-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, miZt1aKoBGv/nj2JEVQmQ22JifGRhEvP7KDwSopcnSEdEu5ySSyzZqMTQ9dP4j6+ bvstWG3MyMkcYc154SDgzQ== 0000950128-95-000040.txt : 19950612 0000950128-95-000040.hdr.sgml : 19950612 ACCESSION NUMBER: 0000950128-95-000040 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950307 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTINGHOUSE ELECTRIC CORP CENTRAL INDEX KEY: 0000106413 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 250877540 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00977 FILM NUMBER: 95519092 BUSINESS ADDRESS: STREET 1: WESTINGHOUSE BLDG STREET 2: 11 STANWIX STREET CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122442000 FORMER COMPANY: FORMER CONFORMED NAME: WESTINGHOUSE ELECTRIC & MANUFACTURING CO DATE OF NAME CHANGE: 19710510 10-K405 1 WESTINGHOUSE 10-K405 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1994 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-K (MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO --------- --------- COMMISSION FILE NUMBER 1-977 WESTINGHOUSE ELECTRIC CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0877540 --------------------------------- ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) WESTINGHOUSE BUILDING, 11 STANWIX STREET, PITTSBURGH, PENNSYLVANIA 15222-1384 (412) 244-2000 - ------------------------------------------------------ ------------------------------------ (Address of principal executive offices) (Zip Code) (Telephone No.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ------------------------------------------ --------------------------------------------------------- Common Stock, par value $1.00 per Share New York Stock Exchange Philadelphia Stock Exchange Pacific Stock Exchange Boston Stock Exchange Chicago Stock Exchange $1.53 Depositary Shares, Each Representing One-Quarter of a Share of Series B Conversion Preferred Stock New York Stock Exchange 7 3/4% Notes due April 15, 1996 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Westinghouse Electric Corporation had 357,149,060 shares of common stock outstanding at January 31, 1995. As of that date, the aggregate market value of common stock held by non-affiliates was $4.9 billion. DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED: 1. Portions of Westinghouse Electric Corporation's Notice of 1995 Annual Meeting and Proxy Statement filed with the Commission pursuant to Regulation 14A of the Securities and Exchange Act of 1934 (the Proxy Statement). (Parts I and III) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The terms "Westinghouse" and "Corporation" as used in this Report on Form 10-K refer to Westinghouse Electric Corporation and its consolidated subsidiaries unless the context indicates otherwise. PART I ITEM 1. BUSINESS. General Westinghouse Electric Corporation was founded in 1886 and since 1889 has operated under a corporate charter granted by the Commonwealth of Pennsylvania in 1872. Today, Westinghouse is a diversified, global, technology-based corporation operating in the principal business arenas of television and radio broadcasting, advanced electronic systems for the defense industry, environmental services, management services at government-owned facilities, services and fuel for the nuclear energy market, services and equipment for the power generation market, transport temperature control equipment, land development for luxury communities, and office furniture systems. For management reporting purposes, Westinghouse applies a business unit concept to its operating organizations, with each business unit consisting of one or more divisions or subsidiaries that meet certain internal criteria for profit center decentralization. In November 1992, the Corporation announced a plan (the Plan) that included exiting its Financial Services business through the disposition of its asset portfolios and the sales of the Distribution and Control Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO). The disposition of Financial Services assets involved the sale of real estate and corporate finance portfolios over a three-year period and the liquidation of the leasing portfolio over a longer period in accordance with contractual terms. Financial Services, DCBU and WESCO have been accounted for as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30). See note 2 to the financial statements included in Part II, Item 8 of this report. In 1994, the Corporation's continuing operations were realigned. As a result of the realignment, the former Power Systems segment was replaced by separate segments for Energy Systems and Power Generation and the former Industries segment was replaced by separate segments for Thermo King and Other Businesses. Other Businesses include those non-strategic businesses that have been identified for sale: the Industrial Products and Services businesses, Resource Energy Systems and Controlmatic. Controlmatic, which was sold in May 1994, and Resource Energy Systems, were formerly part of the Government & Environmental Services segment. Westinghouse Communications has been transferred from the former Industries segment to the Broadcasting segment. For financial reporting purposes, the Corporation's Continuing Operations are aligned into the following nine segments: Broadcasting, Electronic Systems, Government & Environmental Services, Thermo King Corporation (Thermo King), Energy Systems, Power Generation, The Knoll Group (Knoll), WCI Communities, Inc. (WCI) and Other Businesses. The financial results of manufacturing and service entities located outside the United States, export sales and foreign licensee income are included in the financial information of the segment that has operating responsibility for such activity. Financial and other information by segment and geographic area is included in note 20 to the financial statements included in Part II, Item 8 of this report. For information about principal acquisitions and divestitures, see notes 2 and 19 to the financial statements included in Part II, Item 8 of this report. During 1994, the largest single customer of Westinghouse was the United States Government and its agencies, whose purchases accounted for 26% of 1994 consolidated sales of products and services. No material portion of the Corporation's business was seasonal in nature. 2 3 REPORTING SEGMENTS BROADCASTING Westinghouse Broadcasting Company (Group W) provides a variety of communications services consisting primarily of commercial broadcasting, program production, distribution and telecommunications. It sells advertising time to radio, television and cable advertisers through national and local sales organizations. Westinghouse Broadcasting Company, Inc. and a number of its subsidiaries were merged into the Corporation and, beginning in 1995, Group W is operated primarily as a division of the Corporation. Group W currently owns and operates five network affiliated television broadcasting stations and 16 radio stations. Group W's television stations are located in Baltimore, Boston, Philadelphia, Pittsburgh and San Francisco and their signals reach approximately ten percent of the United States viewing audience. Four of the five Group W television stations are currently rated either first or second in prime time and in news among adult viewers. Group W's radio stations form the largest non-network radio group in the United States. They are located in Boston, Chicago, Detroit, Houston, Los Angeles, New York City, Philadelphia, Pittsburgh and San Francisco, which includes eight of the top ten radio markets in the nation. In addition, WINS, Group W's all-news radio station in New York City, currently has more listeners over the age of 18 than any other radio station in the United States. Group W Satellite Communications provides sports programming and the marketing and advertising sales for two country music entertainment channels. Group W Satellite Communications is also the industry leader in providing technical services to broadcast and cable television networks. Further, the Westinghouse Communications division provides a comprehensive range of telecommunication solutions to business and industry. Its products and services include wide area and local area voice and data communications services. The Broadcasting segment also includes Group W's program production and distribution business, Group W Productions, which supplies television series and special programs through national syndication to broadcast television stations and cable networks throughout the United States. In July 1994, Westinghouse Broadcasting Company and CBS, Inc. (CBS) announced an agreement to enter into a comprehensive strategic alliance that would establish long-term station affiliations between CBS and all of Group W's television stations; form new, jointly-held entities that would acquire additional stations, expand both companies' distribution and programming capabilities nationwide, and merge their advertising sales representation operations. The agreement is subject to the execution of definitive documentation and approval by the Federal Communications Commission. Group W's broadcast stations have many competitors, both large and small, and compete principally on the basis of audience ratings, price and service. Group W's commercial broadcast television business experiences competition from cable television which provides program diversification in addition to improved reception. Broadcast television stations and cable television systems are also in competition in varying degrees with other communications and entertainment media, including movie theaters, videocassette distributors and over-the-air pay television. Due to the rapid pace of technological advancement, broadcast television stations can expect continued strong competition in the future. Still, after years of such intense competition, these broadcast television stations remain, by a wide margin, the premier distributors of news and entertainment programming in their geographic markets. ELECTRONIC SYSTEMS Electronic Systems is a world leader in the research, development, production and support of advanced electronic systems for defense, government, and commercial customers. Products provided to the Department of Defense (DoD) and foreign governments include surveillance and fire control radars, electronic countermeasures equipment, electro-optical systems, missile launching and handling systems, marine propulsion and power generation systems, anti-submarine warfare systems and torpedoes and satellite-based sensors. Products for government and commercial customers include air traffic control systems, satellite communications terminals, mail processing systems, and security and information 3 4 systems. Sales to the DoD accounted for 64% of 1994 Electronic Systems sales. International sales were 23% of total sales. In general, sales to the DoD, international, and other government customers are made through competitive procurements. Contract awards are based primarily on performance and cost evaluations. Contract types vary from fixed-price on production programs to cost-type on development activities. Changes in budgetary plans, procurement policies, and economic and political conditions strongly influence Electronic Systems business. In general, sales to the United States government and foreign military sales through the United States government, are subject to termination procedures prescribed by statute. This segment encounters significant domestic and foreign competition from large electronic companies, on the basis of technology, price, service, warranty and product performance. On any weapon or avionics system procurement, Electronic Systems might be a prime bidder, competing against or teamed with any one of the major domestic or international aerospace companies. Electronic Systems' competitors in the security and information system markets are fewer in number. GOVERNMENT & ENVIRONMENTAL SERVICES The Westinghouse Government & Environmental Services Company includes Environmental Services, the management of certain government-owned facilities and the United States naval nuclear reactors programs. Environmental Services provides a variety of toxic, hazardous and radioactive waste remediation and treatment services. Through Aptus, Inc., the Corporation offers toxic and hazardous waste incineration, treatment, transportation, storage and analysis services. These services are performed at facilities located in Kansas, Utah and Minnesota. Westinghouse is presently negotiating the sale of Aptus. Westinghouse Remediation Services, Inc. provides comprehensive toxic and hazardous waste remediation services, including mobile, on-site environmental treatment technologies. The Scientific Ecology Group, Inc. offers a broad range of on- and off-site services to manage radioactive materials and mixed wastes, including the only commercially-licensed radioactive waste incinerator and the only recycling facility for radioactive contaminated metals in the United States. Through the Westinghouse Savannah River Company and other subsidiaries and divisions, the Corporation manages four government-owned facilities under contracts with the United States Department of Energy (DOE). The principal mission at these sites is cleanup, waste management and the safe storage and handling of the nation's nuclear materials inventory. These businesses are under contracts with the federal government, which reserves the right to terminate these contracts for convenience. The government-funded U.S. naval nuclear reactors programs consist of the Corporation's nuclear and technical support businesses for the United States Navy. These businesses include the Bettis Atomic Power Laboratory, the Plant Apparatus Division, the Machinery Apparatus Operation and the Machinery Technology Division. Competition for services provided by businesses in the Government & Environmental Services segment is based on price, technology preference, environmental experience, performance reputation and, with respect to certain businesses, availability of permitted treatment or disposal facilities. THERMO KING Thermo King, a world leader in its primary businesses, manufactures a complete line of transport temperature control equipment, including units for trucks, truck trailers, container ships, buses and railway cars and service parts to support these units. The transport refrigeration units are powered by diesel fuel, gasoline, propane or electricity. Thermo King maintains international manufacturing facilities in Ireland, Brazil, Spain, the Dominican Republic, Puerto Rico, the United Kingdom, the Czech Republic and the People's Republic of China. It has dealerships throughout the world, and its equipment is used in virtually every country. Thermo King is subject to competition worldwide for all of its products. Its products compete on the basis of service, technology, warranty, product performance, and cost. In addition, Thermo King's customers and 4 5 end users are concerned about environmental issues, especially chlorofluorocarbons, noise pollution and engine emissions. Thermo King designs its products to meet or exceed all current environmental requirements. ENERGY SYSTEMS The Energy Systems business unit primarily serves the worldwide nuclear energy market. It also designs and develops solar-based energy systems and process control systems for nuclear and fossil-fueled power plants and industrial facilities. About 40% of the world's operating commercial nuclear power plants incorporate Westinghouse technology. The business unit focuses on supplying a wide range of operating plant services, ranging from performance-based maintenance programs to new products and services that enhance plant performance. The business unit also has complete capabilities for supplying customers with nuclear fuel for pressurized water reactors. The annual market for operating plant services and fuel is over $10 billion in the United States and $30 billion globally. The business unit is actively marketing new nuclear power plants and components for new plants to the worldwide market. The business unit is also working with government agencies and industry leaders to revitalize the nuclear energy option, and is developing a simplified nuclear power plant design that incorporates passive safety systems. Energy Systems has a number of domestic and foreign competitors in the electric utility industry where Westinghouse is recognized as a significant supplier. Positive factors with respect to competitive position are technology, service and worldwide presence. Negative factors are an increasing number of foreign and small competitors, particularly in the service area. The principal vehicles of competition are technology, product development and performance, customer service, pricing and financing. POWER GENERATION The Power Generation business unit designs, manufactures and services steam turbine-generators for commercial nuclear and fossil-fueled power plants, as well as combustion turbine-generators for natural gas and oil-fired power plants. In addition to serving the regulated electric utility industry, the business unit supplies, services and operates power plants for independent power producers and other non-utility customers. Growing demand for electrical energy has contributed to the business unit's growth. In 1994, the business unit was awarded orders for approximately 5,900 megawatts of new power generating capacity. The domestic market for new generating equipment over the next ten years is expected to be nearly 140 gigawatts; the international market is expected to be over six times the size of the domestic market. The Power Generation business unit recently entered into a joint venture with Long Yuan Power Technology Exploitation Corporation (LYPTEC) and is in final contract negotiations with Shanghai Turbine Works for the sale and joint manufacture of steam turbines to meet China's rapidly growing energy needs. With more than 2,800 operating units worldwide based on Westinghouse power generation technology, the business unit has a substantial base for its service business. The business unit reentered the renewable energy market through a business alliance. The alliance will develop, manufacture and service power projects based on renewable sources of generation, such as wind turbines, small hydro projects and photovoltaics. The Power Generation business unit is a participant in the development of emerging technologies which could shape the future of power generation. Power Generation has a number of domestic and foreign competitors in the electric utility industry where Westinghouse is recognized as a significant supplier. Positive factors with respect to competitive position are technology, service and worldwide presence. Negative factors are an increasing number of foreign and regional competitors, particularly in the service area. The principal vehicles of competition are technology, product performance, customer service, pricing and financing. KNOLL Knoll consists of the Corporation's office furniture business. Knoll provides a wide range of furniture products ranging from designer-oriented individual pieces to systems designed to improve work environments and contribute to productivity. Products include individually hand-crafted furniture, executive furniture, general office furniture, furniture-grade textiles, office accessories and furniture systems. 