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________________________________________________________________________________
________________________________________________________________________________
UNITED STATES
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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8974
ALLIEDSIGNAL INC.
(Exact name of registrant as specified in its charter)
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<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)
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Registrant's telephone number, including area code (201)455-2000
Securities registered pursuant to Section 12(b) of the Act:
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<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 1998-2000 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>
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* 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 [x]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $18.9 billion at December 31, 1996.
There were 282,814,625 shares of Common Stock outstanding at December 31, 1996.
Documents Incorporated by Reference
Part I and II: Annual Report to Shareowners for the Year Ended December
31, 1996.
Part III: Proxy Statement for Annual Meeting of Shareowners to be held
April 28, 1997.
________________________________________________________________________________
________________________________________________________________________________
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ALLIEDSIGNAL INC.
CROSS REFERENCE SHEET
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<CAPTION>
Page(s) in
Form 10-K Heading(s) in Annual Report to Shareowners for Annual
Item No. Year Ended December 31, 1996 Report
- ---------------------------------- ------------------------------------------------------------ ------------
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1. Business Note 25. Segment Financial Data ............................ 37
Note 26. Geographic Areas -- Financial Data ................ 38
Management's Discussion and Analysis ....................... 19
3. Legal Proceedings Note 21. Commitments and Contingencies ..................... 35
5. Market for the Regis- Note 27. 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
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Heading(s) in Proxy Statement for Page(s) in
Annual Meeting of Shareowners Proxy
to be held April 28, 1997 Statement
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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
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* 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,
1996.
2
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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
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ITEM PAGE
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Part I. 1 Business........................................................................................ 4
2 Properties...................................................................................... 13
3 Legal Proceedings............................................................................... 14
4 Submission of Matters to a Vote of Security Holders............................................. 14
Executive Officers of the Registrant............................................................... 14
Part II. 5 Market for the Registrant's Common Equity and Related Stockholder Matters....................... 16
6 Selected Financial Data......................................................................... 16
7 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 16
8 Financial Statements and Supplementary Data..................................................... 16
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 16
Part III. 10 Directors and Executive Officers of the Registrant............................................. 16(a)
11 Executive Compensation......................................................................... 17(a)
12 Security Ownership of Certain Beneficial Owners and Management................................. 17(a)
13 Certain Relationships and Related Transactions................................................. 17
Part IV. 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 17
Signatures.................................................................................................... 18
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(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, 1996. Certain other information relating to the Executive
Officers of the Registrant appears at pages 14 and 15 of this Report.
3
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PART I.
ITEM 1. BUSINESS
AlliedSignal Inc. (with its consolidated subsidiaries 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.
AlliedSignal is an advanced technology and manufacturing company serving
customers worldwide with aerospace and automotive products, chemicals, fibers,
plastics and advanced materials. The Company's operations are conducted under
three business segments: Aerospace, Automotive and Engineered Materials.
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.
Following is a description of the major Aerospace businesses:
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MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR MARKETS COMPETITORS
- -------------------- --------------------------- ------------------------- -------------------------- ----------------
<S> <C> <C> <C> <C>
Engines Turbine propulsion TFE731 turbofan Business, regional Pratt & Whitney
engines TPE331 turboprop and military trainer Canada
TFE1042 turbofan aircraft Rolls-
LF507 turbofan Commercial and military Royce/Allison
CFE738 turbofan helicopters Engine Company
T53, T55 Military vehicles Turbomeca
LT101 turboshaft Commercial and military
T800 turboshaft marine craft
AGT1500 turboshaft
TF40 turboshaft
----------------------------------------------------------------------------------------------------
Auxiliary power units Airborne auxiliary Commercial and Pratt & Whitney
(APUs) power units military aircraft Canada
Jet fuel starters Ground power Sundstrand
Secondary power
systems
Ground power units
----------------------------------------------------------------------------------------------------
Repair and overhaul Engine and APU Commercial and military Airlines
repair, overhaul and aircraft, marine and Independent
spare part sales land propulsion service
vehicles. providers
- -------------------------------------------------------------------------------------------------------------------------
Aerospace Environmental control Air conditioning Commercial, business Hamilton
Equipment systems(ECS) systems and general Standard
Systems Bleed air control aviation aircraft Intertechnique
systems Military aircraft Liebherr
Cabin pressure systems Spacecraft Nord Micro
Environmental and Parker Hannifin
thermal control for Sundstrand
spacecraft
Smoke detection
systems
ECS and component repair,
overhaul and spare part
sales
----------------------------------------------------------------------------------------------------
Engine systems and Electronic, Commercial, military, ABG Semca
accessories hydromechanical and regional and general Chandler-Evans
pneumatic gas turbine aviation aircraft Hamilton
engine controls engines Standard
Digital electronic Spacecraft Lockheed Martin
engine controls for Military battle tanks Lucas
military battle tanks
Fuel flow metering
components
Pressure transducers
Engine controls and
accessories repair,
overhaul and parts
sales
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MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR MARKETS COMPETITORS
- -------------------- --------------------------- ------------------------- -------------------------- ----------------
<S> <C> <C> <C> <C>
Power management and Electric, hydraulic and Commercial and Auxilec
generation systems pneumatic power military aircraft Lucas
generation systems Ground vehicles Parker Bertea
Power distribution and Smiths
power management Sundstrand
systems
Pumps, starters,
converters, controls,
electrical actuation
for flight surfaces
Pumps, starters,
converters, generators
and actuators repair,
overhaul and parts
sales
----------------------------------------------------------------------------------------------------
Landing systems Wheels and brakes Commercial and Aircraft Braking
Friction products military aircraft Systems
Brake control systems Dunlop
Wheel and brake B.F. Goodrich
overhaul services Messier-Bugatti
- -------------------------------------------------------------------------------------------------------------------------
Commercial Avionics Avionics systems Flight safety systems: Commercial, business Garmin
Systems Enhanced Ground and general aviation Honeywell
Proximity Warning Government aviation Narco
Systems (EGPWS) Rockwell/Collins
Traffic Alert and Sextant
Collision Avoidance Trimble
Systems (TCAS)
Windshear detection
and weather radar
systems
Flight data and cockpit
voice recorders
Communication and
navigation systems
Flight controls
Flight management systems
Data management and
aircraft performance
monitoring systems
Air-to-ground telephones
Cockpit displays
Global positioning
systems
- -------------------------------------------------------------------------------------------------------------------------
Electronic Systems Avionics systems Automatic flight control Military aviation Honeywell
systems Launch vehicles Kaiser
Cockpit display systems Space subsystems Lear Astronics
Navigation systems Lockheed Martin
Identification systems Rockwell/Collins
Integrated systems Smiths
Vehicle management
systems
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Automatic test systems Computer-controlled U.S. Government and GDE Systems
automatic test systems international logistics Honeywell
Functional testers and centers Litton
ancillaries Military aviation Lockheed Martin
Northrop Grumman
----------------------------------------------------------------------------------------------------
Guidance systems Inertial sensors/systems Military and Astronautics-
and star sensors/ commercial vehicles Kearfott
systems for guidance, Commercial spacecraft Ball
stabilization, and launch vehicles Honeywell
navigation and control Energy Litton
Transportation Rockwell/Collins
Missiles
Munitions
Underwater
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<CAPTION>
MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR MARKETS COMPETITORS
- -------------------- --------------------------- ------------------------- -------------------------- ----------------
<S> <C> <C> <C> <C>
Tactical command, Combat identification Military aviation GM Hughes/
control, communications, systems Military communications Magnavox
computers and ('Identification Friend Civil communications Harris
intelligence or Foe' (IFF)) Commercial information Litton
Commercial information security Lockheed Martin
security equipment Motorola
Satellite communication Raytheon/
terminals (SATCOM) E-Systems
Secured communication Rockwell/Collins
equipment (INFOSEC) Thomson-CSF/
Hazeltine
----------------------------------------------------------------------------------------------------
Radar systems Aircraft precision Global and U.S. airspace GM Hughes
landing agencies Motorola
Ground surveillance Military aviation Raytheon
Target detection devices Military missiles Rockwell
Thomson-CSF
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Underwater detection Acoustic towed arrays Military aviation GM Hughes
systems Dipping sonars Submarines and surface Lockheed Martin
Mine countermeasures ships Northrop Grumman
Mine warfare systems Raytheon
STN/Atlas
Thomson-CSF
- -------------------------------------------------------------------------------------------------------------------------
Government Management and technical Maintenance/operation of U.S. and foreign Computer
Services services space systems and government space and Sciences
facilities communications Dyncorp
Systems engineering, facilities Lockheed Martin
integration and Raytheon
training SAIC
services
Management of data
processing facilities
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Aerospace segment serves key military and commercial components 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, business aircraft and wide-bodied 'jumbos' flown by the world's
commercial airlines, 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, Aero International (Regional),
Raytheon, Israeli Aircraft Industries, Northrop Grumman, British Aerospace,
Cessna, Fairchild/Dornier, Dassault, Gulfstream, Bombardier, Rockwell
International, Pratt & Whitney, General Electric and Rolls-Royce, as well as the
world's leading airlines and business aircraft and general aviation aircraft
operators, and dealers and distributors of general aviation products. The
Company also provides field engineering management and technical support
services to Boeing, the National Aeronautics and Space Administration (NASA),
the U.S. Department of Defense (DoD), the U.S. Department of Energy, other
federal civilian agencies as well as state and local governments and other
commercial entities.
The Company is affected by U.S. Government budget constraints for defense
and space programs as well as the level of production of commercial, business
and general aviation aircraft which are impacted by business cycles and world
economic conditions. Growth in the Company's commercial business for aerospace
products is expected, over the long term, to help mitigate the reductions 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 can be canceled or reduced if aircraft orders are cut back.
Aerospace's 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.
In 1996, world defense spending flattened after declining in prior years.
The Company believes that the cyclical downturn for the commercial aircraft
industry reached bottom in 1995. A slight improvement was seen in the second
half of 1996 and this growth is expected to significantly accelerate in 1997.
Most major U.S. and international airlines operated in an improving economic
6
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environment. The modest turnaround for the airline industry that began in the
second half of 1993, continued in 1994 and strengthened significantly in 1995
and 1996. The regional airlines experienced strong traffic growth and new
regional aircraft orders were higher in 1996. The high-end business aviation
market showed moderate growth and the commercial aftermarket spare parts and
repair and overhaul business showed strong growth during 1996.
Sales to the U.S. Government, acting through its various departments and
agencies and through prime contractors, amounted to $1,833 million for 1996 and
$1,806 million for 1995, which includes sales to the DoD of $1,237 million in
1996 and $1,205 million in 1995. Approximately 55% and 54% of sales to the U.S.
Government in 1996 and 1995, respectively, were made under fixed-price contracts
in which the Company agrees to perform a contract for a fixed price and retains
for itself any benefits of cost savings or must bear the burden of cost
overruns.
Government contracts and, in general, subcontracts thereunder are
terminable, in whole or in part, for default or for convenience by the
government or the higher level contractor if deemed in their best interest. Upon
termination for convenience, 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.
In addition to the right of the government to terminate, government
contracts are conditioned upon the continuing availability of Congressional
appropriations. Congress usually appropriates funds on a fiscal-year basis even
though contract performance may extend over many years. Consequently, at the
outset of a program, the prime contract is usually partially funded and
additional funds are normally only appropriated to the contract by Congress in
future years. Fixed-price subcontracts are normally fully funded, but are
subject to convenience termination if the prime contract is not funded.
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 currently aware of any such investigations that it
expects will have a material adverse effect on the Company. In addition, the
Company carries out proactive compliance programs focused on areas of potential
exposure.
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 $4,514 million at December 31, 1996
and $4,523 million at December 31, 1995 of which U.S. and foreign government
orders were $1,906 million and $1,871 million for the respective years. The
Company anticipates that approximately $3,562 million of the total 1996 backlog
will be filled during 1997.
The Aerospace segment's international operations consist primarily of
exporting U.S. manufactured products and systems, performance of services that
include operating aircraft repair and overhaul facilities, and licensing
activities. The principal manufacturing facility outside of the U.S. is in
Canada.
AUTOMOTIVE
The Automotive segment designs, engineers, manufactures and distributes
systems and components for worldwide vehicle manufacturers and aftermarket
customers.
Following is a description of the major Automotive businesses:
<TABLE>
<CAPTION>
MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS MAJOR MARKETS COMPETITORS
- ------------------------- ------------------------- --------------------- -------------------------- ---------------------
<S> <C> <C> <C> <C>
Automotive Aftermarket Filters Oil, air, fuel, Automotive and heavy AC/Delphi/GM
transmission and vehicle aftermarket Knecht
coolant filters channels Labinal
PCV valves Mann & Hummel
Purolator/Mark IV
Wix/Dana
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MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS MAJOR MARKETS COMPETITORS
- ------------------------- ------------------------- --------------------- -------------------------- ---------------------
<S> <C> <C> <C> <C>
Electronic components Spark plugs Automotive aftermarket AC/Delphi/GM
Glow plugs channels Belden/Cooper
Wire and cable Bosch
Oxygen sensors Champion/Cooper
Rockwell/Collins
Eyquem
NGK
-------------------------------------------------------------------------------------------------------
Brake components Disc pads and brake Automotive and heavy Abex/Cooper
linings vehicle aftermarket EIS/Standard Motor
Disc and drum brakes channels and original Ferodo/T&N
Brake hydraulic equipment service (OES) Girling/Lucas
components Lockheed/AP
Brake fluid Mintex, Textar/BBA
Brake components Raybestos/Echlin
Teves/ITT
-------------------------------------------------------------------------------------------------------
Steering components Ball-joints Automotive and heavy Quinton
Rack & pinions vehicle aftermarket Hazel/Echlin
Power-steering pumps channels and OES ZF
Power-steering
components
- ------------------------------------------------------------------------------------------------------------------------------------
Safety Restraint Seat belt systems Seat belt assemblies Automotive and heavy Autoliv
Systems Pretensioners vehicle original Takata
Seat-integrated belts equipment manufacturers TRW
(OEMs)
-------------------------------------------------------------------------------------------------------
Air bag systems Air bag modules: Automotive and heavy Morton International
Driver vehicle OEMs Takata
Passenger TRW
Inflators
Cushions
- ------------------------------------------------------------------------------------------------------------------------------------
Turbocharging Systems Charge-air systems Turbochargers Automotive and heavy Behr/McCord
Charge-air coolers vehicle OEMs Holset
Aluminum cooling Engine manufacturers IHI
modules Aftermarket distributors KKK
Superchargers and dealers Mitsubishi/MHI
Remanufactured Modine
components Schwitzerc
Valeo
- ------------------------------------------------------------------------------------------------------------------------------------
Friction Materials Brake friction Disc brake pads Automotive and heavy Abex/Cooper
materials Drum brake linings vehicle OEMs, OES and Akebono
Brake blocks aftermarket channels BBA Group
Railway and commercial/ Delphi/GM
military aircraft OEMs Echlin
and brake manufacturers Ferodo/T&N
JBI
Nisshinbo
Sumitomo
Teves/ITT
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Truck Brake Systems Air brake systems Anti-lock braking On-highway medium and Cummins/Holset
(joint venture) systems (ABS) heavy truck, Echlin/Midland-Grau
Air compressors bus and trailer OEMs Rockwell WABCO
Air valves Off-highway equipment
Air dryers OEMs
Actuators Aftermarket distributors
Truck electronics and dealers/OES
Competitive
remanufactured
products
- ------------------------------------------------------------------------------------------------------------------------------------
Filters & Spark Plugs Filters Oil, air, Automotive and heavy AC/Delphi/GM
transmission vehicle OEMs and OES Champion Labs/U.I.S.
and fuel filters channels Purolator/Mark IV
Wix/Dana
-------------------------------------------------------------------------------------------------------
Spark plugs Spark plugs Automotive and heavy AC/Delphi/GM
vehicle OEMs, OES and Bosch
aftermarket channels Champion/Cooper
NGK
Nippondenso
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</TABLE>
On April 12, 1996, the Company sold a major component of its worldwide
braking business to Robert Bosch Gmbh, a privately held German company, for $1.5
billion in cash, subject to certain post-closing adjustments. Included in the
sale were the worldwide light-vehicle and medium-heavy
8
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truck hydraulic braking and ABS businesses. These businesses had 1995 sales of
approximately $2.0 billion. Excluded from the sale were the brake friction
materials business, brake-related sales to the independent aftermarket and the
truck brake systems business which is part of a joint venture with Knorr-Bremse
AG of Germany.
In February 1997, the Company and Knorr-Bremse AG, agreed in principle to
purchase the heavy-truck air brake systems business of Echlin Inc. in the United
States and Europe, as well as Echlin's U.S.-based commercial vehicle friction
materials and aftermarket brake shoe relining operations. The businesses to be
acquired have sales of about $320 million. The proposed acquisition is subject
to review by government agencies in the U.S. and Europe.
Automotive operations are located in the U.S., Australia, Brazil, Canada,
China, France, Germany, India, Ireland, Italy, Japan, Malaysia, Mexico, South
Korea, Spain and the United Kingdom. Distribution and marketing are conducted in
these and numerous other countries as well. 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.
Internationally, products are marketed under the Bendix, Fram, Autolite, Garrett
and Jurid trademarks.
Excluding the impact of the divested braking business from both years,
worldwide passenger car and truck OE sales accounted for approximately 50% and
48% in 1996 and 1995, respectively, of the total sales of the Automotive segment
with aftermarket sales, including OES sales, accounting for the balance. In 1996
and 1995, Automotive operations outside the U.S. accounted for $1,583 and $1,531
million, respectively, or 43% in both years, of total Automotive sales. Total
worldwide sales for 1996 and 1995 to the Company's five largest automotive
manufacturing customers amounted to $1,099 and $1,016 million, or 30% and 28%,
respectively, of total Automotive sales.
