avionics Systems successfully penetrated the safety avionics market by winning a
contract from Gulfstream to provide a safety avionics suite for the Gulfstream
GV aircraft. The award included a traffic alert and collision avoidance system
(TCAS II), ground proximity warning systems and maintenance data acquisition
units. Israeli Aircraft Industries selected the Company for three contracts with
a combined sales potential exceeding $30 million. The TFE731-40 engine, a
turbofan from the Company's generation of TFE731 engines, was selected as the
propulsion system for the Astra SPX aircraft and the Company's APUs and
environmental control systems were selected for the Galaxy business jet.
Dassault Aviation
7
<PAGE>
<PAGE>
selected Engines to supply the most powerful of its new family of turbofan
engines, the TFE731-60, for Dassault's new Falcon 900EX. Engines received a
contract for 69 TPE331-14 turboprop engines from Jetstream with a sales
potential of $220 million. Canadair selected Engines to supply APUs and air
turbine start systems for its fleet of Global Express aircraft with a combined
sales potential of $50 million.
NASA awarded ATSC the test, evaluation and maintenance contract for its
White Sands Test Facility in New Mexico. The initial three-year contract, plus a
two-year option, has a sales potential of $163 million. In an award that secured
a strong position for future potential space station work, Equipment Systems
received a contract from NASA's Lewis Research Center to develop the first space
flight demonstration of a solar dynamic electric power generation system with a
sales potential of $15 million. Aerospace was part of four industry teams that
will share in $98 million in technology reinvestment project grants from the
U.S. government's Advanced Research Projects Agency. Among the projects is a $42
million award for the development of a radar system to be used in an Autonomous
Landing Guidance System and a $43 million award to develop Fly-by-Light Advanced
Systems Hardware. ATSC is developing and installing the ground system for
Taiwan's new satellite program under a contract with a sales potential,
including options, of $32 million.
The Company expects that these programs will require only minimal fixed
capital spending.
AUTOMOTIVE
The Automotive segment designs, engineers and manufactures systems and
components for worldwide vehicle manufacturers and aftermarket customers. The
segment's principal business areas are braking systems, engine components,
safety restraint systems and the aftermarket. Within each area, the segment
offers a wide range of products for passenger cars and light, medium and heavy
trucks.
For manufacturers of passenger cars and light trucks, the Company provides
disc and drum brakes, power brake boosters and master cylinders, brake valves,
wheel end products, friction materials, spark plugs, turbochargers and occupant
protection systems (seat belts, air bags and related components).
The Company's primary product offerings for the manufacturers of medium and
heavy trucks and off-road vehicles primarily include air and hydraulic brake
actuation components, air and hydraulic drum and disc brakes, anti-lock braking
systems (ABS), compressors, air dryers, friction materials, turbochargers and
charge-air intercoolers.
The aftermarket business includes replacement parts for most of the above
items as well as air, oil and fuel filters, wire and cable products, and brake
sealants and fluids.
Automotive operations are located in the U.S., Australia, Brazil, Canada,
China, France, Germany, India, Ireland, Italy, Japan, Malaysia, Mexico, Poland,
Portugal, South Korea, Spain, Turkey and the United Kingdom. Distribution and
marketing are conducted in these and numerous other countries as well.
Internationally, products are marketed under the Bendix, Fram, Autolite, Garrett
and Jurid trademarks.
Worldwide passenger car and truck OE sales accounted for approximately 74%
in both 1995 and 1994 of the net sales of the Automotive segment with
aftermarket sales accounting for the balance. In 1995 and 1994 Automotive
operations outside the U.S. accounted for $2,499 and $2,217 million, or 45% in
both years, of worldwide sales.
In 1995 and 1994 sales of automotive OE systems and components were made to
approximately 30 customers of which the Company's five largest automotive
manufacturing customers accounted for approximately 52% and 56%, respectively,
of such sales. Total worldwide sales (for OE and aftermarket use) for 1995 and
1994 to the Company's five largest automotive manufacturing customers amounted
to $2,138 and $2,063 million, including sales to Ford Motor Company (Ford), the
segment's largest customer, of $887 and $782 million for the respective years.
8
<PAGE>
<PAGE>
The segment's operations outside the U.S. are conducted through various
foreign companies in which it has interests ranging from minor to complete
control. International operations also include the exporting of U.S.
manufactured products and licensing activities.
The Automotive segment's products are sold in highly competitive markets to
customers who demand performance, quality and competitive prices. Virtually all
automotive components are sold in competition with other independent suppliers
or with the captive component divisions of the vehicle manufacturers. While the
Company's competitive position varies among its products, the Company believes
it is a significant factor in each of its major product markets. The major
independent competitors in one or more major business areas include: ITT Teves,
Lucas Girling, Rockwell-WABCO, Dana, Autoliv, Cooper Industries, Schwitzer,
Midland, Bosch, Kelsey Hayes, KKK, TRW, Purolator, Delco, AM Brake, Raybestos,
Takata and Morton.
In 1994 the Company established two joint ventures in Europe, one with
Sogefi S.p.A. and the other with Gilardini, a subsidiary of Fiat, and Sequa. The
joint venture with Sogefi S.p.A., a European manufacturer and distributor of
automotive filters and other automotive products, has enabled both partners to
penetrate new markets through a joint distribution network and to reduce costs
through consolidation of both warehouses and distribution centers. The joint
venture with Gilardini and Sequa -- BAG, S.p.A. -- which began operations in the
third quarter of 1995, manufactures and supplies hybrid inflators for driver-
and passenger-side air bag modules that are assembled by the Company's new plant
in Italy. Hybrid inflators provide a cost-efficient method of inflating air
bags, using compressed argon gas and a proprietary environmentally-friendly
solid generant from the Atlantic Research Corporation, which is used to heat the
gas. These operations provide the Company with an entry into the European air
bag market. In January 1995 the Company and Jidosha Kiki Co. of Japan formed a
joint venture to supply brake boosters for vehicles built in Europe by Japanese
manufacturers. The venture is based in Pamplona, Spain.
In late December 1994 the Company acquired Ford's spark plug manufacturing
plant in Treforest, South Wales. The acquisition enhanced the Company's
relationship with Ford as its sole supplier of spark plugs in both North America
and Europe and provides a manufacturing base in Europe for growth in the
aftermarket spark plug business.
In April 1995 the Company acquired the Budd Company's Wheel and Brake
Division, whose products include: rotors, hubs, drums and related assemblies for
passenger cars and light trucks; steel disk wheels for heavy trucks; and
demountable rims and hub and drum assemblies for medium- and heavy-duty trucks.
The Wheel and Brake Division had 1994 sales of over $300 million.
In June 1995 the Company acquired Fiat Auto Poland S.A. (Fiat)'s braking
business in Poland, whose products include disc and drum brakes, master
cylinders and brake boosters; and became the exclusive supplier of braking
systems to Fiat in Poland. The manufacturing facility of the business is located
in Twargodora, Poland. Annual sales approximate $30 million.
In 1995 the Company purchased Transturk Holding's 68% interest in Transturk
Fren Donanim Industriesi AS, a leading Turkish manufacturer of braking systems.
The acquisition brings the Company's investment in the company to 80%. Annual
sales approximate $27 million.
Construction of a new turbocharger plant in Shanghai, China was completed
and production began in September 1995. This facility enables the Company to
serve the rapidly growing diesel engine market in China and provide
turbochargers to international markets as opportunities develop.
Automotive, as previously announced, has decided to exit the light-vehicle
ABS business and is conducting discussions concerning the future of its
light-vehicle braking business. Exiting the ABS business could hinder the
Company's ability to remain a first tier supplier of complete braking systems.
The Company expects that neither exiting the ABS business nor the absence of an
agreement regarding the light-vehicle braking business would have a material
impact on the Company's results of operations or financial position in 1996. The
ABS actions do not affect the heavy-truck ABS business, in which the Company's
joint venture with Knorr-Bremse has a significant market position.
In addition, a reduction in the Automotive workforce was announced and
substantially completed in the fourth quarter of 1995. The reduction eliminates
approximately 3,100 full-time-equivalent positions. The workforce reduction is
expected to be completed by the end of 1996.
9
<PAGE>
<PAGE>
ENGINEERED MATERIALS
The Engineered Materials segment is composed of four major divisions:
Polymers, Fluorine Products, Specialty Chemicals and Electronic Materials. The
Specialty Chemicals and Electronic Materials divisions were formed in February
1996 by realigning some of Engineered Materials' businesses in order to increase
the focus on the rapidly growing global markets these divisions serve.
Polymers. The Polymers division consists of the Fibers and Plastics
businesses which were combined in 1995 to enhance the units' vertical
integration and ensure optimization throughout the nylon system.
The Company's Fibers business is a leading producer of type 6 nylon and the
third largest producer of nylon in the U.S. The Company is also the largest
domestic producer of caprolactam, the primary intermediate for type 6 nylon,
from which it produces fine and heavy denier nylon yarns and molding compounds
and film. These yarns are sold under the trademarks Anso'r', Anso X'r', Anso
IV'r', Anso V'r', Worry-Free'r', CrushResisterTM and Caprolan'r'. In addition,
the Company produces heavy denier polyester yarns. The Company primarily sells
yarns to the carpet, textile, motor vehicle and industrial markets.
In the carpet yarn markets, both continuous filament and staple nylon yarns
are sold to yarn processors and mills for the manufacture of carpeting. Nylon
filament and staple are the dominant fiber yarns used in carpet production. The
four largest producers, including the Company, have over 90% of domestic
capacity. The Company has achieved recognition as a leader in product
development and has developed a strong customer base. Brand identity, service to
customers and quality are important competitive factors in the market and there
is considerable price competition.
In the motor vehicle and industrial markets, the Company's primary products
are nylon and polyester yarns for use in tire cord, seat belts, hoses,
tarpaulins and outdoor furniture. In 1995 the Company announced plans to
increase capacity at its industrial polyester yarn facility in Longlaville,
France at a cost of approximately $45 million. In November 1995 the Company
acquired Bridgestone/Firestone's 50 million-pound industrial polyester fiber
plant in Hopewell, Virginia. With anticipated modernization, the Company
believes that the Hopewell plant will have annual sales of approximately $100
million. The Company believes that polyester yarn will become the primary
reinforcement for passenger car radial tires in the world in the late 1990s and
is exploring development opportunities in the Asia/Pacific region.
The textile fibers markets, where the Company sells Caprolan'r' nylon flat
yarns for warp knit and weaving applications, include intimate apparel, sports
outerwear, jackets and such recreational products as sleeping bags, back packs
and luggage. The industry is highly price competitive.
The Plastics business manufactures and markets engineering resins. The
Company is a leading producer of nylon 6 engineering resins (Capron'r') for the
automotive, electrical and electronic component, food packaging, lawn care and
power tool markets.
In October 1995 the Company acquired the nylon plastics and industrial
fibers manufacturing facilities in Rudolstadt, Germany, from the German state of
Thuringia. The Company plans to invest about $100 million during the next three
years to expand and upgrade the facility.
Fluorine Products. The Fluorine Products business consists of Hydrofluoric
Acid (HF), Fluorocarbons, Nuclear Services, Sulfur Hexafluoride (SF6) and
Sterilant Gases.
The Company is the world's largest producer of HF and an industry leader in
the production and sale of products derived from HF, including fluorocarbons,
SF6 and uranium hexafluoride (UF6).
Genetron'r' fluorocarbons are sold mainly as refrigerants to OE and
replacement manufacturers of air conditioning and refrigeration equipment and as
foam blowing agents to rigid foam producers. Genesolv'r' fluorocarbons are sold
as solvents in precision cleaning applications such as electronics, optics and
aerospace applications. The Montreal Protocol (Protocol), which has been signed
by the United States, regulates worldwide chlorofluorocarbons (CFC) production
and consumption. With few exceptions, the Protocol required 100% elimination of
fully halogenated CFC production by industrialized countries as of December 31,
1995. The amended U.S. Clean Air Act also regulates CFCs and similarly required
that most U.S. production of CFCs be phased out by the end of 1995.
10
<PAGE>
<PAGE>
CFCs produced in the U.S. are also subject to the Ozone Depleting Chemical Tax
of the Revenue Reconciliation Act of 1989. In accordance with applicable law,
the Company's Genetron'r' and Genesolv'r' products include CFCs.
The Company is continuing its efforts to develop environmentally-friendly
fluorocarbon products as it replaces the current CFC product line. An existing
commercial plant in El Segundo, California was converted in 1991 to manufacture
hydrochlorofluorocarbon (HCFC)-141b, a key substitute for CFC-11, a blowing
agent in urethane foams, and as a replacement for CFC-113 in critical solvent
applications. By 1994 the Company more than tripled the plant's capacity to 60
million pounds per year. The Company has commercialized key CFC substitute
products in various applications, including automotive air conditioning and
residential, commercial and industrial refrigeration. In this connection, the
Company began manufacturing environmentally-friendly alternatives to CFCs at a
new $70 million multi-product commercial facility in Geismar, Louisiana targeted
primarily at the substitute products HCFC-123, HCFC-124, hydrofluorocarbon
(HFC)-125 and HFC-134a. The Company is continuing its research and development
efforts in view of the changing regulatory environment in which it operates. The
Company cannot predict the impact of possible future regulatory issues.
The Company acquired the CFC business of Akzo NV, with facilities in the
Netherlands, in April 1994. This acquisition has provided the Company with
access to new markets for its fluorocarbon products.
The Company's Nuclear Services business processes uranium ore concentrates
into UF6 which is an essential intermediate in the production of fuel elements
for nuclear power reactors for domestic and foreign customers. A Company
subsidiary is in partnership with a General Atomics' affiliate to market UF6
conversion services supplied by the Company's Metropolis, Illinois manufacturing
facility. The partnership, ConverDyn, competes for the open world market with
four foreign processors that are either government owned or controlled.
The Company is one of two domestic producers of SF6, a gas primarily used
by utilities because of its electrical insulatory properties in circuit
breakers, switches, transmission lines and electronic minisubstations.
The Company also produces sterilant gases which primarily consist of blends
of ethylene oxide and fluorocarbons that are sold to hospitals, medical device
manufacturers and contract sterilizers. The Company holds the patents for
selected sterilant gas blends using environmentally-friendly fluorocarbons.
Specialty Chemicals. Businesses included are Riedel-de Haen, Performance
Chemicals, A-C'r' Performance Additives, the UOP joint venture, Carbon
Materials, the Environmental Catalysts joint venture and Specialty Films.
In October 1995 the Company purchased Hoechst AG's 95.8% interest in
Riedel-de Haen AG, a specialty chemicals manufacturer located in Seelze,
Germany. Riedel-de Haen manufactures products for the pharmaceutical and
electronics industries, as well as coatings, photo dyes and specialty pigments
markets. Annual sales approximate $250 million.
The Performance Chemicals business is a leading supplier of specialty oxime
chemicals for use in the agricultural, coatings, photographic, pharmaceutical,
adhesives and sealants, and mining industries. The Company has some cost
benefits from its captive source of hydroxylamine sulfate.
A-C'r' Performance Additives are low-molecular weight polyethylene polymer
additives which primarily serve the textiles, plastics, adhesives and polishes
specialty markets worldwide.
UOP is an equally owned joint venture with Union Carbide Corporation which
designs and licenses processes, and produces and markets catalysts for the
petroleum refining, gas processing, petrochemical and food industries.
The Carbon Materials business produces binder pitch for electrodes for the
aluminum and carbon industries, creosote oils as preservatives for the wood
products and carbon black markets, refined naphthalene as a chemical
intermediate, and driveway sealer tar and roofing pitch for the construction
industry. All of the tar products are distilled from coal tar, a by-product of
the steel industry's coking operations.
11
<PAGE>
<PAGE>
The Environmental Catalysts business is a major worldwide supplier of
catalysts used in catalytic converters for automobiles. In November 1994 the
Company and General Motors Corporation (GM) formed a joint venture to produce
coated automotive catalytic converter substrates. The Company contributed its
environmental catalysts business and GM contributed coating-related technology
and a long-term supply contract to the joint venture.
Major products in the Specialty Films business include cast nylon
(Capran'r'), biaxially oriented nylon film (Biax'r') and fluoropolymer film
(Aclar'r'). Specialty film markets include food, pharmaceutical, and other
packaging and industrial applications. The Company plans to begin manufacturing
SpectraVueTM, a line of thin plastic films that significantly improves the image
quality of Liquid Crystal Displays, during 1996. The Company will manufacture
SpectraVueTM components from a new $25 million facility in Elizabeth, New
Jersey.
Electronic Materials. Businesses included are Laminate Systems, Advanced
Microelectronic Materials and Amorphous Metals.
Laminate Systems manufactures circuit board laminates for the electronic
and electrical industries. The Company's product line includes copper clad and
unclad laminates used in computer, telecommunication, instrumentation and
military applications. Approximately 55% of sales are to the international
market, primarily in southeast Asia and throughout Europe. The industry is
highly price competitive. The Company, in partnership with Mitsui Mining and
Smelting Company, is backward integrated in electro deposited copper foil. This
unit also manufactures electrical grade glass yarns in partnership with Nittobo
Corporation of Japan.