5 6 Knoll is subject to a high degree of competition (including price, service, design and product performance) for sales of products to the interior design, construction, industrial and consumer markets from both large and small competitors. WCI WCI develops land into master-planned luxury communities located primarily in Florida, Arizona and California. Among WCI's major community developments are Coral Springs, Parkland, Bermuda Bay, Pelican Bay, Pelican Marsh, Pelican Landing, Gateway and Bay Colony, all in Florida, Redhawk in Tucson, Arizona and Bighorn in Palm Springs, California. WCI is subject to a high degree of competition. Competition is based on reputation, price, quality and service. WCI holds a preeminent position in all of its markets. The Corporation is reviewing alternatives for monetizing WCI. OTHER BUSINESSES Other Businesses is a diverse group of businesses providing products and services to commercial, industrial, utility, and government customers. These products and services include: watches; operations at waste-to-energy plants; process rectifiers and associated renewal parts; electro-mechanical parts; copper rod and magnet wire, liquid insulation and resins, and flexible insulation; decorative and industrial high-pressure laminates; large industrial motors; and commercial printing. Other Businesses competes in local geographic markets based on price, performance reputation, technology preference and experience. These businesses are deemed non-strategic and are expected to be sold. DISCONTINUED OPERATIONS Discontinued Operations consists of Financial Services, DCBU and WESCO. During 1994, the Corporation continued to liquidate Financial Services, resulting in a reduction of assets and debt. Financial Services' remaining portfolio investments consist primarily of the leasing portfolio, the Corporation's investment in LW Real Estate Investments, L.P. (LW) and other assets, mostly real estate properties and investments in partnerships. The leasing portfolio is expected to be liquidated in accordance with contractual terms. A significant portion of LW and all of the other remaining assets are expected to be liquidated by the end of 1995. On January 31, 1994, the Corporation completed the sale of DCBU, excluding its Australian subsidiary, to Eaton Corporation for a purchase price of $1.1 billion and the assumption by the buyer of certain liabilities. The sale of its Australian subsidiary was completed in March 1994. On February 28, 1994, the Corporation completed the sale of WESCO to an affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a purchase price of approximately $340 million. The proceeds consisted of approximately $275 million in cash, approximately $50 million in first mortgage notes, and the remainder in stock and options of the new company. RAW MATERIALS The Corporation has experienced no significant difficulty with respect to sources and availability of raw materials essential to the business. PATENTS Westinghouse owns or is licensed under a large number of patents and patent applications in the United States and other countries that, taken together, are of material importance to its business. Such patent rights are, in the judgment of the Corporation, adequate for the conduct of its business. None of its important products, however, is covered by exclusive controlling patent rights that preclude the manufacture of competitive products by others. 6 7 BACKLOG The backlog of firm orders of the Corporation from Continuing Operations, excluding amounts associated with uranium supply contract settlements, was $10,416 million and $9,925 million at December 31, 1994 and 1993, respectively. Of the 1994 backlog, $6,375 million is expected to be liquidated after 1995. In addition to the reported backlog, the Corporation provides certain non-Westinghouse products primarily for nuclear steam supply systems customers. Backlog for the Corporation is as follows: Electronic Systems backlog at year-end 1994 and 1993 was $3,897 million and $3,835 million. Backlog of $2,276 million is expected to be liquidated after 1995. Government & Environmental Services backlog at year-end 1994 and 1993 was $128 million and $87 million. Backlog of $30 million is expected to be liquidated after 1995. Thermo King backlog at year-end 1994 and 1993 was $280 million and $159 million. Backlog of $11 million is expected to be liquidated after 1995. Energy Systems backlog at year-end 1994 and 1993 was $2,623 million and $2,574 million. Backlog of $1,775 million is expected to be liquidated after 1995. Power Generation backlog at year-end 1994 and 1993 was $2,682 million and $2,340 million. Backlog of $1,709 million is expected to be liquidated after 1995. Knoll backlog at year-end 1994 and 1993 was $100 million and $108 million. Backlog is expected to be liquidated during 1995. Other Businesses backlog at year-end 1994 and 1993 was $655 million and $759 million. Backlog of $564 million is expected to be liquidated after 1995. Also included in backlog at year-end 1994 and 1993 was $51 million and $63 million attributable to Corporate and Other, of which $10 million is expected to be liquidated after 1995. ENVIRONMENTAL MATTERS Information with respect to Environmental Matters is incorporated herein by reference to Management's Discussion and Analysis -- Environmental Matters included in Part II, Item 7 and in note 16 to the financial statements included in Part II, Item 8 of this report. RESEARCH AND DEVELOPMENT Data with respect to research and development is incorporated herein by reference to note 20 to the financial statements included in Part II, Item 8 of this report. EMPLOYEE RELATIONS During 1994, Westinghouse employed an average of 84,400 people, with approximately 74,800 located in the United States. During the same period, approximately 11,000 domestic employees were represented in collective bargaining by 20 labor organizations. Of these employees, 48% were represented by unions that are affiliated with, and/or bargain in conjunction with, one of three national unions, namely, the International Brotherhood of Electrical Workers; the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers; and the Federation of Westinghouse Independent Salaried Unions. In August 1994, the Corporation negotiated four-year agreements with these unions, representing about 5,300 employees. The basic agreements provide wage increases of 2.5% in August 1995 and 1996, and 3% in August 1997. They also provide a one-time salary bonus payment of $1,000 in September 1994 and a $500 bonus in April 1995. In addition, there are seven (7) potential cost-of-living increases. 7 8 FOREIGN AND DOMESTIC OPERATIONS Data with respect to foreign and domestic operations and export sales is incorporated herein by reference to note 20 to the financial statements included in Part II, Item 8 of this report. ITEM 2. PROPERTIES. At December 31, 1994, the Corporation's Continuing Operations owned or leased 902 locations totalling more than 40 million square feet of floor area in the United States and 32 foreign countries. Domestic operations of Continuing Operations comprised approximately 82% of the total space. Facilities leased in the United States accounted for approximately 25% of the total space occupied by Continuing Operations and facilities leased in foreign countries accounted for approximately 8% of the total space occupied by Continuing Operations. No individual lease was material. A number of manufacturing plants and other facilities formerly used in operations are either vacant, partially utilized, or leased to others. All of these plants are expected to be sold, leased, or otherwise utilized. Except for these facilities, the Corporation's physical properties are adequate and suitable, with an appropriate level of utilization, for the conduct of its business in the future. ITEM 3. LEGAL PROCEEDINGS. (a) On December 1, 1988, the Republic of the Philippines (Republic) and National Power Corporation (NPC) filed a lawsuit in the United States District Court (USDC) for the District of New Jersey asserting claims against the Corporation, Westinghouse International Projects Company and Burns and Roe Enterprises, Inc. (Burns and Roe) relating to a contract between NPC and Westinghouse for the construction of a nuclear power plant in the Philippines as well as an earlier consulting contract between NPC and Burns and Roe relating to the same project. The complaint alleges, among other things, bribery and other fraudulent conduct, tortious interference with the fiduciary duty owed by Ferdinand E. Marcos to the Republic and the people of the Philippines, common law fraud, and violations of various New Jersey and federal statutes, including the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) statute. This action seeks recision of the Westinghouse and Burns and Roe contracts and restitution of all money and other property paid to Westinghouse and Burns and Roe or, alternatively, reformation of the NPC-Westinghouse contract. Plaintiffs requested compensatory, punitive and treble damages, costs and expenses of the lawsuit, and such other relief as the USDC deems just and proper. Also on December 1, 1988, Westinghouse filed a request for arbitration with the International Chamber of Commerce Court of Arbitration (ICC) pursuant to the NPC-Westinghouse contract, setting forth certain claims Westinghouse has against NPC and the Republic and asking for arbitration of the anticipated claims of the Republic and NPC related to the Philippines nuclear power plant. The Republic and NPC challenged the jurisdiction of the ICC, arguing that the contract between the parties, including its arbitration provision, was invalid due to alleged bribery in the procurement of the contract. In December 1991, the ICC arbitration panel issued its award finding that the Republic and NPC had failed to carry their burden of proving the alleged bribery by the Corporation. The panel thereby concluded that the arbitration clause and contract were valid and that the panel has jurisdiction over the remaining disputes between NPC and the Corporation. In January 1992, NPC filed an action for annulment of the award by the ICC arbitration panel in the Swiss Federal Supreme Court. In September 1993, the Swiss Federal Supreme Court issued an order dismissing NPC's annulment action and assessing costs against NPC. Arbitration before the ICC was concluded in October 1994 and the parties await a decision. With respect to the suit filed in the USDC, Westinghouse filed a motion requesting that the action filed there be stayed in its entirety pending arbitration of the Republic's claims. In 1989, the Court granted a motion brought by the Corporation and ordered 14 of the 15 counts in the lawsuit stayed pending arbitration. The Court retained jurisdiction over the remaining count involving an alleged intentional interference with a fiduciary relationship. Trial commenced with respect to this one count in March 1993. In May 1993, a jury verdict was rendered in favor of the Corporation with respect to all claims relating to the alleged intentional 8 9 interference with a fiduciary relationship. NPC and the Republic have indicated that they intend to appeal this decision. (b) In October 1990, Commonwealth Edison Company (Commonwealth Edison) filed a lawsuit against the Corporation and four individual defendants (all employees of the Corporation or a Corporation subsidiary company) in Circuit Court in Cook County, Illinois, for an unspecified amount of damages, including treble and punitive damages, based on the Corporation's supply of nuclear steam supply systems for Commonwealth Edison's Zion, Byron and Braidwood plants. The complaint sets forth counts of common law fraud against the Corporation and the employees, and violation of the Illinois Consumer Fraud and Deceptive Practices Act and violations of the RICO statute against the Corporation. In November 1991 Commonwealth Edison dismissed the individual defendants and the parties are currently engaged in discovery. A trial date is set for the first quarter of 1996. (c) In October 1990, Houston Lighting and Power Company (HLP) and its co-owners filed a lawsuit against the Corporation and two individual defendants (one current and one retired employee of the Corporation) in the District Court of Matagorda County, Texas, for an unspecified amount of damages. The claims arise out of the Corporation's supply of nuclear steam supply systems for the South Texas Project. Subsequently, HLP disclosed that it is seeking $780 million for estimated past and future damages. The petition alleges breach of contract warranty, misrepresentation, negligent misrepresentation and violation of the Texas Deceptive Trade Practices Act. In January 1991, the parties reached agreement to dismiss the individual defendants. The parties are continuing discovery, and a trial date is set for the second quarter of 1995. (d) In April 1991, Duquesne Light Company (Duquesne) and its co-owners filed a lawsuit against the Corporation in the USDC for the Western District of Pennsylvania for an undetermined amount of damages, including treble and punitive damages. Subsequently Duquesne disclosed that it was seeking approximately $320 million for damages. The claims arose out of the Corporation's supply of nuclear steam supply systems for the Beaver Valley plants. Duquesne asserted counts for breach of contract, fraud, negligent misrepresentation, and violations of the RICO statute. In July 1994, the judge dismissed the negligent misrepresentation claims and portions of its RICO claims. The case went to trial on September 12, 1994. At the close of the evidence, the judge dismissed all remaining counts except common law fraud. On December 6, 1994, the jury returned a verdict in favor of the Corporation on the remaining count. On January 5, 1995, Duquesne Light filed an appeal. (e) In February 1993, Portland General Electric Company (Portland) filed a lawsuit against the Corporation in the USDC for the Western District of Pennsylvania seeking unspecified damages based on claims for breach of contract, negligence, fraud, negligent misrepresentation, and violations of the federal RICO statute and the Oregon RICO statute relating to the Corporation's design, manufacture and installation of steam generators at the Trojan Nuclear Plant, an electric generating facility located in Ranier, Oregon. Also in February 1993, the Eugene Water & Electric Board (the Board), a 30% owner of the Trojan Nuclear Plant, filed a suit containing essentially the same allegations and seeking unspecified damages. A declaratory judgment that the steam generators are defective and the Corporation is liable to plaintiff for expenses, including replacement power, incurred as a result of the alleged defects was also sought in both cases. Although the Board's suit was filed in the USDC for the District of Oregon, its motion to change the venue to the USDC for the Western District of Pennsylvania was granted. In April 1993, on Portland's motion, the Board's case was consolidated with the Portland case. The parties are seeking total damages of approximately $350 million. In June 1993, the court granted the Corporation's motion to dismiss plaintiffs' claims for negligence and negligent misrepresentation. The court also dismissed, in part, the plaintiffs' claims under Section 1962(b) of the federal RICO statute relating to the Trojan project enterprise. The parties continue to engage in discovery. This case could go to trial in 1995. (f) In July 1993, Northern States Power Company (NSP) filed a lawsuit against the Corporation in the USDC for the District of Minnesota for an unspecified amount of damages, including treble and punitive damages, based on the Corporation's supply of steam generators at NSP's Prairie Island Nuclear Plant. The complaint sets forth counts for breach of contract, fraud, negligent misrepresentation, violations of the RICO and violations of the Minnesota Prevention of Consumer Fraud Act. Discovery has commenced. 