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.
ENGINEERED MATERIALS
The Engineered Materials segment manufactures chemicals, fibers, plastics
and advanced materials with applications for numerous industries, including
automotive, carpeting, refrigeration, construction, electronics, computers and
utilities.
Following is a description of the major Engineered Materials businesses:
<TABLE>
<CAPTION>
MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR MARKETS COMPETITORS
- --------------------- ---------------------- --------------------------- -------------------------- ----------------
<S> <C> <C> <C> <C>
Polymers Carpet fiber Nylon filament and staple Residential, commercial BASF
yarns and various specialty Beaulieu
markets Du Pont
Monsanto
Novalis
----------------------------------------------------------------------------------------------------------
Industrial fiber Industrial nylon and Passenger car and truck Akzo
polyester yarns tires Du Pont
Auto and light truck Hoechst/Celanese
seatbelts and airbags Kolon
Broad woven fabrics Rhone-Poulenc
Ropes and mechanical Tong Yang
rubber goods
Luggage
----------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR MARKETS COMPETITORS
- ------------------ --------------- ----------------------- ------------- -------------
<S> <C> <C> <C> <C>
Chemical Caprolactam Nylon for fibers, BASF
intermediates Phenol engineered resins and DSM
Acetone film Du Pont
Ammonium sulfate Methyl methacrylate Enichem
Hydroxylamine (MMA) Monsanto
Alphamethyl styrene Phenol resins Phenol Chemie
Cyclohexanol Fertilizer ingredients Rhone-Poulenc
Cyclohexanone Specialty chemicals Ube
Adipic acid Vitamins
Carbonization
--------------------------------------------------------------------------------------------------
Engineering Thermoplastic nylon Food and BASF
plastics resins pharmaceutical Bayer
Thermoplastic resin packaging Du Pont
alloys and blends Engine housings General Electric
Post-consumer (e.g., electric Hoechst/Celanese
recycled PET resins hand tools, chain Monsanto
Recycled nylon saws)
resins Automotive body
components
Office furniture
Electrical and
electronics
-------------------------------------------------------------------------------------------------
Textile nylon Fine denier nylon Hosiery BASF
yarns Lingerie Du Pont/Akra
Active wear FCFC
Recreational Fibra
equipment Nylstar
Luggage
-------------------------------------------------------------------------------------------------
Spectra performance Spectra'r' (extended Cordage for Akzo
materials chain polyethylene) commercial, DSM
Spectra Shield'r' fishing and Du Pont
(polyethylene) recreational OCF
Shield composites use
Spectra Fusion'r' Sports equipment
(fishing line) composites
Gold Shield'r' Bullet resistant
(Aramid) vests,
helmets and heavy
armor
Cut resistant
industrial
gloves
Sailcloth
- -------------------------------------------------------------------------------------------------------------------
Electronic Multilayer circuitry Laminates Military ADI/Isola
Materials materials Prepregs Telecommunications Nanya
Copper foil Automotive Nelco
Computers Polyclad
Consumer electronics
-------------------------------------------------------------------------------------------------
Copper-clad rigid Laminates Military ADI/Isola
laminates for Telecommunications General Electric
circuitry Automotive Nanya
Computers Nelco
Consumer electronics Polyclad
-------------------------------------------------------------------------------------------------
Advanced Materials for Semiconductors Tokyo-Ohka
microelectronic computer chip Microelectronics
materials manufacturing
-------------------------------------------------------------------------------------------------
Amorphous metals Amorphous metal Electrical Allegheny-Ludlum
ribbons and distribution Steel
components transformers Armco Steel
High frequency Kawasaki Steel
electronics Nippon Steel
Metal joining Toshiba
Theft deterrent Vacuum Smelze
- -------------------------------------------------------------------------------------------------------------------
Specialty Performance Low-molecular weight Textiles BASF
Chemicals additives polyethylene Plastics Eastman Chemical
Polymer additives Adhesives Hoechst/Celanese
Polish Mitsui
Coatings
Inks
Cosmetics
-------------------------------------------------------------------------------------------------
Performance Custom chemicals Agricultural and BASF
chemicals Specialty silanes pharmaceutical DSM
Crosslinking agents intermediates
Fine organic and Metal, glass,
inorganic chemicals plastic processing
Technical Coatings, adhesives
preservatives and sealants
Pigments and dyes Photographics,
Electronic and graphics and
laboratory security printing
chemicals Other industrial
applications
-------------------------------------------------------------------------------------------------
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</TABLE>
<TABLE>
<CAPTION>
MAJOR BUSINESSES PRODUCT CLASSES MAJOR PRODUCTS/SERVICES MAJOR MARKETS COMPETITORS
- ---------------- -------------------- ----------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Hydrofluoric acid Anhydrous and Fluorocarbons Du Pont
(HF) aqueous Steel Norfluor
hydrofluoric acid Oil refining Quimaco Fluor
Ultra-high purity Chemical
hydrofluoric acid intermediates
Electronics
----------------------------------------------------------------------------------------
Fluorocarbons Genetron'r' Refrigeration Atochem
refrigerants, Air conditioning Du Pont
aerosol and Polyurethane foam ICI
insulation foam Rigid-board
blowing insulation
agents Electronics
Genesolv'r' solvents Optical
Oxyfume sterilant Metalworking
gases Hospitals
Medical equipment
manufacturers
------------------------------------------------------------------------------------
Fluorine specialties Sulfur hexafluoride Resins Air Products
(SF6) Lubricants Asahi Glass
Boron trifluoride Fibers catalysts Atochem
(BF3) Ausimont
Iodine pentafluoride Kanto Denka
(IF5) Kogyo
Antimony Solvay Fluor
pentafluoride
(SbF5)
---------------------------------------------------------------------------------------
Nuclear services UF6 conversion Nuclear fuel British Nuclear
services Electric utilities Fuels
Cameco (Canada)
Cogema (France)
Tennex (Russia)
---------------------------------------------------------------------------------------
UOP (joint venture): Processes Petroleum, ABB Lummus
Process technology Catalysts petrochemical, gas Global
Refining products Molecular sieves processing and Criterion
Gas processing Adsorbents chemical industries IFP (France)
processes and Design of process Procatalyse
equipment plants and (France)
equipment Stone & Webster
Zeochem
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Engineered Materials' three major businesses are aligned around markets,
customers and common technologies. Brand identity, service to customers and
quality are important competitive factors in the market and there is
considerable price competition.
The Montreal Protocol (Protocol), which was 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. The Company completed its
efforts to develop environmentally safer fluorocarbon products and replaced
its CFC product line. The Company has commercialized key CFC substitute products
in various applications, including automotive air conditioning and residential,
commercial and industrial refrigeration. 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.
Engineered Materials operations are mainly located in the U.S., France and
Germany. Polymers and Specialty Chemicals manufacturing facilities are also
located in the Netherlands; Electronic Materials maintains facilities in
Southeast Asia, including Taiwan, Singapore, Thailand and South Korea.
Engineered Materials also has significant exports worldwide.
The Engineered Materials segment also includes the following other
businesses: carbon materials, environmental catalysts and specialty films. 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. 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 formed a joint venture to produce coated automotive
catalytic converter substrates. Major products in the specialty films business
include cast nylon (Capran'r'), biaxially oriented nylon film (Capran Emblem'r')
and fluoropolymer film (Aclar'r'). Specialty film markets include food,
pharmaceutical, and other packaging and industrial applications.
11
<PAGE>
<PAGE>
SEGMENT FINANCIAL DATA
Note 25 (Segment Financial Data) of Notes to Financial Statements in the
Company's 1996 Annual Report to shareowners is incorporated herein by reference.
DOMESTIC AND FOREIGN FINANCIAL DATA
Note 26 (Geographic Areas -- Financial Data) of Notes to Financial
Statements in the Company's 1996 Annual Report to shareowners is incorporated
herein by reference.
OTHER RECENT DEVELOPMENTS
The Company has undertaken certain repositioning actions that require
employee and asset relocation, plant integration and capital improvements. The
repositioning actions are generally expected to be completed by 1998.
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 actions by local governments
and changes in foreign currency exchange rates.
The Company's principal foreign manufacturing operations are in Australia,
Brazil, Canada, France, Germany, Ireland, Italy, Japan, Mexico, 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
The principal raw materials used by the Company's segments include:
Aerospace -- carbon fiber; electronic, optical and mechanical component parts
and assemblies; electronic and electromechanical devices and metallic products;
Automotive -- castings, forgings, steel and bar stock, copper, aluminum,
platinum and titanium and Engineered Materials -- 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. The principal raw materials used in the Company's
operations are generally readily available. The Company is dependent on its
suppliers and subcontractors in order to meet commitments to its customers, and
many major components and product equipment items are procured or subcontracted
with a number of domestic and foreign companies. The Company maintains a
qualification and performance surveillance process to control risk associated
with such reliance on third parties. The Company believes that sources of supply
for raw materials and components are generally adequate.
PATENTS AND TRADEMARKS
The Company owns approximately 9,500 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 patent license agreement 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.
12
<PAGE>
<PAGE>
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 $345, $353 and $318 million in
1996, 1995 and 1994, respectively. Customer-sponsored (principally the U.S.
Government) research and development activities amounted to an additional $536,
$536 and $486 million in 1996, 1995 and 1994, respectively.
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 certain 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 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 $43 million in 1996. The Company estimates that during each of
the years 1997 and 1998 such capital expenditures will be in the $55 to $60
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 1996 Annual Report to shareowners, incorporated herein by reference,
for further information regarding environmental matters.
EMPLOYEES
The Company had an aggregate of 76,600 salaried and hourly employees at
December 31, 1996. Approximately 53,200 were located in the United States, and,
of these employees, about 25% were unionized employees represented by various
local or national unions.
ITEM 2. PROPERTIES
The Company has 339 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
13
<PAGE>
<PAGE>
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)
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
Fostoria, OH
Greenville, OH
Jackson, TN
Maryville, TN
Conde, France
Thaon-Les-Vosges, France
Colleferro, 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
ITEM 3. LEGAL PROCEEDINGS
The first and second paragraphs of Note 21 (Commitments and Contingencies)
of Notes to Financial Statements at page 35 of the Company's 1996 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), 61 Chairman of the Board since January 1992. Chief Executive Officer of the
1991 Company since July 1991.
John W. Barter, 50 Executive Vice President and President, AlliedSignal Automotive since
1985 October 1994. Senior Vice President and Chief Financial Officer from July
1988 to September 1994.
Daniel P. Burnham, 50 Executive Vice President and President, AlliedSignal Aerospace since January
1991 1992.
Frederic M. Poses, 54 Executive Vice President and President, AlliedSignal Engineered Materials
1988 since April 1988.
</TABLE>
- ------------
(a) Also a director.
(table continued on next page)
14
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
NAME, AGE,
DATE FIRST
ELECTED AN OFFICER BUSINESS EXPERIENCE
- ------------------------------- ----------------------------------------------------------------------------
<S> <C>
Peter M. Kreindler, 51 Senior Vice President, General Counsel and Secretary since December 1994.
1992 Senior Vice President and General Counsel from March 1992 to November
1994. Senior Vice President and General Counsel-Elect from January 1992 to
February 1992.
Donald J. Redlinger, 52 Senior Vice President -- Human Resources and Communications since February
1991 1995. Senior Vice President -- Human Resources from January 1991 to
January 1995.
Paul R. Schindler, 55 Senior Vice President -- International since August 1993. Chairman of
1993 Imperial Chemical Industries Asia/Pacific (chemical manufacturer) from
April 1991 to July 1993.
James E. Sierk, 58 Senior Vice President -- Quality and Productivity since January 1991.
1991
Richard F. Wallman, 45 Senior Vice President and Chief Financial Officer since March 1995. Vice
1995 President and Controller of International Business Machines Corp. (IBM)
(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, 49 Vice President -- Government Relations since January 1989.
1989
Catharine M. deLacy, 39 Vice President, Health, Safety and Environmental since July 1995. Vice
1995 President -- Health, Safety and Environmental of Occidental Petroleum
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.
Robert F. Friel, 41 Vice President and Treasurer since September 1996. Vice President Finance
1996 and Administration, AlliedSignal Engines from June 1992 to August 1996.
Assistant Treasurer from March 1989 to May 1992.
Nancy A. Garvey, 47 Vice President and Controller since September 1996. Vice President and
1994 Treasurer from February 1994 to August 1996. Staff Vice
President -- Investor Relations from November 1989 to January 1994.
Larry E. Kittelberger, 48 Vice President and Chief Information Officer since August 1995 (Executive
1996 Officer since February 1996). Corporate Chairman -- Information Officer
Leadership Committee of Tenneco Inc. (diversified industrial concern) from
June 1989 to July 1995.
Frederick H. McClintock, 60 Vice President -- Materials Management since February 1996. Vice
1996 President -- Materials Management AlliedSignal Aerospace from March 1992
to January 1996. Owner and operator of Global Supply Institute (consulting
business) from June 1990 to February 1992.
</TABLE>
15
<PAGE>
<PAGE>
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 27 (Unaudited Quarterly Financial Information) of Notes to
Financial Statements at page 38 of the Company's 1996 Annual Report to
shareowners, and such information is incorporated herein by reference.
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 1996
Annual Report to shareowners, and such information is incorporated herein by
reference.
On July 10, 1996, the Company acquired Electron Vision Inc. in exchange for
148,941 shares of common stock. Because the fairness of this transaction had
been approved by the California Department of Corporations, the transaction was
exempt from registration pursuant to Section 3(a)(10) of the Securities Act of
1933, as amended (the 'Act').
On October 3, 1996, in exchange for 143,355 shares of its common stock, the
Company acquired the assets of Lori, Inc. from The Nordam Group Inc. ('Nordam').
Because Nordam is an 'accredited investor' within the meaning of Rule 501(a)(3)
under the Act, the common shares of the Company transferred to Nordam in this
transaction were not registered under the Act, in reliance on Rule 506 under the
Act.
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
1996 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 1996 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 January 31, 1997 appearing on pages 26
through 38 of the Company's 1996 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 1996
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,
1996, and such information is incorporated herein by reference. Certain other
information relating to Executive Officers of the Registrant appears at pages 14
and 15 of this Form 10-K Annual Report.
16
<PAGE>
<PAGE>
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.
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 1996 Annual Report to shareowners:
Report of Independent Accountants.................................................... 38
Consolidated Statement of Income for the years ended December 31, 1996, 1995 and
1994................................................................................ 26
Consolidated Statement of Retained Earnings for the years ended December 31, 1996,
1995 and 1994....................................................................... 26
Consolidated Balance Sheet at December 31, 1996 and 1995............................. 27
Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1995 and
1994................................................................................ 28
Notes to Financial Statements........................................................ 29
</TABLE>
(a)(2.) Consolidated Financial Statement Schedules
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>
10.2 Deferred Compensation Plan for Non-Employee Directors of
AlliedSignal Inc., as amended
10.3 Retirement Plan for Non-Employee Directors of AlliedSignal Inc.,
as amended
13 Pages 19 through 39 (except for the data included under the captions 'Financial
Statistics' on page 39) of the Company's 1996 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
During the three months ended December 31, 1996, reports on Form 8-K were
filed on November 26 and December 16, in each case reporting, under Item 9,
unregistered sales of the Company's Common Stock in reliance on Regulation S
under the Act.
17
<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 28, 1997 By: /s/ NANCY A. GARVEY
----------------------------------
Nancy A. Garvey
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:
Name Name
- ----------------------------------------- ------------------------------------
* *
- ----------------------------------------- -------------------------------------
Lawrence A. Bossidy Ivan G. Seidenberg
Chairman of the Board and Chief Executive Director
Officer and Director
* *
- ----------------------------------------- -------------------------------------
Hans W. Becherer 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 Henry T. Yang
Director Director
*
- -----------------------------------------
Russell E. Palmer
Director
/s/ RICHARD F. WALLMAN /s/ NANCY A. GARVEY
- ----------------------------------------- -------------------------------------
Richard F. Wallman Nancy A. Garvey
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)
February 28, 1997
18
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
<C> <S>
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 (filed herewith)
10.3* Retirement Plan for Non-Employee Directors of AlliedSignal Inc., as amended (filed herewith)
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 as amended 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 Forms 10-Qs for the
quarters ended June 30, 1995 and June 30, 1996)
10.14 364-Day Credit Agreement dated as of June 30, 1995 as amended 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 Forms 10-Qs for the
quarters ended June 30, 1995 and June 30, 1996)
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 1996 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.
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as ...... 'r'
<PAGE>
<PAGE>
EXHIBIT 10.2
Deferred Compensation Plan for Non-Employee Directors
of AlliedSignal Inc.
-----------------------------------------------------
(As Amended Effective January 1, 1997)
1. ELIGIBILITY
Each member of the Board of Directors (the "Board") of AlliedSignal Inc.
(the "Corporation") who is not an employee of the Corporation or any of its
subsidiaries (a "Director") is eligible to participate in the Deferred
Compensation Plan for Non-Employee Directors of AlliedSignal Inc. (the "Plan").
2. DEFINITIONS
(a) Committee. The Nominating and Board Affairs Committee of the Board
or any successor.
(b) Common Stock. The publicly traded common stock of the Corporation or
any successor.
(c) Compensation. All amounts payable for services as a Director,
including amounts payable for services as a member or chairman of a committee of
the Board.
(d) Elective Deferrals. Compensation deferred by a Director under the
Plan after December 31, 1996 (other than Non-Elective Deferrals and Lump-Sum
Compensation, as defined below).