The Advanced Microelectronics Materials business designs, develops and
manufactures materials for semiconductor companies worldwide. The Company is a
leader in technology that smoothes integrated circuits under the trademark
ACCUGLASS'r'.
The Company manufactures amorphous metals (METGLAS'r' Alloys) that offer
significant efficiency gains in electrical distribution transformers over
conventional electrical steel which is currently used. Amorphous metals are also
a key component in theft deterrent systems used by retail companies.
In December 1995 the Company exited its high-density polyethylene (HDPE)
business. Paxon Polymer Company, L.P., a partnership of the Company and Exxon
Chemical Company, transferred the HDPE business to Exxon.
The principal raw materials used in the Engineered Materials segment are
generally readily available and include cumene, natural gas, sulfur,
terephthalic acid, ethylene and ethylene glycol, fluorspar, HF, carbon
tetrachloride, chloroform, nylon resins, fiberglass, copper foil, platinum,
rhodium and coal tar pitch. The Company is producing virtually all of its HF and
nylon resin requirements. Important competitors are: Du Pont, GE, Monsanto,
Hoechst/Celanese, BASF Fibers, Koppers, U.S.I., Phillips, Soltex, Atochem and
Nan Ya.
SEGMENT FINANCIAL DATA
Note 23 (Segment Financial Data) of Notes to Financial Statements in the
Company's 1995 Annual Report to shareowners is incorporated herein by reference.
DOMESTIC AND FOREIGN FINANCIAL DATA
Note 24 (Geographic Areas -- Financial Data) of Notes to Financial
Statements in the Company's 1995 Annual Report to shareowners is incorporated
herein by reference.
FOREIGN ACTIVITIES
The Company's foreign businesses are subject to the usual risks attendant
upon investments in foreign countries, including nationalization, expropriation,
limitations on repatriation of funds, restrictive action by local governments
and changes in foreign currency exchange rates.
12
<PAGE>
<PAGE>
The Company's principal foreign manufacturing operations are in Australia,
Brazil, Canada, France, Germany, Ireland, Italy, Japan, Mexico, Poland,
Portugal, South Korea, Spain, Singapore, Taiwan, the Netherlands and the United
Kingdom. The Company maintains sales and business offices in these and various
other countries, including Austria, Belgium, China, Denmark, Finland, Hong Kong,
India, New Zealand, Norway, Sweden and Turkey as well as warehousing,
distribution and aircraft repair and overhaul facilities to support foreign
operations and export sales. Further information about foreign activities is
discussed in the segment narratives.
RAW MATERIALS
Among the principal raw materials used by the Company, in addition to those
previously discussed for the Engineered Materials segment, are electronic,
optical and mechanical component parts and assemblies, electronic and
electromechanical devices, metallic products, castings, forgings, steel and bar
stock, copper, aluminum, platinum and titanium. The Company believes that
sources of supply for raw materials and components are generally adequate.
PATENTS AND TRADEMARKS
The Company owns approximately 14,000 patents or pending patent
applications and is licensed under other patents covering certain of its
products and processes. It believes that, in the aggregate, the rights under
such patents and licenses are generally important to its operations, but does
not consider that any patent or license or group of them related to a specific
process or product is of material importance in relation to the Company's total
business.
The Company also has registered trademarks for a number of its products.
Some of the more significant trademarks include: AiResearch, Anso, Autolite,
Bendix, Bendix/King, Capron, Fram, Garrett, Genetron, Jurid, King and Norplex
Oak.
RESEARCH AND DEVELOPMENT
The Company's research activities are directed toward the discovery and
development of new products and processes, improvements in existing products and
processes, and the development of new uses of existing products.
Research and development expense totaled $353, $318 and $313 million in
1995, 1994 and 1993, respectively. Customer-sponsored (principally the U.S.
government) research and development activities amounted to an additional $536,
$486 and $514 million in 1995, 1994 and 1993, respectively.
The Company has approximately 48 research facilities which provide direct
support to the operating segments.
ENVIRONMENT
The Company is subject to various federal, state and local requirements
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment. It is the Company's policy to comply with
these requirements and the Company believes that, as a general matter, its
policies, practices and procedures are properly designed to prevent unreasonable
risk of environmental damage, and of resulting financial liability, in
connection with its business. Some risk of environmental damage is, however,
inherent in particular operations and products of the Company, as it is with
other companies engaged in similar businesses. (See the description of the
Engineered Materials segment, above, for information regarding regulation of
CFCs.)
The Company is and has been engaged in the handling, manufacture, use or
disposal of many substances which are classified as hazardous or toxic by one or
more regulatory agencies. The Company believes that, as a general matter, its
handling, manufacture, use and disposal of such substances are in accord with
environmental laws and regulations. It is possible, however, that future
knowledge or other developments, such as improved capability to detect
substances in the environment, increasingly strict environmental laws and
standards and enforcement policies thereunder, could bring into question the
Company's handling, manufacture, use or disposal of such substances.
Among other environmental requirements, the Company is subject to the
federal Superfund law, and similar state laws, under which the Company has been
designated as a potentially responsible party which may be liable for cleanup
costs associated with various hazardous waste sites, some of which are on the
U.S. Environmental Protection Agency's Superfund priority list. Although, under
some court interpretations of these laws, there is a possibility that a
responsible party might have to bear
13
<PAGE>
<PAGE>
more than its proportional share of the cleanup costs if it is unable to obtain
appropriate contribution from other responsible parties, the Company has not had
to bear significantly more than its proportional share in multi-party situations
taken as a whole.
Capital expenditures for environmental control facilities at existing
operations were $44 million in 1995. The Company estimates that during each of
the years 1996 and 1997 such capital expenditures will be in the $40 to $45
million range. In addition to capital expenditures, the Company has incurred and
will continue to incur operating costs in connection with such facilities.
Reference is made to Management's Discussion and Analysis at page 21 of the
Company's 1995 Annual Report to shareowners, incorporated herein by reference,
for further information regarding environmental matters.
EMPLOYEES
The Company had an aggregate of 88,500 salaried and hourly employees at
December 31, 1995. Of the approximately 33,000 unionized employees, 19,000 are
employed in the Company's U.S. and Canadian plants and other facilities.
Unionized employees are represented by local unions that are either independent
or affiliated with the United Auto Workers, the International Association of
Machinists, the United Steelworkers of America, the Oil, Chemical and Atomic
Workers International Union, the International Brotherhood of Teamsters and many
other international unions. Relations between the Company and its employees and
their various representatives have been generally satisfactory, although the
Company has experienced work stoppages from time to time. Approximately 39% of
the Company's U.S. and Canadian unionized employees are covered by labor
contracts scheduled to expire in 1996. Major labor negotiations will include
locations in all of the segments.
ITEM 2. PROPERTIES
The Company has 372 locations consisting of plants, research laboratories,
sales offices and other facilities. The plants are generally located to serve
large marketing areas and to provide accessibility to raw materials and labor
pools. The properties are generally maintained in good operating condition.
Utilization of these plants may vary with government spending and other business
conditions; however, no major operating facility is significantly idle. The
facilities, together with planned expansions, are expected to meet the Company's
needs for the foreseeable future. The Company owns or leases warehouses,
railroad cars, barges, automobiles, trucks, airplanes and materials handling and
data processing equipment. It also leases space for administrative and sales
staffs. The Company's headquarters and administrative complex are located at
Morris Township, New Jersey.
The principal plants, which are owned in fee unless otherwise indicated,
are as follows:
AEROSPACE
Phoenix, AZ (4 plants, 3 fully leased, 1 partially leased)
Tempe, AZ
Tucson, AZ (partially leased)
Torrance, CA (partially leased)
Stratford, CT (owned by the U.S. Government and managed by the Company)
Fort Lauderdale, FL
South Bend, IN
Lawrence, KS
Olathe, KS
Columbia, MD
Towson, MD
Teterboro, NJ
Rocky Mount, NC
Rexdale, Ont., Canada (partially leased)
Raunheim, Germany
AUTOMOTIVE
Greenville, AL
Torrance, CA
St. Joseph, MI
Fostoria, OH
Greenville, OH
Sumter, SC
Jackson, TN
Maryville, TN
Campinas, Brazil
Angers, France
Conde, France
Moulins, France
Thaon-Les-Vosges, France
Crema, Italy
Glinde, Germany
Skelmersdale, United Kingdom
ENGINEERED MATERIALS
Metropolis, IL
Baton Rouge, LA
Geismar, LA
Moncure, NC
Philadelphia, PA
Pottsville, PA
Columbia, SC
Chesterfield, VA
Hopewell, VA
Longlaville, France
Seelze, Germany
14
<PAGE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The first and second paragraphs of Note 19 (Commitments and Contingencies)
of Notes to Financial Statements at page 35 of the Company's 1995 Annual Report
to shareowners are incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant, listed as follows, are elected
annually in April. There are no family relationships among them.
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED AN OFFICER BUSINESS EXPERIENCE
- ------------------------------- ----------------------------------------------------------------------------
<S> <C>
Lawrence A. Bossidy (a), 60 Chairman of the Board since January 1992. Chief Executive Officer of the
Company since July 1991. Vice Chairman and Executive Officer of the
1991 General Electric Company (diversified industrial corporation) from 1984 to
June 1991.
John W. Barter, 49 Executive Vice President and President, AlliedSignal Automotive since
October 1994. Senior Vice President and Chief Financial Officer from July
1985 1988 to September 1994.
Daniel P. Burnham, 49 Executive Vice President and President, AlliedSignal Aerospace since January
1992. Executive Vice President and President-Elect, AlliedSignal Aerospace
1991 Company from July 1991 to December 1991. President, AiResearch Group from
March 1990 to June 1991.
Frederic M. Poses, 53 Executive Vice President and President, AlliedSignal Engineered Materials
since April 1988.
1988
Isaac R. Barpal, 56 Senior Vice President and Chief Technology Officer since August 1993. Vice
President -- Science & Technology of Westinghouse Electric Corporation
1993 (electric equipment manufacturer) from June 1987 to July 1993.
Peter M. Kreindler, 50 Senior Vice President, General Counsel and Secretary since December 1994.
Senior Vice President and General Counsel from March 1992 to November
1992 1994. Senior Vice President and General Counsel-Elect from January 1992 to
February 1992. Partner, Arnold & Porter (law firm) from January 1990 to
December 1991.
Donald J. Redlinger, 51 Senior Vice President -- Human Resources and Communications since February
1995. Senior Vice President -- Human Resources from January 1991 to
1991 January 1995.
Paul R. Schindler, 54 Senior Vice President -- International since August 1993. Chairman of
Imperial Chemical Industries Asia/Pacific (chemical manufacturer) from
1993 April 1991 to July 1993. Chairman of Imperial Chemical Industries China
from July 1989 to March 1991.
James E. Sierk, 57 Senior Vice President -- Quality and Productivity since January 1991.
1991
</TABLE>
- ------------
(a) Also a director.
(table continued on next page)
15
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED AN OFFICER BUSINESS EXPERIENCE
- ------------------------------- ----------------------------------------------------------------------------
<S> <C>
Richard F. Wallman, 44 Senior Vice President and Chief Financial Officer since March 1995. Vice
President and Controller of International Business Machines Corp. (IBM)
1995 (manufacturer of information-handling systems) from April 1994 to February
1995. General Assistant Controller of IBM from October 1993 to March 1994.
Assistant Controller -- Sales & Marketing of Chrysler Corporation
(automobile manufacturer) from April 1989 to September 1993.
Kenneth W. Cole, 48 Vice President -- Government Relations since January 1989.
1989
G. Peter D'Aloia, 51 Vice President and Controller since February 1994. Vice President and
Treasurer from August 1988 to January 1994.
1985
Catherine M. de Lacy, 38 Vice President, Health, Safety and Environmental since July 1995. Vice
President -- Health, Safety and Environmental of Occidental Petroleum
1995 Corporation (oil and gas explorer, developer, producer and marketer) from
April 1993 to June 1995. Director -- Environmental Affairs & Technical
Support of Occidental Petroleum Corporation from May 1990 to March 1993.
Nancy A. Garvey, 46 Vice President and Treasurer since February 1994. Staff Vice
President -- Investor Relations from November 1989 to January 1994.
1994
Larry E. Kittelberger, 47 Vice President and Chief Information Officer since August 1995 (Executive
Officer since February 1996). Corporate Chairman -- Information Officer
1996 Leadership Committee of Tenneco Inc. (diversified industrial concern) from
June 1989 to July 1995.
Frederick H. McClintock, 59 Vice President -- Materials Management since February 1996. Vice
President -- Materials Management AlliedSignal Aerospace from March 1992
1996 to January 1996. Owner and operator of Global Supply Institute (consulting
business) from June 1990 to February 1992.
Richard P. Schroeder, 44 Vice President -- Manufacturing since June 1994. Vice President of Quality,
Operations and Supply Management at Asea Brown Boveri Inc. (international
1994 electrical engineering company) -- Industrial Group and North American
operations from August 1991 to May 1994. Vice President and General
Manager Customer Service, Corporate Quality, and Government Compliance of
Codex (communications for both voice and data communications systems), a
unit of Motorola, Inc., from November 1986 to July 1991.
</TABLE>
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market and dividend information for the Registrant's common stock is
contained in Note 25 (Unaudited Quarterly Financial Information) of Notes to
Financial Statements at page 38 of the Company's 1995 Annual Report to
shareowners, and such information is incorporated herein by reference.
16
<PAGE>
<PAGE>
The number of record holders of the Registrant's common stock is contained
in the statement 'Selected Financial Data' at page 39 of the Company's 1995
Annual Report to shareowners, and such information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information included under the captions 'For the Year' and 'At
Year-End' in the statement 'Selected Financial Data' at page 39 of the Company's
1995 Annual Report to shareowners is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
'Management's Discussion and Analysis' on pages 19 through 25 of the
Company's 1995 Annual Report to shareowners is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements, together with the report
thereon of Price Waterhouse LLP dated February 1, 1996 appearing on pages 26
through 38 of the Company's 1995 Annual Report to shareowners, are incorporated
herein by reference. With the exception of the aforementioned information and
the information incorporated by reference in Items 1, 3, 5, 6 and 7, the 1995
Annual Report to shareowners is not to be deemed filed as part of this Form 10-K
Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors of the Registrant, as well as information
relating to compliance with Section 16(a) of the Securities Exchange Act of
1934, will be contained in a definitive Proxy Statement involving the election
of directors which the Registrant will file with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after December 31,
1995, and such information is incorporated herein by reference. Certain other
information relating to Executive Officers of the Registrant appears at pages 15
and 16 of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is contained in the Proxy
Statement referred to above in 'Item 10. Directors and Executive Officers of the
Registrant,' and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners and
management is contained in the Proxy Statement referred to above in 'Item 10.
Directors and Executive Officers of the Registrant,' and such information is
incorporated herein by reference.
17
<PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE IN
ANNUAL REPORT TO
SHAREOWNERS
----------------
<S> <C>
(a)(1.) Index to Consolidated Financial Statements:
Incorporated by reference to the 1995 Annual Report to shareowners:
Report of Independent Accountants.................................................... 38
Consolidated Statement of Income for the years ended December 31, 1995, 1994 and
1993................................................................................ 26
Consolidated Statement of Retained Earnings for the years ended December 31, 1995,
1994 and 1993....................................................................... 26
Consolidated Balance Sheet at December 31, 1995 and 1994............................. 27
Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1994 and
1993................................................................................ 28
Notes to Financial Statements........................................................ 29
(a)(2.) Consolidated Financial Statement Schedules
</TABLE>
The two financial statement schedules applicable to the Company have been
omitted because of the absence of the conditions under which they are required.
(a)(3.) Exhibits
See the Exhibit Index to this Form 10-K Annual Report. The following
exhibits listed on the Exhibit Index are filed with this Form 10-K Annual
Report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------
<C> <S>
13 Pages 19 through 39 (except for the data included under the captions 'Financial
Statistics' on page 39) of the Company's 1995 Annual Report to shareowners
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
The exhibits identified in the Exhibit Index with an asterisk(*) are
management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended December 31,
1995.
18
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AlliedSignal Inc.
February 27, 1996 By: /s/ G. PETER D'ALOIA
----------------------------------
G. Peter D'Aloia
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
<TABLE>
<CAPTION>
NAME NAME
---- ----
<S> <C>
* *
- ------------------------------------------------------ ------------------------------------------------------
Lawrence A. Bossidy Russell E. Palmer
Chairman of the Board and Chief Executive Director
Officer and Director
* *
- ------------------------------------------------------ ------------------------------------------------------
Hans W. Becherer Ivan G. Seidenberg
Director Director
* *
- ------------------------------------------------------ ------------------------------------------------------
Eugene E. Covert Andrew C. Sigler
Director Director
* *
- ------------------------------------------------------ ------------------------------------------------------
Ann M. Fudge John R. Stafford
Director Director
* *
- ------------------------------------------------------ ------------------------------------------------------
Paul X. Kelley Thomas P. Stafford
Director Director
* *
- ------------------------------------------------------ ------------------------------------------------------
Robert P. Luciano Robert C. Winters
Director Director
*
- ------------------------------------------------------
Robert B. Palmer
Director
/s/ RICHARD F. WALLMAN /s/ G. PETER D'ALOIA
- ------------------------------------------------------ ------------------------------------------------------
Richard F. Wallman G. Peter D'Aloia
Senior Vice President and Vice President and Controller
Chief Financial Officer (Chief Accounting Officer)
*By: /s/ RICHARD F. WALLMAN
- ------------------------------------------------------
(Richard F. Wallman
Attorney-in-fact)
</TABLE>
February 27, 1996
19
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as 'r'
The trademark symbol shall be expressed as 'tm'
The subscript numerics in chemistry notation shall be expressed as baseline
numerics, e.g., sulfur hexafluoride would be expressed SF6.