9 10 (g) In August 1988, the Pennsylvania Department of Environmental Resources (DER) filed a complaint against the Corporation alleging violations of the Pennsylvania Clean Streams Law at the Corporation's Gettysburg, Pennsylvania, elevator plant. The DER requested that the Environmental Hearing Board assess a penalty in the amount of $9 million. The Corporation has denied these allegations. The parties completed discovery and a portion of the hearing on the complaint began in 1991. The hearing resumed in 1992 and concluded in February 1993. All post-trial briefs have been filed and the parties await a decision. (h) The Corporation has been defending consolidated class and derivative actions and an individual lawsuit brought by shareholders of the Corporation against the Corporation, Westinghouse Financial Services, Inc. (WFSI) and Westinghouse Credit Corporation (WCC), previously subsidiaries of the Corporation, and/or certain present and former directors and officers of the Corporation, as well as other unrelated parties. Together, these actions allege various federal securities law and common law violations arising out of alleged misstatements or omissions contained in the Corporation's public filings concerning the financial condition of the Corporation, WFSI and WCC in connection with a $975 million charge to earnings announced on February 27, 1991, a public offering of Westinghouse common stock in May 1991, a $1,680 million charge to earnings announced on October 7, 1991, and alleged misrepresentations regarding the adequacy of internal controls at the Corporation, WFSI and WCC. The consolidated class and derivative actions are pending in the USDC for the Western District of Pennsylvania. In July 1993, the court dismissed in its entirety the derivative claim and dismissed most of the class action claims, with leave to replead certain claims in both actions. Both actions were subsequently replead. On September 27, 1994, the court denied plaintiffs' motion for reinstatement of certain of the dismissed class action claims against the Corporation. On January 20, 1995, the court again dismissed the derivative complaint in its entirety with prejudice. On February 8, 1995, certain of the plaintiffs appealed the dismissal of these claims. Also on January 20, 1995, the court dismissed the class action claims, but granted plaintiffs the right to replead certain of the class action claims. Plaintiffs did not replead the claims and on February 28, 1995, the court dismissed the class action claims in their entirety. The plaintiffs have notified the Corporation that they intend to appeal this dismissal. The remaining individual action was dismissed by the USDC for the Southern District of Texas on December 20, 1994. An appeal was dismissed on February 14, 1995. (i) In February 1993, the Corporation was sued by 108 former employees who were laid off subsequent to the cancellation by the federal government of all contracts pertaining to the carrier-based A-12 aircraft program. The complaint alleges age discrimination on the part of the Corporation. The suit was filed in the USDC for the District of Maryland. The plaintiffs seek back pay with benefits and reinstatement of jobs or front pay. Also, in April 1993, the Equal Employment Opportunity Commission (EEOC) filed a class-action, age discrimination suit against Westinghouse in the USDC for the District of Maryland on behalf of 388 former Westinghouse employees (which includes the aforementioned 108 employees) who were laid off or involuntarily terminated from employment subsequent to the federal government's cancellation of all contracts pertaining to the carrier-based A-12 aircraft program. The suit alleges age discrimination and discriminatory employment practices. The suit seeks back pay, interest, liquidated damages, reinstatement of jobs, court costs and other appropriate relief. These two cases have been consolidated by the court. The parties are currently involved in the discovery process. The court adopted a case management plan which calls for a series of trials centered on separate Electronic Systems' divisions. The first trial is scheduled for September 5, 1995. Currently, no other trials are scheduled. (j) Beginning in early 1990 and continuing into 1994, numerous asbestos lawsuits have been filed against the Corporation and numerous other defendants in the Circuit Court of Jackson County, Mississippi. The plaintiffs allege personal injury, wrongful death and loss of consortium claims arising out of exposure to products containing asbestos that were manufactured, supplied or installed by the defendants. In April 1993, trial commenced in the Circuit Court with respect to the claims of nine plaintiffs against a number of defendants, including the Corporation. In August 1993, a jury awarded a verdict in favor of five of the plaintiffs against the Corporation and certain other defendants and awarded a defense verdict in favor of the Corporation against the four other plaintiffs. The jury found Westinghouse approximately 38% liable on the aggregate damage verdict of some $8.75 million awarded the five plaintiffs, with punitive damages at 10% of compensatory damages. The Corporation is entitled to offsets on these verdicts from settlements previously paid by certain defendants and will also apply its insurance coverage to these verdicts. The judge has 10 11 previously ruled that the jury's findings on certain questions may apply to approximately 6,400 other cases pending which, however, would still have to be tried on issues of exposure, causation and the amount of compensatory damages, if any. The judge denied the motions of the Corporation and the other defendants who were found liable for a judgment notwithstanding the verdict and a new trial. The Corporation has appealed the verdict. The Corporation was a direct defendant in approximately 550 of 2,100 consolidated claims, as well as a third party defendant in an additional 2,200 claims, alleging personal injury, wrongful death and loss of consortium claims arising from alleged exposure to asbestos-containing products manufactured, supplied or installed by various defendants, including the Corporation. Westinghouse has removed 508 of the direct claims to Federal Court from the Baltimore City Circuit Court where they were originally filed, leaving approximately 50 cases still in the Baltimore City Circuit Court. A common issues trial commenced in June 1994. The trial focused on five exemplary plaintiffs, none of whom had claims against Westinghouse. At issue for Westinghouse, however, were questions of failure to warn and negligence with respect to two of its products. In December 1994, the Baltimore jury returned a verdict, finding the two Westinghouse products defective due to their asbestos content and the Corporation's alleged failure to warn adequately of the health hazards associated with those products. The jury also found that Westinghouse can be held liable for punitive damages in certain cases using a multiplier of two times the compensatory damages. The jury's findings on product defect and punitive damages may be binding in future litigation with the plaintiffs remaining in this consolidation who have claims against Westinghouse. Each of these plaintiffs, however, will be required to prove at trial that they developed an asbestos-related disease, that they were exposed to one of the two Westinghouse products at issue, and that this exposure was a substantial factor in the development of the disease. Any compensatory awards will be divided among other defendants also found liable to the plaintiffs, and will be covered in large part by insurance. The Corporation intends to appeal the common issues judgment. In addition to the Mississippi and Baltimore asbestos lawsuits described herein, the Corporation is a defendant in other asbestos lawsuits which have been brought in various other jurisdictions. (k) In August of 1993, the bankruptcy Trustee for the Bonneville Pacific Corporation (Bonneville) sued over 70 defendants, including Westinghouse, in federal district court in Salt Lake City, Utah. The Trustee's claims against the group of defendants, including Westinghouse; Deloitte & Touche; Mayer, Brown & Platt; Piper Jaffray, Inc.; and Kidder Peabody and Company, are numerous, but consist primarily of common law fraud and aiding and abetting in breaches of fiduciary duty on the part of former officers and directors of Bonneville. There are also claims by the Trustee for the tort of conspiracy and civil RICO violations. Westinghouse has filed numerous motions seeking dismissal of the claims and has filed a denial of the allegations. The Corporation's involvement with Bonneville consisted of four sale/lease back transactions in co-generation projects through its former subsidiary, WCC. The case is now entering the deposition phase. On October 6, 1994, the Trustee filed its preliminary damage calculation which totalled $647 million against a group of defendants, including Westinghouse, on a theory of joint and several liability. The Trustee is also seeking treble damages based upon the Trustee's position that a violation of civil RICO has occurred. Westinghouse continues to reject the validity of the claims and believes that the preliminary damage calculations are without merit. In the course of discovery, Westinghouse will challenge these damage calculations. (l) On August 16, 1994, the Official Committee of Unsecured Creditors of Phar-Mor, Inc. filed suit against Westinghouse and others in the United States Bankruptcy Court for the Northern District of Ohio, alleging that an August 1991 tender offer conducted by Phar-Mor, Inc. (Phar-Mor) was a fraudulent conveyance and therefore should be rescinded. Westinghouse participated in the tender offer and received approximately $30 million. The suit also alleges that Westinghouse must repay approximately $20 million it received in the tender offer as proceeds from the tender of stock by the DeBartolo Family Limited Partnership (DeBartolo). Westinghouse received the proceeds from DeBartolo's tender of Phar-Mor stock pursuant to a pre-existing loan to DeBartolo from Westinghouse collateralized by DeBartolo's holdings in Phar-Mor. DeBartolo also has been named as a defendant in this litigation and has separately been sued for the same $20 million. 11 12 Counsel for DeBartolo has filed a motion with the Judicial Panel on Multidistrict Litigation requesting that the fraudulent conveyance action be transferred to the United States District Court (USDC) for the Western District of Pennsylvania for consolidation with approximately 40 other Phar-Mor-related cases currently pending in the USDC. Among these 40 cases is an action filed by Westinghouse in October 1992 in connection with loans to, and equity investments in, Phar-Mor. Westinghouse's suit against Phar-Mor asserts, among other things, federal securities law fraud claims and state law claims for fraud and negligent misrepresentation against various defendants, including principally Phar-Mor's independent accountants (Coopers & Lybrand), its Chief Executive Officer and Treasurer (David S. Shapira), and its controlling shareholder (Giant Eagle, Inc.). Westinghouse has filed a pretrial statement of damages with the Court claiming total damages in excess of $162 million. Among the other Phar-Mor-related cases pending in the USDC are claims by creditors and investors in Phar-Mor against Coopers & Lybrand and/or David Shapira and Giant Eagle, and an action by Phar-Mor against Coopers & Lybrand. Beginning in December 1993 and thereafter, Coopers & Lybrand, David Shapira and/or Giant Eagle asserted cross-claims or third-party complaints in numerous of these cases against Westinghouse and others for contribution and indemnification, alleging, that Westinghouse, by virtue of attendance by its representatives at meetings of Phar-Mor's Board of Directors, became a "de facto" member of the board of directors and thus should share jointly and severally in the payment of damages. Westinghouse has filed an answer denying the allegations contained in the cross-claims and third-party complaints. Total damage claims being asserted in cross-claims and third-party complaints amount to in excess of $1.5 billion. The parties are currently involved in fact discovery in the litigation currently pending in the USDC. Pre-trial statements have been submitted by the parties. This case could go to trial in the second half of 1995. (m) A description of the derivative litigation involving certain of the Corporation's current and past directors is incorporated herein by reference to "Litigation Involving Derivative Claims Against Directors" in the Proxy Statement. (n) On November 4, 1993, the Wisconsin Department of Natural Resources (DNR) issued a notice of violation to the Corporation alleging that it violated the Wisconsin Hazardous Waste Management Act by failing, with respect to its former Milwaukee repair facility, to notify the Department of the presence of PCBs and for failing to remediate the PCBs at the facility. The matter was referred to the Wisconsin Department of Justice (DOJ). The case has been settled, and Westinghouse paid a $150,000 fine pursuant to the Consent Decree. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in the foregoing matters and although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has meritorius defenses to the litigation described in items (a) through (m) above, and management believes that the litigation should not have a material adverse effect on the financial condition of the Corporation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None during the fourth quarter of 1994 EXECUTIVE OFFICERS The name, offices, and positions held during the past five years by each of the executive officers of the Corporation as of March 1, 1995 are listed below. Officers are elected annually. There are no family relationships among any of the executive officers of the Corporation. 12 13
AGE AT NAME, OFFICES, AND POSITIONS MARCH 1, 1995 ---------------------------- ----------------- Michael H. Jordan -- Chairman and Chief Executive Officer 58 since June 30, 1993; Partner with Clayton, Dublier & Rice, Inc. from September 1992 to June 1993; Chairman of PepsiCo International Foods and Beverages Division from December 1990 to August 1992. Prior to December 1990, Mr. Jordan held numerous other management positions of increasing responsibility at PepsiCo International. Gary M. Clark -- President since June 30, 1993; President 59 and Acting Chief Executive Officer from January 27, 1993 to June 30, 1993; Member of President's Office from January 1, 1993 to January 27, 1993; Executive Vice President, Industries and Corporate Resources from December 1990 to January 1993; Executive Vice President, Industries from January 1989 to December 1990. Frank R. Bakos -- President, Power Generation since August 57 1994; Vice President and General Manager, Power Generation from January 1989 to August 1994. Louis J. Briskman -- Senior Vice President and General 46 Counsel since January 1994; Senior Vice President, Secretary and General Counsel from January 1993 to January 1994; Deputy General Counsel from January 1989 to January 1993. Francis J. Harvey -- President, Electronic Systems since 51 March 1, 1995; President, Westinghouse Government & Environmental Services Company from January 1994 to March 1, 1995; Vice President, Science and Technology from July 1993 to January 1994; General Manager, Marine Division from July 1986 to July 1993. Willard C. Korn -- Chairman and Chief Executive Officer, 52 Westinghouse Broadcasting Company since November 1994; President, Westinghouse Broadcasting Company from January 1993 to November 1994; President, Group (W) Television from June 1990 to January 1993. Richard A. Linder -- Chairman, Electronic Systems since 63 March 1, 1995; President, Electronic Systems from August 1994 to March 1, 1995; Executive Vice President from October 1993 to August 1994; Group President from February 1993 to October 1993; Member of President's Office from January 1993 to February 1993; Executive Vice President, Electronic Systems from December 1987 to January 1993. James S. Moore -- President, Westinghouse Government & 58 Environmental Services Company since March 1, 1995; Senior Vice President, Corporate Human Resources and Total Quality from January 1993 to March 1, 1995; Vice President of Executive Resources and Development from July 1991 to January 1993; President, Westinghouse Savannah River Company from September 1988 to July 1991.