(e) Lump-Sum Compensation. A one-time lump-sum amount for each Director
serving on December 31, 1996 who elected such amount in satisfaction of any
benefits under the Retirement Plan for Non-Employee Directors of AlliedSignal
Inc. (the "Retirement Plan"), which amount is automatically deferred under the
Plan.
(f) Non-Elective Deferrals. Effective January 1 of each year after 1996,
$15,000 of annual Compensation for Directors not eligible for a benefit under
the Retirement Plan, which amount is automatically deferred under the Plan.
(g) Pre-1997 Elective Deferrals. Compensation deferred by a Director
under the Plan prior to January 1, 1997.
<PAGE>
<PAGE>
- 2 -
(h) Retirement. As used in the Plan, the term "retirement" or "retire"
shall include any termination of a Director's Board service except, in the case
of Lump-Sum Compensation, any termination which the Board determines to have
resulted from gross cause. "Gross cause" means fraud, misappropriation or
intentional misconduct damaging to the property or business of the Corporation
or any of its subsidiaries, or commission of a crime.
(i) Secretary. The Secretary of the Corporation.
3. INVESTMENT OPTIONS
Amounts deferred under the Plan shall be invested as described below.
(a) Pre-1997 Elective Deferrals. These amounts have been credited to a
deferred compensation account (the "Director's account") either (i) in cash with
interest as described in paragraphs 5(b) and (c) below or (ii) in shares of
Common Stock, as elected by the Director, and will remain in the form elected
until paid out.
(b) Elective Deferrals. A Director may elect to have these amounts
credited to the Director's account in cash (i) with interest as described in
paragraph 5(c) below or (ii) which is valued as if invested in one or more of
the funds available for investments by participants in the AlliedSignal Savings
Plan as described in paragraph 5(g) below. All such amounts will be paid out in
cash.
(c) Non-Elective Deferrals. These amounts will be credited to the
Director's account on January 1 of each year in the form of equivalent shares of
Common Stock, calculated based on the mean between the highest and lowest sales
prices of the Common Stock as reported on the New York Stock Exchange Composite
Tape for the immediately preceding December 31 (or, if there were no sales on
such day, for the last preceding day on which there were sales) and valued as
described in paragraph 5(f) below. For any person who becomes a Director after
January 1, a pro rata portion of the annual amount based on the number of days
remaining in the calendar year will be credited to the Director's account on the
Director's first day of service in the form of equivalent shares of Common
Stock, calculated based on such mean for the first day of service (or, if there
were no sales on such day, for the last preceding day on which there were
sales). All such amounts will be paid out in cash after retirement from the
Board.
(d) Lump-Sum Compensation. This amount will be credited to the
Director's account, effective January 1, 1997, either (i) 100% in the form of
equivalent shares of Common Stock, calculated based on the mean between the
highest and lowest sales prices of the Common Stock as reported on the New York
Stock Exchange Composite Tape for
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December 31, 1996 and valued as described in paragraph 5(f) below, or (ii) 50%
in the form of equivalent shares of Common Stock, calculated and valued as
described in (i), and 50% in cash with interest at the rate of 10% per annum, as
elected by the Director prior to January 1, 1997. All such amounts will be paid
out in cash after retirement from the Board.
4. PARTICIPATION
(a) Elective Deferrals.
(i) Time of Election. Prior to the beginning of any calendar
year, each Director who is not then participating in the Plan (other
than by virtue of Non-Elective Deferrals and/or Lump-Sum Compensation)
may elect to participate in the Plan by directing that all or any part
of the Director's Compensation which otherwise would have been payable
currently for services as a Director during such calendar year shall be
credited to the Director's account as Elective Deferrals. Any person who
shall become a Director during any calendar year may elect, before the
Director's term begins, to defer payment of all or any part of the
Director's Compensation for the remainder of such calendar year.
(ii) Form and Duration of Election. An election to make Elective
Deferrals shall be made by written notice executed by the Director and
filed with the Secretary. Such election shall continue in effect for
succeeding calendar years unless the Director terminates such election
by written notice filed with the Secretary. Any such termination shall
become effective as of the end of the calendar year in which such notice
is given and only with respect to Compensation payable for services as a
Director thereafter. Amounts credited to the Director's account prior to
the effective date of termination shall not be affected by such
termination and shall be distributed only in accordance with the terms
of the Plan.
(iii) Adjustment of Future Deferrals. Prior to the beginning of
any calendar year, a Director participating in the Plan may file another
written notice with the Secretary electing to change the amount of
Elective Deferrals to be credited to the Director's account for services
as a Director commencing with such calendar year. Amounts credited to
the Director's account prior to the effective date of such change shall
not be affected by such change and shall be distributed only in
accordance with the terms of the Plan,
(iv) Adjustment of Investment Options. A Director may elect to
change the investment options with respect to those portions of the
Director's account applicable to Elective Deferrals which are valued as
if invested in one or more of
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the funds available for investments by participants in the AlliedSignal
Savings Plan. Any such election to reallocate amounts among the
investment funds shall be made by written notice executed by the
Director and filed with the Secretary, may be made no more often than
once each calendar quarter during the 30-day period beginning on the
third business day following an earnings release by the Corporation, and
shall be effective on the first business day following receipt by the
Secretary.
(b) Non-Elective Deferrals. No participation election is required for
Non-Elective Deferrals since the crediting of such amounts to the Director's
account will be automatic.
(c) Lump-Sum Compensation. No participation election is required for
Lump-Sum Compensation since the crediting of such amounts to the Director's
account, in accordance with the irrevocable investment option elected by the
Director prior to January 1, 1997, will be automatic.
5. THE DIRECTOR'S ACCOUNT
(a) All Compensation which a Director has elected to defer under the
Plan shall be credited to the Director's account consistent with the Director's
investment options, as described in paragraph 3. All credits shall be made as
unfunded book entries and the Director shall not have any interest in any
amounts credited to the Director's account until distributed in accordance with
the Plan.
(b) Amounts credited to the Director's account in cash for services as a
Director during 1993 or any prior calendar year shall accrue amounts equivalent
to interest commencing on the date such amounts would otherwise have been paid,
at a rate per annum for each calendar quarter fixed by the Treasurer of the
Corporation at the commencement of such calendar quarter based upon the sum of
(i) the average quoted rate for three-month U.S. Treasury Bills for the last
full week of the preceding calendar quarter, and (ii) a rate per annum of three
percent.
(c) Amounts credited to the Director's account in cash for services as a
Director during 1994 or any subsequent calendar year, other than cash amounts
referred to in Paragraph 5(g), Lump-Sum Compensation and Non-Elective Deferrals,
shall accrue amounts equivalent to interest commencing on the date such amounts
would otherwise have been paid, at the same rates per annum as those fixed for
deferrals with respect to the relevant calendar years under the AlliedSignal
Inc. Incentive Compensation Plan for Executive Employees, as amended from time
to time.
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(d) Amounts credited to the Director's account in cash as a result of
the conversion of shares or equivalent shares to cash pursuant to paragraph 7(a)
shall accrue amounts equivalent to interest commencing on the date of such
conversion, at the higher of the two rates provided under paragraphs 5(b) and
(c), regardless of the calendar year or years to which the underlying deferral
of shares or equivalent shares relates. The determination of which rate is
higher shall be made each calendar quarter and, for purposes of such
determination, the rate provided under paragraph 5(c) for cash amounts deferred
with respect to the then current calendar year shall be compared to the rate
provided under paragraph 5(b) for the then current calendar quarter.
(e) Amounts determined pursuant to this paragraph 5 shall be compounded
at the end of each calendar quarter and credited to the Director's account.
Amounts credited to the Director's account in cash shall continue to accrue
amounts equivalent to interest in accordance with paragraphs 5(b), (c) or (d)
until distributed in accordance with the Plan.
(f) Amounts credited to the Director's account in shares or equivalent
shares of Common Stock shall accrue amounts equivalent to cash or stock
dividends as declared by the Board. For Pre-1997 Elective Deferrals, such
equivalent amounts shall continue to accrue amounts equivalent to interest or
dividends. For Non-Elective Deferrals and Lump-Sum Compensation, such equivalent
amounts shall be credited to the Director's account as if reinvested in Common
Stock. Amounts credited to the Director's account in equivalent shares of Common
Stock shall be valued on the same basis as investments by participants in the
AlliedSignal Common Stock Fund under the AlliedSignal Savings Plan, as indicated
in paragraph 5(g).
(g) Amounts credited to the Director's account in cash but which are
valued as if invested in one or more of the funds available for investment by
participants in the AlliedSignal Savings Plan shall be valued on the same basis
as investments by participants in such funds (excluding any charge for expenses
and, with respect to the AlliedSignal Common Stock Fund, excluding any liquidity
reserves and assuming reinvestment of dividend equivalents).
6. DISTRIBUTION FROM ACCOUNTS
(a) Form of Election.
(i) Pre-1997 Elective Deferrals. The aggregate amount of
Pre-1997 Elective Deferrals credited to a Director's account shall be
distributed in accordance with the Director's distribution election in
effect at the time such amounts were credited to the Director's account,
as modified effective January 1, 1997 by a Director's special one-time
election to take advantage of the Federal
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Source Tax Law (4 U.S.C. ss.114). If no distribution election was in
effect, such amounts shall be paid on the first business day of the
calendar year immediately following the year in which the Director
ceases to be a Director.
(ii) Elective Deferrals. At the time a Director makes a
participation election pursuant to paragraph 4(a), the Director shall
also file with the Secretary a written election with respect to the
distribution of the aggregate amount credited to the Director's account
pursuant to such participation election. A Director may elect to receive
such amount in one lump-sum payment or in a number of approximately
equal installments (provided the payout period does not exceed 10
years). The Director may also elect to have the lump-sum payment or the
first installment paid (A) on the first business day of the calendar
year immediately following the year in which the Director ceases to be a
Director, (B) on the first business day of such calendar year as the
Director may elect, or (C) as soon as practicable following the
Director's death. Except in the case of the Director's death, in which
event paragraph 8 shall govern, subsequent installments shall be paid on
the first business day of each succeeding installment period until the
entire amount credited to the Director's account shall have been paid.
Absent such an election, except in the case of death, the amount of
Elective Deferrals in the Director's account shall be paid on the first
business day of the calendar year immediately following the year in
which the Director ceases to be a Director.
(iii) Lump-Sum Compensation. The aggregate amount credited to a
Director's account as Lump-Sum Compensation shall be distributed in
accordance with the distribution election filed by the Director with the
Secretary prior to January 1, 1997. Such distribution election shall
have included an election to receive such amount in one lump-sum payment
or in a number of approximately equal installments (provided the payout
period does not exceed 10 years), and an election to have the lump-sum
payment or the first installment paid (A) on the first business day of
the calendar year immediately following the year in which the Director
ceases to be a Director, (B) on the first business day of a calendar
year which is such number of years following retirement as the Director
may elect, or (C) as soon as practicable following the Director's death.
Except in the case of the Director's death, in which event paragraph 8
shall govern, subsequent installments shall be paid on the first
business day of each succeeding installment period until the entire
amount credited to the Director's account shall have been paid. Absent
such an election, except in the case of death, the amount of Lump-Sum
Compensation in the Director's account shall be paid on the first
business day of the calendar year immediately following the year in
which the Director ceases to be a Director.
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(iv) Non-Elective Deferrals. Although no participation election
is required for Non-Elective Deferrals, each Director prior to the
beginning of any calendar year may file with the Secretary a written
election with respect to the distribution of the aggregate amount of
Non-Elective Deferrals credited to the Director's account for the next
calendar year. Any person who shall become a Director during any
calendar year may file with the Secretary before the Director's term
begins a written election with respect to the distribution of the
aggregate amount of Non-Elective Deferrals credited to the Director's
account for the remainder of such calendar year. Any such election shall
continue in effect for Non-Elective Deferrals credited to the Director's
account in succeeding calendar years, unless the Director files a new
written election prior to the beginning of any calendar year. A Director
may elect to receive such amount in one lump-sum payment or in a number
of approximately equal installments (provided the payout period does not
exceed 10 years). The Director may also elect to have the lump-sum
payment or the first installment paid (A) on the first business day of
the calendar year immediately following the year in which the Director
ceases to be a Director of the Corporation, (B) on the first business
day of a calendar year which is such number of years following
retirement as the Director may elect, or (C) as soon as practicable
following the Director's death. Except in the case of the Director's
death, in which event paragraph 8 shall govern, subsequent installments
shall be paid on the first business day of each succeeding installment
period until the entire amount credited to the Director's account shall
have been paid. Absent such an election, except in the case of death,
the amount of Non-Elective Deferrals credited to the Director's account
shall be paid on the first business day of the calendar year immediately
following the year in which the Director ceases to be a Director.
(b) Adjustment of Method of Distribution of Future Deferrals. Whether or
not a Director has filed a notice pursuant to paragraph 4(a)(iii) electing to
change the amount of Elective Deferrals to be credited to the Director's
account, a Director participating in the Plan may, prior to the beginning of any
calendar year, file another written notice with the Secretary electing to change
the method of distribution of the aggregate amount of Elective Deferrals
credited to the Director's account for services as a Director commencing with
such calendar year. Amounts credited to the Director's account prior to the
effective date of such change shall not be affected by such change and shall be
distributed only in accordance with the election in effect at the time such
amounts were credited to the Director's account.
(c) Aggregate Amounts. References to the aggregate amounts credited to
the Director's account include accrued amounts equivalent to interest and
dividends.
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7. CHANGE IN CONTROL
(a) Conversion of Shares. Notwithstanding anything to the contrary in
the Plan, shares of Common Stock and equivalent shares of Common Stock credited
to a Director's account shall be converted to cash, as soon as practicable
following a Change in Control but in no event later than 90 days after the
Change in Control, in an amount equal to the total number of shares or
equivalent shares of Common Stock, and fractional interests thereof, credited to
the Director's account, multiplied by the Multiplication Factor. "Multiplication
Factor" shall mean (A) in the case of an acquisition of Common Stock described
in paragraph 7(d)(i), the Acquisition Price per Share, (B) in the event of the
occurrence of an Offer as defined in paragraph 7(d)(ii), the Offer Price per
Share, (C) in the case of an event described in paragraph 7(d)(iii), the Merger
Price per Share, or (D) in the case of a change in the composition of the Board
as described in paragraph 7(d)(iv), the highest Fair Market Value per Share of
the Common Stock for any day during (i) the ninety-day period ending on or
within 89 days following the date of the Change in Control which the Committee,
in its sole discretion, shall select prior to the Change in Control, or (ii) if
the Committee shall not have selected a ninety-day period pursuant to clause (i)
of this sentence prior to the Change in Control, the ninety-day period ending on
the 45th day following the date of the Change in Control. "Acquisition Price per
Share" shall mean the greater of (A) the highest price per share stated on the
Schedule 13D or any amendment thereto filed by the holder of 30% or more of the
Corporation's voting power which gives rise to the Change in Control, and (B)
the highest Fair Market Value per Share of Common Stock during the ninety-day
period ending on the date the Change in Control occurs. "Offer Price per Share"
shall mean the greater of (A) the highest price per share of Common Stock paid
in any Offer, which Offer is in effect at any time during the ninety-day period
ending on the date on which the Change in Control occurs, or (B) the highest
Fair Market Value per Share of Common Stock during such ninety-day period. Any
securities or property which are part or all of the consideration paid for
shares of Common Stock in the Offer shall be valued in determining the Offer
Price per Share at the higher of (A) the valuation placed on such securities or
property by the corporation, person or other entity making such Offer or (B) the
valuation placed on such securities or property by the Committee. "Merger Price
per Share" shall mean the greater of (A) the fixed or formula price for the
acquisition of shares of Common Stock occurring pursuant to such event described
in paragraph 7(d)(iii) if such fixed or formula price is determinable on the
date on which the Change in Control occurs, and (B) the highest Fair Market
Value per Share of Common Stock during the ninety-day period ending on the date
on which the Change in Control occurs. Any securities or property which are part
or all of the consideration paid for shares of Common Stock pursuant to such
event shall be valued in determining the Merger Price per Share at the higher of
(A) the valuation placed on such securities or property by the corporation,
person or other entity which is a party with the Corporation to an event
described in paragraph 7(d)(iii), or (B) the valuation
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placed on such securities or property by the Committee. For purposes of this
paragraph (7)(a), "Fair Market Value per Share of Common Stock" for any day
shall be the mean between the highest and lowest sales prices of Common Stock as
reported on the New York Stock Exchange Composite Tape for such day.
(b) Interest Equivalents. Notwithstanding anything to the contrary in
the Plan, in the event of a Change in Control (i) the Plan may not be amended to
reduce the formulas contained in paragraph 5 which determine the rate at which
amounts equivalent to interest accrue with respect to cash amounts credited to a
Director's account, including cash amounts attributable to the conversion of
shares or equivalent shares in a Director's account pursuant to paragraph 7(a),
and (ii) the Plan Administrator referred to in paragraph 10(c) shall fix rates
under the formulas contained in paragraph 5 in lieu of the Treasurer of the
Corporation.
(c) Payment on a Change in Control. In the event of a Change in Control,
the aggregate amount credited to the Director's account under the Plan shall be
paid in one lump-sum payment as soon as practicable following the Change in
Control but in no event more than 90 days after the Change in Control.
Notwithstanding the foregoing, any election with respect to Pre-1997 Elective
Deferrals in which a Director did not elect a lump-sum payment on a Change in
Control shall remain in effect.