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
<S> <C>
3(i) Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 99.1 to the Company's Form 10-Q for the quarter ended
March 31, 1993)
3(ii) By-laws of the Company, as amended (incorporated by reference to Exhibit 99.2
to the Company's Form 10-Q for the quarter ended March 31, 1993)
4 The Company is a party to several long-term debt instruments under which, in
each case, the total amount of securities authorized does not exceed 10% of
the total assets of the Company and its subsidiaries on a consolidated
basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K,
the Company agrees to furnish a copy of such instruments to the Securities
and Exchange Commission upon request.
9 Omitted (Inapplicable)
10.1 Master Support Agreement, dated as of February 26, 1986 as amended and
restated as of January 27, 1987, as further amended as of July 1, 1987 and
as again amended and restated as of December 7, 1988, by and among the
Company, Wheelabrator Technologies Inc., certain subsidiaries of
Wheelabrator Technologies Inc., The Henley Group, Inc. and Henley Newco
Inc. (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K
for the year ended December 31, 1988)
10.2* Deferred Compensation Plan for Non-Employee Directors of AlliedSignal Inc.,
as amended (incorporated by reference to Exhibit 10.2 to the Company's Form
10-K for the year ended December 31, 1993)
10.3* Retirement Plan for Non-Employee Directors of AlliedSignal Inc., as amended
(incorporated by reference to Exhibit 19.2 to the Company's Form 10-Q for
the quarter ended June 30, 1990)
10.4* Stock Plan for Non-Employee Directors of AlliedSignal Inc., as amended
(incorporated by reference to Exhibit C to the Company's Proxy Statement,
dated March 10, 1994, filed pursuant to Rule 14a-6 of the Securities
Exchange Act of 1934)
10.5* 1985 Stock Plan for Employees of Allied-Signal Inc. and its Subsidiaries, as
amended (incorporated by reference to Exhibit 19.3 to the Company's Form
10-Q for the quarter ended September 30, 1991)
10.6* AlliedSignal Inc. Incentive Compensation Plan for Executive Employees, as
amended (incorporated by reference to Exhibit B to the Company's Proxy
Statement, dated March 10, 1994, filed pursuant to Rule 14a-6 of the
Securities Exchange Act of 1934)
10.7* Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of
AlliedSignal Inc. and its Subsidiaries, as amended (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
March 31, 1995)
10.8* 1982 Stock Option Plan for Executive Employees of Allied Corporation and its
Subsidiaries, as amended (incorporated by reference to Exhibit 19.4 to the
Company's Form 10-Q for the quarter ended September 30, 1991)
10.9* AlliedSignal Inc. Severance Plan for Senior Executives, as amended
(incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for
the quarter ended March 31, 1994)
10.10* Salary Deferral Plan for Selected Employees of AlliedSignal Inc. and its
Affiliates, as amended (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended March 31, 1995)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
<S> <C>
10.11* 1993 Stock Plan for Employees of AlliedSignal Inc. and its Affiliates
(incorporated by reference to Exhibit A to the Company's Proxy Statement,
dated March 10, 1994, filed pursuant to Rule 14a-6 of the Securities
Exchange Act of 1934)
10.12* Amended and restated Agreement dated May 6, 1994 between the Company and
Lawrence A. Bossidy (incorporated by reference to Exhibit 10.3 to the
Company's Form 10-Q for the quarter ended June 30, 1994)
10.13 Five-Year Credit Agreement dated as of June 30, 1995 by and between
AlliedSignal Inc., a Delaware corporation, the banks, financial
institutions and other institutional lenders listed on the signature pages
thereof (the 'Lenders'), Citibank, N.A., as agent, and ABN Amro Bank N.V.
and Morgan Guaranty Trust Company of New York, as co-agents, for the
Lenders (incorporated by reference to Exhibit 10.1 to the Company's Form
10-Q for the quarter ended June 30, 1995)
10.14 364-Day Credit Agreement dated as of June 30, 1995 by and between
AlliedSignal Inc., a Delaware corporation, the banks, financial
institutions and other institutional lenders listed on the signature pages
thereof (the 'Lenders'), Citibank, N.A., as agent, and ABN Amro Bank N.V.
and Morgan Guaranty Trust Company of New York, as co-agents, for the
Lenders (incorporated by reference to Exhibit 10.2 to the Company's Form
10-Q for the quarter ended June 30, 1995)
11 Omitted (Inapplicable)
12 Omitted (Inapplicable)
13 Pages 19 through 39 (except for the data included under the captions
'Financial Statistics' on page 39) of the Company's 1995 Annual Report
to shareowners (filed herewith)
16 Omitted (Inapplicable)
18 Omitted (Inapplicable)
21 Subsidiaries of the Registrant (filed herewith)
22 Omitted (Inapplicable)
23 Consent of Independent Accountants (filed herewith)
24 Powers of Attorney (filed herewith)
27 Financial Data Schedule (filed herewith)
28 Omitted (Inapplicable)
99 Omitted (Inapplicable)
</TABLE>
- ------------
The Exhibits identified above with an asterisk(*) are management contracts
or compensatory plans or arrangements.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS AlliedSignal Inc.
1995 Compared with 1994
IN 1995 THE COMPANY DEDICATED SUBSTANTIAL RESOURCES TO LINKING A PROGRESSION OF
INNOVATIVE PROCESS IMPROVEMENTS TO FOCUS MORE ON CUSTOMER SATISFACTION. The
initiatives focus our efforts to provide our customers with a quality product,
delivered on time, without defects, at a highly competitive price. The Company
continued to grow its businesses through the introduction of new products,
market expansion, niche acquisitions and globalization. The Company accelerated
its aggressive global growth strategy, and international customers provided 40%
of the Company's total 1995 sales. These process improvements and growth
initiatives contributed to strong operating results in 1995 despite increased
customer-driven price constraints and unfavorable results by Automotive's
anti-lock braking systems (ABS) business.
IN 1995 THE COMPANY TOOK FURTHER ACTIONS TO IMPROVE PROFITABILITY, INTRODUCED
SEVERAL NEW PRODUCTS AND GLOBALIZED A NUMBER OF KEY BUSINESSES THROUGH INTERNAL
GROWTH AND ACQUISITIONS:
Aerospace made a significant contribution toward making aircraft safer with the
development of an early warning system for windshear and a ground proximity
warning system. In addition, the Company's traffic alert and collision avoidance
system (TCAS), initially developed for large aircraft, had strong sales to the
regional airlines in 1995. In January 1996 the Company completed the acquisition
of Northrop Grumman Corporation's precision products business based in Norwood,
Massachusetts. The acquisition, which has annual sales of approximately $39
million, is expected to bolster Aerospace's navigation and guidance systems
business for military and space applications. During 1995 the Company also
increased its investment in Societe D'Etudes et de Constructions Aero-Navales to
83% by purchasing an additional 34% interest in Europe's leading supplier of
aircraft heat exchange equipment. To facilitate future growth and further
establish a global presence, Aerospace formed a joint venture in Russia to
market wheels, brakes and brake systems for civilian aircraft and has agreed to
form other joint ventures in Russia and China.
Automotive, as previously announced, has decided to exit the light-vehicle ABS
business and is conducting discussions concerning the future of its
light-vehicle braking business. Exiting the ABS business could hinder the
Company's ability to remain a first tier supplier of complete braking systems.
The Company expects that neither exiting the ABS business nor the absence of an
agreement regarding the light-vehicle braking business would have a material
impact on the Company's results of operations or financial position in 1996. See
Note 3 of Notes to Financial Statements for additional information. In addition,
a reduction in the Automotive workforce was announced and substantially
completed in the fourth quarter of 1995. The reduction eliminates approximately
3,100 salaried and hourly full-time-equivalent positions and is expected to be
completed by the end of 1996. In April 1995 the Company acquired the Budd
Company's Wheel & Brake Division (Budd Wheel & Brake), which has annual sales of
more than $300 million. In June 1995 the Company acquired Fiat Auto Poland S.A.
(Fiat)'s braking business, which is expected to continue to supply Fiat's two
automotive assembly facilities in Poland. Annual sales approximate $30 million.
In October 1995 Automotive increased to 80% its ownership in the Turkish brake
manufacturer, Transturk Fren Donanim Industriesi AS. Annual sales approximate
$27 million. Also in 1995 a new joint venture began manufacturing hybrid
inflators for driver- and passenger-side air bag modules that are being
assembled at the Company's new plant in Italy. Production also began at a new
turbocharger plant in Shanghai, China.
Engineered Materials purchased Hoechst AG's 95.8% interest in Riedel-de Haen AG
(Riedel-de Haen), a German specialty chemicals manufacturer in October 1995.
Riedel-de Haen manufactures chemicals for the pharmaceutical and electronics
industries, as well as the coatings, photo dyes and specialty pigments markets.
Annual sales approximate $250 million. Also in October the Company acquired a
nylon plastics and industrial fibers manufacturing facility in Rudolstadt,
Germany with annual sales of approximately $60 million. The Company plans to
invest about $100 million during the next three years to expand and upgrade the
facility. In November 1995 the Company acquired Bridgestone/Firestone's 50
million-pound industrial polyester fiber plant in Hopewell, Virginia. With
anticipated modernization, the Company believes that the Hopewell plant will
have annual sales of approximately $100 million. In December 1995 the Company
exited its high-density polyethylene (HDPE) business. Paxon Polymer Company,
L.P. (Paxon), a partnership of the Company and Exxon Chemical Company (Exxon),
transferred the HDPE business to Exxon. See Note 3 of Notes to Financial
Statements for additional information.
THE BOARD OF DIRECTORS VOTED TO INCREASE THE REGULAR QUARTERLY DIVIDEND ON THE
COMMON STOCK BY 15%, FROM $0.195 TO $0.225 PER SHARE. The dividend increase will
be effective in the first quarter of 1996. The Company had previously increased
its regular quarterly dividend by 16% in the first quarter of 1995.
RESULTS OF OPERATIONS. Record sales and net income were achieved again in 1995
as gains were realized in all business segments through growth, strong demand
and productivity initiatives.
NET SALES in 1995 were $14,346 million, an increase of 12% over 1994. Of the
$1,529 million increase, $613 million was the result of strong volume gains by
the Engineered Materials and Aerospace segments and $760 million from the
consolidation of recent acquisitions offset in part by a $91 million reduction
for disposed businesses, $181 million was the result of favorable foreign
exchange rate fluctuations in the Automotive segment and $66 million was due to
higher prices in the Engineered Materials segment. Automotive's sales increased
$627 million, or 13%, Engineered Materials was $441 million, or 13%, higher and
Aerospace had a $461 million, or 10%, gain.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percent of net sales decreased
from 10.7% in 1994 to 10.5% in 1995.
19
<PAGE>
<PAGE>
Expenses increased by $137 million, or 10%, reflecting in part the impact of
acquisitions.
INCOME FROM OPERATIONS of $1,260 million in 1995 improved by $108 million, or
9%, compared with last year. Excluding the nonrecurring items in 1995 (see Note
3 of Notes to Financial Statements for information), income from operations
improved by $152 million, or 13%. Engineered Materials' and Aerospace's income
from operations both increased 20%; while Automotive had a 1% decrease.
Operating margins increased slightly, from 9.0% in 1994 to 9.1% in 1995, and
productivity (the constant dollar basis relationship of sales to costs) of the
Company's businesses increased 5.2% over last year reflecting manufacturing and
materials management initiatives and unit sales increases. See the detailed
discussion of net income below for information by industry segment.
EQUITY IN INCOME OF AFFILIATED COMPANIES of $191 million increased by $62
million, or 48%, compared with last year mainly because of improved joint
venture earnings for Paxon, UOP process technology (UOP), Knorr-Bremse AG
(Knorr-Bremse)'s European truck brake systems and Converdyn conversion services.
OTHER INCOME (EXPENSE), a $22 million loss, improved by $5 million, or 19%,
compared with a loss of $27 million in 1994 primarily reflecting a gain on the
sale of an investment and lower foreign exchange losses. Higher minority
interest was a partial offset.
INTEREST AND OTHER FINANCIAL CHARGES of $168 million increased by $25 million,
or 17%, from 1994 largely due to higher average interest rates and an increased
level of debt.
NET INCOME in 1995 was $875 million, or $3.09 a share, an increase of 15%
compared with $759 million, or $2.68 a share, for 1994. The higher income in
1995 was the result of strong operating performance by the Engineered Materials
and Aerospace segments and a small increase by Automotive.
A DISCUSSION OF THE OPERATIONS OF THE BUSINESS SEGMENTS follows. Adjusted net
income for the Automotive and Engineered Materials segments excludes the impact
of the 1995 nonrecurring items. (Dollars in millions)
<TABLE>
<CAPTION>
Aerospace NET SALES NET INCOME
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 5,084 $ 303
- --------------------------------------------------------------------------------
1994 4,623 260
- --------------------------------------------------------------------------------
Increase $ 461 $ 43
- --------------------------------------------------------------------------------
</TABLE>
Aerospace's sales increased 10% reflecting the acquisition of Textron's Lycoming
Turbine Engine Division (Lycoming Engine) in October 1994, continued strong
demand for safety-related commercial avionics systems, such as predictive
windshear, ground proximity warning, global positioning and TCAS, and higher
sales of auxiliary power units (APUs). TCAS sales were particularly strong as
U.S. operators of 10-to-30-seat aircraft complied with the Federal Aviation
Administration's mandate to install TCAS by the end of 1995. Commercial and
military aftermarket showed strong growth. Equipment Systems' repair and
overhaul services and environmental control systems also had higher sales. This
increase was somewhat offset by lower sales for Government Electronics Systems,
where comparisons were adversely affected by one-time contract settlements in
1994 and the closeout of certain programs.
Overall, the Company's 1995 sales to the Department of Defense (DoD), as a prime
contractor and subcontractor, declined 7% compared with 1994 because of reduced
defense spending. Sales to the commercial and foreign government markets
increased 19%, while sales to the National Aeronautics and Space Administration
(NASA) and other U.S. government agencies increased 2% in 1995. Sales to the DoD
accounted for 24% of Aerospace's total sales, a decrease of 4 percentage points
compared with 1994.
Aerospace's net income improved 17% compared with last year. Synergies from the
Lycoming Engine acquisition, process improvements, organizational efficiencies,
higher sales of APUs and continued strong demand for safety-related Commercial
Avionics Systems contributed to significantly higher income. Profit margins
benefited by the early product development and marketing of the safety-related
avionics systems. Strong sales of higher margin commercial and military
aftermarket products also contributed to higher income. Equipment Systems had
higher earnings from improved sales of environmental control systems as well as
from increased repair and overhaul business. Earnings related to government
services also improved, but Government Electronic Systems had lower income
primarily due to earnings related to one-time contract settlements in 1994 and
manufacturing difficulties.
The U.S. defense budget is expected to continue to decline for a number of
years, but at a progressively slower rate. A number of the Company's military
and space programs may be stretched out, curtailed or canceled. However, the
Company does not expect that its defense-related sales will decline as rapidly
as the defense budget because of recent acquisitions, opportunities to grow in
certain markets and the Company's strong competitive position on various
programs. The Company's ability to successfully retain and compete for such
business is highly dependent on continually advancing its technology base,
management procifiency, strategic alliances and cost-effective performance.
The Company believes that the cyclical downturn for the commercial aircraft
industry reached bottom in 1995 and a small improvement is expected in 1996.
Regional airline traffic continues to grow significantly and new regional
aircraft orders were higher in 1995. The commercial aftermarket showed strong
growth during 1995.
The Company continues to receive significant contracts from the commercial
aviation industry, DoD and NASA and earnings are expected to remain strong.
At December 31, 1995 and 1994 the Company had firm orders for its aerospace
products from the U.S. and foreign governments of $1,871 and $1,803 million,
respectively. Total backlog, including commercial contracts, at year-end 1995
and 1994 was $4,523 and $4,730 million, respectively. The Company anticipates
that approximately $3,010 million of the total 1995 backlog will be filled
during 1996.
<TABLE>
<CAPTION>
ADJUSTED
Automotive NET SALES NET INCOME NET INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 5,549 $ 146 $ 217
- --------------------------------------------------------------------------------
1994 4,922 215 215
- --------------------------------------------------------------------------------
Increase/(Decrease) $ 627 $ (69) $ 2
- --------------------------------------------------------------------------------
</TABLE>
Automotive's sales were up 13% compared with 1994 reflecting improvements in all
major business units. Automotive's sales benefited from the acquisition of Budd
Wheel & Brake as well as growing demand for braking systems in Europe. Although
North American vehicle production volumes decreased slightly in 1995, North
American braking systems' content per vehicle
20
<PAGE>
<PAGE>
[GRAPHIC REPRESENTATION of Net Sales (dollars in billions), expressed
numerically below.]