13 14
AGE AT NAME, OFFICES, AND POSITIONS MARCH 1, 1995 ---------------------------- ----------------- Fredric G. Reynolds -- Executive Vice President and Chief 44 Financial Officer since March 1994; Senior Vice President, Finance, and Chief Financial Officer, PepsiCo International Foods from December 1990 to March 1994; Senior Vice President, Finance, and Chief Financial Officer, Frito-Lay from May 1989 to December 1990. Louis J. Valerio -- Vice President and Controller since 45 February 1995; independent consultant from March 1994 to February 1995; consultant, United Airlines from April 1993 to March 1994; Senior Vice President, Finance, United Airlines from February 1990 to April 1993; Vice President-Treasurer, United Airlines from February 1989 to February 1990; Vice President, Financial Planning and Analysis, United Airlines from February 1988 to February 1989. James F. Watson, Jr. -- President, Thermo King since 57 February 1993; Vice President and General Manager, North American Division of Thermo King from October 1983 to February 1993. Nathaniel D. Woodson -- President, Energy Systems since 53 August 1994; Vice President and General Manager, Energy Systems from November 1990 to August 1994; President, International from March 1989 to November 1990.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The principal markets for the Corporation's common stock are identified on page 1 of this report. The remaining information required by this item appears on page 52 of this report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information required by this item appears on page 52 of this report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item appears on pages 16 through 25 of this report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item, together with the report of Price Waterhouse LLP dated January 31, 1995, appears on pages 26 through 51 of this report and is incorporated herein by reference. 14 15
PAGE ----- Report of Management 26 Report of Independent Accountants 26 Consolidated Statement of Income for each of the three years in the period ended December 31, 1994 27 Consolidated Balance Sheet at December 31, 1994 and 1993 28 Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1994 29 Notes to the Financial Statements 30 Quarterly Financial Information (unaudited) 51 Five-Year Summary Selected Financial and Statistical Data (Unaudited) 52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 15 16 Management's Discussion and Analysis OVERVIEW During 1994, the Corporation benefitted from the results of management's initiatives to strengthen its financial position and improve its competitiveness. Evidence of the Corporation's progress includes: - - Customer orders for 1994 increased 4%. The largest improvement, an increase of 12%, occurred in the fourth quarter, with the Corporation's Power Generation and Electronic Systems businesses each receiving awards totalling approximately $1 billion. Backlog exceeded $10 billion at year-end 1994. - - Excluding special charges, operating profit for 1994 was $690 million compared to $701 million in 1993. The 1994 results included a $103 million increase in pension costs. - - The Corporation made progress on its restructuring activities. Through December 31, 1994, involuntary employee separations as a result of implementing the 1993 restructuring initiative totalled approximately 3,200 compared to a two-year target of 3,400. Nearly 1,100 other employees left through attrition. New restructuring initiatives identified during 1994 will result in an additional 1,200 employee separations. - - The Corporation made additional progress in rebuilding its equity base through the issuance of preferred stock. In addition, net debt was reduced by $1.7 billion. The Corporation reported net income of $77 million, or $.07 per share, for 1994. Net losses in 1993 and 1992 were $326 million and $1,394 million, or $1.07 and $4.11 per share, respectively. See note 14 to the financial statements for a discussion of earnings per share. Included in 1994 results were pre-tax provisions of $71 million ($51 million after-tax) for additional restructuring activities and $308 million ($195 million after-tax) for the settlement of a portion of the Corporation's pension obligation. Included in 1993 results was a pre-tax provision of $750 million ($493 million after-tax) for restructuring, the disposition of certain non-strategic businesses and certain litigation and environmental contingencies. The 1993 results also included after-tax charges of $95 million for Discontinued Operations and $56 million for the adoption of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." Included in 1992 results were after-tax charges of $1,413 million to record the estimated loss on disposal of Discontinued Operations and $338 million for the adoption of both SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes." See the notes to the financial statements for further discussion of these matters. Excluding the after-tax effect of the special charges described above, income from Continuing Operations was $323 million, or $.71 per share, for 1994 compared to $318 million, or $.76 per share, for 1993 and $357 million, or $.95 per share, for 1992. The higher pension costs in 1994 reduced per share earnings by $.17. In 1995, the Corporation expects to continue implementation of its programs to improve both the operating performance and competitive positions of its core businesses. The focus on customer orientation and international opportunities will continue. Furthermore, the Corporation will persist in its aggressive drive to reduce costs and improve competitiveness. Cost reduction initiatives will be undertaken when the resulting benefits are substantial in relation to the cost of the programs and are realizable in the near term. Net periodic pension costs in 1995 are expected to decline by approximately $25 million from the 1994 level. While subject to many variables, management currently believes that anticipated revenue increases coupled with cost reductions should improve earnings significantly for the full year 1995. However, the Corporation's first quarter 1995 earnings are expected to be approximately flat compared to the prior year period excluding certain 1994 nonrecurring gains. During 1995, the Corporation also expects to continue the divestitures of non-strategic businesses and apply the proceeds to further reduce debt. Alternative strategies for monetizing WCI Communities, Inc. (WCI) continue to be explored. RESULTS OF OPERATIONS--CONTINUING OPERATIONS In 1994, the Corporation expanded the number of reported business segments and realigned certain businesses to reflect more closely the Corporation's core businesses. Segment information for 1993 and 1992 has been restated to reflect these changes. The Corporation's consolidated revenues from sales of products and services were essentially flat in 1994 compared to 1993, totalling approximately $8.8 billion. Operating profit for each of the last three years included special charges primarily related to the Corporation's restructuring activities. All restructuring charges, which totalled $71 million in 1994, $350 million in 1993 and $36 million in 1992, were distributed to the applicable segments. Other special charges included in operating profit in 1993 were $125 million for litigation costs, $60 million for Corporate environmental costs and $20 million for asset writeoffs associated with projects that were discontinued. Other special charges in 1992 also included $35 million related to a workforce reduction at Electronic Systems. Also included in 1994 segment operating profit are increases in pension costs totalling $103 million. The increase is attributable primarily to the effects of changes in actuarial assumptions and reduced levels of anticipated asset earnings. See note 3 to the financial statements. Broadcasting Revenues for Broadcasting increased 7% to $870 million in 1994 reflecting growth in advertising revenues, particularly in television. The 1994 Olympics and political campaigns contributed to the increased advertising revenues. Group W Satellite Communications (GWSC) also reported higher revenues. Revenues for Broadcasting were flat in 1993 compared to 1992 as a weak west coast television market and lower volume at 16 17 RESULTS OF OPERATIONS--CONTINUING OPERATIONS (in millions)
Operating Profit (Loss) Sales of Products and Services Operating Profit (Loss) Excluding Special Charges - ----------------------------------------------------------------------------------------------------------------------------- Year ended December 31 1994 1993 1992 1994 1993 1992 1994 1993 1992 ------------------------- ----------------------- ----------------------- Broadcasting $ 870 $ 812 $ 814 $203 $ 145 $165 $201 $157 $165 Electronic Systems 2,467 2,597 2,855 165 83 225 176 220 260 Government & Environmental Services 389 338 370 58 33 100 62 65 100 Thermo King 877 719 705 130 109 103 130 109 103 Energy Systems 1,235 1,314 1,325 7 (59) 116 33 111 116 Power Generation 1,715 1,787 1,856 110 (23) 121 105 103 121 The Knoll Group 567 510 578 (67) (39) (40) (27) (30) (14) WCI Communities, Inc. 248 253 235 68 61 87 65 65 97 Other Businesses 497 544 564 (27) (64) (14) (27) (59) (14) Corporate and Other 148 164 139 (28) (100) (70) (28) (40) (70) Intersegment Sales (165) (163) (190) -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------- Total $8,848 $8,875 $9,251 $619 $ 146 $793 $690 $701 $864 =============================================================================================================================
Group W Productions were offset by stronger performance in radio and GWSC. In addition, 1992 benefitted from advertising revenues generated by the 1992 Olympics and political campaigns. Included in 1993 operating profit was $12 million for restructuring costs, of which $2 million was subsequently not required and adjusted in 1994. Excluding restructuring amounts, operating profit increased 28% to $201 million in 1994 compared to $157 million in 1993 due to the increased advertising revenues and improvements in productivity resulting from cost reduction programs. Excluding restructuring, operating profit decreased 5% in 1993 compared to 1992 due to an unfavorable mix of sales. The strategic alliance between CBS and Westinghouse Broadcasting Company announced in 1994 is expected to increase the number of television stations owned by the parties and expand their distribution and programming capabilities nationwide. See note 19 to the financial statements. Electronic Systems Revenues for Electronic Systems decreased 5% to $2,467 million in 1994 compared to 1993 and 9% in 1993 compared to 1992. Lower revenues from Department of Defense (DoD) contracts in both years and the 1992 divestitures of the Electrical Systems and Copper Laminates divisions were the primary causes of the decreased revenues. Operating profit reflected restructuring charges of $11 million and $137 million in 1994 and 1993, respectively, and a $35 million charge in 1992 for a workforce reduction. Excluding these charges in each of the three years, operating profit decreased 20% to $176 million in 1994, primarily as a result of higher pension costs and lower DoD revenues, which were partially offset by savings from cost reduction programs. Operating profit excluding special charges decreased 15% to $220 million in 1993 from lower DoD revenues. Electronic Systems' business is influenced by changes in the budgetary plans and procurement policies of the U.S. government. Reductions in defense spending and program cancellations in recent years have adversely affected operating results. The Corporation intends to maintain a strong focus on DoD opportunities and believes that through continual streamlining of its operations, it is well positioned over the long term to benefit from the demand for advanced electronic systems by the U.S. and foreign governments. Government & Environmental Services Revenues for Government & Environmental Services increased 15% to $389 million in 1994 due to increased volume in hazardous waste remediation services and radioactive waste incineration, increased work scope and fees for the naval nuclear program, and higher award fees at several Department of Energy (DOE) sites operated and managed by the Corporation. Revenues decreased 9% in 1993 compared to 1992 due to lower volume and reduced prices in the hazardous waste remediation and incineration businesses. Included in 1994 and 1993 operating profits were $4 million and $32 million, respectively, for restructuring activities and other actions. Excluding the charges in both years, operating profit decreased 5% to $62 million in 1994 because price compression in the hazardous waste remediation and incineration markets more than offset the increased award fees in government operations. Operating profit excluding special charges decreased 35% in 1993 compared to 1992 due to the lower volume and price compression in the hazardous waste remediation and incineration markets. The Corporation continues to review its portfolio of environmental businesses to determine how best to focus its efforts. In 1994, the Corporation signed a letter of intent to sell Aptus, its hazardous waste incineration business. See note 19 to the financial statements. The DOE has recently announced its intention to open for bid certain of its operating and maintenance contracts as they expire. The Corporation intends to vigorously pursue the retention of its current contracts and selectively bid on sites not currently managed by the Corporation. 17 18 Thermo King Revenues for Thermo King increased 22% to $877 million in 1994 due to volume increases in the domestic truck and trailer, service parts, and container product lines as well as in the international truck and trailer product line. Revenues for 1993 compared to 1992 increased only 2% because lower European revenues partially offset strong performance in the domestic truck and trailer and service parts product lines. Operating profit increased 19% to $130 million in 1994 compared to 1993 and 6% in 1993 compared to 1992 primarily as a result of the increased volume. Energy Systems Revenues for Energy Systems decreased 6% to $1,235 million in 1994 due to reduced licensee income and the favorable 1993 effect of a change in accounting for nuclear fuel revenues. Revenues were flat in 1993 compared to 1992 as the increase from the change in revenue recognition offset the decrease resulting from higher 1992 revenues on large nuclear projects. Included in 1994 operating profit was $26 million for restructuring activities related to the separation of approximately 400 employees in late 1994. Included in the 1993 operating loss was $170 million for restructuring, litigation and other costs. Excluding special charges in both years, operating profit decreased 70% to $33 million in 1994 compared to 1993 and 4% in 1993 compared to 1992. The decrease in operating profit in 1994 was attributed to lower licensee income, the change in accounting for nuclear fuel revenue in 1993 and increased pension costs. Cost savings from restructuring activities were beginning to materialize in late 1994. The decrease in operating profit from 1992 to 1993 was a result of an unfavorable mix of sales. Power Generation Revenues for Power Generation decreased 4% to $1,715 million in 1994 due to lower revenues from project purchase-resale items for major projects and steam operating plant service, largely offset by higher combustion turbine and field services sales. Revenues also decreased 4% in 1993 compared to 1992 due to a decrease in purchase-resale items and a depressed power generation field service market. Included in the 1993 operating loss was $126 million for restructuring activities, of which $5 million was redeployed to other businesses in 1994. Excluding the impact of restructuring in both years, operating profit increased slightly to $105 million in 1994 compared to $103 million in 1993. Cost improvements from restructuring activities in 1994 were essentially offset by higher pension costs. Excluding the 1993 charge for restructuring, operating profit decreased 15% in 1993 compared to 1992 due to the lower volume and an unfavorable mix of sales. Power Generation continues to focus on international opportunities. Of the $2.5 billion of orders received in 1994, more than 60% were from customers outside the U.S. Particular successes were achieved in China, where Power Generation received orders for four units, and in South Korea. The Knoll Group Revenues for The Knoll Group (Knoll) increased 11% to $567 million in 1994 compared to 1993 due to both market and market share growth in North America. Revenues decreased 12% in 1993 compared to 1992 due to lower shipments and reduced prices in the domestic market and poor economic conditions in Europe. Knoll's operating results for the last three years have included restructuring charges totalling $40 million in 1994, $9 million in 1993 and $26 million in 1992. A major restructuring program was begun in mid-1994 and will be completed in the first half of 1995. The results of this program were evident in the North American results for the fourth quarter of 1994, while European operations are expected to improve as those restructuring activities are completed. Knoll's total operating loss, which increased by $16 million in 1993, decreased by 10% in 1994 reflecting the improvement in North America. WCI Communities, Inc. Revenues for WCI decreased slightly to $248 million in 1994 compared to 1993 due to the continued weak real estate markets in California. These depressed markets were partially offset by strong land and condominium sales in Coral Springs and Naples, Florida. Revenues increased 8% in 1993 compared to 1992 as strong sales in South Florida were partially offset by the weak Southern California market. Included in 1994 operating profit was a $3 million reduction of the $10 million restructuring charge in 1992. Excluding the impact of restructuring, operating profit was flat at $65 million in 1994 compared to 1993 after decreasing 33% from 1992 due to an unfavorable mix of sales. The Corporation continues to explore alternatives for monetizing WCI. Other Businesses The Other Businesses segment is a diverse group of businesses that the Corporation views as non-strategic. During 1994, the Corporation completed the sales of Controlmatic and Gladwin Corporation. See note 19 to the financial statements. The Corporation continues to pursue the disposition of the remaining businesses in this segment. Revenues of Other Businesses decreased 9% to $497 million in 1994 due to the May 1994 sale of Controlmatic. Revenues decreased 4% in 1993 compared to 1992 due to lower production and delayed deliveries at Westinghouse Motor Company and the weak economic conditions in Controlmatic's European market. 