(d) Definition of Change in Control. For purposes of the Plan, a Change
in Control is deemed to occur at the time (i) when any entity, person or group
(other than the Corporation, any subsidiary or any savings, pension or other
benefit plan for the benefit of employees of the Corporation or its
subsidiaries) which theretofore beneficially owned less than 30% of the Common
Stock then outstanding acquires shares of Common Stock in a transaction or
series of transactions that results in such entity, person or group directly or
indirectly owning beneficially 30% or more of the outstanding Common Stock, (ii)
of the purchase of shares of Common Stock pursuant to a tender offer or exchange
offer (other than an offer by the Corporation) for all, or any part of, the
Common Stock ("Offer"), (iii) of a merger in which the Corporation will not
survive as an independent, publicly owned corporation, a consolidation, or a
sale, exchange or other disposition of all or substantially all of the
Corporation's assets, (iv) of a substantial change in the composition of the
Board during any period of two consecutive years such that individuals who at
the beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the stockholders of the Corporation, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period, or (v) of any transaction or
other event which the Committee, in its discretion, determines to be a Change in
Control for purposes of the Plan.
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8. DISTRIBUTION ON DEATH
If a Director should die before all amounts credited to the Director's
account shall have been paid in accordance with the Director's prior elections,
the balance in such account (including all unpaid installments if installment
payments had been elected by the Director under paragraph 6) shall be paid as
soon as practicable following the Director's death to the beneficiary designated
in writing by the Director and filed with the Secretary of the Corporation. The
payable balance shall be paid to the estate of the Director if (a) no such
designation has been made or (b) the designated beneficiary shall have
predeceased the Director and no further designation has been made. A Director
may change the designated beneficiary at any time during the Director's lifetime
by filing a subsequent designation in writing with the Secretary of the
Corporation.
9. PAYMENT IN THE EVENT OF HARDSHIP
Upon receipt of a request from a Director or a Director's designated
beneficiary, delivered in writing to the Secretary, the Committee may cause the
Corporation to accelerate payment promptly of all or any part of the unpaid
balance credited to the Director's account (other than amounts credited as
Lump-Sum Compensation and Non-Elective Deferrals) if it finds in its sole
discretion that continued deferral of such amount would result in hardship to
the Director or the person otherwise entitled to receive it. For this purpose,
"hardship" means an unanticipated financial emergency that is caused by an event
beyond the control of the Director or other person entitled to receive payment
and that would result in severe financial hardship to such person if
acceleration of payment were not permitted.
10. MISCELLANEOUS
(a) The right of a Director to receive any amount credited to the
Director's account shall not be transferable or assignable by the Director,
except by will or by the laws of descent and distribution. To the extent that
any person acquires a right to receive any amount credited to a Director's
account hereunder, such right shall be no greater than that of an unsecured
general creditor of the Corporation. Except as expressly provided herein, any
person having an interest in any amount credited to a Director's account under
the Plan shall not be entitled to payment until the date the amount is due and
payable. No person shall be entitled to anticipate any payment by assignment,
alienation, sale, pledge, encumbrance or transfer in any form or manner prior to
actual or constructive receipt thereof.
(b) The Corporation shall not be required to reserve or otherwise set
aside funds or shares of Common Stock for the payment of its obligations
hereunder. With
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respect to Pre-1997 Elective Deferrals, the Corporation shall make available as
and when required a sufficient number of shares of Common Stock to meet the
needs of the Plan. To the extent that registration of such shares under the
Securities Act of 1933 shall be required prior to their resale, the Corporation
undertakes to either file a registration statement relating to such shares or
include such shares in another registration statement to be filed within a
reasonable time.
(c) Prior to a Change in Control, the Committee shall interpret the Plan
and make all determinations deemed necessary or desirable for the Plan's
implementation. The determination of the Committee shall be conclusive. The
Committee may obtain such advice or assistance as it deems appropriate from
persons not serving on the Committee. The Senior Vice President responsible for
Human Resources or other appropriate officer of the Corporation shall, prior to
any Change in Control, name as Plan Administrator any person or entity
(including, without limitation, a bank or trust company). Following a Change in
Control, the Plan Administrator shall interpret the Plan and make all
determinations deemed necessary or desirable for the Plan's implementation. The
determination of the Plan Administrator shall be conclusive. The Corporation
shall provide the Plan Administrator with such records and information as are
necessary for the proper administration of the Plan. The Plan Administrator
shall rely on such records and other information as the Plan Administrator shall
in its judgment deem necessary or appropriate in determining the eligibility of
a Director and the amount payable to a Director under the Plan.
(d) The Board may at any time amend or terminate the Plan provided that
no amendment or termination shall impair the rights of a Director with respect
to amounts then credited to the Director's account.
(e) Each Director participating in the Plan will receive a statement at
least quarterly indicating the amounts credited to the Director's account as of
the end of the preceding calendar quarter.
(f) If adjustments are made to outstanding shares of Common Stock as a
result of stock dividends, split-ups, recapitalizations, mergers, consolidations
and the like, an appropriate adjustment will also be made in the number of
shares or equivalent shares of Common Stock credited to the Director's account.
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EXHIBIT 10.3
Retirement Plan for Non-Employee Directors
of AlliedSignal Inc.
------------------------------------------
(As Amended Effective January 1, 1997)
1. Eligibility
Each member of the Board of Directors (the "Board") of AlliedSignal Inc.
(the "Corporation") who is not an employee of the Corporation or any of its
subsidiaries and who at the time of retirement from the Board, as defined in
paragraph 6(f), shall have served five years on the Board, the Board of
Directors of Allied Corporation (the "Allied Board"), the Board of Directors of
The Signal Companies, Inc. (the "Signal Board") or the board of directors of any
corporation acquired by the Corporation, Allied Corporation ("Allied") or The
Signal Companies, Inc. ("Signal") if the Director was a non-employee director of
the acquired corporation at the time of acquisition (an "Acquired Corporation
Board"), or any combination thereof, as a non-employee director and shall have
attained at least age 60 (an "Eligible Director") shall, unless the Eligible
Director elects otherwise pursuant to paragraph 6(g), be eligible to receive a
retirement benefit under the Retirement Plan for Non-Employee Directors of
AlliedSignal Inc. (the "Plan"). Notwithstanding the foregoing, an Eligible
Director shall not include (a) any individual who becomes a member of the Board
after December 31, 1996, or (b) any members of the Board on December 31, 1996
who waived their rights to any benefits under the Plan in exchange for the
crediting of a lump-sum amount in satisfaction thereof to their accounts under
the Deferred Compensation Plan for Non-Employee Directors of AlliedSignal Inc.,
effective January 1, 1997.
2. Amount of Benefit
(a) An Eligible Director who at the time of retirement from the Board
shall have attained age 70 shall be entitled to receive, for the remainder of
the Director's lifetime, a retirement benefit at an annual rate equal to the
annual Board retainer in effect for non-employee directors of the Board at the
time of such retirement.
(b) An Eligible Director who at the time of retirement from the Board
shall have attained age 60 but not age 70 shall be entitled to receive, for a
period of time equal to the number of months such Director served as a
non-employee director on the Board, the Allied Board, the Signal Board or any
Acquired Corporation Board, or any combination thereof, a retirement benefit at
an annual rate equal to the
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annual Board retainer in effect for non-employee directors of the Board at the
time of such retirement.
3. Time of Payment
(a) Except as otherwise provided in paragraphs 3(b) and 3(c), the
retirement benefit determined in accordance with paragraph 2 shall be paid to an
Eligible Director commencing upon such Director's retirement from the Board (a
"Retired Director") in as nearly equal as possible quarterly installments at the
same time as quarterly installments of the annual Board retainer are paid to
non-employee directors serving on the Board at the time of the payment. If such
payments are made to current directors more frequently than quarterly, then
amounts due under the Plan shall be paid on such more frequent basis. If an
Eligible Director elects not to receive such payments or a Retired Director
elects to stop receiving such payments prior to the receipt of all payments due
under the Plan, such Director shall so advise the Corporation and may not
thereafter elect to receive or resume receipt of such payments.
(b) Each member of the Board may irrevocably elect to receive a lump-sum
payment of the present value of the retirement benefit, as determined in
accordance with paragraphs 2 and 3(d), which remains payable, in the event the
individual becomes a Retired Director on or before the second anniversary date
of a Change in Control. Such lump-sum payment shall be made to the Retired
Director within the 90-day period following the later of the Change in Control
or such Director's retirement from the Board. Such election may be made by
filing a written notice with the Secretary of the Corporation before a Change in
Control but not after the later of September 30, 1990 or 30 days after becoming
a member of the Board.
(c) Each Retired Director may irrevocably elect to receive a lump-sum
payment of the present value of the retirement benefit, as determined in
accordance with paragraphs 2 and 3(d), which remains payable, in the event of a
Change in Control. Such lump-sum payment shall be paid to the Retired Director
within the 90-day period following the Change in Control. A surviving spouse of
a deceased Retired Director may irrevocably elect to receive a lump-sum payment
of the amount payable to the surviving spouse pursuant to paragraph 5, in the
event of a Change in Control. Such election by a Retired Director or by the
surviving spouse of a deceased Retired Director may be made by filing a written
notice with the Secretary of the Corporation before a Change in Control but not
after September 30, 1990.
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(d) For purposes of determining the present value of a Retired
Director's retirement benefit under paragraphs 3(b) and 3(c), and of a surviving
spouse's benefit under paragraph 5, the Pension Benefit Guaranty Corporation
immediate annuity rate and the UP 1984 mortality table in effect immediately
before the Change in Control shall be used.
(e) For purposes of the Plan, a Change in Control is deemed to occur at
the time (i) when any entity, person or group (other than the Corporation, any
subsidiary or any savings, pension or other benefit plan for the benefit of
employees of the Corporation or its subsidiaries) which theretofore beneficially
owned less than 30% of the Corporation's Common Stock ("Common Stock") then
outstanding acquires shares of Common Stock in a transaction or series of
transactions that results in such entity, person or group directly or indirectly
owning beneficially 30% or more of the outstanding Common Stock, (ii) of the
purchase of shares of Common Stock pursuant to a tender offer or exchange offer
(other than an offer by the Corporation) for all, or any part of, the Common
Stock, (iii) of a merger in which the Corporation will not survive as an
independent, publicly owned corporation, a consolidation, or a sale, exchange or
other disposition of all or substantially all of the Corporation's assets, (iv)
of a substantial change in the composition of the Board of Directors during any
period of two consecutive years such that individuals who at the beginning of
such period were members of the Board of Directors cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the stockholders of the Corporation, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period, or (v) of any transaction or
other event which the Nominating and Board Affairs Committee of the Board or any
successor thereto ("Committee"), in its discretion, determines to be a Change in
Control for purposes of the Plan.
4. Competition
A Retired Director who receives payment under the Plan, whether in
installments or in a lump sum, shall not engage in any activity in competition
with the Corporation's business for the applicable period with respect to which
the Retired Director receives such payment pursuant to paragraph 2.
5. Payments on Death
In the event of the death of a Retired Director prior to receiving
payments pursuant to paragraph 3(a) for a period equal to the lesser of (a) the
total number of
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months of such Director's service on the Board, the Allied Board, the Signal
Board or any Acquired Corporation Board, or any combination thereof, as a
non-employee director or (b) 120 months, such Retired Director's surviving
lawful spouse, if any, will be entitled to such payments for the remainder of
such lesser period or until such spouse's death, whichever occurs first. In the
event of a Change in Control, the surviving spouse of a Retired Director shall
receive a lump-sum payment of the present value of the amounts which remain
payable under the preceding sentence, provided that either (i) the surviving
spouse of a deceased Retired Director made an election pursuant to paragraph
3(c) or (ii) the Retired Director, had he survived, would have been entitled to
receive a lump-sum payment pursuant to either paragraph 3(b) or 3(c). Such
lump-sum payment shall be paid to the surviving spouse within the 90-day period
following the Change in Control. Except as set forth herein, nothing in the Plan
shall create any benefit, cause of action, right of sale, transfer, assignment,
pledge, encumbrance, or other such right in any heirs or the estate of any
Retired Director. In the event of the death of an Eligible Director prior to
such Director's retirement from the Board, no payments will be due under the
Plan.
6. Miscellaneous
(a) The right to receive any payment under the Plan shall not be
transferable or assignable.
(b) The Corporation shall not be required to set aside funds for the
payment of its obligations under the Plan.
(c) The Board may at any time amend or terminate the Plan provided that
no amendment or termination shall impair the rights of an Eligible Director to
receive upon retirement from the Board the payments which would have been made
to such Director had the Plan not been amended or terminated (based upon such
Director's service on the Board, the Allied Board, the Signal Board or any
Acquired Corporation Board, or any combination thereof, to the date of such
amendment or termination) or the rights of a Retired Director (or such
Director's surviving spouse) to receive any remaining payments due under the
Plan.
(d) Nothing in the Plan shall be deemed to create any obligation on the
part of the Board to nominate any Director for reelection by the Corporation's
shareholders.
(e) Prior to a Change in Control, the Committee shall interpret the Plan
and make all determinations deemed necessary or desirable for the Plan's
<PAGE>
<PAGE>
- 5 -
implementation. The determination of the Committee shall be conclusive. The
Committee may obtain such advice or assistance as it deems appropriate from
persons not serving on the Committee. The Senior Vice President responsible for
Human Resources or other appropriate officer of the Corporation shall, prior to
any Change in Control, name as Plan Administrator any person or entity
(including, without limitation, a bank or trust company). Following a Change in
Control, the Plan Administrator shall interpret the Plan and make all
determinations deemed necessary or desirable for the Plan's implementation. The
determination of the Plan Administrator shall be conclusive. The Corporation
shall provide the Plan Administrator with such records and information as are
necessary for the proper administration of the Plan. The Plan Administrator
shall rely on such records and other information as the Plan Administrator shall
in its judgment deem necessary or appropriate in determining any Director's
eligibility for and amount of retirement benefits under the Plan.
(f) As used in the Plan, "retirement from the Board" shall include any
termination of service (other than by death) of an Eligible Director except any
termination which the Committee or, if applicable, the Plan Administrator
determines to have resulted from gross cause. "Gross Cause" means fraud,
misappropriation of or intentional misconduct damaging to the property or
business of the Corporation or any of its subsidiaries, or commission of a
crime.
(g) Payments in respect of an Eligible Director under the Plan shall be
in lieu of any payments based upon service as a non-employee director otherwise
provided in respect of such Eligible Director under any other retirement plan or
arrangement of Allied, Signal or any corporation acquired by the Corporation,
Allied or Signal unless the Eligible Director elects by written notice to the
Secretary of the Corporation to receive payments under such other plan or
arrangement in lieu of payments under the Plan.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
AlliedSignal Inc.
1996 COMPARED WITH 1995
RECORD EARNINGS IN 1996 REFLECT THE COMPANY'S SUCCESS IN FOCUSING ITS STRATEGIC
THRUSTS ON GROWTH AND PRODUCTIVITY. Growth was driven by introducing new
products, entering new markets, gaining more business from existing customers
and winning new customers. Growth was also achieved through acquisitions, mainly
in the fourth quarter of 1995. Productivity was greatly improved through
continued initiatives for excellence in manufacturing and advances in product
design, engineering, outsourcing and supply base management.
IN APRIL 1996, THE COMPANY SOLD ITS WORLDWIDE HYDRAULIC AND ANTI-LOCK BRAKING
SYSTEMS (ABS) BUSINESSES (BRAKING BUSINESS). The braking business had 1995 sales
and income from operations of approximately $2.0 billion and $154 million,
respectively. The Company received consideration of $1.5 billion, subject to
certain post-closing adjustments. It is expected that the proceeds will
ultimately be used to grow the Company's higher-margin businesses and to pursue
acquisitions that will expand or complement the Company's business portfolio.
The sale of the braking business resulted in a gain of $655 million (after-tax
$368 million, or $1.30 per share). Excluded from the sale were brake friction
materials, brake-related sales to the independent aftermarket and the medium-
and heavy-duty truck brake systems business which is part of a joint venture
with Knorr-Bremse AG.
IN THE SECOND QUARTER OF 1996, THE COMPANY RECORDED A PRETAX CHARGE OF $622
MILLION (AFTER-TAX $359 MILLION, OR $1.27 PER SHARE) RELATING TO THE COST OF
ACTIONS TO REPOSITION SOME OF ITS MAJOR BUSINESS UNITS AND TO RECOGNIZE
ADDITIONAL ENVIRONMENTAL REMEDIATION LIABILITIES AS WELL AS OTHER CHARGES. The
repositioning actions will enhance the Company's competitiveness and
productivity. The actions include consolidating production facilities,
rationalizing manufacturing capacity and optimizing operational capabilities.
The components of the repositioning charge include asset write-downs of $136
million, severance costs of $127 million and other exit costs of $14 million.
The repositioning actions are generally expected to be completed by 1998 and
will not materially impact the Company's liquidity. Upon completion, the
repositioning actions are expected to generate additional annual income from
operations of approximately $200 million. The charge to recognize additional
environmental liabilities amounted to $175 million. See Note 3 of Notes to
Financial Statements for additional information.
THE BOARD OF DIRECTORS APPROVED AN INCREASE OF 16% IN THE QUARTERLY COMMON STOCK
DIVIDEND, FROM $0.225 TO $0.26 PER SHARE. The dividend increase will be
effective with the first quarter of 1997. The Company had previously increased
its regular quarterly dividend by 15% in the first quarter of 1996.
RESULTS OF OPERATIONS. The Company's net income reached the billion-dollar
milestone for the first time as businesses continued to grow and increase
productivity.