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
11.8 12.8 14.3
</TABLE>
[GRAPHIC REPRESENTATION of Income (dollars in millions), expressed numerically
below.]
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
656* 759 875
</TABLE>
- ----------
* Before cumulative effect of 1993 change in accounting principle.
[GRAPHIC REPRESENTATION of Earnings Per Share (dollars per share), expressed
numerically below.]
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
2.31* 2.68 3.09
</TABLE>
- ----------
* Before cumulative effect of 1993 change in accounting principle.
increased as a result of key business wins with the Ford Motor Company (Ford)
and the Chrysler Corporation (Chrysler). ABS sales were significantly lower
during the year. The acquisition of the seat belt business of the General Safety
Corporation in late 1994 resulted in significant sales gains. Safety restraints
also experienced increased sales due to higher air bag demand in North America
and the startup of an air bag plant in Italy. European spark plug sales
increased largely due to the acquisition of a spark plug plant in the U.K. in
1994. Record production levels of heavy trucks translated into increased sales
for North American truck braking systems and turbochargers. The continuation of
the trend toward producing diesel-powered cars in Europe and penetration into
the Asian market also favorably impacted turbocharger sales. Turbocharger plants
continue to operate at capacity levels. The segments sales improvement also
reflects the impact of favorable foreign exchange rate fluctuations.
Automotive's adjusted net income improved by 1% compared with 1994. Net income
was substantially higher for North American safety restraints principally
reflecting materials management and operational initiatives and for the European
aftermarket largely due to cost savings, improved distribution and pricing
improvements. Turbochargers and truck braking systems had significantly higher
income on strong sales growth. In addition, turbochargers experienced higher
operating margins due to operational excellence and other manufacturing
initiatives. Rapid growth in the European turbodiesel passenger car market and
growth initiatives in the Asia/Pacific region have strained our turbocharger
manufacturing capacity. Process improvements and a planned expansion are
expected to alleviate the capacity constraints. Offsets included significant
losses for ABS and reduced profit margins on North American light-vehicle
braking systems.
<TABLE>
<CAPTION>
ADJUSTED
Engineered Materials NET SALES NET INCOME NET INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 3,713 $ 473 $ 402
- --------------------------------------------------------------------------------
1994 3,272 330 330
- --------------------------------------------------------------------------------
Increase $ 441 $ 143 $ 72
- --------------------------------------------------------------------------------
</TABLE>
Engineered Materials sales increased 13% compared with 1994. Sales were higher
for all Engineered Materials business units, especially polymers, performance
materials and laminate systems. In the polymers business, sales were
significantly higher because of price improvement for intermediate chemicals and
increased sales volumes and prices for industrial polyester, especially in
Europe. Plastics had strong sales growth in all product lines. Carpet fibers
experienced price pressure and lower volumes throughout the fourth quarter of
1995 as the industry attempted to correct high levels of inventory. Performance
materials had substantially higher sales reflecting increased sales of
performance additives, advanced microelectronic materials and performance
chemicals, in part reflecting the acquisition of Riedel-de Haen in late 1995.
Laminate systems had significantly higher sales volumes mainly in the U.S. and
Asia/Pacific region.
Engineered Materials' adjusted net income increased 22% compared with the same
period last year. Net income was substantially higher for polymers as a result
of price improvement for intermediate chemicals and increased sales volume and
prices for plastics and higher sales volumes of industrial polyester fibers.
Carpet fibers and textile nylon also had higher income largely the result of
productivity improvements. Performance materials improved substantially due to
higher sales of performance chemicals and advanced microelectronic materials.
Uranium ore processing operations also improved. Laminate systems had higher
income on significantly higher sales. Environmental catalysts and carbon
materials also had income gains. There was also a substantial increase in net
income from the Paxon and UOP joint ventures. Fluorine products had slightly
lower net income, in part because of lower selling prices and costs associated
with the transition to mandated chlorofluorocarbon (CFC) substitutes in the U.S.
and other developed countries. Income from CFC substitutes was higher as the
Company's proprietary refrigerants gained acceptance among original equipment
(OE) manufacturers.
REGARDING ENVIRONMENTAL MATTERS, the Company is subject to various federal,
state and local requirements relating to the protection of the environment. The
Company believes that, as a general matter, its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and that its handling, manufacture, use and disposal of hazardous or
toxic substances are in accord with environmental laws and regulations. However,
mainly because of past operations and operations of predecessor companies, the
Company, like other companies engaged in similar businesses, is a party to
lawsuits and claims and has incurred remedial response and voluntary cleanup
costs associated with environ-
21
<PAGE>
<PAGE>
[GRAPHIC REPRESENTATION of Capital Expenditures/R&D (dollars in millions),
expressed numerically below.]
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Capital expenditures................................... 718 639 746
Company-funded R&D..................................... 313 318 353
----- ----- -----
Total....................................... 1,031 957 1,099
----- ----- -----
</TABLE>
[GRAPHIC REPRESENTATION of Long-Term Debt as a Percent of Total Capital
(percent), expressed numerically below.]
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
37.9 30.4 25.6
</TABLE>
[GRAPHIC REPRESENTATION of Return on Shareowners' Equity (after-tax percent),
expressed numerically below.]
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
30.6 28.9 26.7
</TABLE>
mental matters. Additional lawsuits, claims and costs involving environmental
matters are likely to continue to arise in the future. The Company continually
conducts studies, individually at Company-owned sites, and jointly as a member
of industry groups at non-owned sites, to determine the feasibility of various
remedial techniques to address environmental matters. It is the Company's policy
to record appropriate liabilities for such matters when environmental
assessments are made or remedial efforts are probable and the costs can be
reasonably estimated. The timing of these accruals is generally on the
completion of feasibility studies or the settlement of claims, but in no event
later than the Company's commitment to a plan of action.
Remedial response and voluntary cleanup expenditures were $72 and $66 million in
1995 and 1994, respectively, and are currently estimated to increase to
approximately $90 million in 1996. While annual expenditures have generally
increased from year to year, and may continue to increase over time, the Company
expects it will be able to fund such expenditures from cash flow from
operations. The timing of expenditures depends on a number of factors, including
regulatory approval of cleanup projects, remedial techniques to be utilized and
agreements with other parties.
During 1995 the Company charged $25 million against pretax income for remedial
response and voluntary cleanup costs. At December 31, 1995 the recorded
liability for environmental matters was $454 million. In addition, in 1995 the
Company incurred operating costs for ongoing businesses of approximately $85
million and capital expenditures of $44 million relating to compliance with
environmental regulations.
Although the Company does not currently possess sufficient information to
reasonably estimate the amounts of liabilities to be recorded upon future
completion of studies or settlements, and neither the timing nor the amount of
the ultimate costs associated with environmental matters can be determined, they
may be significant to the Company's consolidated results of operations.
Management does not expect that environmental matters will have a material
adverse effect on the consolidated financial position of the Company.
See Note 19 of Notes to Financial Statements for a discussion of the Company's
commitments and contingencies, including those related to environmental matters.
REGARDING FINANCIAL INSTRUMENTS, the Company, with operating and financing
activities in numerous countries and sales throughout the world, is exposed to
fluctuations in interest rates and foreign currency exchange rates. The Company
manages exposure to changes in interest rates through its regular borrowing and
investing decisions and, when deemed appropriate, through the use of interest
rate swap agreements. The objective of such risk management activity is to
minimize the cost of the Company's debt financing over an extended period of
time. The Company manages exposure to foreign currency exchange rates for
transactional items by matching and offsetting assets and liabilities and
thereafter through financial hedge contracts with third parties. The Company
does not use financial instruments for trading or other speculative purposes.
See Note 15 of Notes to Financial Statements for further information on
financial instruments.
INFLATION has not been a significant factor for the Company in a number of
years. Cost increases for labor and material have generally been low, and any
impact has been offset by productivity enhancement programs, including materials
management.
THE FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) issued Statement No. 121 -
"Accounting for the Impairment of Long-lived Assets to Be Disposed Of" (FASB No.
121), effective for 1996. The Company is completing an analysis of FASB No. 121
which is not expected to have a material impact on the Company's results of
operations or financial position.
The FASB issued Statement No. 123 - "Accounting for Stock-based Compensation"
(FASB No. 123), which is also effective for 1996. The Company plans to continue
to account for stock compensation in accordance with the provisions of the
Accounting Principles Board Opinion No. 25 - "Accounting for Stock Issued to
Employees", and will provide the pro-forma disclosures required by FASB No. 123
in the notes to the 1996 financial statements.
FINANCIAL CONDITION. Significant improvement in operating cash flows and strong
earnings growth resulted in continued improvement in the Company's financial
condition.
TOTAL ASSETS at December 31, 1995 were $12,465 million, an increase of $1,144
million from December 31, 1994, primarily due to acquisitions. Cash and cash
equivalents at year-end 1995 were $540 million, an increase of $32 million
compared with
22
<PAGE>
<PAGE>
December 31, 1994. Cash flows from operating activities increased by $173
million, or 17%, because of improved earnings and lower trade accounts
receivable, partially offset by higher inventories to meet the Company's
increased sales level. The current ratio at year-end 1995 was 1.3x, down
slightly from 1.4x last year. The Company's working capital turnover was also
down slightly to 5.2x at December 31, 1995 from 5.5x a year earlier.
THE MAXIMUM AMOUNT OF BORROWING available under the Company's revolving credit
agreements (Credit Agreements) was reduced by the Company in June 1995 from $900
million to $750 million because the floating rate Employee Stock Ownership Plan
(ESOP) notes were refinanced in 1995 and are no longer supported by the Credit
Agreements. The Credit Agreements support the issuance of commercial paper.
There was $58 million of commercial paper outstanding at year-end 1995 and no
commercial paper outstanding at the end of 1994. Commercial paper borrowing
reached a high of $900 million during 1995.
TOTAL DEBT at year-end 1995 of $2,010 million increased $323 million primarily
as a result of increased short-term borrowing mainly due to acquisitions.
Long-term debt of $1,366 million was reduced by $58 million during the year. The
Company's total debt as a percent of capital was 33.7% at December 31, 1995,
down from 34.1% at year-end 1994. Long-term debt to capital was 25.6% at
year-end 1995, down from 30.4% at year-end 1994. See Note 13 of Notes to
Financial Statements for details of long-term debt and a discussion of the
Credit Agreements.
THE COMPANY REPURCHASED 5.5 MILLION SHARES OF COMMON STOCK for $239 million in
1995. Common stock was repurchased in 1995 to meet expected requirements for
shares issued under employee benefit plans and a shareowner dividend
reinvestment plan. At year-end 1995 the Company had 75.5 million shares of
common stock held in treasury carried at $1,658 million. As of year-end 1995 the
Company was authorized to repurchase 8.1 million shares of common stock.
CAPITAL EXPENDITURES during 1995 were $746 million, an increase of $107 million
from the $639 million spent in 1994, mainly due to capacity expansions in the
Engineered Materials segment. Spending by the segments and Corporate since 1993
is shown in Note 23 of Notes to Financial Statements. The Company's total
capital expenditures in 1996 are currently projected at about $765 million.
These expenditures are expected to be financed by internally generated funds.
Approximately 67% of the projected 1996 expenditures are planned for expansion
and cost reduction, 27% for replacement and maintenance and 6% for environmental
projects.
1994 COMPARED WITH 1993
IN 1994 THE COMPANY DEVELOPED NEW INITIATIVES TO IMPROVE EFFICIENCY AND
ELIMINATE WASTE, SHARPEN ITS FOCUS ON CUSTOMER SATISFACTION AND TARGET FOREIGN
GROWTH OPPORTUNITIES. PRODUCTIVITY PROGRAMS STARTED SINCE 1991 CONTINUED TO
ENHANCE AND GROW THE BUSINESS. One new initiative - Operational Excellence -
will enhance productivity programs by redesigning the Company's basic processes
to remove variations and improve manufacturing yields as well as by implementing
measurement tools to monitor our progress. Another initiative - Customer
Partnerships - involves customers in designing the Company's products, while
reducing cycle times in engineering, manufacturing and product support. The
Company will start training employees in 1995 in Total Quality Leadership Phase
II to provide natural work teams with analytical tools for achieving process
improvements.
DURING 1994 THE COMPANY LAID THE FOUNDATION FOR GROWTH IN 1995 AND BEYOND:
Aerospace acquired Lycoming Engine in October 1994. This acquisition extends the
Engines group's product offerings in the robust regional aircraft market as well
as into helicopter and other commercial and military applications for turbine
engines. To reduce costs and improve competitiveness in its core product lines,
Aerospace consolidated 12 businesses into four integrated units and merged its
sales and service organizations into a single group. During the year Aerospace
introduced new high-technology products to enhance flight safety and also agreed
to form a number of strategic alliances in Japan and China to better position
itself as a global supplier and to secure a share of the fast-growing markets in
the Asia/Pacific region.
Globalization is also a key factor in Automotive's growth strategy. The Company
acquired Ford's spark plug plant in the U.K., which had 1993 sales of about $20
million, and a seat belt manufacturer in Italy, owned by the Fiat Group, which
had annual sales of approximately $34 million. Automotive began construction of
a $27 million turbocharger plant in Shanghai, China and has entered into joint
venture agreements to produce air bag inflators in Italy, to distribute
aftermarket products throughout Europe and to supply brake boosters from Spain
for vehicles built in Europe by Japanese manufacturers. In November 1994 the
Company acquired the seat belt business of General Safety Corporation, a
supplier to General Motors Corporation and Ford. General Safety had 1994 sales
of about $95 million.
Engineered Materials began manufacturing environmentally-safer alternatives to
CFCs at a new $70 million facility in Geismar, Louisiana and acquired the small
CFC business of Akzo N.V. in the Netherlands. A joint venture agreement with
General Motors to produce coated automotive catalytic converter substrates was
signed in November 1994. The venture strengthens the technology and
manufacturing capacity of both companies.
RESULTS OF OPERATIONS. The Company's sales and earnings expanded to record
levels in 1994. The Company grew through new product introductions and niche
acquisitions and by gaining market share in an expanding worldwide economy.
Internal restructuring and productivity improvements drove earnings
significantly higher.
NET SALES in 1994 were $12,817 million, an increase of 8% over last year. Of the
$990 million increase, $880 million was the result of strong volume gains by the
Automotive and Engineered Materials segments and $442 million from the
consolidation of recent acquisitions, offset in part by a $163 million reduction
for disposed businesses, $131 million due to lower prices mainly in the
Automotive segment and $38 million due to unfavorable foreign exchange
fluctuations.
INCOME FROM OPERATIONS of $1,152 million in 1994 improved by $198 million, or
21%. Excluding the nonrecurring items in 1993 (see Note 3 of Notes to Financial
Statements for information), income from operations improved by $214 million, or
23%. Aerospace's income increased 12%; Automotive was 17% higher and Engineered
Materials had a 30% gain. Operating margins increased from 7.9% in 1993 to 9.0%
in 1994 and productivity increased by 6.2% over last year reflecting business
consoli-
23
<PAGE>
<PAGE>
dations, cycle time reductions, materials management initiatives and unit sales
increases. See the detailed discussion of net income below for information by
industry segment.
OTHER INCOME (EXPENSE), a $27 million loss, compares with a loss of $9 million
in 1993 reflecting higher minority interest as a result of the formation in late
1993 of a venture with a subsidiary of Knorr-Bremse in the U.S. and reduced
interest income from investments in short-term securities. Reduced foreign
exchange costs on forward contracts had a favorable impact.
INTEREST AND OTHER FINANCIAL CHARGES of $143 million decreased by $14 million,
or 9%, from 1993 because of refunding a number of debt issues at lower interest
rates and a reduced level of outstanding debt. Higher interest rates on floating
rate borrowings partially offset such savings.
THE EFFECTIVE TAX RATE in 1994 was 31.7% compared with 27.9% in 1993. The 3.8
percentage point increase in 1994 was due to a higher level of earnings subject
to the U.S. statutory rate, additional non-deductible expenses in 1994 and the
absence of the favorable impact of a rate increase on the 1993
beginning-of-the-year deferred tax balances as a result of the 1993 Tax Act. See
Note 6 of Notes to Financial Statements for further information.
INCOME BEFORE THE CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE of
$759 million, or $2.68 a share, in 1994 increased by $103 million, or $0.37 a
share, compared with $656 million, or $2.31 a share, last year.
NET INCOME in 1994 was $759 million, or $2.68 a share, compared with $411
million, or $1.45 a share, for 1993. However, 1993 was impacted by the
cumulative effect of adopting an accounting change of $245 million, or $0.86 a
share. The higher income in 1994 was the result of a strong operating
performance by all segments.