18 19 Included in the 1993 operating loss was $5 million for restructuring. Excluding restructuring costs, the operating loss decreased 54% to $27 million in 1994 after increasing $45 million in 1993. The significant loss in 1993 reflected project cost overruns at Controlmatic and lower volume at Westinghouse Motor Company. RESTRUCTURING OF OPERATIONS The Corporation is committed to strengthening its core businesses and improving its profitability through certain restructuring actions including changes in business and product line strategies, as well as downsizing for process reengineering and productivity improvements. The Corporation expects to continue to implement restructuring initiatives as competitive conditions dictate in an ongoing effort to reduce its overall cost structure and improve its competitiveness. An overview of the Corporation's recent restructuring actions follows. See note 19 to the financial statements. Restructuring of Operations--1993 Initiative Shortly after joining the Corporation in June 1993, Chairman and Chief Executive Officer Michael Jordan initiated an extensive review by management of all of the Corporation's businesses. As a result of this review, management developed a plan to restructure its continuing businesses to improve productivity and operating performance. This plan was expected to result in the reduction of approximately 6,000 employees during the subsequent two years; approximately 2,600 through normal attrition and 3,400 through involuntary separations. As part of its extensive review, management identified the individual projects to be included in the restructuring plan and identified the affected employee groups. Generally, separated employees receive benefits under the Corporation's Employee Security and Protection (ES&P) Plan, including permanent job separation benefits, retraining and outplacement assistance. The amount included for these benefits in the restructuring charge represents the incremental cost of such benefits over those amounts previously accrued under SFAS No. 112. Although the 1993 restructuring initiative involved substantially all of the Corporation's continuing businesses, particular focus was placed on Corporate overhead functions and on the Electronic Systems and Power Generation business units. The current estimated cost of the Corporation's 1993 restructuring initiative totalled $350 million, consisting of $206 million for employee separation costs, $22 million for a noncash pension curtailment charge, $68 million for asset writedowns and $54 million for facility closure and rationalization costs. Through December 31, 1994, employee reductions as a result of implementing the 1993 restructuring initiative totalled 3,181. In addition, nearly 1,100 employees left through attrition. Completion of the remaining involuntary separations under the 1993 initiative is expected in 1995. The 3,400 employee separations that were included as part of the 1993 restructuring provision are expected to result in annual pre-tax savings of approximately $100 million, primarily through reduced employment costs. Approximately 75% of this annual savings was realized in 1994. The total cash expenditures related to the 1993 restructuring initiative are expected to approximate $260 million with the remaining noncash charges consisting primarily of asset writedowns and the pension curtailment charge. Cash expenditures through year-end 1994 totalled almost $200 million. Beginning in 1995, cash savings from these initiatives are expected to exceed remaining cash expenditures. Restructuring of Operations--1994 Initiative During the fourth quarter of 1994, management approved additional restructuring projects totalling $113 million primarily for costs associated with approximately 1,200 additional employee separations. Certain amounts accrued for restructuring in 1992 and miscellaneous adjustments were applied to these program costs to reduce the required restructuring charge to $71 million. Separated employees generally receive benefits under the Corporation's ES&P Plan. The new restructuring initiative primarily relates to Knoll and involves major cost reduction efforts in both its North American and European operations. The 1994 initiative also includes further employee reductions at Energy Systems and certain other business units. The restructuring activities included in the 1994 restructuring provision are expected to result in annual pre-tax savings of approximately $70 million, primarily from reduced employment costs. Total cash expenditures, which approximate $82 million, are expected to be funded in 1995 through operating cash flows of Continuing Operations. These expenditures, however, are expected to be largely offset by savings, resulting in a net cash outflow of approximately $12 million in 1995. 1994 PENSION SETTLEMENT The Corporation's restructuring activities contributed to a high level of lump sum cash distributions from the Corporation's pension fund during 1994. The magnitude of these cash distributions required that the Corporation apply the provisions of SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and recognize a settlement loss of $308 million during the fourth quarter of 1994. This noncash charge to income represents the pro-rata portion of unrecognized losses associated with the pension obligation that was settled. The settlement loss did not impact shareholders' equity because the decrease resulting from the income statement provision was fully offset by a reduction in the charge to shareholders' equity related to the minimum pension liability. See note 3 to the financial statements. 19 20 DISPOSITION OF NON-STRATEGIC BUSINESSES During the fourth quarter of 1993, the Corporation recorded a $215 million charge to dispose of certain non-strategic businesses. Of this amount, $20 million related to asset writedowns was charged to operating profit. Non-strategic businesses included parts of the former Environmental Services business unit and all of the businesses in the Industrial Products and Services business unit. During 1994, the Corporation completed the sales of Controlmatic and Gladwin Corporation. The Corporation continues to pursue the disposition of the remaining non-strategic businesses. Activity relating to the liability for disposition of non-strategic businesses for the year ended December 31, 1994 is summarized below:
LIABILITY FOR DISPOSITION OF NON-STRATEGIC BUSINESSES (in millions) - ------------------------------------------------------------------- Balance at December 31, 1993 $215 Asset writedowns (20) Disposal of businesses (25) Additional provision 17 - ------------------------------------------------------------------- Balance at December 31, 1994 $187 ===================================================================
The asset writedowns primarily consisted of permitting and site preparation costs for two projects that the Corporation no longer intends to pursue. OTHER INCOME AND EXPENSES For the year ended December 31, 1994, other income and expense, which was a net expense of $285 million, consisted primarily of the $308 million charge for the settlement of a portion of the Corporation's pension obligation. The Corporation recorded an additional $17 million provision for the estimated loss on disposition of non-strategic businesses to reflect actual sales experience and revised estimates of proceeds and selling costs for the remaining businesses to be sold. These charges were partially offset by gains totalling $42 million from the sale of two radio stations and a shopping center development. See notes 18 and 19 to the financial statements for additional discussion of these matters. For the year ended December 31, 1993, other income and expense, which was a net expense of $165 million, consisted primarily of a $195 million provision for the estimated loss on disposition of non-strategic businesses. This charge was offset by a gain on the sale of an equity participation in a production company. No significant other income or expense items were recorded in 1992. INTEREST EXPENSE Interest expense decreased $40 million to $177 million in 1994 compared to 1993 primarily due to lower average outstanding short-term debt. Average outstanding short-term debt of Continuing Operations decreased $772 million in 1994 compared to 1993. Average short-term debt of Continuing Operations is expected to increase in 1995 because of the fourth quarter 1994 transfer of debt from Discontinued Operations. See note 10 to the financial statements. Interest expense decreased $8 million to $217 million in 1993 compared to 1992 due to lower effective interest rates on average outstanding debt, partially offset by higher fees associated with the revolving credit facility and the replacement of short-term floating-rate debt with higher coupon long-term fixed-rate debt. INCOME TAXES The Corporation's 1994 provision for income taxes of $71 million was 45.2% of income before taxes and minority interest. The Corporation's 1993 benefit for income taxes was 32.6% of the losses from all sources. The 1993 benefit totalled $153 million consisting of $70 million from Continuing Operations, $53 million from Discontinued Operations and $30 million from the cumulative effect of the change in accounting principle. The 1992 benefit was 52.7% of the losses from all sources. The 1992 benefit totalled $1,530 million and consisted of $187 million tax expense on income from Continuing Operations, offset by benefits of $882 million from Discontinued Operations and $835 million from the cumulative effect of changes in accounting principles. Numerous items have caused these effective tax rates to differ from the U.S. statutory income tax rates of 35% for 1994 and 1993 and 34% for 1992. The Corporation's effective tax rate varies depending on the specific dollar amounts of permanent tax differences and the relationship of those differences to income before income taxes and minority interest. An analysis of these items is set forth in the Effective Tax (Benefit) Rate for Continuing Operations table included in note 5 to the financial statements. The net deferred tax asset at December 31, 1994 was $2,380 million as shown in the Consolidated Deferred Income Tax Sources table in note 5 to the financial statements. The three significant components of the deferred tax asset balance are: (i) the tax effect of net operating loss carryforwards of $2,944 million, $472 million of which will expire by the year 2007 and the balance by 2008, (ii) the tax effect of cumulative net temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes of $2,736 million that represents future net income tax deductions. Of this net temporary difference, approximately $1,200 million represents a net pension obligation and approximately $1,270 million represents an obligation for postretirement and postemployment benefits, and (iii) alternative minimum tax credit carryforwards of $261 million which have no expiration date. 20 21 Management believes that the Corporation will have sufficient future taxable income to make it more likely than not that the net deferred tax asset will be realized. In making this assessment, management considered the net losses generated in 1992 and 1993 as aberrations caused in part by the liquidation of a substantial portion of Financial Services assets and not recurring conditions. Further, the Corporation's Continuing Operations have been consistently profitable and the loss from Continuing Operations in 1993 was due to restructuring and other actions. Management also considered the actual historic operating performance and taxable income generated by Continuing Operations. Certain of the tax losses will not occur until future years. Each tax loss year would receive a new 15-year carryforward period. Under a conservative assumption, however, that all net cumulative temporary differences other than net operating loss carryforwards reversed in 1994, the Corporation would have through the year 2009 to recover the tax asset. This would require the Corporation to generate a minimum of approximately $400 million of annual taxable income. Management believes that average annual future taxable income will exceed this minimum amount. In addition, there are certain tax planning strategies that could be employed to utilize a net operating loss carryforward that would otherwise expire. Some of the strategies that would be most feasible are sale and leaseback of facilities, change in the method of tax deductible depreciation, purchase of leases that would generate taxable income, and capitalization of research and development expense for tax purposes. The following table shows a reconciliation of income or loss from Continuing Operations before income taxes to taxable income from Continuing Operations: RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES TO TAXABLE INCOME (in millions)
Year ended December 31 1994 1993* 1992* - ------------------------------------------------------------------- Income (loss) from Continuing Operations before income taxes $ 157 $(236) $ 550 - ------------------------------------------------------------------- Permanent increases (decreases): Income earned in foreign activities and Puerto Rico (77) (108) (162) State income taxes (11) (33) (29) Goodwill amortization 24 40 22 Other 1 55 (15) - ------------------------------------------------------------------- Net permanent decrease (63) (46) (184) - ------------------------------------------------------------------- Temporary increases (decreases): Pension expense greater (less) than amount deducted for tax purposes 291 24 (29) Long-term contract adjustment 12 (84) (38) Depreciation 23 35 38 Provisions for restructuring and other actions (136) 713 -- Other 21 149 114 - ------------------------------------------------------------------- Net temporary increase 211 837 85 - ------------------------------------------------------------------- Taxable income from Continuing Operations $ 305 $ 555 $ 451 =================================================================== *Certain amounts have been adjusted to reflect income tax returns as filed.