NET SALES in 1996 were $13,971 million, a decrease of $375 million, or 3%,
compared with 1995. Net sales were lower reflecting the sale of the braking
business. Excluding the braking business, net sales increased $1,019 million, or
8%. Of this increase, $794 million was due to volume gains, mainly by the
Aerospace segment, and $366 million from the consolidation of recent
acquisitions, offset in part by an $88 million reduction for disposed
businesses, mainly by the Engineered Materials segment. Selling prices and the
impact of foreign exchange were slightly unfavorable. Aerospace sales increased
$630 million, or 12%, and Engineered Materials improved by $300 million, or 8%.
Automotive sales increased $85 million, or 2%.
COST OF GOODS SOLD as a percent of sales was 83.1% in 1996 compared with 81.2%
in 1995. Included in 1996 are repositioning and other charges totaling $637
million, and 1995 reflects a provision of $115 million relating to the
revaluation of the ABS assets to their fair market value (special charges). See
Note 3 of Notes to Financial Statements for further information. Excluding these
special charges, 1996 cost of goods sold as a percent of sales was 78.5%, a
decrease compared to 80.4% in 1995 mainly due to Operational Excellence programs
to lower manufacturing and material costs.
GAIN ON SALE OF BUSINESS reflects the 1996 pretax gain of $655 million on the
sale of the braking business and the 1995 pretax gain of $71 million on the
transfer of the high-density polyethylene (HDPE) joint venture, Paxon Polymer
Company, L.P. (Paxon), to Exxon Chemical Company (Exxon). See Note 4 of Notes to
Financial Statements for further information.
INCOME FROM OPERATIONS of $1,509 million in 1996 improved by $249 million, or
20%, compared with last year. Both 1996 and 1995 include pretax gains on the
sales of businesses as well as special charges (special items). Excluding the
impact of these special items, income from operations improved by $187 million,
or 14%. Aerospace income from operations increased 18% and Engineered Materials
improved 15%, but Automotive income from operations decreased 11%. The Company's
operating margin was 10.7% in 1996, significantly higher than the 9.1% in 1995.
Productivity (the constant dollar relationship of sales to costs) improved by
6.0% over last year, reflecting in part initiatives in manufacturing
(Operational Excellence), product development (Technical Excellence) and sales
and marketing (Customer Excellence) and the sale of the high-cost braking
business. See the detailed discussion of net income below for information by
industry segment.
EQUITY IN INCOME OF AFFILIATED COMPANIES of $143 million decreased by $48
million, or 25%, compared with last year, mainly because the Company exited its
HDPE joint venture in December 1995 and because of lower earnings from
Knorr-Bremse AG's truck brake systems joint venture.
19
<PAGE>
<PAGE>
A partial offset was significantly higher earnings from the UOP process
technology joint venture (UOP).
OTHER INCOME (EXPENSE), $87 million income in 1996, improved by $109 million
compared with last year mainly due to increased interest income (included in the
Corporate and Unallocated segment), primarily reflecting the investment of cash
received from the sale of the braking business, higher foreign exchange costs
last year and the minority interest share of the 1996 repositioning and other
charges.
INTEREST AND OTHER FINANCIAL CHARGES of $186 million in 1996 increased by $18
million, or 11%, compared with last year due to higher levels of short-term
debt.
THE EFFECTIVE TAX RATE in 1996 was 34.3% compared with 30.6% in 1995. Adjusted
for special items in both years, the effective tax rate in 1996 was 33.5%
compared with 33.0% in 1995.
NET INCOME IN 1996 of $1,020 million, or $3.61 per share, was 17% higher than
last year's net income of $875 million, or $3.09 per share. Adjusted for special
items in both years, net income for 1996 was $1,011 million, or $3.58 per share,
an increase of 16% over 1995 net income. The higher adjusted net income in 1996
was the result of a substantial improvement in the operating performance by the
Aerospace segment and higher earnings by the Engineered Materials segment. The
Automotive segment had moderately lower earnings.
A DISCUSSION OF THE OPERATIONS OF THE BUSINESS SEGMENTS follows. Adjusted net
income (see tables below) for the segments excludes the impact of the 1996 and
1995 special items. (Dollars in millions)
<TABLE>
<CAPTION>
ADJUSTED
AEROSPACE NET SALES NET INCOME NET INCOME
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 $5,714 $ 206 $ 385
- -------------------------------------------------------------------------------
1995 5,084 303 303
- -------------------------------------------------------------------------------
INCREASE (DECREASE) $ 630 $ (97) $ 82
===============================================================================
</TABLE>
Aerospace sales of $5,714 million in 1996 increased $630 million, or 12%,
compared with 1995. Military aftermarket sales and sales to commercial original
equipment manufacturers (OEMs) were substantially higher. Commercial aftermarket
sales also improved. Military OEM sales were lower. Engines had significantly
higher sales of commercial and military propulsion engines and auxiliary power
units (APUs), including significantly higher aftermarket parts and repair and
overhaul sales. Equipment Systems also showed strong sales growth with gains
across most product lines, including engine fuel systems, environmental control
systems and aircraft landing systems to both the aftermarket and OEMs. Sales for
Electronic Systems increased significantly reflecting the acquisition of a
precision products business in January 1996 and gains in guidance and control
systems. Government Services also had significantly higher sales, but Commercial
Avionics Systems sales were moderately lower, reflecting the completion in 1995
of the program to install mandated traffic alert and collision avoidance systems
(TCAS) on commuter aircraft. Production problems at Commercial Avionics Systems,
resolved in the latter part of the year, delayed the introduction of new
products.
The Company's 1996 sales to the Department of Defense (DoD), as a prime
contractor and subcontractor, increased 3% compared with 1995 despite reductions
in U.S. defense spending. Sales to the DoD accounted for 22% of Aerospace's
total sales, a decrease of 2 percentage points compared with 1995. Sales to the
commercial and foreign government markets increased 18%, while sales to the
National Aeronautics and Space Administration (NASA) and other U.S. Government
agencies declined 1% in 1996.
Aerospace adjusted net income improved to $385 million from $303 million, an
increase of $82 million, or 27%, compared with the same period last year. Strong
sales growth and productivity resulted in substantially higher earnings for
Engines, Equipment Systems and Electronic Systems. Government Services also had
significant gains, but Commercial Avionics Systems had substantially reduced
earnings due to lower sales, manufacturing difficulties and certain
repositioning expenses excluded from the 1996 provision.
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 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 proficiency, strategic
alliances and cost-effective performance.
The Company believes that the cyclical downturn for the commercial aircraft
industry reached bottom in 1995. A slight improvement was seen in the second
half of 1996 and this growth is expected to significantly accelerate in 1997.
Regional airlines experienced strong traffic growth and new regional aircraft
orders were higher in 1996. The business aviation market showed moderate growth
and the commercial aftermarket spare parts and repair and overhaul business
showed strong growth during 1996.
The Company continues to receive significant contracts from the commercial
aviation industry, DoD and NASA and Aerospace earnings are expected to remain
strong.
At December 31, 1996 and 1995, the Company had firm orders for its aerospace
products from the U.S. and foreign governments of $1,906 and $1,871 million,
respectively. Total backlog, including commercial contracts, at year-end 1996
and 1995 was $4,514 and $4,523 million, respectively. The Company anticipates
that approximately $3,562 million of the total 1996 backlog will be filled
during 1997.
<TABLE>
<CAPTION>
ADJUSTED
AUTOMOTIVE NET SALES NET INCOME NET INCOME
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 $ 4,240 $ 521 $ 202
- -------------------------------------------------------------------------------
1995 5,549 146 217
- -------------------------------------------------------------------------------
INCREASE (DECREASE) $ (1,309) $ 375 $ (15)
===============================================================================
</TABLE>
Automotive sales of $4,240 million in 1996 were $1,309 million, or 24%, lower
than last year. However, excluding the divested braking business, Automotive
sales increased $85 million, or 2%. Safety Restraint Systems, primarily air
bags, and Turbocharging Systems had significantly higher sales volumes in
Europe, reflecting strong demand. Growth by Turbochargers reflected the
continued preference by European customers for turbocharged, diesel-powered
cars, although turbocharger sales were lower in Japan and North America. Filters
and Spark Plugs had significantly higher
20
<PAGE>
<PAGE>
[GRAPHIC REPRESENTATION of Net Sales (dollars in billions), expressed
numerically below.]
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
12.8 14.3 14.0
</TABLE>
[GRAPHIC REPRESENTATION of Net Income (dollars in millions), expressed
numerically below.]
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
759 875 1,020
</TABLE>
[GRAPHIC REPRESENTATION of Earnings Per Share (dollars per share), expressed
numerically below.]
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
2.68 3.09 3.61
</TABLE>
<PAGE>
sales in part due to new product introductions and higher original equipment
sales. Sales of Friction Materials increased slightly, mainly in North America.
European Aftermarket sales were significantly impacted by weak economic
conditions and North American Aftermarket sales were slightly higher. Sales of
Truck Brake Systems in North America were lower primarily because of decreasing
medium- and heavy-duty truck production.
Automotive adjusted net income decreased to $202 million from $217 million a
year ago, a $15 million, or 7%, decrease. The decrease reflects the absence of
net income from the divested braking business. Excluding the braking business,
Automotive income increased substantially. Reductions in distribution costs for
the North American Aftermarket business as well as significant sales gains and
manufacturing improvements for Filters and Spark Plugs contributed to the net
income growth. Higher sales resulting from additional production capacity for
Turbochargers and Safety Restraints also resulted in significant income gains.
<TABLE>
<CAPTION>
ADJUSTED
ENGINEERED MATERIALS NET SALES NET INCOME NET INCOME
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 $ 4,013 $ 361 $ 432
- -------------------------------------------------------------------------------
1995 3,713 473 402
- -------------------------------------------------------------------------------
INCREASE (DECREASE) $ 300 $ (112) $ 30
===============================================================================
</TABLE>
Engineered Materials sales of $4,013 million in 1996 were $300 million, or 8%,
higher compared with 1995, principally due to acquisitions. Specialty Chemicals
sales increased substantially, mainly reflecting the acquisition of Riedel-de
Haen in October 1995. The Polymers business had significantly higher sales of
industrial fibers and engineering plastics products, primarily due to
acquisitions in the fourth quarter of 1995. Carpet fiber plants operated near
capacity as stronger demand was driven by sustained economic growth. The
Fluorine Products business showed slight improvement as the transition away from
chlorofluorocarbons (CFCs) to substitute products was completed and the business
diversifies to include more fluorine specialty products. Sales also increased
for environmental catalysts, carbon materials and amorphous metals. Sales for
Electronic Materials were moderately lower due to softness in the printed
circuit board industry, however, improved sales of advanced microelectronic
materials were a partial offset.
Engineered Materials adjusted net income increased to $432 million from $402
million, a $30 million, or 7%, increase. Substantially higher earnings for
Specialty Chemicals was driven by UOP as the petrochemical and refining
industries continued to be strong worldwide. The acquisition of Riedel-de Haen
also contributed to higher earnings. Net income was significantly higher for the
Polymers business, mainly reflecting improved market conditions for carpet fiber
and earnings from the Bridgestone/Firestone acquisition in late 1995. Fluorine
Products net income also increased due to sales growth and significant
operational improvements. Electronic Materials income improved on higher sales
for advanced micro electronic materials. A partial offset to higher segment
income was the absence of earnings from the HDPE joint venture.
REGARDING ENVIRONMENTAL MATTERS, the Company is subject to various federal,
state and local government 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 environmental 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 no later than the completion of
feasibility studies.
21
<PAGE>
<PAGE>
[GRAPHIC REPRESENTATION of Capital Expenditures/R&D (dollars in millions),
expressed numerically below.]
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Capital expenditures .................. 639 746 755
Company-funded R&D .................... 318 353 345
--- ---- -----
Total ........................ 957 1,099 1,100
--- ----- -----
</TABLE>
[GRAPHIC REPRESENTATION of Long-Term Debt as a Percent of Total Capital
(percent), expressed numerically below.]
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
30.4 25.6 22.2
</TABLE>
[GRAPHIC REPRESENTATION of Return on Shareowners' Equity (after-tax percent),
expressed numerically below.]
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
28.9 26.7 26.6
</TABLE>
<PAGE>
Remedial response and voluntary cleanup expenditures were $87 and $72 million in
1996 and 1995, respectively, and are currently estimated to increase to
approximately $95 million in 1997. 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.
As previously discussed, in the second quarter of 1996 the Company charged $175
million against pretax income for remedial response and voluntary cleanup costs.
At December 31, 1996, the recorded liability for environmental matters was $530
million. In addition, in 1996 the Company incurred operating costs for ongoing
businesses of approximately $60 million and capital expenditures of $43 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 21 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 17 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
Operational Excellence and materials management.
FINANCIAL CONDITION. Continued strong operating cash flows, the proceeds from
the sale of the braking business and additional borrowing capacity leaves the
Company well positioned to pursue its strategic growth and productivity
initiatives.
TOTAL ASSETS at December 31, 1996 were $12,829 million, an increase of $364
million, or 3%, from December 31, 1995. Cash and cash equivalents and short-term
investments at year-end 1996 were $1,766 million, an increase of $1,226 million
compared with December 31, 1995, primarily reflecting the proceeds received from
the sale of the braking business. Cash flows from operating activities of $1,196
million decreased by $20 million, or 2%, compared with last year. The current
ratio at year-end 1996 was 1.6x, up significantly from 1.3x last year. The
Company's working capital turnover was down slightly to 5.0x at December 31,
1996 from 5.2x a year earlier.
THE MAXIMUM AMOUNT OF BORROWING available under the Company's revolving credit
agreements (Credit Agreements) was $750 million. The Credit Agreements support
the issuance of commercial paper. There was $470 and $58 million of commercial
paper outstanding at the end of 1996 and 1995, respectively. Commercial paper
borrowing reached a high of $1,271 million during 1996.
TOTAL DEBT at year-end 1996 of $1,931 million decreased $79 million. Long-term
debt of $1,317 million was reduced by $49 million during the year. The Company's
total debt as a percent of capital was 29.5% at December 31, 1996, down from
33.7% at year-end 1995. Long-term debt as a percent of capital was 22.2% at
year-end 1996, down from 25.6% at
22
<PAGE>
<PAGE>
year-end 1995. See Note 15 of Notes to Financial Statements for details of
long-term debt and a discussion of the Credit Agreements.
THE COMPANY REPURCHASED 7.0 MILLION SHARES OF COMMON STOCK for $409 million in
1996. Common stock was repurchased to meet expected requirements for shares
issued under employee benefit plans and a shareowner dividend reinvestment plan.
At year-end 1996, the Company had 75.4 million shares of common stock held in
treasury carried at $1,953 million. In December 1996, the Board of Directors
voted to increase the Company's common share repurchase authority by 50 million
shares. As of year-end 1996, the Company was authorized to repurchase 51.2
million shares of common stock.
The Board of Directors also voted to seek shareowner approval at the 1997 Annual
Meeting of an amendment to the Company's certificate of incorporation which
would increase the number of authorized common shares to one billion from 500
million. If approved by shareowners, the additional shares would be available
for stock splits, acquisitions and other purposes.
CAPITAL EXPENDITURES during 1996 were $755 million, an increase of $9 million
from the $746 million spent in 1995. Spending by the segments and Corporate
since 1994 is shown in Note 25 of Notes to Financial Statements. The Company's
total capital expenditures in 1997 are currently projected at approximately $740
million. These expenditures are expected to be financed by internally generated
funds. Approximately 66% of the projected 1997 expenditures are planned for
expansion and cost reduction, 26% for replacement and maintenance and 8% for
environmental projects.
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 the Company's efforts to provide its 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 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 an enhanced ground
proximity warning system. In addition, the Company's 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
acquired business, 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 Europe's leading supplier of aircraft heat exchange equipment to
83% by purchasing an additional 34% interest.
Automotive decided to exit the light-vehicle ABS business. See Note 3 of
Notes to Financial Statements for additional information. In addition, a
reduction in the Automotive workforce was announced and largely completed in the
fourth quarter of 1995. The reduction eliminates approximately 3,100 salaried
and hourly full-time-equivalent positions. 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, 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
HDPE business. Paxon transferred the HDPE business to Exxon. See Note 4 of Notes
to Financial Statements for additional information.
RESULTS OF OPERATIONS. Record sales and net income were achieved 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. Favorable foreign exchange rate fluctuations in the
Automotive segment increased sales by $181 million and higher selling prices in
the Engineered Materials segment increased sales by $66 million. Automotive
sales increased $627 million, or 13%, Engineered Materials improved $441
million, or 13%, and Aerospace had a $461 million, or 10%, gain.
COST OF GOODS SOLD as a percent of sales increased from 80.4% in 1994 to 81.2%
in 1995 as the current year includes a provision of $115 million relating to the
revaluation of the Company's ABS assets to their fair market value and certain
other closure costs. Excluding this provision, cost of goods sold as a percent
of sales was 80.4% in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percent of net sales decreased
from 10.7% in 1994 to 10.5% in 1995. Expenses increased by $137 million, or 10%,
reflecting in part the impact of acquisitions.
GAIN ON SALE OF BUSINESS reflects the pretax gain of $71 million on the transfer
of the HDPE business to Exxon in December 1995.
23
<PAGE>
<PAGE>
INCOME FROM OPERATIONS of $1,260 million in 1995 improved by $108 million, or
9%, compared with last year. Excluding the impact of the 1995 special items,
income from operations improved by $152 million, or 13%. Engineered Materials
and Aerospace income from operations both increased 20%; Automotive had a 1%
decrease. Operating margins increased slightly, from 9.0% in 1994 to 9.1% in
1995, and productivity 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, Knorr-Bremse's European truck brake systems
business 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 per share, an increase of 15%
compared with $759 million, or $2.68 per 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 (see tables below) for the Automotive and Engineered Materials segments
excludes the impact of the 1995 special 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 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 APUs. TCAS sales were particularly strong as U.S. operators of
10-to-30-seat aircraft complied with the U.S. 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 Electronic Systems, where comparisons were adversely
affected by one-time contract settlements in 1994 and the closeout of certain
programs.