A DISCUSSION OF THE OPERATIONS OF THE BUSINESS SEGMENTS, before the cumulative
impact of an accounting change on net income, follows. Adjusted net income
excludes the impact of the 1993 nonrecurring items. (Dollars in millions)
<TABLE>
<CAPTION>
ADJUSTED
Aerospace NET SALES NET INCOME NET INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 $ 4,623 $ 260 $ 260
- --------------------------------------------------------------------------------
1993 4,530 225 229
- --------------------------------------------------------------------------------
Increase $ 93 $ 35 $ 31
- --------------------------------------------------------------------------------
</TABLE>
Aerospace's sales increased 2% over last year. The acquisitions of the Lycoming
Engine and Sundstrand Data Control operations and contract settlements with the
U.S. Air Force contributed significantly to the higher sales. The regional
airline market continued to grow, but a reduction in military spending and
weakness in the commercial aircraft market continued to restrict sales. The
Engines group had lower sales of spares and repair and overhaul services to the
aftermarket. Government Electronic Systems had lower sales of avionics equipment
to the military. Equipment Systems had reduced commercial and military sales,
but sales from aircraft landing systems' repair and overhaul operations were
higher, in part reflecting new business. Commercial Avionics Systems had lower
sales mainly of TCAS II, reflecting the completion of the airline industry
retrofit program. Sales were reduced by the mid-year 1994 dispositions of the
actuation and hangar businesses.
Overall, the Company's 1994 sales to the DoD, as a prime contractor and
subcontractor, declined by 7% compared with 1993 because of reduced defense
spending. Sales to the commercial and foreign government markets increased by
5%, while sales to NASA and other U.S. government agencies increased by 13% in
1994. Sales to the DoD accounted for 28% of Aerospace's total sales, a decrease
of 3 percentage points compared with 1993.
Although sales were up only slightly, Aerospace's net income increased 14%
compared with last year's adjusted net income. Cost savings from business
consolidations, materials management and other productivity programs, especially
in the Engines group, contributed to significantly higher income. The Engines
group also had lower engineering expense on certain major programs that were
winding down. Government Electronic Systems had favorable contract settlements
and Equipment Systems had higher income from commercial aftermarket sales of
aircraft landing systems. The benefits from the productivity programs offset the
continued contraction of military spending and softness in the commercial
aircraft market.
At December 31, 1994 and 1993 the Company had firm orders for its aerospace
products from the U.S. and foreign governments of $1,803 and $1,861 million,
respectively. Total backlog, including commercial contracts, at year-end 1994
and 1993 was $4,730 and $4,773 million, respectively.
<TABLE>
<CAPTION>
ADJUSTED
Automotive NET SALES NET INCOME NET INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 $ 4,922 $ 215 $ 215
- --------------------------------------------------------------------------------
1993 4,506 228 186
- --------------------------------------------------------------------------------
Increase/(Decrease) $ 416 $ (13) $ 29
- --------------------------------------------------------------------------------
</TABLE>
Automotive's sales were up 9% compared with 1993. Demand was substantially
higher for braking systems, turbochargers and safety restraints. Strong OE
markets and new product introductions increased sales for North American and
European brakes and air bags. Sales of ABS increased in 1994, reflecting new
business with Ford and Chrysler due in part to the introduction of the Company's
advanced traction control system. Hybrid inflator technology spurred
significantly higher sales of air bag systems. Strong diesel truck sales in
North America and greater demand for diesel-powered cars in Europe led to
significantly higher turbocharger sales. Turbocharger plants operated at
capacity to satisfy the heavy demand. North American truck brake systems, which
benefited from strong OE medium and heavy truck demand, had increased sales.
Sales of European truck brake systems are no longer consolidated, following the
1993 venture with Knorr-Bremse.
Automotive's adjusted net income increased 16% reflecting higher sales for
turbochargers, braking systems, truck brakes and air bags. OE sales were very
strong in the North American market, and European businesses strengthened due to
the economic turnaround occurring mainly in France and Spain. Income growth was
limited by temporary capacity constraints in the turbocharger business.
Productivity improvements, plant rationalization and materials management
throughout the segment also contributed to the significantly higher earnings.
<TABLE>
<CAPTION>
ADJUSTED
Engineered Materials NET SALES NET INCOME NET INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 $ 3,272 $ 330 $ 330
- --------------------------------------------------------------------------------
1993 2,791 273 276
- --------------------------------------------------------------------------------
Increase $ 481 $ 57 $ 54
- --------------------------------------------------------------------------------
</TABLE>
Engineered Materials' sales increased 17% because of strong automotive, housing,
industrial and electronics markets. Higher
24
<PAGE>
<PAGE>
sales volumes of industrial and carpet fibers also reflect shipments from the
new polyester facility in France and the acquisition of a carpet nylon business
in Europe. Laminates grew significantly through continued globalization and
market share gains. Fluorine products had improved sales of
environmentally-safer CFC substitutes as additional capacity was added during
the year and as a result of recent acquisitions. Environmental catalysts had
strong sales to the OE automotive industry. Plastics had higher sales to the
automotive, packaging and distributor markets. Amorphous metals expanded sales
to the article surveillance and transformer markets.
Adjusted net income for Engineered Materials was up 20% reflecting higher sales
volumes for all businesses as well as operating efficiencies. The laminate
systems business had strong earnings on substantially higher sales. Fluorine
products had higher income reflecting increased CFC substitute capacity and cost
reductions, although pricing pressures limited gains. The amorphous metals,
performance chemicals and uranium hexafluoride businesses had increased income
on higher sales. Carpet and industrial fibers had substantially higher earnings
on increased sales volumes and prices, but these gains were mostly offset by
higher raw material costs and by start-up costs at the Longlaville facility.
Higher profit contributions were also realized from Engineered Materials' joint
ventures - Paxon and UOP.
REGARDING ENVIRONMENTAL MATTERS, remedial response and voluntary cleanup
expenditures were $66 and $65 million in 1994 and 1993, respectively.
During 1994 the Company charged $37 million against pretax income for remedial
response and voluntary cleanup costs. At December 31, 1994 the recorded
liability for environmental matters was $494 million. In addition, the Company
incurred operating costs for ongoing businesses of approximately $80 million and
capital expenditures of $43 million relating to compliance with environmental
regulations.
FINANCIAL CONDITION. Cash flow from operating activities exceeded $1 billion for
the third consecutive year, allowing the Company to continue to invest heavily
in its growth initiatives - particularly acquisitions and increases in capacity.
Additional working capital investment required to support the Company's sales
growth during 1994 impacted further cash flow improvements. High levels of
operating cash flow, together with major debt repayments and increases in
retained earnings have resulted in a significant improvement in the Company's
financial position in recent years.
TOTAL ASSETS at December 31, 1994 were $11,321 million, an increase of $492
million from December 31, 1993. Cash and cash equivalents at year-end 1994 were
$508 million, a decrease of $384 million compared with December 31, 1993, mainly
reflecting the acquisitions of Lycoming Engine and General Safety. Cash flows
from operating activities decreased by $137 million because of higher accounts
receivable reflecting the Company's increased sales level. The current ratio at
year-end 1994 was 1.4x, compared with 1.3x last year. The Company's working
capital turnover improved to 5.5x at December 31, 1994 from 4.8x a year earlier.
THE MAXIMUM AMOUNT OF BORROWING available under the Company's Credit Agreements
was $900 million. The Credit Agreements support the issuance of commercial paper
as well as outstanding floating rate ESOP notes. There was no commercial paper
outstanding at year-end 1994 and $164 million at the end of 1993. Commercial
paper borrowing reached a high of $516 million during 1994. Outstanding ESOP
notes, at favorable floating interest rates, totaled $217 and $259 million at
December 31, 1994 and 1993, respectively.
TOTAL DEBT at year-end 1994 was $1,687 million, a decrease of $273 million,
primarily as a result of paying down commercial paper and a redemption of a
deutsche mark bond issue. Long-term debt was reduced by $178 million. The
Company's total debt as a percent of capital was 34.1% at December 31, 1994,
down from 42.7% at year-end 1993. Long-term debt to capital was 30.4% at
year-end 1994, down from 37.9% at year-end 1993. See Note 13 of Notes to
Financial Statements for details of long-term debt and a discussion of the
Credit Agreements.
THE COMPANY REPURCHASED 2.9 MILLION SHARES OF COMMON STOCK for $103 million in
1994. Common stock was repurchased in 1994 to meet expected requirements for
shares issued under employee benefit plans and a shareowner dividend
reinvestment plan. At year-end the Company had 75.1 million shares of common
stock held in treasury carried at $1,505 million.
CAPITAL EXPENDITURES during 1994 were $639 million, a decrease of $79 million
from the $718 million spent in 1993. Spending by the segments and Corporate
since 1993 is shown in Note 23 of Notes to Financial Statements.
- --------------------------------------------------------------------------------
SAFE HARBOR STATEMENT under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained herein, the matters
discussed in this annual report are forward-looking statements which involve
risks and uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and other factors discussed in the
Company's filings with the Securities and Exchange Commission.
25
<PAGE>
<PAGE>
Consolidated Statement of Income AlliedSignal Inc.
<TABLE>
<CAPTION>
Years ended December 31 (dollars in millions except per share amounts) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 14,346 $ 12,817 $ 11,827
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of goods sold 11,539 10,299 9,551
Selling, general and administrative expenses 1,503 1,366 1,338
Nonrecurring items 44 -- (16)
- -----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 13,086 11,665 10,873
- -----------------------------------------------------------------------------------------------------------------------------------
Income from operations 1,260 1,152 954
Equity in income of affiliated companies 191 129 122
Other income (expense) (22) (27) (9)
Interest and other financial charges (168) (143) (157)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before taxes on income 1,261 1,111 910
Taxes on income 386 352 254
- -----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting principle 875 759 656
Cumulative effect of change in accounting principle -- -- (245)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 875 $ 759 $ 411
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share of common stock: (a)
Before cumulative effect of change in accounting principle $ 3.09 $ 2.68 $ 2.31
Cumulative effect of change in accounting principle -- -- (.86)
- -----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 3.09 $ 2.68 $ 1.45
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings per share of common stock are based upon the following weighted
average number of shares: 1995, 283,437,773 shares; 1994, 283,446,399 shares and
1993, 283,233,078 shares. No dilution results from outstanding common stock
equivalents.
Consolidated Statement of Retained Earnings
<TABLE>
<CAPTION>
Years ended December 31 (dollars in millions except per share amounts) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,613 $ 1,023 $ 747
Net income 875 759 411
Other 44 11 27
Common stock dividends
(1995--$.78 per share; 1994--$.6475 per share; 1993--$.58 per share) (217) (180) (162)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 2,315 $ 1,613 $ 1,023
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Notes to Financial Statements" are an integral part of these statements.
26
<PAGE>
<PAGE>
Consolidated Balance Sheet AlliedSignal Inc.
<TABLE>
<CAPTION>
December 31 (dollars in millions) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 540 $ 508
Accounts and notes receivable 1,751 1,697
Inventories 1,991 1,743
Other current assets 608 637
- -----------------------------------------------------------------------------------------------------------------------------------
Total current assets 4,890 4,585
Investments and long-term receivables 479 475
Property, plant and equipment--net 4,742 4,260
Cost in excess of net assets of acquired companies--net 1,572 1,349
Other assets 782 652
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 12,465 $ 11,321
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,385 $ 1,296
Short-term borrowings 397 133
Commercial paper 58 --
Current maturities of long-term debt 189 130
Accrued liabilities 1,775 1,832
- -----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,804 3,391
Long-term debt 1,366 1,424
Deferred income taxes 551 406
Postretirement benefit obligations other than pensions 1,864 1,790
Other liabilities 1,288 1,328
SHAREOWNERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
Capital--common stock--Authorized 500,000,000 shares
(par value $1 per share); issued: 358,228,742 shares 358 358
--additional paid-in capital 2,489 2,458
Common stock held in treasury, at cost:
1995--75,459,178 shares; 1994--75,096,896 shares (1,658) (1,505)
Cumulative foreign exchange translation adjustment 61 18
Unrealized holding gain on equity securities 27 40
Retained earnings 2,315 1,613
- -----------------------------------------------------------------------------------------------------------------------------------
Total shareowners' equity 3,592 2,982
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareowners' equity $ 12,465 $ 11,321
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Notes to Financial Statements" are an integral part of this statement.
27
<PAGE>
<PAGE>
Consolidated Statement of Cash Flows AlliedSignal Inc.
<TABLE>
<CAPTION>
Years ended December 31 (dollars in millions) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 875 $ 759 $ 411
Adjustments to reconcile net income to net cash flows from operating activities:
Cumulative effect of change in accounting principle -- -- 245
Nonrecurring items 39 -- (59)
Streamlining and restructuring -- (180) (217)
Depreciation and amortization (includes goodwill) 612 560 547
Undistributed earnings of equity affiliates (59) (10) (34)
Deferred taxes 198 180 110
Decrease (increase) in accounts and notes receivable 134 (195) 91
Decrease (increase) in inventories (141) 134 123
Decrease (increase) in other current assets 35 (65) 14
Increase in accounts payable 16 113 20
Increase (decrease) in accrued liabilities (245) (56) 151
Other (248) (197) (222)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flow provided by operating activities 1,216 1,043 1,180
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Expenditures for property, plant and equipment (746) (639) (718)
Proceeds from disposals of property, plant and equipment 46 54 37
Decrease in investments and long-term receivables 27 32 48
(Increase) in other investments (4) (8) (31)
Cash paid for acquisitions (499) (531) (244)
Proceeds from sales of businesses 72 130 129
Decrease (increase) in marketable securities -- 90 (40)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flow (used for) investing activities (1,104) (872) (819)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in commercial paper 58 (164) 160
Net increase (decrease) in short-term borrowings 253 64 (88)
Proceeds from issuance of common stock 104 43 143
Proceeds from issuance of long-term debt 108 7 131
Payments of long-term debt (147) (215) (355)
Repurchases of common stock (239) (103) (229)
Cash dividends on common stock (217) (180) (162)
Redemption of common stock purchase rights -- (7) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flow (used for) financing activities (80) (555) (400)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 32 (384) (39)
Cash and cash equivalents at beginning of year 508 892 931
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 540 $ 508 $ 892
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Notes to Financial Statements" are an integral part of this statement.
28
<PAGE>
<PAGE>
Notes to Financial Statements AlliedSignal Inc.
(dollars in millions except per share amounts)
Note 1
- --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ALLIEDSIGNAL INC. is a global, advanced technology and manufacturing company.
The Company's principal lines of business are aerospace, automotive and
engineered materials (chemicals, fibers, plastics and advanced materials). The
principal markets for aerospace products are the U.S. and foreign governments,
aircraft manufacturers, commercial airlines and dealers and distributors of
general aviation products. Automotive products are sold to worldwide
manufacturers of passenger cars, light, medium and heavy trucks, buses and
off-highway vehicles and the independent aftermarket and passenger car/truck
dealers. Engineered materials have applications for numerous industries
including automotive, carpeting, refrigeration, construction, electronics,
computer and utilities, among others.
CONSOLIDATED FINANCIAL STATEMENTS include the accounts of AlliedSignal Inc. and
majority-owned subsidiaries. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INVENTORIES are valued at the lower of cost or market using the last-in,
first-out (LIFO) method for certain qualifying domestic inventories and the
first-in, first-out (FIFO) or the average cost method for other inventories.
INVESTMENTS AND LONG-TERM RECEIVABLES are carried at market value if readily
determinable or cost. Investments in affiliates over which significant influence
is exercised are accounted for using the equity method of accounting.
PROPERTY, PLANT AND EQUIPMENT are carried at cost and are generally depreciated
using estimated service lives, which range from 3 to 40 years. For the financial
statements, depreciation is computed principally on the straight-line method.
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES is being amortized on a
straight-line basis over appropriate periods ranging from 20 to 40 years. The
cumulative amount of goodwill amortized at December 31, 1995 and 1994 is $407
and $358 million, respectively.
POSTEMPLOYMENT BENEFITS for former or inactive employees, excluding retirement
benefits, are accounted for under the provisions of Financial Accounting
Standards Board (FASB) Statement No. 112--"Employers' Accounting for
Postemployment Benefits" (FASB No. 112), effective January 1, 1993. FASB No. 112
requires the Company to accrue the cost of certain benefits, including
severance, workers' compensation and health care coverage, over an employee's
service life. A one-time charge for the adoption of FASB No. 112 of $396 million
(after-tax $245 million, or $0.86 a share) was recognized as the cumulative
effect of a change in accounting principle in 1993. The 1993 ongoing expense was
$18 million (after-tax $11 million, or $0.04 a share). The Company uses the
services of an enrolled actuary to calculate postemployment costs. The Company
previously expensed the cost of such benefits on a pay-as-you-go basis or
recognized the impact at the time of a specific event.
RECOGNITION OF CONTRACT REVENUES primarily relates to Aerospace operations.
Under fixed-price contracts, sales and related costs are recorded as deliveries
are made. Sales and related costs under cost-reimbursable contracts are recorded
as costs are incurred. Anticipated future losses on contracts are charged to
income when identified. Contracts which are part of a program are evaluated on
an overall program basis.