DISCONTINUED OPERATIONS In November 1992, the Corporation announced a plan (the Plan) that included exiting its Financial Services business through the disposition of its asset portfolios and the sales of the Distribution and Control Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO). See notes 1 and 2 to the financial statements for a discussion of the Plan. The disposition of Financial Services assets involved the sale of real estate and corporate finance portfolios over a three-year period and the liquidation of the leasing portfolio over a longer period in accordance with contractual terms. Financial Services, DCBU and WESCO have been accounted for as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30). Upon adoption of the Plan, the Corporation recorded a pre-tax charge of $2,201 million consisting of $2,350 million for an addition to the valuation allowance for Financial Services portfolios, $300 million for estimated losses from operations of Financial Services during the phase-out period and $144 million for restructuring charges related to the change in corporate strategy. These charges were partially offset by an estimated $449 million gain from the dispositions of DCBU and WESCO and an estimated $144 million of earnings from those operations during their phase-out periods. The after-tax charge for the estimated loss on the disposal of Discontinued Operations was $1,383 million. Based on its quarterly review of the assumptions used in determining the estimated loss from Discontinued Operations, the Corporation recorded an additional pre-tax provision for loss on disposal of Discontinued Operations of $148 million in 1993. This change in the estimated loss resulted from a reduction of the expected selling prices of WESCO and the Australian subsidiary of DCBU; a decision to sell in bulk a Financial Services residential development that the Corporation, upon adoption of the Plan, had intended to develop; and revision to the estimated interest costs expected to be incurred by Discontinued Operations during the disposal period. On January 31, 1994, the Corporation completed the sale of DCBU, excluding its Australian subsidiary, to Eaton Corporation for a purchase price of $1.1 billion and the assumption by the buyer of certain liabilities. The sale of the Australian subsidiary was completed in March 1994. On February 28, 1994, the Corporation completed the sale of WESCO to an affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a purchase price of approximately $340 million. The proceeds consisted of approximately $275 million in cash, approximately $50 million in first mortgage notes, and the remainder in stock and options of the new company. 21 22 The portfolio investments of Financial Services have been reduced from $8,967 million at year-end 1992 to $1,230 million at December 31, 1994. Substantially all of the remaining real estate assets of $297 million at December 31, 1994 are expected to be liquidated in 1995. The corporate portfolio essentially has been liquidated. The leasing portfolio, which totalled $924 million at December 31, 1994, is expected to continue to liquidate through 2015 in accordance with contractual terms. The remaining liability for the estimated loss on disposal of Discontinued Operations at December 31, 1994 of $145 million is expected to be utilized in the following manner: ESTIMATED REQUIREMENT--LIABILITY FOR THE ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS (in millions)
At December 31 1994 - ----------------------------------------------------------- Financial Services $ 80 Disposition costs--DCBU and WESCO 65 - ----------------------------------------------------------- Total $145 ===========================================================
The estimated reserve requirement for Financial Services includes future operating losses and estimated credit losses, primarily related to the leasing portfolio. Partially offsetting the operating and credit losses are estimated future gains from sales of the remaining real estate assets. Future disposition costs relating to the sales of DCBU and WESCO include product warranty claims, medical claims, employee separation costs and potential environmental remediation costs. Management believes that the liability for the estimated loss on disposal of Discontinued Operations is adequate. The adequacy of this liability is evaluated each quarter. The following table presents sales and operating profit (loss) for Discontinued Operations for each of the three years in the period ended December 31, 1994: RESULTS OF OPERATIONS (in millions)
Year ended December 31 1994 1993 1992 - ----------------------------------------------------------- Sales of products and services: DCBU and WESCO $ 319 $2,384 $2,428 Financial Services 41 305 745 Operating profit (loss): DCBU and WESCO 4 68 104 Financial Services (204) (212) (194) ===========================================================
DCBU and WESCO Operating results for the year ended December 31, 1994 include the operating results of DCBU for the month ended January 31, 1994 and of WESCO for the two months ended February 28, 1994, their respective dates of sale. Operating profit decreased 35% in 1993 compared to 1992 due primarily to a 2% decline in revenues, an unfavorable mix of sales and non-recurring costs for strategic initiatives at WESCO. Financial Services During 1994, the Corporation continued to liquidate Financial Services, resulting in a reduction in assets and debt. Financial Services revenues of $41 million for 1994 decreased $264 million compared to 1993, reflecting the significant reduction in assets through dispositions during 1993 and 1994. Revenues of $305 million for 1993 decreased 59% compared to 1992 due primarily to a reduction in assets through dispositions. At December 31, 1994, Financial Services portfolio investments totalled $1,230 million, a decrease of $321 million from $1,551 million at year-end 1993. Portfolio investments at December 31, 1994 and 1993 included $913 million and $1,062 million, respectively, of receivables, and $317 million and $489 million, respectively, of other portfolio investments. Of the receivables at December 31, 1994 and 1993, $886 million and $969 million, respectively, were leasing receivables, and the remainder consisted primarily of residential real estate loans and corporate receivables from highly leveraged transactions. Other portfolio investments at December 31, 1994 and 1993 included the Corporation's investment in LW Real Estate Investments, L.P. (LW) of $133 million in both periods, real estate properties of $88 million and $141 million, respectively, and other investments of $96 million and $215 million, respectively, consisting primarily of investments in real estate and leasing partnerships. The leasing portfolio is expected to liquidate in accordance with contractual terms. Management expects substantially all of the Corporation's investment in LW and the remaining real estate assets to be liquidated by the end of 1995. Leasing receivables consist of direct financing and leveraged leases. At December 31, 1994 and 1993, 81% and 77%, respectively, related to aircraft and 18% and 19%, respectively, related to cogeneration facilities. Certain leasing receivables classified as performing and totalling approximately $139 million at December 31, 1994 have been identified by management as potential problem receivables. This amount consists primarily of leveraged leases related to aircraft leased by major U.S. airlines. Such leasing receivables were current as to payments and performing in accordance with contractual terms at December 31, 1994. Net Debt of Discontinued Operations A summary of changes in net debt of Discontinued Operations for the year ended December 31, 1994 is presented in the table below:
CHANGES IN NET DEBT OF DISCONTINUED OPERATIONS (in millions) - ------------------------------------------------------------------------------- Net debt at December 31, 1993 $ 3,183 Proceeds from sales of DCBU and WESCO (1,374) Liquidations of Financial Services assets (323) Cash used in operating activities of Financial Services 187 Asset fundings of Financial Services 86 Cash used in operating activities related to DCBU and WESCO and restructuring 170 Net cash provided by Continuing Operations (120) Debt transferred to Continuing Operations (625) Debt assumed by buyers of Discontinued Operations (18) - ------------------------------------------------------------------------------- Net debt at December 31, 1994 $ 1,166 ===============================================================================
22 23 Of the remaining $1.2 billion of net debt of Discontinued Operations, approximately $700 million is expected to be repaid in 1995. Approximately $300 million is expected to be repaid through the liquidation of portfolio investments of Financial Services. The remaining 1995 debt repayment of $400 million will occur as cash is received from Continuing Operations, the timing of which is expected to coincide with sales of non-strategic businesses. The Corporation expects to reduce the debt of Discontinued Operations to that amount which is supportable by the leasing portfolio and can be repaid as that portfolio liquidates over its contractual terms. As a result, additional cash may be required from Continuing Operations. LIQUIDITY AND CAPITAL RESOURCES Overview The Corporation manages its liquidity as a consolidated enterprise without regard to whether assets or debt are classified for balance sheet purposes as part of Continuing Operations or Discontinued Operations. As a result, the discussion below focuses on the Corporation's consolidated cash flows and capital structure. The Corporation seeks to ensure that it has adequate resources for reinvestment in its core businesses and for strategic acquisitions. Based on its ongoing review of the Corporation's capital structure and associated interest costs, management believes that the Corporation's operating and financial flexibility will benefit from lower leverage. During 1994, the Corporation took several actions to reduce its leverage and rebuild its capital structure, including the continued liquidations of assets of Discontinued Operations, the issuance of preferred stock and the reduction of the common stock dividend. As a result, net debt (total debt less cash and cash equivalents) was reduced by $1.7 billion. The Corporation intends to continue to reduce its consolidated net debt by up to an additional $1 billion in 1995. This reduction will be achieved principally by the sale of portfolio investments of Discontinued Operations and the disposition of other non-strategic businesses of Continuing Operations. Management expects that cash from Continuing Operations and availability under its revolving credit facilities will continue to be sufficient to meet future business needs. Other sources of liquidity generally available to the Corporation include cash and cash equivalents, proceeds from sales of non-strategic assets and borrowings from other sources, including funds from the capital markets. Operating Activities The operating activities of Continuing Operations provided $303 million of cash during the year ended December 31, 1994, a decrease of $432 million from the amount provided in 1993. The two major factors contributing to this decrease were pension contributions and restructuring costs. Cash contributions of approximately $300 million were made to the Corporation's pension plans in 1994, whereas the 1993 contribution consisted primarily of assets of Discontinued Operations. During 1995, management expects to contribute approximately $300 million in cash to the Corporation's pension plans. During 1994, the Corporation expended approximately $200 million for expenditures related to its 1993 restructuring initiative. Savings from the Corporation's restructuring activities are expected to essentially offset related cash expenditures in 1995. A significant use of operating cash in 1994 involved an increase in working capital related to uncompleted contracts with progress billing terms. Customers are exerting increasingly greater pressure to delay payments under major contracts for as long as possible. The Corporation will focus significant effort in 1995 on reducing long-term contract and inventory investments in an overall effort to improve working capital turnover. The operating activities of Discontinued Operations used $357 million of cash during 1994 compared to cash provided of $45 million during 1993. The primary operating cash requirements of Discontinued Operations for 1994 were interest and operating costs of Financial Services and divestiture costs of DCBU and WESCO. Operating activities for 1993 included cash generated by the operations of DCBU and WESCO, both of which were sold in early 1994. The future operating cash requirements of Discontinued Operations are primarily attributable to interest costs on debt, operating costs and disposition costs related to DCBU and WESCO. Investing Activities Investing activities provided $1,353 million of cash during 1994 compared to $2,668 million of cash provided in 1993. During 1994, the Corporation sold two radio stations, an investment in a joint venture and two non-strategic businesses (Gladwin Corporation and Controlmatic), generating cash totalling $88 million. The Corporation purchased the Norden Unit of United Technologies Corporation, the KPIX-AM and FM radio stations in San Francisco and a minority interest in Group W Radio for total cash expenditures of $109 million. Proceeds from the first quarter 1994 sales of DCBU and WESCO generated $1.4 billion of cash, while liquidations of Financial Services portfolio investments generated additional cash of $323 million. Cash generated by the liquidations of Financial Services portfolio investments was significantly greater in 1993 because of the early success of the liquidation plan. 23 24 Capital expenditures were $259 million for 1994, a decrease of $13 million from 1993. Capital expenditures in 1995 are expected to approximate the 1994 level. In 1995, the Corporation expects to generate approximately $300 million of cash through the continued liquidation of portfolio investments of Discontinued Operations. In addition, sales of non-strategic businesses, as well as the potential monetization of WCI, are expected to generate cash proceeds to the Corporation. Financing Activities Cash used by financing activities during 1994 totalled $2,203 million compared to cash used of $3,754 million during 1993. Net debt was reduced by $1,709 million during 1994 to $3,393 million at year-end reflecting lower borrowings under the revolving credit facilities. As the Corporation's financial condition improved in 1994, a significant level of its cash and cash equivalents were used to repay debt. As a result, total debt of the Corporation was $3,737 million at December 31, 1994, a decrease of $2,613 million from $6,350 million at December 31, 1993. Further debt reductions of $750 million to $1 billion are expected in 1995. Two new revolving credit agreements with more favorable terms and conditions than the previous facility were executed in August 1994 (see Revolving Credit Facilities). Total borrowings under the revolvers were $919 million at December 31, 1994. These borrowings carried a composite interest rate of 6.7% at year-end 1994 and were based on the London Interbank Offer Rate (LIBOR). In March 1994, the Corporation sold in a private placement depositary shares representing 3,600,000 shares of Series C preferred stock for net proceeds of $505 million. These shares will convert to common shares in June 1997. At the beginning of 1994, the Corporation reduced its common stock dividend from $.40 per share to $.20 per share. This reduction resulted in annual cash savings to the Corporation of approximately $70 million. Dividends paid in 1994 also included dividends for the Series C preferred stock issued in March 1994. As a result of the financing activities described above, the Corporation's net debt at December 31, 1993 fell from 83% of consolidated net capitalization to 65% at December 31, 1994. As net debt declines further during 1995 and equity grows through consistent earnings of Continuing Operations, this percentage is expected to continue to improve. On August 26, 1992, the Corporation filed a registration statement on Form S-3 for the issuance of up to $1 billion of debt securities. At December 31, 1994, $400 million of this shelf registration remained unused. Revolving Credit Facilities On August 5, 1994, the Corporation replaced its December 1991 revolver with two revolving credit agreements (revolvers). These facilities have a combined commitment level of $2.5 billion, with $2.0 billion maturing on August 4, 1997 (three-year revolver) and $500 million maturing on August 4, 1995 (364-day revolver). Borrowings under the revolvers are used for general corporate purposes, including the repayment of maturing long-term debt. The interest rates for borrowings under the revolvers are determined at the time of each borrowing and are based on one of a variety of floating rate indices plus a margin based on the Corporation's long-term debt ratings. Unused capacity under the revolvers equalled $1,581 million and $996 million at December 31, 1994 and 1993, respectively. Borrowing availability is subject to compliance with certain covenants, representations and warranties. At December 31, 1994, the Corporation was in compliance with these covenants. Hedging Activities Prior to the adoption of the Plan, Financial Services entered into interest rate and currency exchange agreements to manage the interest rate and currency risk associated with various debt instruments. No transactions were speculative or leveraged. Given their nature, these agreements have been accounted for as hedging transactions. The Corporation's credit exposure under interest rate and currency exchange agreements is limited to the cost of replacing an agreement in the event of non-performance by its counterparty. To minimize this risk, Financial Services selected high credit quality counterparties. At December 31, 1994, the aggregate credit exposure to counterparties totalled approximately $78 million. This exposure resulted primarily from an interest rate and currency swap with an A-rated counterparty. The contract matures in February 1996. In 1994, outstanding interest rate exchange agreements resulted in a net increase in the average borrowing rate for Discontinued Operations of approximately 0.6% and a net increase in the corresponding interest expense of approximately $12 million. The hedging policy followed by Financial Services targeted a mix of fixed and floating rate debt that was attainable through the issuance of debt instruments with particular rate reset characteristics and/or the use of interest rate exchange agreements. Therefore, interest expense would not have been materially different had the fixed/floating target been attained without the use of interest rate exchange agreements. The Corporation continually monitors its economic exposure to changes in foreign exchange rates and enters into foreign exchange forward or option contracts to hedge its transaction exposure when appropriate. As a result, the Corporation's unhedged foreign exchange exposure is not significant. Furthermore, changes in foreign exchange rates whether favorable or unfavorable are not expected to have a significant impact on the Corporation's financial results or operating activities. 24 25 With respect to the Corporation's operations in highly inflationary and unstable economies that are accounted for in accordance with SFAS No. 52, "Foreign Currency Translation," the combined total sales for those operations were less than 0.5% of the Corporation's sales for 1994. Any translation adjustments resulting from converting the local currency balance sheets and income statements of designated hyperinflationary subsidiaries into U.S. dollars are recorded as period costs in accordance with SFAS No. 52. Securities Ratings The Corporation's debt and preferred stock are currently rated by Moody's Investor Service (Moody's), Standard and Poor's Corporation (S&P) and Fitch Investor's Service, Inc. (Fitch). The following table summarizes the agencies' ratings for outstanding securities at December 31, 1994 and 1993. SECURITIES RATINGS