The Company's 1995 sales to the DoD, as a prime contractor and subcontractor,
declined 7% compared with 1994 because of reduced defense spending. Sales to the
DoD accounted for 24% of Aerospace total sales, a decrease of 4 percentage
points compared with 1994. Sales to the commercial and foreign government
markets increased 19%, while sales to NASA and other U.S. government agencies
increased 2% in 1995.
Aerospace 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 Electronic Systems had lower income primarily due to
earnings related to one-time contract settlements in 1994 and manufacturing
difficulties.
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.
<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 sales were up 13% compared with 1994 reflecting improvements in all
major business units. Automotive sales benefited from the acquisition of the
Budd Company's Wheel and Brake Division, as well as growing demand for brake
systems in Europe. Although North American vehicle production volumes decreased
slightly in 1995, North American brake systems content per vehicle increased as
a result of key business wins with the Ford Motor Company and the Chrysler
Corporation. 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 Restraint Systems 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
Brake Systems and Turbocharging Systems. The continuation of the trend toward
producing turbocharged, diesel-powered cars in Europe and penetration into the
Asian market also favorably impacted turbocharger sales. Turbocharger plants
continued to operate at capacity levels. The segment's sales improvement also
reflected the impact of favorable foreign exchange rate fluctuations.
Automotive adjusted net income improved 1% compared with 1994. Net income was
substantially higher for North American Safety Restraint Systems principally
reflecting materials management and operational initiatives and for the European
Aftermarket largely due to cost savings, improved distribution and pricing
improvements. Turbocharging Systems and Truck Brake Systems had significantly
higher income on strong sales growth. In addition, Turbocharging Systems
experienced higher operating margins due to Operational Excellence and other
manufacturing initiatives. Rapid growth in the European
24
<PAGE>
<PAGE>
turbodiesel passenger car market and growth initiatives in the Asia/Pacific
region strained Automotive's 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 light-vehicle brake systems in North America.
<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, Electronic
Materials and Specialty Chemicals. 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. The carpet fibers
business experienced price pressure and lower volumes throughout the fourth
quarter of 1995 as the industry attempted to reduce high levels of inventory.
Electronic Materials had significantly higher sales volumes of laminate and
advanced microelectronic materials mainly in the U.S. and Asia/Pacific region.
Specialty Chemicals improved due to increased sales of performance chemicals in
part reflecting the acquisition of Riedel-de Haen in late 1995.
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, increased sales volumes 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. Electronic Materials had higher income on
significantly higher sales. Specialty Chemicals improved substantially due to
increased net income from UOP and higher sales of performance chemicals.
Fluorine Products had slightly lower net income in part because of lower selling
prices and costs associated with the transition to mandated 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 OEMs.
Environmental catalysts and carbon materials also had income gains. There was
also a substantial increase in net income from the Paxon joint venture.
REGARDING ENVIRONMENTAL MATTERS, remedial response and voluntary cleanup
expenditures were $72 and $66 million in 1995 and 1994, respectively. 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 $65
million and capital expenditures of $44 million relating to compliance with
environmental regulations.
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 December 31, 1994. Cash flows from operating activities of $1,216
million increased by $173 million, or 17%, compared with last year 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 Credit Agreements
was reduced by the Company in June 1995 from $900 million to $750 million
because the floating rate Employee Stock Ownership Plan 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 borrowings 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 borrowings 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 as a percent of capital was
25.6% at year-end 1995, down from 30.4% at year-end 1994. See Note 15 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 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.
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 1994
is shown in Note 25 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) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES ........................................ $13,971 $14,346 $12,817
- --------------------------------------------------------------------------------------
COST OF GOODS SOLD ............................... 11,606 11,654 10,299
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..... 1,511 1,503 1,366
GAIN ON SALE OF BUSINESS ......................... (655) (71) --
- --------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES ......................... 12,462 13,086 11,665
- --------------------------------------------------------------------------------------
INCOME FROM OPERATIONS ........................... 1,509 1,260 1,152
EQUITY IN INCOME OF AFFILIATED COMPANIES ......... 143 191 129
OTHER INCOME (EXPENSE) ........................... 87 (22) (27)
INTEREST AND OTHER FINANCIAL CHARGES ............. (186) (168) (143)
- --------------------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME .................... 1,553 1,261 1,111
TAXES ON INCOME .................................. 533 386 352
- --------------------------------------------------------------------------------------
NET INCOME ....................................... $ 1,020 $ 875 $ 759
======================================================================================
EARNINGS PER SHARE OF COMMON STOCK(1) ............ $ 3.61 $ 3.09 $ 2.68
======================================================================================
</TABLE>
(1) EARNINGS PER SHARE OF COMMON STOCK ARE BASED UPON THE FOLLOWING WEIGHTED
AVERAGE NUMBER OF SHARES: 1996, 282,830,064 SHARES; 1995, 283,437,773
SHARES AND 1994, 283,446,399 SHARES. THERE IS NO MATERIAL DILUTIVE EFFECT
ON EARNINGS PER SHARE OF COMMON STOCK DUE TO COMMON STOCK EQUIVALENTS.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR .......................... $ 2,315 $1,613 $ 1,023
NET INCOME ............................................ 1,020 875 759
OTHER ................................................. 141 44 11
COMMON STOCK DIVIDENDS (1996--$.90 PER SHARE;
1995--$.78 PER SHARE; 1994--$.6475 PER SHARE) ........ (262) (217) (180)
- ----------------------------------------------------------------------------------------
BALANCE AT END OF YEAR ................................ $ 3,214 $ 2,315 $ 1,613
========================================================================================
</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) 1996 1995
- ----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ..................................................... $ 1,465 $ 540
SHORT-TERM INVESTMENTS ........................................................ 301 --
ACCOUNTS AND NOTES RECEIVABLE ................................................. 1,661 1,751
INVENTORIES ................................................................... 1,946 1,991
OTHER CURRENT ASSETS .......................................................... 466 608
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS .......................................................... 5,839 4,890
INVESTMENTS AND LONG-TERM RECEIVABLES ......................................... 473 479
PROPERTY, PLANT AND EQUIPMENT -- NET .......................................... 4,219 4,742
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES -- NET ..................... 1,418 1,572
OTHER ASSETS .................................................................. 880 782
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS .................................................................. $12,829 $12,465
====================================================================================================
LIABILITIES
- ----------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
ACCOUNTS PAYABLE .............................................................. $ 1,187 $ 1,385
SHORT-TERM BORROWINGS ......................................................... 32 397
COMMERCIAL PAPER .............................................................. 470 58
CURRENT MATURITIES OF LONG-TERM DEBT .......................................... 112 189
ACCRUED LIABILITIES ........................................................... 1,895 1,775
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES ..................................................... 3,696 3,804
LONG-TERM DEBT ................................................................ 1,317 1,366
DEFERRED INCOME TAXES ......................................................... 610 551
POSTRETIREMENT BENEFIT OBLIGATIONS OTHER THAN PENSIONS ........................ 1,787 1,864
OTHER LIABILITIES ............................................................. 1,239 1,288
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 ................................................. 2,547 2,489
COMMON STOCK HELD IN TREASURY, AT COST:
1996--75,414,117 SHARES; 1995--75,459,178 SHARES ............................. (1,953) (1,658)
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT ............................ 2 61
UNREALIZED HOLDING GAIN ON MARKETABLE SECURITIES .............................. 12 27
RETAINED EARNINGS ............................................................. 3,214 2,315
- ----------------------------------------------------------------------------------------------------
TOTAL SHAREOWNERS' EQUITY ..................................................... 4,180 3,592
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY ..................................... $12,829 $12,465
====================================================================================================
</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) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ----------------------------------------------------------------------------------------------------------------
NET INCOME .............................................................. $1,020 $875 $759
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
GAIN ON SALE OF BUSINESS ................................................ (655) (71) --
REPOSITIONING AND OTHER CHARGES ......................................... 622 115 (180)
DEPRECIATION AND AMORTIZATION (INCLUDES GOODWILL) ....................... 602 612 560
UNDISTRIBUTED EARNINGS OF EQUITY AFFILIATES ............................. (33) (59) (10)
DEFERRED INCOME TAXES ................................................... 213 198 180
DECREASE (INCREASE) IN ACCOUNTS AND NOTES RECEIVABLE .................... (163) 134 (195)
DECREASE (INCREASE) IN INVENTORIES ...................................... (87) (141) 134
DECREASE (INCREASE) IN OTHER CURRENT ASSETS ............................. 134 35 (65)
INCREASE IN ACCOUNTS PAYABLE ............................................ 117 16 113
(DECREASE) IN ACCRUED LIABILITIES ....................................... (77) (245) (56)
NET TAXES PAID ON GAIN ON SALE OF BRAKING BUSINESS ...................... (49) -- --
OTHER ................................................................... (448) (253) (197)
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................... 1,196 1,216 1,043
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ----------------------------------------------------------------------------------------------------------------
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT .......................... (755) (746) (639)
PROCEEDS FROM DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT ................ 77 46 54
DECREASE IN INVESTMENTS AND LONG-TERM RECEIVABLES ....................... 20 27 32
(INCREASE) IN OTHER INVESTMENTS ......................................... (12) (4) (8)
CASH PAID FOR ACQUISITIONS .............................................. (114) (499) (531)
PROCEEDS FROM SALES OF BUSINESSES ....................................... 1,358 72 130
(INCREASE) IN SHORT-TERM INVESTMENTS .................................... (301) -- --
DECREASE IN MARKETABLE SECURITIES ....................................... -- -- 90
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES .................... 273 (1,104) (872)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN COMMERCIAL PAPER ............................. 412 58 (164)
NET INCREASE (DECREASE) IN SHORT-TERM BORROWINGS ........................ (356) 253 64
PROCEEDS FROM ISSUANCE OF COMMON STOCK .................................. 147 104 43
PROCEEDS FROM ISSUANCE OF LONG-TERM DEBT ................................ 48 108 7
PAYMENTS OF LONG-TERM DEBT .............................................. (124) (147) (215)
REPURCHASES OF COMMON STOCK ............................................. (409) (239) (103)
CASH DIVIDENDS ON COMMON STOCK .......................................... (262) (217) (180)
REDEMPTION OF COMMON STOCK PURCHASE RIGHTS .............................. -- -- (7)
- ----------------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) FINANCING ACTIVITIES ................................ (544) (80) (555)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... 925 32 (384)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .......................... 540 508 892
- ----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................................ $ 1,465 $ 540 $ 508
================================================================================================================
</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
CONSOLIDATED FINANCIAL STATEMENTS include the accounts of AlliedSignal Inc. and
its majority-owned subsidiaries. The preparation of consolidated 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. Certain reclassifications were made to prior year amounts to conform
with the 1996 presentation.
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 all other inventories.
INVESTMENTS 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, 1996 and 1995 is $423
and $407 million, respectively.
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 no later than
the completion of feasibility studies. The liabilities for environmental costs
recorded in Accrued Liabilities and Other Liabilities at December 31, 1996 and
1995 were $120 and $410 million and $90 and $364 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 forward agreements and combination
options (options purchased and written as a unit) used to hedge assets and
liabilities, or net investments in foreign subsidiaries, are recognized in Other
Income (Expense) or Cumulative Foreign Exchange Translation Adjustment.
Gains and losses on foreign currency forward 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.
<PAGE>
<PAGE>
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. Budd Wheel & Brake was sold in 1996 as part of the sale of the
Company's worldwide hydraulic and anti-lock braking systems (ABS) businesses
(braking business). 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.
29
<PAGE>
<PAGE>
The Company also made smaller acquisitions in 1996, 1995 and 1994.
NOTE 3 REPOSITIONING AND OTHER CHARGES
In the second quarter of 1996, the Company recorded a pretax charge of $277
million relating to the costs of actions to reposition some of its major
business units. The repositioning actions are intended to enhance the Company's
competitiveness and productivity and include consolidating production
facilities, rationalizing manufacturing capacity and optimizing operational
capabilities. As a result, approximately 6,100 positions will be eliminated in
some plants and 2,900 positions will be added in others, for a net reduction of
3,200 positions. The components of the repositioning charge include asset
write-downs of $136 million, severance costs of $127 million and other exit
costs of $14 million. The repositioning actions are generally expected to be
completed by 1998. In 1996, cash expenditures for repositioning actions were
approximately $10 million, primarily for severance costs.
In the second quarter of 1996, the Company adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position 96-1,
"Environmental Remediation Liabilities" (SOP 96-1). SOP 96-1 provides additional
guidance regarding the manner in which existing authoritative accounting
literature is to be applied to the specific circumstances of recognizing,
measuring and disclosing environmental remediation liabilities. The adoption of
SOP 96-1 resulted in a pretax charge of $175 million, and is accounted for as a
change in estimate. The Company also recorded other charges primarily related to
changes made in employee benefit programs and in connection with customer and
former employee claims.
Repositioning and other charges totaling $637 million are included as part of
Cost of Goods Sold for 1996. Other Income (Expense) for 1996 includes a $15
million credit for repositioning and other charges representing the minority
interest share of such charges. The total pretax impact of the repositioning and
other charges for 1996 is $622 million (after-tax $359 million, or $1.27 per
share).
Cost of Goods Sold in 1995 includes a provision of $115 million (after-tax $71
million, or $0.25 per share) relating to management's decision to exit the ABS
business. The provision consists of the revaluation of the Company's ABS assets
to their fair market value and certain other closure costs.
NOTE 4 GAIN ON SALE OF BUSINESS
In April 1996, the Company sold its braking business to Robert Bosch GmbH, a
privately-held German company. The braking business had 1995 sales and income
from operations of approximately $2.0 billion and $154 million, respectively.
The Company received consideration of $1.5 billion, subject to certain
post-closing adjustments. The sale of the braking business resulted in a pretax
gain of $655 million (after-tax $368 million, or $1.30 per share).
In December 1995, the Company transferred the assets of its high-density
polyethylene (HDPE) business joint venture, Paxon Polymer Company, L.P. (Paxon),
to Exxon Chemical Company (Exxon). The transfer of the HDPE business to Exxon
resulted in a pretax gain of $71 million (after-tax $71 million, or $0.25 per
share).
NOTE 5 OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME AND OTHER $ 94 $ 35 $ 29
MINORITY INTERESTS (18) (36) (30)
FOREIGN EXCHANGE GAIN (LOSS) 11 (21) (26)
- --------------------------------------------------------------------------------
$ 87 $(22) $(27)
================================================================================
</TABLE>
NOTE 6 INTEREST AND OTHER FINANCIAL CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL INTEREST AND OTHER
FINANCIAL CHARGES $209 $189 $166
LESS-- CAPITALIZED INTEREST (23) (21) (23)
- --------------------------------------------------------------------------------
$186 $168 $143
================================================================================
</TABLE>
<PAGE>
NOTE 7 TAXES ON INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES
ON INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES $1,099 $1,101 $ 973
FOREIGN 454 160 138
- --------------------------------------------------------------------------------
$1,553 $1,261 $1,111
================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- ---------------------------------------------------------------------------------------
TAXES ON INCOME
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES $359 $347 $297
FOREIGN 174 39 55
- ---------------------------------------------------------------------------------------
$533 $386 $352
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
TAXES ON INCOME CONSIST OF:
CURRENT:
UNITED STATES $190 $118 $98
STATE 41 25 34
FOREIGN 89 44 40
- ---------------------------------------------------------------------------------------
320 187 172
- ---------------------------------------------------------------------------------------
DEFERRED:
UNITED STATES 133 192 129
STATE (5) 12 36
FOREIGN 85 (5) 15
- ---------------------------------------------------------------------------------------
213 199 180
- ---------------------------------------------------------------------------------------
$533 $386 $352
=======================================================================================
</TABLE>
30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- ---------------------------------------------------------------------------------------
<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 OVER
(UNDER) U.S. TAX RATE .4 (1.7) (.6)
ASSET BASIS DIFFERENCES (.1) (2.0) (3.3)
NONDEDUCTIBLE AMORTIZATION 2.1 1.1 1.0
STATE INCOME TAXES 1.3 1.6 3.9
TAX BENEFITS OF FOREIGN
SALES CORPORATION (1.9) (1.5) (1.4)
DIVIDENDS RECEIVED DEDUCTION (.2) (.1) (.1)
ESOP DIVIDEND TAX BENEFIT (.7) (.8) (.9)
ALL OTHER ITEMS-- NET (1.6) (1.0) (1.9)
- ---------------------------------------------------------------------------------------
34.3% 30.6% 31.7%
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
DEFERRED INCOME TAXES
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INCLUDED IN THE FOLLOWING BALANCE
SHEET ACCOUNTS:
OTHER CURRENT ASSETS $ 309 $ 431
OTHER ASSETS 178 180
ACCRUED LIABILITIES (18) (16)
DEFERRED INCOME TAXES (610) (551)
- ---------------------------------------------------------------------------------------
$(141) $ 44
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
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 $(733) $(719)
POSTRETIREMENT BENEFITS OTHER
THAN PENSIONS 764 761
POSTEMPLOYMENT BENEFITS 69 71
INVESTMENT AND OTHER ASSET BASIS
DIFFERENCES (474) (346)
NONRECURRING ITEMS 179 133
OTHER ACCRUED ITEMS 424 378
FOREIGN NET OPERATING LOSSES 188 241
U.S. CAPITAL LOSS -- 14
DEFERRED FOREIGN GAIN (50) --
UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES (67) (64)
ALL OTHER ITEMS-- NET (404) (373)
- ---------------------------------------------------------------------------------------
(104) 96
VALUATION ALLOWANCE (37) (52)
- ---------------------------------------------------------------------------------------
$(141) $44
=======================================================================================
</TABLE>
<PAGE>
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.