ENVIRONMENTAL expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments are made or remedial efforts are probable and the costs can be
reasonably estimated. The timing of these accruals is generally on the
completion of feasibility studies or the settlement of claims, but in no event
later than the Company's commitment to a plan of action. The liabilities for
environmental costs recorded in Accrued Liabilities and Other Liabilities at
December 31, 1995 and 1994 were $90 and $364 million and $78 and $416 million,
respectively.
INTEREST RATE AND FOREIGN CURRENCY FORWARD, OPTION AND SWAP AGREEMENTS are
accounted for as a hedge of the related asset, liability, firm commitment or
anticipated transaction when designated and effective as a hedge of such items.
Agreements qualifying for hedge accounting are accounted for as follows:
Changes in the amount to be received or paid under interest rate swap
agreements are recognized in Interest and Other Financial Charges.
Gains and losses on foreign currency agreements used to hedge assets and
liabilities, or net investments in foreign subsidiaries, are recognized in
Other Income (Expense) or Cumulative Foreign Exchange Translation Adjustment,
respectively.
Gains and losses on foreign currency agreements used to hedge firm foreign
currency commitments, and purchased foreign currency options used to hedge
anticipated foreign currency transactions, are recognized in the measurement
of the hedged transaction when the transaction occurs.
Changes in the fair value of agreements not qualifying for hedge accounting are
recognized in Other Income (Expense).
The carrying value of each agreement is reported in Accounts and Notes
Receivable, Other Current Assets, Accounts Payable or Accrued Liabilities, as
appropriate.
INCOME TAXES are based on the asset and liability approach. Deferred tax
liabilities or assets reflect the impact of temporary differences between
amounts of assets and liabilities for financial and tax reporting. Such amounts
are subsequently adjusted, as appropriate, to reflect changes in tax rates
expected to be in effect when the temporary differences reverse. A valuation
allowance is established for any deferred tax asset for which realization is not
likely. Deferred income taxes have not been provided on approximately $278
million of undistributed earnings of foreign affiliated companies which are
considered
29
<PAGE>
<PAGE>
to be permanently reinvested. Any U.S. taxes payable on foreign earnings which
may be remitted, however, will be substantially offset by foreign tax credits.
Note 2
- --------------------------------------------------------------------------------
ACQUISITIONS
In 1995 the Company acquired The Budd Company's Wheel & Brake Division (Budd
Wheel & Brake) for approximately $160 million in cash. Budd Wheel & Brake
manufactures rotors, hubs, drums and related assemblies for passenger cars and
light trucks; steel disc wheels for heavy trucks; demountable rims; and hub and
drum assemblies for medium- and heavy-duty vehicles and had 1994 sales of over
$300 million. In addition, the Company acquired a 95.8% interest in Riedel-de
Haen AG from Hoechst AG for $245 million in cash. Riedel-de Haen AG is a
specialty chemicals manufacturer located in Germany. The business had 1994 sales
of approximately $250 million.
In 1994 the Company acquired the Lycoming Turbine Engine Division of Textron
Inc. (Lycoming Engine) for $375 million in cash and the assumption of certain
liabilities. During 1995 the Company received $28 million in final settlement of
the purchase price. The business had 1994 sales of $550 million. Lycoming Engine
manufactures turbofan engines for regional airlines, helicopter engines for
commercial, military and utility aircraft, military tank engines and marine
propulsion engines.
In 1993 the Company acquired the data control business of Sundstrand Corporation
(Data Controls) for $195 million in cash. The business had sales of $194 million
in 1992. Data Controls manufactures a wide range of avionics such as ground
proximity warning systems, reactive windshear detection systems, flight data and
voice recorders, general aviation in-flight phone systems and aircraft condition
monitoring systems.
The Company also made a number of smaller acquisitions in 1995, 1994 and 1993.
Note 3
- --------------------------------------------------------------------------------
NONRECURRING ITEMS
The 1995 nonrecurring items consist of a provision of $115 million (after-tax
$71 million, or $0.25 a share) relating to management's decision to exit the
anti-lock braking systems (ABS) business. The provision consists of the
revaluation of the Company's ABS assets to their fair market value and certain
other closure costs. Also included is a gain of $71 million (after-tax $71
million, or $0.25 a share) from the transfer of the assets of the Company's
high-density polyethylene (HDPE) business joint venture, Paxon Polymer Company,
L.P. (Paxon), to Exxon Chemical Company (Exxon).
The 1993 nonrecurring items consist of a gain of $89 million (after-tax $50
million, or $0.17 a share) from the formation of an alliance of the Company's
air-brake control and related product operations for heavy trucks with those of
Knorr-Bremse AG, partly offset by a provision totaling $73 million (after-tax
$49 million, or $0.17 a share) covering transaction and other costs, including
formation costs, relating to Knorr-Bremse and other business ventures as well as
the cost of several legal actions.
Note 4
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income and other $ 35 $ 29 $ 41
Minority interests (36) (30) (7)
Foreign exchange (loss) (1) (21) (26) (43)
- -------------------------------------------------------------------------------------
$ (22) $ (27) $ (9)
- -------------------------------------------------------------------------------------
</TABLE>
(1) Includes the amortization of premiums for foreign currency forward exchange
contracts of $(3), $(12) and $(38) million, in each of the respective years. In
part, the contracts, in conjunction with domestic borrowings, were utilized to
finance certain foreign operations and contributed to lower expense on the
"Interest and Other Financial Charges" line.
Note 5
- --------------------------------------------------------------------------------
INTEREST AND OTHER FINANCIAL CHARGES
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total interest and other
financial charges $ 189 $ 166 $ 186
Less--Capitalized interest (21) (23) (29)
- -------------------------------------------------------------------------------------
$ 168 $ 143 $ 157
- -------------------------------------------------------------------------------------
</TABLE>
Note 6
- --------------------------------------------------------------------------------
TAXES ON INCOME
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME BEFORE TAXES
ON INCOME
- ------------------------------------------------------------------------------------
United States $ 1,101 $ 973 $ 799
Foreign 160 138 111
- ------------------------------------------------------------------------------------
$ 1,261 $ 1,111 $ 910
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
TAXES ON INCOME
- ------------------------------------------------------------------------------------
United States $ 347 $ 297 $ 244
Foreign 39 55 10
- ------------------------------------------------------------------------------------
$ 386 $ 352 $ 254
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes on income consist of:
Current:
United States $ 118 $ 98 $ 95
State 25 34 25
Foreign 44 40 24
- ------------------------------------------------------------------------------------
187 172 144
- ------------------------------------------------------------------------------------
Deferred:
United States 192 129 99
State 12 36 25
Foreign (5) 15 (14)
- ------------------------------------------------------------------------------------
199 180 110
- ------------------------------------------------------------------------------------
$ 386 $ 352 $ 254
- ------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The principal items accounting for the difference in taxes on income computed at
the U.S. statutory rate and as recorded on an overall basis are as follows:
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
Taxes on foreign earnings (under) U.S. tax rate (1.7) (.6) (2.4)
Asset basis differences (2.0) (3.3) (1.7)
Nondeductible amortization 1.1 1.0 1.2
State income taxes 1.6 3.9 3.3
Tax benefits of Foreign Sales Corporation (1.5) (1.4) (1.9)
Dividends received deduction (.1) (.1) (.2)
ESOP dividend tax benefit (.8) (.9) (.9)
Impact of rate change on beginning-of-the-year deferred tax balances -- -- (1.5)
All other items--net (1.0) (1.9) (3.0)
- -----------------------------------------------------------------------------------------------------------------------------------
30.6% 31.7% 27.9%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Included in the following balance sheet accounts:
Other current assets $ 431 $ 483
Other assets 180 124
Accrued liabilities (16) --
Deferred income taxes (551) (406)
- ---------------------------------------------------------------------------------------------------
$ 44 $ 201
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------------------------
DEFERRED TAX ASSETS/(LIABILITIES)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
The temporary differences and carryforwards which give rise to deferred
tax assets and liabilities are as follows:
Property, plant and equipment basis differences $ (844) $ (793)
Postretirement benefits other than pensions 750 741
Postemployment benefits 76 106
Investment and other asset basis differences (496) (515)
Nonrecurring items 252 265
Other accrued items 389 423
Other tax credits -- 31
Alternative minimum tax credit -- 12
Foreign net operating losses 241 181
U.S. capital loss 16 22
All other items--net (285) (199)
- ---------------------------------------------------------------------------------------------------
99 274
Valuation allowance (55) (73)
- ---------------------------------------------------------------------------------------------------
$ 44 $ 201
- ----------------------------------------------------------------------------------------------------
</TABLE>
The foreign net operating losses relate to several countries. Such losses are
available to reduce income tax payments in the future, subject to varying
expiration rules. The U.S. capital loss is available to offset income tax
payments on capital gains through 1997.
Note 7
- --------------------------------------------------------------------------------
ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade $1,477 $1,526
Other 308 204
- --------------------------------------------------------------------------------------------------
1,785 1,730
Less--Allowance for doubtful accounts
and refunds (34) (33)
- --------------------------------------------------------------------------------------------------
$1,751 $1,697
- --------------------------------------------------------------------------------------------------
</TABLE>
The Company is a party to agreements under which it can sell undivided interests
in designated pools of trade accounts receivable up to $500 million (average
outstanding was $500 million during 1995 and 1994). New receivables are sold
under the agreements as previously sold receivables are collected. During 1995
this represented an average collection period of 47 days or a replacement of
receivables of approximately eight times. At both December 31, 1995 and 1994
customer accounts receivable on the Consolidated Balance Sheet have been reduced
by $500 million reflecting such sales. The Company acts as an agent for the
purchasers in the collection and administration of the receivables.
Note 8
- --------------------------------------------------------------------------------
INVENTORIES
<TABLE>
<CAPTION>
December 31 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 650 $ 488
Work in process 769 761
Finished products 747 711
Supplies and containers 98 70
- --------------------------------------------------------------------------------
2,264 2,030
Less--
Progress payments (145) (160)
Reduction to LIFO cost basis (128) (127)
- --------------------------------------------------------------------------------
$ 1,991 $ 1,743
- --------------------------------------------------------------------------------
</TABLE>
Inventories valued at LIFO amounted to $286 million at December 31, 1995 and
$267 million at December 31, 1994, which amounts were below estimated
replacement cost by $128 and $127 million, respectively.
Note 9
- --------------------------------------------------------------------------------
OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Current-deferred taxes $ 431 $ 483
Other 177 154
- --------------------------------------------------------------------------------
$ 608 $ 637
- --------------------------------------------------------------------------------
</TABLE>
Note 10
- --------------------------------------------------------------------------------
INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Affiliates (1) $ 382 $ 416
Long-term receivables 97 59
- --------------------------------------------------------------------------------
$ 479 $ 475
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes unrealized holding gains of $44 and $66 million at December 31,
1995 and 1994, respectively, on equity securities in accordance with FASB No.
115. The cost basis of the equity securities was $25 and $44 million at December
31, 1995 and 1994, respectively.
31
<PAGE>
<PAGE>
At December 31, 1995 the Company had a partnership interest in UOP, a
significant joint venture accounted for under the equity method. UOP, a 50%
joint venture, is in the process technology and catalyst business. Prior to
December 28, 1995 the Company also had a 50% partnership interest in Paxon, a
significant joint venture accounted for under the equity method. Paxon
manufactures and sells high-density polyethylene resins. On that date, Paxon
transferred the HDPE business to Exxon.
Combined selected financial data for these two entities are summarized as
follows (Paxon amounts are not included in the 1995 balance sheet below):
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,516 $1,251 $1,238
Income from operations 265 165 151
Income before cumulative effect
of changes in accounting
principles (1) 219 147 149
Net income (1) (2) 219 132 90
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 419 $ 854
Total assets 986 1,523
Current liabilities 373 304
Noncurrent liabilities 325 351
Equity 288 868
- --------------------------------------------------------------------------------
</TABLE>
(1) No U.S. taxes have been provided by the entities on partnership income, as
the individual partners are responsible for their proportionate share of U.S.
taxes payable.
(2) Reflects in 1994 the adoption of FASB No. 106 ($15 million) and in 1993 the
adoptions of FASB No. 106 ($37 million) and FASB No. 112 ($22 million).
Note 11
- --------------------------------------------------------------------------------
PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 370 $ 333
Machinery and equipment 6,528 5,862
Buildings 1,545 1,371
Office furniture and equipment 781 702
Transportation equipment 173 145
Construction in progress 388 379
- --------------------------------------------------------------------------------
9,785 8,792
Less--Accumulated depreciation
and amortization (5,043) (4,532)
- --------------------------------------------------------------------------------
$4,742 $4,260
- --------------------------------------------------------------------------------
</TABLE>
Note 12
- --------------------------------------------------------------------------------
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Customer advance payments/deposits $ 182 $ 235
Insurance 113 132
Postretirement benefits
other than pensions 122 128
Wages 267 304
Other 1,091 1,033
- --------------------------------------------------------------------------------
$1,775 $1,832
- --------------------------------------------------------------------------------
</TABLE>
Note 13
- --------------------------------------------------------------------------------
LONG-TERM DEBT AND CREDIT AGREEMENTS
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Employee stock ownership plan
refunding notes, 6.957% and 7.016%,
due 1996-1997 $ 44 $ 120
Employee stock ownership plan
floating rate notes, 4.82%-5.32%,
due 1996-1999 203 212
6.75% notes, due August 15, 2000 100 --
9 7/8% debentures due June 1, 2002 250 250
9.20% debentures due February 15, 2003 100 100
Medium term notes, 8.93%-9.28%,
due 1997-2001 129 129
Zero coupon bonds and money
multiplier notes, 13.0%-14.26%,
due 1996-2009 214 278
9 1/2% debentures due June 1, 2016 100 100
Industrial development bond
obligations, 4.1%-6.75%, maturing
at various dates through 2026 105 105
Other (including capitalized leases),
2.0%-15.3%, maturing at various
dates through 2016 122 131
- --------------------------------------------------------------------------------
1,367 1,425
Less--Unamortized discount (1) (1)
- --------------------------------------------------------------------------------
$ 1,366 $ 1,424
- --------------------------------------------------------------------------------
</TABLE>
The schedule of principal payments on long-term debt is as follows:
<TABLE>
<CAPTION>
LONG-TERM
At December 31, 1995 DEBT(1)
- --------------------------------------------------------------------------------
<S> <C>
1996 $ 189
1997 119
1998 214
1999 165
2000 160
Thereafter 708
- --------------------------------------------------------------------------------
1,555
Less--Current portion (189)
- --------------------------------------------------------------------------------
$ 1,366
- --------------------------------------------------------------------------------
</TABLE>
(1) Amounts are net of repurchases.
The Company has two credit agreements (Credit Agreements) with a group of 21
banks (Five-Year and 364-Day Credit Agreements) with commitments aggregating
$750 million. The funds available under the Credit Agreements may be used for
any corporate purpose. Loans under the $375 million Five-Year Credit Agreement
are required to be repaid no later than June 30, 2000. Annually, the Company may
request that the maturity of the Five-Year Credit Agreement be extended by
another year. The Company intends to request an extension of this agreement in
1996. The banks' commitments to lend under the $375 million 364-Day Credit
Agreement terminate on June 28, 1996. The Company intends to renegotiate this
agreement in 1996. The Company has agreed to pay facility fees of 0.095% per
annum and 0.065% per annum on the aggregate commitments for the Five-Year and
364-Day Credit Agreements, respectively, subject to increase or decrease on the
Five-Year Agreement in the event of changes in the Company's long-term debt
ratings. The Credit Agreements do not restrict the Company's ability to pay
dividends or require the Company to maintain a specific net worth. However, they
do contain other customary conditions and events of default, the failure to com-
32
<PAGE>
<PAGE>
ply with, or occurrence of, which would prevent any further borrowings and would
generally require the repayment of any outstanding borrowings under either
Credit Agreement. Such conditions include the absence of any material adverse
change in the ability of the Company to pay its indebtedness when due, and such
events of default include (a) non-payment of Credit Agreement debt and interest
thereon, (b) non-compliance with the terms of the covenants, (c) cross-default
with other debt in certain circumstances, (d) bankruptcy and (e) defaults upon
obligations under the Employee Retirement Income Security Act. Additionally,
each of the banks has the right to terminate its commitment to lend under the
Credit Agreements if any person or group acquires beneficial ownership of 30% or
more of the Company's voting stock or during any 12-month period individuals who
were directors of the Company at the beginning of the period cease to
constitute a majority of the Board of Directors (the Board).
Interest on borrowings under the Credit Agreements would be determined, at the
Company's option, by (a) an auction bidding procedure; (b) the highest of the
floating base rate of the agent bank, 0.5% above the average CD rate, or 0.5%
above the Federal funds rate; or (c) a spread (equal to 15.5 and 18.5 basis
points for the Five-Year and 364-Day Credit Agreements, respectively), over the
average Eurocurrency rate of three reference banks. The spread over the
Eurocurrency rate on the Five-Year Agreement is subject to increase or decrease
if the Company's long-term debt ratings change. The Company had no balance
outstanding under the Credit Agreements at December 31, 1995. The Credit
Agreements presently serve as support for the issuance of commercial paper.
Note 14
- --------------------------------------------------------------------------------
LEASE COMMITMENTS
Future minimum lease payments under operating leases having initial or remaining
noncancelable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
LEASE
At December 31, 1995 PAYMENTS
- --------------------------------------------------------------------------------
<S> <C>
1996 $ 79
1997 62
1998 54
1999 45
2000 39
Thereafter 164
- --------------------------------------------------------------------------------
Total $ 443
- --------------------------------------------------------------------------------
</TABLE>
Rent expense of $121, $135 and $128 million was included in costs and expenses
for 1995, 1994 and 1993, respectively.
Note 15
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
The Company, as a result of its global operating and financing activities, is
exposed to changes in interest rates and foreign currency exchange rates which
may adversely affect its results of operations and financial condition. In
seeking to minimize the risks and/or costs associated with such activities, the
Company manages exposure to changes in interest rates and foreign currency
exchange rates through its regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. The
instruments utilized include forward, option and swap agreements. The Company
does not use financial instruments for trading or other speculative purposes.
The Company had no leveraged financial instruments at December 31, 1995.
At December 31, 1995 the Company held interest rate swap agreements maturing
through the year 2000. At December 31, 1995 interest rate swap agreements
effectively changed $300 million of fixed-rate debt (average 9.53%) to U.S.
commercial paper based floating rate debt (average 8.24%). Based on their terms,
these agreements will be terminated by the counterparty if short-term interest
rates drop below a predetermined level. Additional interest rate swaps
effectively changed $74 million of London Interbank Offer Rate (LIBOR) based
floating rate debt (average 5.26%) to fixed rate debt (average 6.92%). At
December 31, 1994 interest rate swap agreements effectively changed $82 million
of LIBOR based floating rate debt (average 5.21%) to fixed rate debt (average
7.12%).
The Company's exposure to changes in foreign currency exchange rates arises from
intercompany loans utilized to finance foreign subsidiaries, receivables,
payables and firm commitments arising from international transactions. The
Company attempts to have all such transaction exposures hedged with internal
natural offsets to the fullest extent possible and, once these opportunities
have been exhausted, through derivative financial instruments with third parties
using forward or option agreements. The Company currently also uses derivative
financial instruments to hedge the Company's exposure to changes in foreign
currency exchange rates for the translated U.S. dollar value of the net income
of a number of foreign subsidiaries. Forward and option agreements used to hedge
net income are reflected at fair value. The Company's principal foreign currency
exposures relate to the French franc, the German deutsche mark, the British
pound and the U.S. dollar. At December 31, 1995 the Company held or had written
foreign currency forward agreements maturing through 1997. The Company uses some
of these agreements to reduce exposures to changes in foreign currency exchange
rates and to reduce the risk that such changes would adversely affect its
results of operations or financial condition. In addition, some of these
instruments are hedges of firmly committed transactions and forecasted
transactions that will or are expected to occur through 1996.
Financial instruments expose the Company to counterparty credit risk for
nonperformance and to market risk for changes in interest and currency rates.
The Company manages exposure to counterparty credit risk through specific
minimum credit standards, diversification of counterparties and procedures to
monitor the amount of credit exposure. The Company's financial instrument
counterparties are substantial investment or commercial banks with significant
experience with such instruments. The Company also has procedures to monitor the
impact of market risk on the fair value and costs of its financial instruments
considering reasonably possible changes in interest and currency rates. The
Company manages market risk by restricting the use of derivative financial
instruments to hedging activities and by limiting potential interest and
currency rate exposures to amounts that are not material to the Company's
consolidated results of operations and cash flows. Because of the above
practices and procedures, management believes that the Company's credit and
market risk exposures from financial instruments are not significant at December
31, 1995.
33
<PAGE>
<PAGE>
The values of the Company's outstanding derivative financial instruments at
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
NOTIONAL
PRINCIPAL FAIR CARRYING
December 31, 1995 AMOUNT VALUE VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest rate swap agreements held $ 374 $ (4) $ --
Foreign currency forward
agreements held 630 (4) (4)
Foreign currency forward
agreements written 1,311 (11) (13)
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
Interest rate swap agreements held $ 82 $ 6 $ 1
Foreign currency forward
agreements held 953 21 18
Foreign currency forward
agreements written 1,130 (24) (28)
Foreign currency options held 276 2 2
- --------------------------------------------------------------------------------
</TABLE>
The only other material financial instruments that are not carried on the
Consolidated Balance Sheet at amounts which approximate fair values are certain
debt instruments. The carrying values of long-term debt and related current
maturities (excluding capitalized leases of $43 and $47 million at year-end 1995
and 1994, respectively) are $1,512 and $1,507 million and the fair values are
$1,733 and $1,590 million at December 31, 1995 and 1994, respectively. The fair
values are estimated based on the quoted market price for the issues (if traded)
or based on current rates offered to the Company for debt of the same remaining
maturity and characteristics.
Note 16
- --------------------------------------------------------------------------------
CAPITAL STOCK
The Company is authorized to issue up to 20,000,000 shares of preferred stock
without par value and may establish series of preferred stock having such number
of shares and such terms as it may determine.
The Company is authorized to issue up to 500,000,000 shares of common stock,
with a par value of one dollar. Common shareowners are entitled to receive such
dividends as may be declared by the Board, are entitled to one vote per share
and are entitled, in the event of liquidation, to share ratably in all the
assets of the Company which are available for distribution to the common
shareowners. Common shareowners do not have preemptive or conversion rights.
Shares of common stock issued and outstanding or held in the treasury are not
liable to further calls or assessments. There is no restriction on dividends or
the repurchase or redemption of common stock by the Company. The Company has
remaining authority to repurchase from time to time up to 8.1 million shares of
common stock.
<TABLE>
<CAPTION>
COMMON
SHARES STOCK/
OUTSTANDING PAID-IN TREASURY
(IN MILLIONS) CAPITAL STOCK
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 1992 283.8 $ 2,782 $ (1,336)
Purchased under repurchase
programs (6.7) -- (220)
Used for Dividend Reinvestment
Plan .1 -- 3
Used for employee benefit plans
(including related tax benefits) 6.6 29 116
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 283.8 2,811 (1,437)
Purchased under repurchase
programs (2.9) -- (103)
Used for Dividend Reinvestment
Plan .2 -- 3
Used for employee benefit plans
(including related tax benefits) 2.0 12 32
Redemption of common stock
purchase rights -- (7) --
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 283.1 2,816 (1,505)
Purchased under repurchase
programs (5.5) -- (239)
Used for Dividend Reinvestment
Plan .2 -- 3
Used for employee benefit plans
(including related tax benefits) 5.0 31 83
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 282.8 $ 2,847 $ (1,658)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 17
- --------------------------------------------------------------------------------
STOCK OPTIONS AND AWARDS
The Company has a 1993 Stock Plan and a 1985 Stock Plan available to grant
options and other related benefits to employees. Under both plans, the Company
may grant incentive and non-qualified stock options, stock appreciation rights
(SARs), restricted shares and restricted units (Units) to officers and other
employees. SARs entitle an optionee to surrender unexercised stock options for
cash or stock equal to the excess of the fair market value of the surrendered
shares over the option value of such shares. The 1993 Stock Plan provides for
the annual grant of awards in an amount not in excess of 1.5% of the total
shares issued (including shares held in treasury) on December 31 of the year
preceding the year of the award. Any shares that are available for awards that
are not utilized in a given year will be available for use in subsequent years.
Units have been granted to certain employees, which entitle the holder to
receive shares of common stock. At December 31, 1995 there were 1,261,688 Units
outstanding, including 304,500 Units granted in 1995, the restrictions on which
generally lapse over periods not exceeding ten years from date of grant.
Incentive stock options have a term determined by the Management Development and
Compensation Committee of the Board (Committee), but not in excess of ten years.
Non-qualified stock options have been granted with terms of up to ten years and
one day. An option becomes exercisable at such times and in such installments as
set by the Committee. Options generally become exercisable over a three-year
period.
34
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Stock Options NUMBER OF SHARES
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1992 18,830,264
Granted at $29.13 - $36.94 per share 5,949,990
Less --
Exercised at $10.34 - $34.35 per share 4,986,618
Lapsed or canceled 145,190
Surrendered upon exercise of SARs 30,000
- --------------------------------------------------------------------------------
Outstanding at December 31, 1993 19,618,446
Granted at $33.57 - $39.07 per share 6,809,010
Less --
Exercised at $13.75 - $35.91 per share 1,693,567
Lapsed or canceled 344,720
Surrendered upon exercise of SARs 17,450
- --------------------------------------------------------------------------------
Outstanding at December 31, 1994 24,371,719
Granted at $35.57 -$48.63 per share 5,944,090
Less --
Exercised at $13.75 - $39.07 per share 4,199,415
Lapsed or canceled 358,567
- --------------------------------------------------------------------------------
Outstanding at December 31, 1995,
$14.35 - $48.63 per share 25,757,827
- --------------------------------------------------------------------------------
Exercisable at December 31, 1995 14,052,739
- --------------------------------------------------------------------------------
Available for grant at December 31, 1994 4,739,240
- --------------------------------------------------------------------------------
Available for grant at December 31, 1995 4,052,748
- --------------------------------------------------------------------------------
</TABLE>
The Company also has a Stock Plan for Non-Employee Directors (Directors) under
which restricted shares and options are granted. New Directors receive grants of
1,500 shares of common stock, subject to certain restrictions. In addition, each
Director will be granted an option to purchase 1,000 shares of common stock each
year on the date of the annual meeting of shareowners. The Company has set aside
225,000 shares for issuance under the Directors plan. Options generally become
exercisable over a three-year period and have a term of ten years. All options
were granted at not less than fair market value at dates of grant.
Treasury shares of common stock have been used upon exercise of stock options.
Differences between the cost of treasury stock used and the total option price
of shares exercised have been reflected in retained earnings.
Note 18
- --------------------------------------------------------------------------------
CUMULATIVE FOREIGN EXCHANGE TRANSLATION
ADJUSTMENT
<TABLE>
<CAPTION>
December 31 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 18 $ (7) $ 58
Translation adjustment and
impact of hedges and
intercompany balances 43 25 (65)
- --------------------------------------------------------------------------------
$ 61 $ 18 $ (7)
- --------------------------------------------------------------------------------
</TABLE>
Note 19
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
The Company is subject to a number of lawsuits, investigations and claims (some
of which involve substantial amounts) arising out of the conduct of its
business, including those relating to commercial transactions, government
contracts, product liability and environmental, safety and health matters. One
such lawsuit was brought by the B.F. Goodrich Company (Goodrich) in the U.S.
District Court for Delaware alleging infringement by the Company of two patents
relating to aircraft brakes and seeking injunctive relief and damages. The
allegation against the Company related only to brakes for the Boeing 777, which
was introduced in 1995, and not to any other brake program of the Company. At
trial, Goodrich claimed damages of approximately $350 million before trebling.
On November 10, 1994, after a full trial on the merits, the District Court ruled
the Goodrich patents were invalid, turned down Goodrich's claim for damages and
denied its request for an injunction. On January 4, 1996, the United States
Court of Appeals for the Federal Circuit affirmed the District Court's ruling.
In accordance with the Company's accounting policy described in Note 1 of Notes
to Financial Statements, liabilities are recorded for environmental matters
generally on the completion of feasibility studies or the settlement of claims,
but in no event later than the Company's commitment to a plan of action.
Although the Company does not currently possess sufficient information to
reasonably estimate the amounts of the liabilities to be recorded upon future
completion of studies, they may be significant to the consolidated results of
operations, but management does not expect that they will have a material
adverse effect on the consolidated financial position of the Company. With
respect to all other matters, while the ultimate results of these lawsuits,
investigations and claims cannot be determined, management does not expect that
these matters will have a material adverse effect on the consolidated results of
operations or financial position of the Company.
The Company has issued or is a party to various direct and indirect guarantees,
bank letters of credit and customer guarantees. Management does not expect these
guarantees will have a material adverse effect on the consolidated results of
operations or the financial position of the Company.
Note 20
- --------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION
Cash and cash equivalents includes cash on hand and on deposit as well as highly
liquid debt instruments with maturities generally of three months or less. Cash
payments during the years 1995, 1994 and 1993 included interest of $183, $121
and $180 million and income taxes of $185, $164 and $130 million, respectively.
In November 1994 the Company and General Motors Corporation formed a joint
venture to manufacture coated substrates for catalytic converters. The Company
contributed its environmental catalysts business and General Motors contributed
other assets and a long-term sales contract to the venture. The transaction had
the following non-cash impact on the Company's 1994 balance sheet:
<TABLE>
<CAPTION>
AMOUNT
- --------------------------------------------------------------------------------
<S> <C>
Current assets $ (24)
Property, plant and equipment -- net (20)
Investments and long-term receivables (23)
Other noncurrent assets (3)
Current liabilities 102
Noncurrent liabilities (32)
- --------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
In October 1993 the Company and Knorr-Bremse AG formed an alliance to which both
companies contributed their European operations, which provide air-brake
controls and related products to the heavy truck industry. The Company owns 35
percent of the venture while Knorr-Bremse owns the balance and manages the
operations. The transaction had the following non-cash impact on the Company's
1993 balance sheet:
<TABLE>
<CAPTION>
AMOUNT
- --------------------------------------------------------------------------------
<S> <C>
Current assets $ (49)
Property, plant and equipment -- net (28)
Investments and long-term receivables 51
Other noncurrent assets (13)
Current liabilities 29
Noncurrent liabilities 10
- --------------------------------------------------------------------------------
</TABLE>
The weighted average interest rate on short-term borrowings and commercial paper
outstanding at December 31, 1995 and 1994 was approximately 7%.
Note 21
- -------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company's U.S. retiree medical programs cover employees who retire with
pension eligibility for hospital, professional and other medical services
(programs). Most of the programs require deductibles and copayments and
virtually all are integrated with Medicare. Retiree contributions are generally
required based on coverage type, plan and Medicare eligibility. The Company also
sponsors retiree life insurance programs which generally provide a flat benefit
of at least two thousand dollars or a benefit as a percent of pay. The retiree
medical and life insurance programs are not funded. Claims and expenses are paid
from the general assets of the Company.
For most non-union employees retiring after July 1, 1992 the Company has
implemented an approach which bases the Company's contribution to retiree
medical premiums on years of service and also establishes a maximum Company
contribution in the future at approximately twice the current level at the date
of implementation.
In 1995, 1994 and 1993 the Company's cost for providing other postretirement
benefits aggregated $142, $150 and $153 million, respectively. The Company uses
the services of an enrolled actuary to calculate postretirement benefit costs.
For measurement purposes, the assumed annual rates of increase in the per capita
cost of covered health care benefits for 1995 were 7% to 10% for indemnity
programs and 6% for managed care programs which reduce to 6% for all programs in
the year 2000 and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. To illustrate,
increasing the assumed health care cost trend rates by 1 percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1995 by $170 million and the aggregate of the service and interest
cost component of net periodic postretirement benefit cost for the year then
ended by $16 million. The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% and 8.75% at December
31, 1995 and 1994, respectively.
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $ 20 $ 27 $ 23
Interest cost on accumulated
postretirement benefit obligation 133 133 137
Net amortization (12) (10) (7)
- --------------------------------------------------------------------------------
141 150 153
Foreign plans 1 -- --
- --------------------------------------------------------------------------------
Net periodic postretirement benefit
cost $ 142 $ 150 $ 153
- --------------------------------------------------------------------------------
</TABLE>
Presented below are the plans' status and amounts recognized in the Company's
Consolidated Balance Sheet at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 1,310 $ 1,120
Fully eligible active plan participants 184 172
Other active plan participants 455 393
- --------------------------------------------------------------------------------
1,949 1,685
Unrecognized prior service cost 161 139
Unrecognized net gain (loss) (124) 94
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost $ 1,986 $ 1,918
- --------------------------------------------------------------------------------
</TABLE>
Note 22
- --------------------------------------------------------------------------------
PENSIONS
The Company's pension plans, most of which are defined benefit plans and almost
all of which are noncontributory, cover substantially all employees. Benefits
under the plans are generally based on years of service and employees'
compensation during the last years of employment or as a flat dollar benefit.
Benefits are generally paid from funds previously provided to trustees. In the
Company's principal U.S. plans, funds are contributed to a trustee as necessary
to provide for current service and for any unfunded projected benefit obligation
over a reasonable period. To the extent that these requirements are fully
covered by assets on hand for a plan, a contribution may not be made in a
particular year. As of year-end 1995 approximately 59% of the assets of U.S.
plans were held in equity securities, with the balance primarily in fixed
income-type securities.
Pension expense in 1995, 1994 and 1993 was $115, $109 and $104 million,
respectively. The Company uses the services of an enrolled actuary to calculate
the amount of pension expense and contributions to trustees of the various
pension plans.