Deferred income taxes have not been provided on approximately $326 million of
undistributed earnings of foreign affiliated companies, which are considered 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 8 SHORT-TERM INVESTMENTS
Short-term investments consist of marketable debt and equity securities
classified as available-for-sale and carried at their quoted market value. The
fair values of marketable debt and equity securities were $155 million ($155
million, at cost) and $128 million ($130 million, at cost), respectively, at
December 31, 1996. The Company also had other short-term investments held for
sale of $18 million at December 31, 1996, carried at cost, which approximates
market value.
NOTE 9 ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
TRADE $1,330 $1,477
OTHER 362 308
- ---------------------------------------------------------------------------------------
1,692 1,785
LESS -- ALLOWANCE FOR DOUBTFUL
ACCOUNTS AND REFUNDS (31) (34)
- ---------------------------------------------------------------------------------------
$1,661 $1,751
=======================================================================================
</TABLE>
The Company is a party to agreements under which it can sell undivided interests
in designated pools of trade accounts receivable up to $575 million (average
outstanding was $517 and $500 million during 1996 and 1995, respectively). New
receivables are sold under the agreements as previously sold receivables are
collected. During 1996, this represented an average collection period of 45 days
or a replacement of receivables of approximately eight times. At both December
31, 1996 and 1995, 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 10 INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS $ 538 $ 650
WORK IN PROCESS 762 769
FINISHED PRODUCTS 814 747
SUPPLIES AND CONTAINERS 88 98
- ---------------------------------------------------------------------------------------
2,202 2,264
LESS --
PROGRESS PAYMENTS (126) (145)
REDUCTION TO LIFO COST BASIS (130) (128)
- ---------------------------------------------------------------------------------------
$1,946 $1,991
=======================================================================================
</TABLE>
Inventories valued at LIFO amounted to $223 million at December 31, 1996 and
$286 million at December 31, 1995, which amounts were below estimated
replacement cost by $130 and $128 million, respectively.
NOTE 11 OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT-- DEFERRED TAXES $309 $431
OTHER 157 177
- ---------------------------------------------------------------------------------------
$466 $608
=======================================================================================
</TABLE>
31
<PAGE>
<PAGE>
NOTE 12 INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AFFILIATES(1) $379 $382
LONG-TERM RECEIVABLES 94 97
- ---------------------------------------------------------------------------------------
$473 $479
=======================================================================================
</TABLE>
(1) INCLUDES UNREALIZED HOLDING GAINS OF $23 AND $44 MILLION AT DECEMBER 31,
1996 AND 1995, RESPECTIVELY, ON EQUITY SECURITIES CLASSIFIED AS
AVAILABLE-FOR-SALE.THE COST BASIS OF THE EQUITY SECURITIES WAS $21 AND $25
MILLION AT DECEMBER 31, 1996 AND 1995, RESPECTIVELY.
At December 31, 1996, the Company had a 50% partnership interest in UOP, a joint
venture accounted for under the equity method. UOP is in the process technology
and catalyst business. Prior to December 28, 1995, the Company also had a 50%
partnership interest in Paxon, a joint venture accounted for under the equity
method. On that date, Paxon transferred the HDPE business to Exxon. Paxon
manufactures and sells high-density polyethylene resins.
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
- ---------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $1,516 $1,251
INCOME FROM OPERATIONS 265 165
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE(1) 219 147
NET INCOME(1)(2) 219 132
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 1995
- ---------------------------------------------------------------------------------------
<S> <C>
CURRENT ASSETS $419
TOTAL ASSETS 986
CURRENT LIABILITIES 373
NONCURRENT LIABILITIES 325
EQUITY 288
=======================================================================================
</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).
NOTE 13 PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
LAND AND LAND IMPROVEMENTS $ 331 $ 370
MACHINERY AND EQUIPMENT 5,760 6,528
BUILDINGS 1,415 1,545
OFFICE FURNITURE AND EQUIPMENT 868 781
TRANSPORTATION EQUIPMENT 153 173
CONSTRUCTION IN PROGRESS 449 388
- ---------------------------------------------------------------------------------------
8,976 9,785
LESS -- ACCUMULATED DEPRECIATION
AND AMORTIZATION (4,757) (5,043)
- ---------------------------------------------------------------------------------------
$4,219 $4,742
=======================================================================================
</TABLE>
<PAGE>
NOTE 14 ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CUSTOMER ADVANCE PAYMENTS/DEPOSITS $ 127 $ 182
INSURANCE 102 113
POSTRETIREMENT BENEFITS OTHER
THAN PENSIONS 135 122
WAGES 315 267
OTHER 1,216 1,091
- ---------------------------------------------------------------------------------------
$1,895 $1,775
=======================================================================================
</TABLE>
NOTE 15 LONG-TERM DEBT AND CREDIT AGREEMENTS
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
EMPLOYEE STOCK OWNERSHIP
PLAN REFUNDING NOTES, 6.957%
AND 7.016%, DUE 1997 $ -- $ 44
EMPLOYEE STOCK OWNERSHIP
PLAN FLOATING RATE NOTES,
4.39% - 5.11%, DUE 1997 - 1999 164 203
6.75% NOTES DUE AUGUST 15, 2000 100 100
97/8% 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 116 129
ZERO COUPON BONDS AND MONEY
MULTIPLIER NOTES, 13.0% - 14.26%,
DUE 1997 - 2009 229 214
91/2% DEBENTURES DUE JUNE 1, 2016 100 100
INDUSTRIAL DEVELOPMENT BOND
OBLIGATIONS, 4.0% - 6.75%, MATURING
AT VARIOUS DATES THROUGH 2026 103 105
OTHER (INCLUDING CAPITALIZED LEASES),
1.07% - 15.3%, MATURING AT VARIOUS
DATES THROUGH 2016 156 122
- ---------------------------------------------------------------------------------------
1,318 1,367
LESS-- UNAMORTIZED DISCOUNT (1) (1)
- ---------------------------------------------------------------------------------------
$1,317 $1,366
=======================================================================================
</TABLE>
The schedule of principal payments on long-term debt is as follows:
<TABLE>
<CAPTION>
LONG-TERM
AT DECEMBER 31, 1996 DEBT(1)
- ---------------------------------------------------------------------------------------
<S> <C>
1997 $ 112
1998 247
1999 165
2000 172
2001 38
THEREAFTER 695
- ---------------------------------------------------------------------------------------
1,429
LESS -- CURRENT PORTION (112)
- ---------------------------------------------------------------------------------------
$1,317
=======================================================================================
</TABLE>
(1) AMOUNTS ARE NET OF REPURCHASES.
The Company has two credit agreements (Credit Agreements) with a group of 20
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, 2001. 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
1997. The banks' commitments to lend under the $375 million 364-Day Credit
Agreement terminate on June 27, 1997. The Company intends to renegotiate this
agreement in 1997. The Company has agreed to pay facility fees of 0.07% per
annum and 0.05% 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
comply
32
<PAGE>
<PAGE>
with, or occurrence of, 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 17.5 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, 1996. The Credit
Agreements presently serve as support for the issuance of commercial paper.
NOTE 16 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, 1996 PAYMENTS
- ---------------------------------------------------------------------------------------
<C> <C>
1997 $ 63
1998 58
1999 54
2000 45
2001 40
THEREAFTER 147
- ---------------------------------------------------------------------------------------
$407
=======================================================================================
</TABLE>
Rent expense of $98, $121 and $135 million was included in costs and expenses
for 1996, 1995 and 1994, respectively.
NOTE 17 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, 1996 and
1995.
At December 31, 1996 and 1995, interest rate swap agreements effectively changed
$300 million of fixed-rate debt at an average rate of 9.53% in both years to
U.S. commercial paper based floating rate debt with an effective average rate of
7.94% and 8.24%, respectively. Based on their terms, these agreements will be
terminated by the counterparty if short-term interest rates drop below a
predetermined level. Other interest rate swaps at December 31, 1996 and 1995
effectively changed $66 and $74 million, respectively, of London Interbank Offer
Rate (LIBOR) based floating rate debt at an average rate of 4.76% and 5.26%,
respectively, to fixed rate debt with an effective average rate of 7.00% and
6.92%, respectively. The Company's interest rate swaps mature through the year
2000.
<PAGE>
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 marked to market and recognized immediately in income. The
Company's principal currency exposures relate to the French franc, the German
deutsche mark, the British pound and the U.S. dollar. At December 31, 1996, the
Company held or had written foreign currency forward and option agreements,
maturing through 1998. The Company only writes foreign currency options in
combination with purchased options as an integral transaction and economic
alternative to using forward agreements.
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 derivatives are not significant at December
31, 1996.
33
<PAGE>
<PAGE>
The values of the Company's outstanding derivative financial instruments at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
NOTIONAL
PRINCIPAL FAIR CARRYING
DECEMBER 31, 1996 AMOUNT VALUE(1) VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST RATE SWAP
AGREEMENTS HELD $366 $ (1) $--
FOREIGN CURRENCY FORWARD
AGREEMENTS HELD 425 (1) (1)
FOREIGN CURRENCY FORWARD
AGREEMENTS WRITTEN 420 2 4
FOREIGN CURRENCY OPTIONS HELD 120 1 1
FOREIGN CURRENCY OPTIONS
WRITTEN 76 (1) (1)
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------
<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)
=======================================================================================
</TABLE>
(1) FAIR VALUES FOR FORWARD, OPTION AND INTEREST RATE SWAP CONTRACTS ARE BASED
ON MARKET QUOTES.
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 $41 and $43 million at year-end 1996
and 1995, respectively) are $1,388 and $1,512 million and the fair values are
$1,560 and $1,733 million at December 31, 1996 and 1995, 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 18 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 Board increased
the Company's repurchase authority by 50 million shares of common stock in
December 1996. As a result, as of December 31, 1996, the Company had remaining
authority to repurchase from time to time up to 51.2 million shares of common
stock.
<PAGE>
<TABLE>
<CAPTION>
COMMON
SHARES STOCK/
OUTSTANDING PAID-IN TREASURY
(IN MILLIONS) CAPITAL STOCK
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
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)
PURCHASED UNDER REPURCHASE
PROGRAMS (7.0) -- (409)
USED FOR DIVIDEND
REINVESTMENT PLAN .1 -- 2
USED FOR EMPLOYEE BENEFIT
PLANS (INCLUDING RELATED
TAX BENEFITS) 6.7 58 109
USED FOR ACQUISITIONS .2 -- 3
- ---------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996 282.8 $2,905 $(1,953)
=======================================================================================
</TABLE>
NOTE 19 STOCK OPTIONS AND AWARDS
The Company has a 1993 Stock Plan and a 1985 Stock Plan available to grant
incentive and non-qualified stock options, stock appreciation rights (SARs),
restricted shares and restricted units (Units) to officers and other employees.
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) as
of 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. There were 4,102,156 and 3,597,248 shares available for
future grants under the terms of the Company's stock option plans at December
31, 1996 and 1995, respectively. 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 from the date of grant.
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. 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. Units have been granted to certain
employees, which entitle the holder to receive shares of common stock. At
December 31, 1996, there were 1,177,680 Units outstanding, including 131,950
Units granted in 1996, the restrictions on which generally lapse over periods
not exceeding ten years from date of grant. Compensation expense is recognized
over the restricted period.
34
<PAGE>
<PAGE>
The following table summarizes information about stock option activity for the
three years ended December 31, 1996:
<TABLE>
<CAPTION>
AVERAGE
EXERCISE
NUMBER PRICE
OF OPTIONS PER SHARE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
OUTSTANDING AT DECEMBER 31, 1993 19,618,446 $24.95
GRANTED 6,809,010 37.55
EXERCISED (1,693,567) 19.32
LAPSED OR CANCELED (344,720) 32.88
SURRENDERED UPON EXERCISE OF SARS (17,450) 21.41
- ---------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1994 24,371,719 28.75
GRANTED 6,399,590 36.53
EXERCISED (4,199,415) 22.87
LAPSED OR CANCELED (358,567) 34.75
- ---------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1995 26,213,327 31.51
GRANTED 4,718,270 51.20
EXERCISED (5,001,777) 28.15
LAPSED OR CANCELED (369,007) 42.02
- ---------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1996 25,560,813 35.65
=======================================================================================
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
---------------------------------- ----------------------------
AVERAGE AVERAGE
RANGE OF EXERCISE EXERCISE
EXERCISE NUMBER AVERAGE PRICE NUMBER PRICE
PRICES OUTSTANDING LIFE(1) PER SHARE EXERCISABLE PER SHARE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$14.35-$29.16 5,796,205 4.2 $21.62 5,796,205 $21.62
$32.00-$35.50 5,353,761 6.6 34.40 4,031,886 34.40
$35.57-$39.07 9,286,347 7.7 36.91 4,170,681 37.61
$42.50-$63.69 5,124,500 9.0 50.53 183,960 45.33
---------- ----------
25,560,813 6.9 35.65 14,182,732 30.27
=======================================================================================
</TABLE>
(1) AVERAGE REMAINING CONTRACTUAL LIFE IN YEARS. THERE WERE 14,052,739 AND
12,659,343 OPTIONS EXERCISABLE AT AVERAGE EXERCISE PRICES PER SHARE OF $27.49
AND $23.55 AT DECEMBER 31, 1995 AND 1994, RESPECTIVELY.
As permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS No. 123), effective for 1996, the Company
continues to account for stock compensation costs in accordance with the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". Had compensation cost been determined based on the fair
value at the grant dates for awards under the Company's stock plans in
accordance with SFAS No. 123, net income would have been reduced by $24 million
($0.09 per share) and $15 million ($0.05 per share) in 1996 and 1995,
respectively. As required by SFAS No. 123, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions for 1996 and 1995, respectively: historical
dividend yield of 1.8% in both years; an expected life of five years and five
and one-half years; historical volatility of 21% and 23% and a risk-free rate of
return of 5.52% and 7.21%. The weighted-average fair values of the options
granted during 1996 and 1995 were $12.43 and $11.06 per share, respectively.
The Company also has a Stock Plan for Non-Employee Directors (Directors' Plan)
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 from the date of grant.
<PAGE>
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 20 CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $61 $18 $(7)
TRANSLATION ADJUSTMENT AND
IMPACT OF HEDGES (59) 43 25
- ---------------------------------------------------------------------------------------
$ 2 $61 $18
=======================================================================================
</TABLE>
NOTE 21 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.
In accordance with the Company's accounting policy described in Note 1 of Notes
to Financial Statements, liabilities are recorded for environmental matters
generally no later than the completion of feasibility studies. 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 22 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 1996, 1995 and 1994 included interest of $178, $183
and $121 million and income taxes of $221, $185 and $164 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:
35
<PAGE>
<PAGE>
<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>
The weighted average interest rate on short-term borrowings and commercial paper
outstanding at December 31, 1996 and 1995 was 6.0% and 7.0%, respectively.
NOTE 23 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 1996, 1995 and 1994 the Company's cost for providing other postretirement
benefits aggregated $121, $142 and $150 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 1996 were 6.75% to 9% for indemnity
programs and 6% to 6.75% 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 one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1996 by $121 million and the aggregate of
the service and interest cost component of net periodic postretirement benefit
cost for the year then ended by $12 million. The weighted-average discount rate
used in determining the accumulated postretirement benefit obligation was 7.75%
and 7.25% at December 31, 1996 and 1995, respectively.
Net periodic postretirement benefit cost for 1996, 1995 and 1994 included the
following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICE COST-BENEFITS ATTRIBUTED
TO SERVICE DURING THE PERIOD $ 24 $ 20 $ 27
INTEREST COST ON ACCUMULATED
POSTRETIREMENT BENEFIT OBLIGATION 110 133 133
NET AMORTIZATION (14) (12) (10)
- ---------------------------------------------------------------------------------------
120 141 150
FOREIGN PLANS 1 1 --
- ---------------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT
BENEFIT COST $121 $142 $150
=======================================================================================
</TABLE>
<PAGE>
Presented below are the plans' status and amounts recognized in the Company's
Consolidated Balance Sheet at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION:
RETIREES $1,054 $1,310
FULLY ELIGIBLE ACTIVE PLAN
PARTICIPANTS 126 184
OTHER ACTIVE PLAN PARTICIPANTS 353 455
- ---------------------------------------------------------------------------------------
1,533 1,949
UNRECOGNIZED PRIOR SERVICE COST 115 161
UNRECOGNIZED NET GAIN (LOSS) 274 (124)
- ---------------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT COST $1,922 $1,986
=======================================================================================
</TABLE>
NOTE 24 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. At December 31, 1996, approximately 61% of the assets of U.S.
plans were held in equity securities, with the balance primarily in fixed
income-type securities.
Pension expense in 1996, 1995 and 1994 was $88, $115 and $109 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 1996, 1995 and 1994 included the following
components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICE COST-BENEFITS EARNED
DURING THE PERIOD $ 133 $ 107 $ 132
INTEREST COST ON PROJECTED
BENEFIT OBLIGATION 398 395 363
ACTUAL RETURN ON PLAN ASSETS (841) (1,019) (65)
NET AMORTIZATION AND DEFERRAL 388 616 (338)
- ---------------------------------------------------------------------------------------
NET PERIODIC PENSION COST FOR
DEFINED BENEFIT PLANS 78 99 92
FOREIGN PLANS AND OTHER 10 16 17
- ---------------------------------------------------------------------------------------
NET PERIODIC PENSION COST $ 88 $ 115 $ 109
=======================================================================================
</TABLE>
The assumed rate of return for the Company's U.S. defined benefit pension plans
was 9.5% in 1996 and 9% in 1995 and 1994. The assumed discount rate used in
calculating the projected benefit obligations at December 31, 1996, 1995 and
1994 was 7.75%, 7.25% and 8.75%, respectively. In addition, the assumed annual
increase in compensation over employees' estimated remaining working lives was
5% in 1996, 1995 and 1994.
36
<PAGE>
<PAGE>
Presented below are the plans' funded status and amounts recognized in the
Company's Consolidated Balance Sheet at December 31, 1996 and 1995 for its
significant defined benefit pension plans:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------------------------
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 $ 3,715 $ 832 $ 3,813 $ 805
NONVESTED 256 65 244 113
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATED BENEFIT OBLIGATION $ 3,971 $ 897 $ 4,057 $ 918
===================================================================================================================
PROJECTED BENEFIT OBLIGATION $ 4,474 $ 933 $ 4,703 $ 953
LESS -- FAIR VALUE OF ASSETS 5,116 711 4,694 699
- -------------------------------------------------------------------------------------------------------------------
OVER (UNDER) FUNDED PLANS 642 (222)(1) (9) (254)
UNRECOGNIZED TRANSITION (ASSET) LIABILITY (6) (24) -- (34)
UNRECOGNIZED NET (GAIN) LOSS (549) (55) 85 26
UNRECOGNIZED PRIOR SERVICE COST (10) 90 (11) 86
- -------------------------------------------------------------------------------------------------------------------
PREPAID (ACCRUED) PENSION COST $ 77 $ (211) $ 65 $ (176)
===================================================================================================================
</TABLE>
(1) INCLUDES $220 MILLION FOR UNFUNDED FOREIGN AND SUPPLEMENTAL DOMESTIC
PENSION PLANS.
Note 25 SEGMENT FINANCIAL DATA
AlliedSignal Inc. is a global, advanced technology and manufacturing company.
The Company's principal lines of business are aerospace, automotive and
engineered materials. Aerospace's principal products, which include propulsion
engines, auxiliary power units, environmental control systems, cabin
pressurization and engine control systems and avionics, are sold to the U.S. and
foreign governments, aircraft manufacturers, commercial airlines and dealers and
distributors of general aviation products. Automotive supplies systems and
components to worldwide manufacturers of passenger cars; light, medium and heavy
trucks; buses; and off-highway vehicles, as well as replacement parts through
the independent aftermarket and passenger car/truck dealers. Engineered
materials' principal products include chemicals, fibers, plastics and advanced
materials, which have applications for numerous industries including automotive,
carpeting, refrigeration, construction, electronics, computer and utilities,
among others.
<PAGE>
<TABLE>
<CAPTION>
CORPORATE
ENGINEERED AND
AEROSPACE AUTOMOTIVE MATERIALS UNALLOCATED (1) TOTAL
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES(2) 1996 $ 5,714 $ 4,240 $ 4,013 $ 4 $ 13,971
1995 5,084 5,549 3,713 -- 14,346
1994 4,623 4,922 3,272 -- 12,817
- --------------------------------------------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT EXPENSE 1996 173 49 123 -- 345
1995 154 80 109 10 353
1994 126 73 110 9 318
- --------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION 1996 186 127 207 31 551
1995 186 164 185 28 563
1994 183 148 171 21 523
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS(3) 1996 359 900 438 (188) 1,509
1995 551 292 563 (146) 1,260
1994 458 411 409 (126) 1,152
- --------------------------------------------------------------------------------------------------------------------
NET INCOME(3)(4) 1996 206 521 361 (68) 1,020
1995 303 146 473 (47) 875
1994 260 215 330 (46) 759
- --------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES 1996 143 212 336 64 755
1995 131 214 334 67 746
1994 148 245 232 14 639
- --------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS 1996 5,172 2,729 3,453 1,475 12,829
1995 5,079 3,813 3,302 271 12,465
1994 5,104 3,276 2,562 379 11,321
====================================================================================================================
</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 $1,172, $1,107 AND $1,089 MILLION FOR EACH OF THE RESPECTIVE
YEARS.
(3) INCLUDES IN 1996 A PRE- AND AFTER-TAX PROVISION FOR REPOSITIONING AND OTHER
CHARGES FOR AEROSPACE OF $292 AND $179 MILLION, AUTOMOTIVE OF $117 AND $49
MILLION, ENGINEERED MATERIALS OF $129 AND $71 MILLION AND CORPORATE AND
UNALLOCATED OF $99 AND $60 MILLION, RESPECTIVELY. ALSO INCLUDES IN 1996
PRE- AND AFTER-TAX GAIN ON SALE OF BRAKING BUSINESS OF $655 AND $368
MILLION FOR AUTOMOTIVE. INCLUDES IN 1995 A PRE- AND AFTER-TAX PROVISION FOR
REPOSITIONING CHARGE OF $115 AND $71 MILLION FOR AUTOMOTIVE, AND A PRE- AND
AFTER-TAX GAIN OF $71 AND $71 MILLION FOR ENGINEERED MATERIALS.
(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 26 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) 1996 $10,774 $252 $ 2,397 $ 548 $ -- $ 13,971
1995 10,734 230 2,740 642 -- 14,346
1994 9,739 202 2,283 593 -- 12,817
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME(3) 1996 736 28 212 44 -- 1,020
1995 734 31 58 52 -- 875
1994 654 23 65 17 -- 759
- ---------------------------------------------------------------------------------------------------------------------
ASSETS 1996 9,880 302 2,501 729 (583) 12,829
1995 9,378 219 2,964 588 (684) 12,465
1994 8,977 205 2,295 543 (699) 11,321
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES 1996 8,059 132 798 243 (583) 8,649
1995 7,623 106 1,535 293 (684) 8,873
1994 7,290 87 1,319 342 (699) 8,339
=====================================================================================================================
</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 $2,399, $2,119 AND
$1,818 MILLION FOR EACH OF THE RESPECTIVE YEARS.
(3) INCLUDES IN 1996 AN AFTER-TAX PROVISION FOR REPOSITIONING AND OTHER CHARGES
FOR THE UNITED STATES OF $356 AND EUROPE OF $3 MILLION. ALSO INCLUDES IN
1996 AN AFTER-TAX GAIN ON THE SALE OF THE BRAKING BUSINESS FOR THE UNITED
STATES OF $244 AND EUROPE OF $143 MILLION AND A LOSS FOR OTHER INT'L OF $19
MILLION. INCLUDES IN 1995 AN AFTER-TAX GAIN FOR THE UNITED STATES OF $42
MILLION AND A LOSS FOR EUROPE OF $42 MILLION.
Note 27 UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------------------
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 $3,778 $3,347 $3,348 $3,498 $13,971 $3,419 $3,630 $3,499 $3,798 $14,346
GROSS PROFIT 766 112(1) 750 737 2,365 672 728 699 593 2,692
NET INCOME 225 272(1)(2) 253 270 1,020 198 227 217 233 875
PER SHARE .80 .96(1)(2) .90 .96 3.61 .70 .80 .77 .83 3.09
DIVIDENDS PAID .225 .225 .225 .225 .90 .195 .195 .195 .195 .78
MARKET PRICE(3)
HIGH 59.25 60.38 66.38 74.38 74.38 39.88 44.50 47.13 49.88 49.88
LOW 47.13 54.25 52.75 61.88 47.13 33.38 38.38 43.13 41.13 33.38
=======================================================================================================================
</TABLE>
(1) INCLUDES A PROVISION OF $637 MILLION (AFTER-TAX $359 MILLION, OR $1.27 PER
SHARE) FOR REPOSITIONING AND OTHER CHARGES. SEE NOTE 3 OF NOTES TO
FINANCIAL STATEMENTS FOR FURTHER INFORMATION.
(2) INCLUDES AN AFTER-TAX GAIN OF $368 MILLION, OR $1.30 PER SHARE, ON THE SALE
OF THE BRAKING BUSINESS. SEE NOTE 4 OF NOTES TO FINANCIAL STATEMENTS FOR
FURTHER INFORMATION.
(3) FROM COMPOSITE TAPE -- STOCK IS PRIMARILY TRADED ON THE NEW YORK STOCK
EXCHANGE.
<PAGE>
Report of Independent Accountants
PRICE WATERHOUSE LLP [LOGO]
January 31, 1997
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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, 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.
PRICE WATERHOUSE LLP
Morristown, NJ
38
<PAGE>
<PAGE>
Selected Financial Data
AlliedSignal Inc. (dollars in millions except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR
- ----------------------------------------------------------------------------------------------------------------
NET SALES $13,971 $14,346 $12,817 $11,827 $12,042 $11,831 $12,343 $11,942 $11,909 $11,116
INCOME (LOSS) FROM CONTINUING
OPERATIONS(1) 1,020 875 759 656 535 (273) 462 528 463 515
NET INCOME (LOSS)(2) 1,020 875 759 411 (712) (273) 462 528 463 656
PER SHARE OF COMMON STOCK:
EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 3.61 3.09 2.68 2.31 1.90 (1.00) 1.67 1.78 1.55 1.53
NET EARNINGS (LOSS) 3.61 3.09 2.68 1.45 (2.52) (1.00) 1.67 1.78 1.55 1.95
DIVIDENDS .90 .78 .6475 .58 .50 .80 .90 .90 .90 .90
AT YEAR-END
- ----------------------------------------------------------------------------------------------------------------
NET WORKING CAPITAL $ 2,143 $ 1,086 $ 1,194 $ 1,078 $ 1,414 $ 526 $ 892 $ 1,065 $ 1,040 $ 722
PROPERTY, PLANT AND
EQUIPMENT -- NET 4,219 4,742 4,260 4,094 3,897 3,638 3,584 3,321 3,214 3,330
TOTAL ASSETS 12,829 12,465 11,321 10,829 10,756 10,382 10,456 10,342 10,069 10,321
LONG-TERM DEBT 1,317 1,366 1,424 1,602 1,777 1,914 2,051 1,903 2,044 2,017
SHAREOWNERS' EQUITY 4,180 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 14.78 12.70 10.53 8.42 7.93 10.79 12.55 11.77 11.05 10.44
AVERAGE INVESTMENT(3) 6,468 5,598 4,848 4,506 4,939 6,771 6,723 6,520 6,629 6,859
COMMON SHARES OUTSTANDING
(IN MILLIONS) 282.8 282.8 283.1 283.8 283.8 276.3 269.4 290.0 295.9 299.9
COMMON SHAREOWNERS OF RECORD 77,856 79,046 82,095 84,248 84,254 91,492 97,210 102,042 111,402 109,322
EMPLOYEES(4) 76,600 88,500 87,500 86,400 89,300 98,300 105,800 107,100 109,550 115,300
FINANCIAL STATISTICS(5)
- ----------------------------------------------------------------------------------------------------------------
RETURN ON SALES (INCOME FROM
OPERATIONS) 10.8 8.8 9.0 8.1 3.4 (2.5) 5.9 8.0 5.7 6.8
RETURN ON SALES (AFTER-TAX) 7.3 6.1 5.9 5.5 4.4 (2.3) 3.7 4.4 3.9 4.6
RETURN ON AVERAGE INVESTMENT
(AFTER-TAX) 17.5 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) 26.6 26.7 28.9 30.6 26.4 (8.4) 13.9 15.6 14.5 14.5
INTEREST COVERAGE RATIO 7.6 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 22.2 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 29.5 33.7 34.1 42.7 44.7 43.9 40.4 35.7 35.9 39.0
FINANCIAL STATISTICS(5)(6)
- ----------------------------------------------------------------------------------------------------------------
RETURN ON SALES (INCOME FROM
OPERATIONS) 10.7 9.1 9.0 7.9 6.5 4.7 5.9 8.0 7.4 6.8
RETURN ON SALES (AFTER-TAX) 7.2 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 17.4 17.5 16.6 13.9 7.8 9.6 11.0 10.9 8.9
RETURN ON AVERAGE SHAREOWNERS'
EQUITY (AFTER-TAX) 26.3 26.7 28.9 30.5 26.7 10.5 13.9 15.6 15.9 12.2
INTEREST COVERAGE RATIO 7.5 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 22.2 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 29.5 33.7 34.1 42.7 44.7 43.9 40.4 35.7 35.9 39.0
================================================================================================================
</TABLE>
(1) IN 1996, INCLUDES THE EFFECT OF A PROVISION FOR REPOSITIONING AND OTHER
CHARGES, AS WELL AS A GAIN ON THE SALE OF THE BRAKING BUSINESS RESULTING IN
A NET GAIN OF $33 MILLION (AFTER-TAX $9 MILLION, OR $0.03 PER SHARE). IN
1992, INCLUDES THE EFFECT OF A PROVISION FOR REPOSITIONING 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 PER SHARE). IN 1991, INCLUDES THE EFFECT OF A PROVISION
FOR REPOSITIONING 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
PER SHARE). IN 1988, INCLUDES AN AFTER-TAX CHARGE OF $125 MILLION, OR $0.42
PER SHARE, FOR REPOSITIONING CHARGES, AN AFTER-TAX GAIN OF $36 MILLION, OR
$0.12 PER 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 PER
SHARE, FROM NONRECURRING ITEMS. IN 1987, INCLUDES THE EFFECT OF THE SALE OF
COMMON STOCK BY UNION TEXAS WHICH RESULTED IN A GAIN OF $108 MILLION
(AFTER-TAX $82 MILLION, OR $0.24 PER SHARE).
(2) INCLUDES IN 1993 THE CUMULATIVE AFTER-TAX PROVISION FOR THE ADOPTION OF
FASB NO. 112 OF $245 MILLION, OR $0.86 PER 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 PER SHARE.
(3) INVESTMENT IS DEFINED AS SHAREOWNERS' EQUITY AND NON-CURRENT DEFERRED
TAXES-NET PLUS TOTAL DEBT.
(4) INCLUDES EMPLOYEES AT FACILITIES OPERATED FOR THE U.S. DEPARTMENT OF
ENERGY.
(5) THE RETURNS AND INTEREST COVERAGE RATIO EXCLUDE THE IMPACT ON INCOME OF THE
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES.
(6) THE RETURNS AND INTEREST COVERAGE RATIO EXCLUDE THE IMPACT OF NONRECURRING
ITEMS IN 1993, PROVISIONS FOR REPOSITIONING CHARGES IN 1996, 1995, 1992,
1991 AND 1988, GAIN ON THE SALE OF THE BRAKING BUSINESS IN 1996, GAIN ON
THE TRANSFER OF THE HDPE BUSINESS TO EXXON IN 1995, 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
AlliedSignal Technical Services Corporation...................... Delaware 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, 33-51455, 33-55410, 33-58345, 33-58347, 33-60261, 33-62963,
33-64295 and 333-14673), on Forms S-3 (Nos. 33-13211, 33-14071, 33-55425,
33-64245 and 333-22355) and on Form S-8 (filed as an amendment to Form S-14, No.
2-99416-01) of our report dated January 31, 1997 appearing in the 1996 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, 1996.
PRICE WATERHOUSE LLP
Morristown, New Jersey
February 28, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Lawrence A. Bossidy
------------------------------
Lawrence A. Bossidy
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Hans W. Becherer
------------------------------
Hans W. Becherer
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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 docments 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.
/s/ Ann M. Fudge
------------------------------
Ann M. Fudge
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Paul X. Kelley
------------------------------
Paul X. Kelley
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Robert P. Luciano
------------------------------
Robert P. Luciano
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Robert B. Palmer
------------------------------
Robert B. Palmer
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Russell E. Palmer
------------------------------
Russell E. Palmer
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Ivan G. Seidenberg
------------------------------
Ivan G. Seidenberg
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Andrew C. Sigler
------------------------------
Andrew C. Sigler
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ John R. Stafford
------------------------------
John R. Stafford
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Thomas P. Stafford
------------------------------
Thomas P. Stafford
Dated: January 23, 1997
<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, Robert F. Friel 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, 1996,
(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.
/s/ Robert C. Winters
------------------------------
Robert C. Winters
Dated: January 23, 1997
<PAGE>
<PAGE>
POWER OF ATTORNEY
I, Henry T. Yang, a director of AlliedSignal Inc. (the "Company"), a
Delaware corporation, hereby appoint Lawrence A. Bossidy, Peter M. Kreindler,
Richard F. Wallman, Robert F. Friel 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, 1996,
(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 therewil h,
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 confuming 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.
/s/ Henry T. Yang
------------------------------
Henry T. Yang
Dated: January 23, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet at December 31. 1996 and the consolidated statement
of income for the year ended December 31. 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,465
<SECURITIES> 301
<RECEIVABLES> 1,330
<ALLOWANCES> 31
<INVENTORY> 1,946
<CURRENT-ASSETS> 5,839
<PP&E> 8,976
<DEPRECIATION> 4,757
<TOTAL-ASSETS> 12,829
<CURRENT-LIABILITIES> 3,696
<BONDS> 1,317
<COMMON> 358
0
0
<OTHER-SE> 3,822
<TOTAL-LIABILITY-AND-EQUITY> 12,829
<SALES> 13,971
<TOTAL-REVENUES> 13,971
<CGS> 11,606
<TOTAL-COSTS> 11,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> 1,553
<INCOME-TAX> 533
<INCOME-CONTINUING> 1,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,020
<EPS-PRIMARY> 3.61
<EPS-DILUTED> 0
<PAGE>