Net periodic pension cost for 1995, 1994 and 1993 included the following
components:
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 107 $ 132 $ 115
Interest cost on projected
benefit obligation 395 363 369
Actual return on plan assets (1,019) (65) (663)
Net amortization and deferral 616 (338) 269
- --------------------------------------------------------------------------------
Net periodic pension cost for
defined benefit plans 99 92 90
Foreign plans and other 16 17 14
- --------------------------------------------------------------------------------
Net periodic pension cost $ 115 $ 109 $ 104
- --------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<PAGE>
The assumed rate of return for the Company's U.S. defined benefit pension plans
was 9% in 1995, 1994 and 1993. The assumed discount rate used in calculating the
projected benefit obligations at December 31, 1995, 1994 and 1993 was 7.25%,
8.75% and 7.25%, respectively. In addition, the assumed annual increase in
compensation over employees' estimated remaining working lives was 5% in 1995
and 1994 and 5.5% in 1993.
Presented below are the plans' funded status and amounts recognized in the
Company's Consolidated Balance Sheet at December 31, 1995 and 1994 for its
significant defined benefit pension plans:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
December 31 BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 3,813 $ 805 $ 3,252 $ 678
Nonvested 244 113 228 82
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $ 4,057 $ 918 $ 3,480 $ 760
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $ 4,703 $ 953 $ 3,911 $ 802
Less--Fair value of assets 4,694 699 4,127 617
- ------------------------------------------------------------------------------------------------------------------------------------
Over (under) funded plans (9) (254)(a) 216 (185)
Unrecognized transition (asset) liability -- (34) 8 (45)
Unrecognized net (gain) loss 85 26 (79) (13)
Unrecognized prior service cost (11) 86 (16) 93
- ------------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 65 $(176) $ 129 $(150)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes $191 million for unfunded foreign and supplemental domestic
pension plans.
Note 23
- --------------------------------------------------------------------------------
SEGMENT FINANCIAL DATA
<TABLE>
<CAPTION>
CORPORATE
ENGINEERED AND
AEROSPACE AUTOMOTIVE MATERIALS UNALLOCATED(1) TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales (2) 1995 $ 5,084 $ 5,549 $3,713 $ -- $14,346
1994 4,623 4,922 3,272 -- 12,817
1993 4,530 4,506 2,791 -- 11,827
- -----------------------------------------------------------------------------------------------------------------------------------
Research and development expense 1995 154 80 109 10 353
1994 126 73 110 9 318
1993 127 63 113 10 313
- -----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 1995 186 164 185 28 563
1994 183 148 171 21 523
1993 184 156 153 21 514
- -----------------------------------------------------------------------------------------------------------------------------------
Income from operations (3) 1995 551 292 563 (146) 1,260
1994 458 411 409 (126) 1,152
1993 402 432 309 (189) 954
- -----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of 1995 303 146 473 (47) 875
change in accounting principle (3,4) 1994 260 215 330 (46) 759
1993 225 228 273 (70) 656
- -----------------------------------------------------------------------------------------------------------------------------------
Capital expenditures 1995 131 214 334 67 746
1994 148 245 232 14 639
1993 139 205 354 20 718
- -----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets 1995 5,079 3,813 3,302 271 12,465
1994 5,104 3,276 2,562 379 11,321
1993 4,502 2,838 2,502 987 10,829
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Intersegment sales approximate market and are not significant.
(1) The "Corporate and Unallocated" column includes amounts for businesses sold
and Corporate items.
(2) Sales to the U.S. Government and its agencies, mainly for the Aerospace
segment, were $1,107, $1,089 and $1,096 million for each of the respective
years.
(3) Includes in 1995 pre- and after-tax impact of nonrecurring items for
Automotive of a charge of $115 and $71 million and a gain of $71 and $71 million
for Engineered Materials, respectively. Includes in 1993 pre- and after-tax
impact of nonrecurring items for Aerospace of a charge of $6 and $4 million, a
net gain of $81 and $42 million for Automotive, a charge of $5 and $3 million
for Engineered Materials and a charge of $54 and $34 million for Corporate and
Unallocated, respectively.
(4) An interest charge is made by Corporate Office to the segments on the basis
of relative investment. Taxes on income are generally included in the segments
which gave rise to the tax effects and equity in income of affiliated companies
is included in the segments in which these companies operate.
37
<PAGE>
<PAGE>
Note 24
- --------------------------------------------------------------------------------
GEOGRAPHIC AREAS--FINANCIAL DATA
<TABLE>
<CAPTION>
ADJUSTMENTS
UNITED OTHER AND
STATES(1) CANADA EUROPE INTERNATIONAL ELIMINATIONS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales (2) 1995 $10,734 $ 230 $2,740 $ 642 $ -- $14,346
1994 9,739 202 2,283 593 -- 12,817
1993 9,220 225 1,897 485 -- 11,827
- -----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative 1995 734 31 58 52 -- 875
effect of change in acccounting 1994 654 23 65 17 -- 759
principle (3) 1993 570 26 55 5 -- 656
- -----------------------------------------------------------------------------------------------------------------------------------
Assets 1995 9,378 219 2,964 588 (684) 12,465
1994 8,977 205 2,295 543 (699) 11,321
1993 8,517 199 1,967 548 (402) 10,829
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities 1995 7,623 106 1,535 293 (684) 8,873
1994 7,290 87 1,319 342 (699) 8,339
1993 7,175 98 1,235 333 (402) 8,439
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sales between geographic areas approximate market and are not significant.
(1) Corporate Office income, expenses, assets and liabilities are included in
the "United States" column.
(2) Included in United States net sales are export sales of $2,119, $1,818 and
$1,699 million for each of the respective years.
(3) Includes in 1995 after-tax nonrecurring items of a gain for the United
States of $42 million and a loss for Europe of $42 million. Includes in 1993
after-tax nonrecurring items of a gain for the United States of $13 million and
a loss for Europe of $12 million.
Note 25
- --------------------------------------------------------------------------------
UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 3,419 $ 3,630 $ 3,499 $ 3,798 $14,346 $ 2,986 $ 3,187 $ 3,110 $3,534 $12,817
Gross profit 672 728 699 708 2,807 584 646 607 681 2,518
Net income 198 227 217 233 875 169 196 189 205 759
Per share .70 .80 .77 .83 3.09 .60 .69 .67 .73 2.68
Dividends paid .195 .195 .195 .195 .78 .145 .1675 .1675 .1675 .6475
Market price (a)
High 39.88 44.50 47.13 49.88 49.88 40.75 37.63 38.75 36.00 40.75
Low 33.38 38.38 43.13 41.13 33.38 34.25 33.13 33.63 30.38 30.38
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) From composite tape--stock is primarily traded on the New York Stock
Exchange.
Report of Independent Accountants
PRICE WATERHOUSE LLP [LOGO]
February 1, 1996
To the Shareowners and Directors of AlliedSignal Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of retained earnings and of cash flows
present fairly, in all material respects, the financial position of AlliedSignal
Inc. and its subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for postemployment benefits in 1993.
PRICE WATERHOUSE LLP
Morristown, NJ
38
<PAGE>
<PAGE>
Selected Financial Data AlliedSignal Inc.
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 14,346 $ 12,817 $ 11,827 $ 12,042 $ 11,831 $ 12,343 $ 11,942 $ 11,909 $ 11,116
Income (loss) from continuing
operations 875 759 656 535 (a) (273)(a) 462 528 463(a) 515(a)
Net income (loss) 875 759 411(b) (712)(b) (273) 462 528 463 656
Per share of common stock:
Earnings (loss) from continuing
operations 3.09 2.68 2.31 1.90 (1.00) 1.67 1.78 1.55 1.53
Net earnings (loss) 3.09 2.68 1.45 (2.52) (1.00) 1.67 1.78 1.55 1.95
Dividends .78 .6475 .58 .50 .80 .90 .90 .90 .90
AT YEAR-END
- -----------------------------------------------------------------------------------------------------------------------------------
Net working capital $ 1,086 $ 1,194 $ 1,078 $ 1,414 $ 526 $ 892 $ 1,065 $ 1,040 $ 722
Property, plant and equipment-net 4,742 4,260 4,094 3,897 3,638 3,584 3,321 3,214 3,330
Total assets 12,465 11,321 10,829 10,756 10,382 10,456 10,342 10,069 10,321
Long-term debt 1,366 1,424 1,602 1,777 1,914 2,051 1,903 2,044 2,017
Shareowners' equity 3,592 2,982 2,390 2,251 2,983 3,380 3,412 3,268 3,129
Book value per share of common stock 12.70 10.53 8.42 7.93 10.79 12.55 11.77 11.05 10.44
Average investment (c) 5,598 4,848 4,506 4,939 6,771 6,723 6,520 6,629 6,859
Common shares outstanding (in millions) 282.8 283.1 283.8 283.8 276.3 269.4 290.0 295.9 299.9
Common shareowners of record 79,046 82,095 84,248 84,254 91,492 97,210 102,042 111,402 109,322
Employees (d) 88,500 87,500 86,400 89,300 98,300 105,800 107,100 109,550 115,300
FINANCIAL STATISTICS (e)
- -----------------------------------------------------------------------------------------------------------------------------------
Return on sales (income from
operations) 8.8 9.0 8.1 3.4 (2.5) 5.9 8.0 5.7 6.8
Return on sales (after-tax) 6.1 5.9 5.5 4.4 (2.3) 3.7 4.4 3.9 4.6
Return on average investment (after-tax) 17.4 17.5 16.6 13.8 (1.3) 9.6 11.0 10.3 10.1
Return on average shareowners'
equity (after-tax) 26.7 28.9 30.6 26.4 (8.4) 13.9 15.6 14.5 14.5
Interest coverage ratio 6.5 6.8 5.1 3.3 (.9) 2.6 3.0 2.8 3.6
Long-term debt as a percent of
total capital 25.6 30.4 37.9 40.5 34.9 33.6 30.8 33.2 33.9
Total debt as a percent of total capital 33.7 34.1 42.7 44.7 43.9 40.4 35.7 35.9 39.0
FINANCIAL STATISTICS (e)(f)
- -----------------------------------------------------------------------------------------------------------------------------------
Return on sales (income from operations) 9.1 9.0 7.9 6.5 4.7 5.9 8.0 7.4 6.8
Return on sales (after-tax) 6.1 5.9 5.5 4.5 2.9 3.7 4.4 4.3 3.9
Return on average investment
(after-tax) 17.4 17.5 16.6 13.9 7.8 9.6 11.0 10.9 8.9
Return on average shareowners'
equity (after-tax) 26.7 28.9 30.5 26.7 10.5 13.9 15.6 15.9 12.2
Interest coverage ratio 6.8 6.8 5.0 3.3 2.1 2.6 3.0 2.9 3.2
Long-term debt as a percent of
total capital 25.6 30.4 37.9 40.5 34.9 33.6 30.8 33.2 33.9
Total debt as a percent of total capital 33.7 34.1 42.7 44.7 43.9 40.4 35.7 35.9 39.0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes in 1992 the effect of a provision for Streamlining and
Restructuring charges as well as a gain on the sale of common stock of Union
Texas Petroleum Holdings, Inc. (Union Texas) resulting in a net charge of $11
million (after-tax $6 million, or $0.02 a share). In 1991, includes the effect
of a provision for Streamlining and Restructuring charges as well as gains on
asset sales by Union Texas resulting in a net charge of $838 million (after-tax
$615 million, or $2.25 a share). In 1988, includes an after-tax provision of
$125 million, or $0.42 a share, to cover Streamlining and Restructuring charges,
an after-tax gain of $36 million, or $0.12 a share, from the sale of the
Company's investment in Akebono Brake Industry Company Ltd. and an after-tax
gain of $81 million, or $0.27 a share, from nonrecurring items. Includes in 1987
the effect of the sale of common stock by Union Texas which resulted in the
Company recording a gain of $108 million (after-tax $82 million, or $0.24 a
share), reflecting the Company's share of an increase in Union Texas' equity.
(b) Includes in 1993 the cumulative after-tax provision for the adoption of FASB
No. 112 of $245 million, or $0.86 a share. Includes in 1992 the cumulative
after-tax provision for the adoption of FASB Nos. 106 and 109 of $1,247 million,
or $4.42 a share.
(c) Investment is defined as shareowners' equity and noncurrent deferred
taxes-net plus total debt.
(d) Includes employees at facilities operated for the U.S. Department of Energy.
(e) The returns and interest coverage ratio exclude the impact of the cumulative
effect of changes in accounting principles on income.
(f) The returns and interest coverage ratio exclude the impact of nonrecurring
items in 1995 and 1993, provisions for Streamlining and Restructuring charges
in 1992, 1991 and 1988, gain on sale of common stock of Union Texas in 1992,
gains on asset sales by Union Texas in 1991, nonrecurring income in 1988 and
Union Texas' equity transaction in 1987.
39
<PAGE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SECURITIES OWNED
COUNTRY OR -------------------------
STATE OF PERCENT
NAME INCORPORATION CLASS OWNERSHIP
---- ------------- ------------ ---------
<S> <C> <C> <C>
AlliedSignal International Finance Corporation................... Delaware Common Stock 100
EM Sector Holdings Inc........................................... Delaware Common Stock 100
AlliedSignal Avionics Inc........................................ Kansas Common Stock 100
AlliedSignal Technologies Inc.................................... Arizona Common Stock 100
</TABLE>
------------------------
The names of the Registrant's other consolidated subsidiaries, which are
primarily totally-held by the Registrant, are not listed because all such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of AlliedSignal Inc.'s Registration Statements on Forms S-8
(Nos. 33-09896, 33-51031, 33-51455, 33-55410, 33-58345, 33-58347, 33-60261,
33-62963, 33-64295 and 33-65792), on Forms S-3 (Nos. 33-13211, 33-14071 and
33-55425) and on Form S-8 (filed as an amendment to Form S-14, No. 2-99416-01)
of our report dated February 1, 1996 appearing on page 38 of the 1995 Annual
Report to Shareowners of AlliedSignal Inc., which is incorporated by reference
in this Annual Report on Form 10-K for the year ended December 31, 1995.
PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
February 27, 1996
<PAGE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
I, Lawrence A. Bossidy, Chairman and Chief Executive Officer
and a director of AlliedSignal Inc. (the "Company"), a Delaware corporation,
hereby appoint Peter M. Kreindler, Richard F. Wallman, G. Peter D'Aloia and
Nancy A. Garvey, each with power to act without the other and with power of
substitution and resubstitution, as my attorney-in-fact and agent for me and in
my name, place and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
LAWRENCE A. BOSSIDY
-----------------------------
Lawrence A. Bossidy
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Hans W. Becherer, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
HANS W. BECHERER
-----------------------------
Hans W. Becherer
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Eugene E. Covert, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
EUGENE E. COVERT
-----------------------------
Eugene E. Covert
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Ann M. Fudge, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
ANN M. FUDGE
-----------------------------
Ann M. Fudge
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Paul X. Kelley, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
PAUL X. KELLEY
-----------------------------
Paul X. Kelley
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Robert P. Luciano, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
ROBERT P. LUCIANO
-----------------------------
Robert P. Luciano
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Robert B. Palmer, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
ROBERT B. PALMER
-----------------------------
Robert B. Palmer
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Russell E. Palmer, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
RUSSELL E. PALMER
-----------------------------
Russell E. Palmer
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Ivan G. Seidenberg, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
IVAN G. SEIDENBERG
-----------------------------
Ivan G. Seidenberg
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Andrew C. Sigler, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
ANDREW C. SIGLER
-----------------------------
Andrew C. Sigler
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, John R. Stafford, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
JOHN R. STAFFORD
-----------------------------
John R. Stafford
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Thomas P. Stafford, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
THOMAS P. STAFFORD
-----------------------------
Thomas P. Stafford
Dated: February 1, 1996
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Robert C. Winters, a director of AlliedSignal Inc. (the
"Company"), a Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M.
Kreindler, Richard F. Wallman, G. Peter D'Aloia and Nancy A. Garvey, each with
power to act without the other and with power of substitution and
resubstitution, as my attorney-in-fact and agent for me and in my name, place
and stead, in any and all capacities,
(i) to sign the Company's Annual Report on Form 10-K under the
Securities Exchange Act of 1934 for the year ended December 31, 1995,
(ii) to sign any amendment to the Annual Report referred to in
(i) above, and
(iii) to file the documents described in (i) and (ii) above
and all exhibits thereto and any and all other documents in connection
therewith,
granting unto each said attorney and agent full power and authority to do and
perform every act and thing requisite, necessary or desirable to be done in
connection therewith, as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
ROBERT C. WINTERS
-----------------------------
Robert C. Winters
Dated: February 1, 1996
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet at December 31, 1995 and the consolidated statement
of income for the year ended December 31, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 540
<SECURITIES> 0
<RECEIVABLES> 1,477
<ALLOWANCES> 34
<INVENTORY> 1,991
<CURRENT-ASSETS> 4,890
<PP&E> 9,785
<DEPRECIATION> 5,043
<TOTAL-ASSETS> 12,465
<CURRENT-LIABILITIES> 3,804
<BONDS> 1,366
<COMMON> 358
0
0
<OTHER-SE> 3,234
<TOTAL-LIABILITY-AND-EQUITY> 12,465
<SALES> 14,346
<TOTAL-REVENUES> 14,346
<CGS> 11,539
<TOTAL-COSTS> 11,539
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> 1,261
<INCOME-TAX> 386
<INCOME-CONTINUING> 875
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 875
<EPS-PRIMARY> 3.09
<EPS-DILUTED> 0
<PAGE>