Moody's S&P Fitch - ------------------------------------------------------------------- At December 31, 1994 Senior long-term debt Ba1 BBB- BBB Preferred stock--depositary shares ba3 BB+ Not rated - ------------------------------------------------------------------- At December 31, 1993 Senior long-term debt Baa3 BBB BBB+ Preferred stock--depositary shares ba1 BBB- Not rated - -------------------------------------------------------------------
Management believes that the Corporation made significant progress during 1994 in strengthening its financial position by rebuilding its equity base and substantially reducing its debt. Further debt reductions in 1995, accompanied by continued improvement in operating results, should facilitate improvement in the Corporation's financial ratings over time. ENVIRONMENTAL MATTERS Compliance with federal, state and local regulations relating to the discharge of substances into the environment, the disposal of hazardous wastes and other related activities affecting the environment have had and will continue to have an impact on the Corporation. While it is difficult to estimate the timing and ultimate costs to be incurred in the future due to uncertainties about the status of laws, regulations, technology and information available for individual sites, management has estimated the total probable and reasonably possible remediation costs that could be incurred by the Corporation based on the facts and circumstances currently known. See note 16 to the financial statements. At December 31, 1994, the Corporation had accrued liabilities totalling $73 million for sites where it has been either named a potentially responsible party (PRP) or has other remedial responsibilities, $70 million for the Bloomington sites and $40 million for decommissioning costs at facilities where the Corporation has ongoing operations. In conjunction with the sales of certain of its businesses, the Corporation has also provided for remediation costs related to past operations of such sites. Annual environmental costs include approximately $5 million for estimated future environmental closure costs at operating sites and approximately $25 million related to current management of hazardous substances and pollution. Capital expenditures for environmental controls, which totalled $12 million in 1994, may vary from year to year. Management believes that the Corporation has adequately provided for its present environmental obligations and that complying with existing government regulations will not materially impact the Corporation's financial position, liquidity or results of operations. LEGAL MATTERS The Corporation is defending a number of lawsuits on various matters. See note 16 to the financial statements. Costs to defend these lawsuits are charged to operations in the period in which the services are rendered. In the last two years, the Corporation has entered into agreements to resolve six litigation claims in connection with alleged tube degradation in steam generators sold by the Corporation as components for nuclear steam supply systems. These agreements generally require the Corporation to provide certain products and services at prices discounted at varying rates. The future impact of these discounts on operating results will be incurred over the next 15 years with the greatest impact occurring during the next nine years. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain of these cases and, although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has meritorious defenses to the litigation referenced above, and management believes that the litigation should not have a material adverse effect on the financial condition of the Corporation. INSURANCE RECOVERIES The Corporation has filed actions against more than 100 of its insurance carriers seeking recovery for environmental, product and property damage liabilities, and certain other matters. The Corporation has settled with several of these carriers and has received recoveries related to these actions. Amounts received to date generally have been applied to cover obligations assumed through the settlements or litigation costs. The Corporation has not accrued for any future insurance recoveries. 25 26 REPORT OF MANAGEMENT The Corporation has prepared the consolidated financial statements and related financial information included in this report. Management has the primary responsibility for the financial statements and other financial information and for ascertaining that the data fairly reflect the financial position, results of operations and cash flows of the Corporation. The financial statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances, and necessarily include amounts that are based on best estimates and judgments with appropriate consideration given to materiality. Financial information included elsewhere in this report is presented on a basis consistent with the financial statements. The Corporation maintains a system of internal accounting controls, supported by adequate documentation, to provide reasonable assurance that assets are safeguarded and that the books and records reflect the authorized transactions of the Corporation. Limitations exist in any system of internal accounting controls based on the recognition that the cost of the system should not exceed the benefits derived. Westinghouse believes its system of internal accounting controls, augmented by its corporate auditing function, appropriately balances the cost/benefit relationship. The independent accountants provide an objective assessment of the degree to which management meets its responsibility for fair financial reporting. They regularly evaluate the system of internal accounting controls and perform such tests and procedures as they deem necessary to express an opinion on the fairness of the financial statements. The Board of Directors pursues its responsibility for the Corporation's financial statements through its Audit Review Committee composed of directors who are not officers or employees of the Corporation. The Audit Review Committee meets regularly with the independent accountants, management and the corporate auditors. The independent accountants and the corporate auditors have direct access to the Audit Review Committee, with and without the presence of management representatives, to discuss the scope and results of their audit work and their comments on the adequacy of internal accounting controls and the quality of financial reporting. We believe that the Corporation's policies and procedures, including its system of internal accounting controls, provide reasonable assurance that the financial statements are prepared in accordance with the applicable securities laws and with a corresponding standard of business conduct. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Westinghouse Electric Corporation In our opinion, the accompanying consolidated financial statements appearing on pages 27 through 51 of this Form 10-K present fairly, in all material respects, the financial position of Westinghouse Electric Corporation and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in note 1 to these financial statements, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," in 1993 and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes," in 1992. [GRAPHIC OMITTED] Price Waterhouse LLP 600 Grant Street Pittsburgh, Pennsylvania 15219-9954 January 31, 1995 26 27 CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------- (in millions except per share amounts) Product sales $ 5,782 $ 5,771 $ 6,222 Service sales 3,066 3,104 3,029 ---------------------------------------- Sales of products and services 8,848 8,875 9,251 ---------------------------------------- Cost of products sold (4,322) (4,634) (4,751) Cost of services sold (2,307) (2,096) (2,271) ---------------------------------------- Costs of products and services sold (6,629) (6,730) (7,022) Provision for restructuring (note 19) (71) (350) (36) Marketing, administration and general expenses (1,529) (1,649) (1,400) Other income and expenses, net (note 18) (285) (165) (18) Interest expense (177) (217) (225) ---------------------------------------- Income (loss) from Continuing Operations before income taxes and minority interest in income of consolidated subsidiaries 157 (236) 550 Income taxes (notes 1 and 5) (71) 70 (187) Minority interest in income of consolidated subsidiaries (9) (9) (6) ---------------------------------------- Income (loss) from Continuing Operations 77 (175) 357 Discontinued Operations, net of income taxes (note 2): Loss from operations -- -- (30) Estimated loss on disposal of Discontinued Operations -- (95) (1,383) ---------------------------------------- Loss from Discontinued Operations -- (95) (1,413) ---------------------------------------- Income (loss) before cumulative effects of changes in accounting principles 77 (270) (1,056) Cumulative effect of changes in accounting principles: Postemployment benefits (notes 1 and 4) -- (56) -- Postretirement benefits other than pensions (notes 1 and 4) -- -- (742) Income taxes (notes 1 and 5) -- -- 404 ---------------------------------------- Net income (loss) $ 77 $ (326) $(1,394) ======================================== Earnings (loss) per common share (note 14): From Continuing Operations $ .07 $ (.64) $ .95 From Discontinued Operations -- (.27) (4.08) From cumulative effect of changes in accounting principles -- (.16) (.98) ---------------------------------------- Earnings (loss) per common share $ .07 $ (1.07) $ (4.11) ======================================== Cash dividends per common share $ .20 $ .40 $ .72 ========================================
The Notes to the Financial Statements are an integral part of these financial statements. 27 28 CONSOLIDATED BALANCE SHEET
At December 31 1994 1993 - -------------------------------------------------------------------------------------------------- (in millions) ASSETS: Cash and cash equivalents (note 1) $ 338 $ 637 Customer receivables (note 6) 1,553 1,381 Inventories (note 7) 1,541 1,549 Uncompleted contracts costs over related billings (note 7) 555 371 Deferred income taxes (note 5) 524 588 Prepaid and other current assets 209 248 ----------------------- Total current assets 4,720 4,774 Plant and equipment, net (note 8) 1,898 1,964 Intangible and other noncurrent assets (note 9) 3,572 3,815 Net assets of Discontinued Operations (note 2) 434 -- ----------------------- Total assets $10,624 $10,553 ======================= LIABILITIES AND SHAREHOLDERS' EQUITY: Revolving credit borrowings and other short-term debt (note 10) $ 662 $ 662 Current maturities of long-term debt (note 12) 17 9 Accounts payable 831 656 Uncompleted contracts billings over related costs (note 7) 473 672 Other current liabilities (note 11) 1,726 1,926 ----------------------- Total current liabilities 3,709 3,925 Long-term debt (note 12) 1,886 1,885 Net liabilities of Discontinued Operations (note 2) -- 211 Other noncurrent liabilities (note 13) 3,207 3,453 ----------------------- Total liabilities 8,802 9,474 ----------------------- Contingent liabilities and commitments (note 16) Minority interest in equity of consolidated subsidiaries 30 34 Shareholders' equity (note 14): Preferred stock, $1.00 par value (25 million shares authorized): Series A preferred (no shares issued) -- -- Series B conversion preferred (8 million shares issued) 8 8 Series C conversion preferred (4 million shares issued) 4 -- Common stock, $1.00 par value (480 million shares authorized, 393 million shares issued) 393 393 Capital in excess of par value 1,932 1,475 Common stock held in treasury (870) (972) Minimum pension liability adjustment (note 3) (962) (1,215) Cumulative foreign currency translation adjustments (38) (45) Retained earnings 1,325 1,401 ----------------------- Total shareholders' equity 1,792 1,045 ----------------------- Total liabilities and shareholders' equity $10,624 $10,553 =======================
The Notes to the Financial Statements are an integral part of these financial statements. 28 29 CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------- (in millions) Cash flows from operating activities of Continuing Operations: Net income (loss) from Continuing Operations $ 77 $ (175) $ 357 Noncash items included in income: Depreciation and amortization 320 311 301 Pension settlement loss 308 -- -- Noncash restructuring charges 31 90 -- Losses (gains) on asset dispositions (8) 180 17 Change in assets and liabilities, net of effects of acquisitions and divestitures of businesses: Receivables, current and noncurrent (77) (56) (61) Inventories 52 (157) (222) Progress payments net of costs on uncompleted contracts (394) (25) 160 Accounts payable 167 47 (40) Deferred and current income taxes (124) (300) (60) Accrued restructuring costs (124) 260 36 Other assets and liabilities 75 560 129 ---------------------------------------- Cash provided by operating activities of Continuing Operations 303 735 617 ---------------------------------------- Cash provided (used) by operating activities of Discontinued Operations (357) 45 465 ---------------------------------------- Cash flows from investing activities: Business divestitures 88 -- 238 Business acquisitions (109) -- -- Liquidation of assets of Discontinued Operations 1,697 4,882 5,029 Asset fundings of Discontinued Operations (86) (2,015) (4,718) Capital expenditures (259) (272) (305) Other 22 73 (48) ---------------------------------------- Cash provided by investing activities 1,353 2,668 196 ---------------------------------------- Cash flows from financing activities: Bank revolver borrowings 9,143 12,935 12,875 Bank revolver repayments (11,079) (15,575) (9,370) Net reduction in other short-term debt (599) (532) (3,937) Repayments of long-term debt (81) (1,037) (1,421) Long-term borrowings 16 603 675 Sale of equity securities 505 -- 543 Treasury stock reissued 58 81 111 Dividends paid (153) (190) (271) Other (13) (39) (173) ---------------------------------------- Cash used by financing activities (2,203) (3,754) (968) ---------------------------------------- Increase (decrease) in cash and cash equivalents (904) (306) 310 Cash and cash equivalents at beginning of period (note 1) 1,248 1,554 1,244 ---------------------------------------- Cash and cash equivalents at end of period (note 1) $ 344 $ 1,248 $ 1,554 ======================================== Supplemental disclosure of cash flow information: Interest paid--Continuing Operations $ 177 $ 205 $ 234 Interest paid--Discontinued Operations 216 433 536 Income taxes paid 123 75 53
The Notes to the Financial Statements are an integral part of these financial statements and include descriptions of noncash transactions. 29 30 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The consolidated financial statements include the accounts of Westinghouse Electric Corporation (Westinghouse) and its subsidiary companies (together, the Corporation) after elimination of intercompany accounts and transactions. Investments in joint ventures and in other companies in which the Corporation does not control but has the ability to exercise significant management influence over operating and financial policies are accounted for by the equity method. Certain previously reported amounts have been reclassified to conform to the 1994 presentation. Discontinued Operations In November 1992, the Corporation's Board of Directors adopted a plan (the Plan) that included exiting Financial Services and other non-strategic businesses. The Corporation classified the operations of Distribution and Control Business Unit (DCBU), Westinghouse Electric Supply Company (WESCO) and Financial Services as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30). Revenue Recognition Sales are recorded primarily as products are shipped and services are rendered. The percentage-of-completion method of accounting is used for major power generation systems with a cycle time in excess of one year, major nuclear fuel and related equipment orders, and certain projects where this method of accounting is consistent with industry practice. For certain long-term contracts in which development and production are combined and cycle times are in excess of two years, revenue is recognized as development milestones are completed or units are delivered. Amortization of Intangible Assets Goodwill and other acquired intangible assets are amortized using the straight-line method over their estimated lives, but not in excess of 40 years for assets acquired prior to January 1, 1994 and not in excess of 15 years for assets acquired after December 31, 1993. Subsequent to the acquisition of an intangible asset, the Corporation continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of an intangible asset may warrant revision or that the remaining balance of such an asset may not be recoverable. When factors indicate that an intangible asset should be evaluated for possible impairment, the Corporation uses an estimate of the related business' undiscounted future cash flows over the remaining life of the asset in measuring whether the intangible asset is recoverable. If such an analysis indicates that impairment has in fact occurred, the Corporation writes down the book value of the intangible asset to its fair market value. Cash and Cash Equivalents The Corporation considers all investment securities with a maturity of three months or less when acquired to be cash equivalents. All cash and temporary investments are placed with high credit quality financial institutions and the amount of credit exposure to any one financial institution is limited. At December 31, 1994 and 1993, cash and cash equivalents included restricted funds of $61 million and $73 million, respectively. Inventories Inventories are stated at the lower of standard cost, which approximates actual cost on a first-in, first-out (FIFO) basis, or market. The elements of cost included in inventories are direct labor, direct material and certain overheads including factory depreciation. Long-term contracts in process include costs incurred plus estimated profits on contracts accounted for using the percentage-of-completion method. Plant and Equipment Plant and equipment assets are recorded at cost and depreciated generally using the straight-line method over their estimated useful lives. Leasehold improvements are amortized over the terms of the respective leases. Expenditures for additions and improvements are capitalized, and costs for repairs and maintenance are charged to operations as incurred. The Corporation limits capitalization of newly acquired assets to those assets with cost in excess of $1,500. Environmental Costs The Corporation expenses or capitalizes, if appropriate under the Corporation's capitalization policy, environmental expenditures that relate to current operations. Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed. The Corporation records liabilities when environmental assessments or remedial efforts are probable and the costs can be reasonably estimated. Such estimates are adjusted if necessary based on the completion of a formal study or the Corporation's commitment to a formal plan of action. The Corporation accrues over their estimated remaining useful lives the anticipated future costs of dismantling incinerators and decommissioning nuclear licensed sites. Off-Balance-Sheet Hedging Debt Instruments The Corporation has entered into interest rate and currency exchange agreements to manage exposure to fluctuations in interest and foreign exchange rates. Interest rate exchange agreements generally involve the exchange of interest payments without exchange of the underlying principal amounts. The Corporation does not enter into speculative or leveraged derivative transactions. 30 31 The differentials paid or received on interest rate swap agreements are accrued and recognized as adjustments to interest expense; gains and losses realized upon settlement of these agreements are deferred and amortized to interest expense over the term of the original agreement if the underlying hedged instrument remains outstanding or immediately if the underlying hedged instrument is settled. At December 31, 1994 and 1993, the Corporation had no deferred gains or losses from terminated interest rate swaps recorded on its balance sheet. Foreign Exchange The Corporation's foreign exchange policy includes matching purchases and sales in national currencies when possible and hedging unmatched transactions in excess of $250,000. In accordance with this policy, the Corporation has entered into various foreign exchange agreements in which it sells a currency forward to hedge a receivable or purchases a currency forward to hedge a payable. Gains and losses on foreign currency contracts offset gains and losses resulting from currency fluctuations inherent in the underlying transactions. Gains and losses on contracts that hedge specific foreign currency commitments are deferred and recognized in net income in the period in which the transaction is consummated. Changes in Accounting Principles In December 1993, the Corporation adopted, retroactive to January 1, 1993, Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires employers to adopt accrual accounting for workers' compensation, salary continuation, medical and life insurance continuation, severance benefits and disability benefits provided to former or inactive employees after employment but before retirement. The Corporation's previous practice was to expense these costs as incurred. See note 4 to the financial statements. Effective January 1, 1992, the Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," on the immediate recognition basis. This statement requires that the expected costs of providing postretirement health care and life insurance benefits be accrued during the employees' service with the Corporation. The Corporation's previous practice was to expense these costs as incurred. See note 4 to the financial statements. In the first quarter of 1992, the Corporation adopted SFAS No. 109, "Accounting for Income Taxes." This statement replaced SFAS No. 96, which the Corporation previously used to account for income taxes. SFAS No. 109 permitted the Corporation to recognize certain deferred tax benefits not recognized under SFAS No. 96. See note 5 to the financial statements. NOTE 2: DISCONTINUED OPERATIONS In November 1992, the Corporation announced the Plan that included exiting Financial Services through the disposition of its asset portfolios and the sales of DCBU and WESCO. The disposition of Financial Services assets involved the sale of the real estate and corporate finance portfolios over a three-year period and the liquidation of the leasing portfolio over a longer period of time in accordance with contractual terms. Financial Services, DCBU and WESCO have been accounted for as discontinued operations in accordance with APB 30. Upon adoption of the Plan, the Corporation recorded a pre-tax charge of $2,201 million in Discontinued Operations consisting of $2,350 million for an addition to the valuation allowance for Financial Services portfolios; $300 million for estimated losses from operations for Financial Services during the phase-out period; and $144 million for restructuring charges related to the change in corporate strategy. These charges were partially offset by an estimated $449 million gain from the dispositions of DCBU and WESCO and an estimated $144 million of earnings from those operations during their phase-out periods. The after-tax charge for the estimated loss on the disposal of Discontinued Operations was $1,383 million. Based on its quarterly review of the assumptions used in determining the estimated loss from Discontinued Operations, the Corporation recorded in the fourth quarter of 1993 an additional pre-tax provision for loss on disposal of Discontinued Operations of $148 million. This change in the estimated loss resulted from a reduction of the expected selling prices of WESCO and the Australian subsidiary of DCBU; a decision to sell in bulk a Financial Services residential development that the Corporation, upon adoption of the Plan, had intended to develop; and a revision to the estimated interest costs expected to be incurred by the Discontinued Operations during the disposal period. On January 31, 1994, the Corporation completed the sale of DCBU, excluding its Australian subsidiary, to Eaton Corporation for a purchase price of $1.1 billion and the assumption by the buyer of certain liabilities. The sale of the Australian subsidiary was completed in March 1994. On February 28, 1994, the Corporation completed the sale of WESCO to an affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a purchase price of approximately $340 million. The proceeds consisted of approximately $275 million in cash, approximately $50 million in first mortgage notes, and the remainder in stock and options of the new company. The portfolio investments of Financial Services have been reduced from $8,967 million at year-end 1992 to $1,230 million at December 31, 1994. Substantially all of the remaining real estate assets of $297 million at December 31, 1994 are expected to be liquidated in 1995. The Financial Services corporate portfolio essentially has been liquidated. The leasing portfolio, which totalled $924 million at December 31, 1994, is expected to continue to liquidate through 2015 in accordance with contractual terms. 31 32 The assets and liabilities of Discontinued Operations have been separately classified on the balance sheet as net assets (liabilities) of Discontinued Operations. A summary of these assets and liabilities follows: NET ASSETS (LIABILITIES) OF DISCONTINUED OPERATIONS (in millions)
At December 31 1994 1993* - ----------------------------------------------------------------------------- Assets: Cash and cash equivalents $ 6 $ 611 Other current assets 1 742 Portfolio investments 1,230 1,551 Deferred income taxes (note 5) 340 415 Accrued estimated gain on sale of DCBU & WESCO -- 441 Other noncurrent assets 220 735 - ----------------------------------------------------------------------------- Total assets--Discontinued Operations 1,797 4,495 - ----------------------------------------------------------------------------- Liabilities: Accounts payable 12 182 Other current liabilities 34 231 Short-term debt (note 10) 374 2,373 Current maturities of long-term debt (note 12) 230 774 Liability for estimated loss on disposal 145 488 Other noncurrent liabilities -- 11 Long-term debt (note 12) 568 647 - ----------------------------------------------------------------------------- Total liabilities--Discontinued Operations 1,363 4,706 - ----------------------------------------------------------------------------- Net assets (liabilities) of Discontinued Operations $ 434 $ (211) ============================================================================= *Certain amounts have been reclassified for comparative purposes.
Of the remaining $1.2 billion of net debt of Discontinued Operations, approximately $700 million is expected to be repaid in 1995. Approximately $300 million is expected to be repaid through the liquidation of portfolio investments of Financial Services. The remaining 1995 debt repayment of $400 million will occur as cash is received from Continuing Operations, the timing of which is expected to coincide with sales of non-strategic businesses. The Corporation expects to reduce the debt of Discontinued Operations to that amount which is supportable by the leasing portfolio and can be repaid as that portfolio liquidates over its contractual term. As a result, additional cash may be required from Continuing Operations. The cash receipts from Continuing Operations represent reimbursements for deferred income tax benefits related to the prior losses of Discontinued Operations that have been or are expected to be utilized by the Corporation to offset tax obligations of Continuing Operations. Management believes that the combination of the net proceeds anticipated from the continued liquidation of assets of Discontinued Operations and from the ultimate realization of deferred income tax benefits will be sufficient to fund Discontinued Operations. Management further believes that the liability for the estimated loss on disposal of Discontinued Operations is adequate. The adequacy of this liability is evaluated each quarter. Portfolio Investments Portfolio investments by category of investment and financing at December 31, 1994 and 1993 are summarized in the table below: PORTFOLIO INVESTMENTS (in millions)
Real Leasing Estate Corporate Total - ------------------------------------------------------------------------------- At December 31, 1994 Receivables $ 886 $ 18 $ 9 $ 913 Other portfolio investments 38 279 -- 317 - ------------------------------------------------------------------------------- Portfolio investments $ 924 $297 $ 9 $1,230 =============================================================================== At December 31, 1993 Receivables $ 969 $ 46 $ 47 $1,062 Other portfolio investments 39 353 97 489 - ------------------------------------------------------------------------------- Portfolio investments $1,008 $399 $144 $1,551 ===============================================================================
Other portfolio investments at December 31, 1994 and 1993 included the Corporation's investment in LW Real Estate Investments, L.P. (LW) of $133 million in both periods, real estate properties of $88 million and $141 million, respectively, and other investments of $96 million and $215 million, respectively, primarily consisting of investments in real estate and leasing partnerships. The remaining portfolio investments, other than the leasing assets, are expected to be substantially liquidated by the end of 1995. Non-earning receivables at December 31, 1994 and 1993 totalled $30 million. There were no reduced earning receivables at December 31, 1994 and 1993. Leasing receivables consist of direct financing and leveraged leases. At December 31, 1994 and 1993, 81% and 77%, respectively, related to aircraft and 18% and 19%, respectively, related to cogeneration facilities. Certain leasing receivables classified as performing and totalling $139 million at December 31, 1994 have been identified by management as potential problem receivables. This amount consists primarily of leveraged leases related to aircraft leased by major U.S. airlines. Such leasing receivables were current as to payments and performing in accordance with contractual terms at December 31, 1994. The components of the Corporation's net investment in leases at December 31, 1994 and 1993 are as follows: NET INVESTMENT IN LEASES (in millions)
At December 31 1994 1993 - ------------------------------------------------------------------------ Rentals receivable (net of principal and interest on nonrecourse loans) $ 864 $ 965 Estimated residual value of leased assets 389 411 Unearned and deferred income (367) (407) - ------------------------------------------------------------------------ Investment in leases 886 969 Deferred taxes and deferred investment tax credits arising from leases (610) (575) - ------------------------------------------------------------------------ Investment in leases, net $ 276 $ 394 ========================================================================
32 33 At December 31, 1994 and 1993, deferred investment tax credits totalled $25 million and $34 million, respectively. These deferred investment tax credits are recognized as income over the contractual terms of the respective leases. Contractual maturities for the Corporation's leasing receivables at December 31, 1994 are as follows: CONTRACTUAL MATURITIES FOR LEASING RECEIVABLES (in millions)
At December 31, 1994 Year of Maturity - ----------------------------------------------------------- After Total 1995 1996 1997 1998 1999 1999 - ----------------------------------------------------------- Leasing $886 $23 $32 $30 $29 $34 $738 ===========================================================
Liability for Estimated Loss on Disposal At the beginning of 1992, the Financial Services valuation allowance totalled $2,330 million. During the first eleven months of 1992, Financial Services wrote off portfolio investments totalling $1,126 million and made additional provisions totalling $205 million. Upon adoption of the Plan in November 1992, the balance of $1,409 million became part of the liability for estimated loss on disposal of Discontinued Operations. The following table is a reconciliation of the liability for the estimated loss on disposal of Discontinued Operations from the adoption of the Plan through December 31, 1994: LIABILITY FOR ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS (in millions)
Financial DCBU & Restruc- Plan-to- Services WESCO turing Date - ----------------------------------------------------------------------------- December 1, 1992 $ 1,409 $ -- $ -- $ 1,409 Adoption of the 1992 Plan 2,650 (593) 144 2,201 1993 Provision 86 62 -- 148 Plan-to-Date Activity (3,902) 415 (126) (3,613) Transfers (163) 176 (13) -- - ----------------------------------------------------------------------------- December 31, 1994 $ 80 $ 60 $ 5 $ 145 =============================================================================
Transfers among Plan components have been made to better reflect estimated reserve requirements until completion of the Plan. The ending balance of $145 million is reflected on the summary of net assets (liabilities) of Discontinued Operations as one amount. Any variances from estimates which may occur for one Plan component will be considered in conjunction with those for other components in determining whether an adjustment of the total liability is necessary. In accordance with APB 30, the consolidated financial statements reflect the operating results of Discontinued Operations separately from Continuing Operations. Summarized operating results of Discontinued Operations follow: OPERATING RESULTS OF DISCONTINUED OPERATIONS (in millions)
Financial DCBU & Services WESCO Total - --------------------------------------------------------------------------- Year ended December 31, 1994 Sales of products and services $ 41 $ 319 $ 360 Net earnings (losses) (204) 4 (200) Year ended December 31, 1993 Sales of products and services $ 305 $2,384 $2,689 Net earnings (losses) (212) 66 (146) Month ended December 31, 1992 Sales of products and services $ 46 $ 198 $ 244 Net earnings (losses) (13) 11 (2) Eleven months ended November 30, 1992 Sales of products and services $ 699 $2,230 $2,929 Income (loss) before income taxes (181) 101 (80) Income taxes (benefit) (71) 7 (64) Minority interest in income 10 4 14 Income (loss) from operations (120) 90 (30) ===========================================================================
NOTE 3: PENSIONS The Corporation has various pension arrangements covering substantially all employees. Most plan benefits are based on either years of service and compensation levels at the time of retirement or a formula based on career earnings. Pension benefits are paid from trusts funded by contributions from employees and the Corporation. The pension funding policy for qualified plans is consistent with the funding requirements of U.S. federal and other government laws and regulations. Plan assets consist primarily of listed stocks, fixed income securities and real estate investments. Included in plan assets at December 31, 1994 are 5,612,600 shares of the Corporation's common stock having a market value of approximately $69 million. Dividends paid by the Corporation during 1994 on shares held by the pension fund totalled approximately $2 million. NET PERIODIC PENSION COSTS (in millions)
Year ended December 31 1994 1993 1992 - ------------------------------------------------------------------------- Service cost $ 79 $ 65 $ 68 Interest cost on projected benefit obligation 404 426 432 Amortization of unrecognized net obligation 36 41 44 Amortization of unrecognized prior service cost 6 5 5 Amortization of unrecognized net loss 112 48 20 - ------------------------------------------------------------------------- 637 585 569 - ------------------------------------------------------------------------- Return on plan assets: Actual return on plan assets (18) (414) (107) Deferred losses (385) (40) (376) - ------------------------------------------------------------------------- Recognized return on plan assets (403) (454) (483) - ------------------------------------------------------------------------- Net periodic pension cost $ 234 $ 131 $ 86 =========================================================================
33 34 Net periodic pension cost increased $103 million in 1994 compared to 1993, due primarily to changes in pension plan assumptions and reduced levels of anticipated asset earnings. 1994 Pension Settlement The Corporation's restructuring activities contributed to a high level of lump sum cash distributions from the Corporation's pension fund during 1994. The magnitude of these cash distributions required that the Corporation apply the provisions of SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and recognize a settlement loss of $308 million during the fourth quarter of 1994. This noncash charge to income represents the pro-rata portion of unrecognized losses associated with the pension obligation that was settled. A curtailment charge of $22 million related to the 1993 restructuring initiative was included in the loss from Continuing Operations for the year ended December 31, 1993. See note 19 to the financial statements. In addition, $54 million was included in the estimated loss on disposal of Discontinued Operations for the year ended December 31, 1992 in accordance with the provisions of SFAS No. 88. SIGNIFICANT PENSION PLAN ASSUMPTIONS
At December 31 1994 1993 - ----------------------------------------------------------- Discount rate 8.5% 7.25% Compensation increase rate 4% 4% Long-term rate of return on plan assets 9.75% 9.75% ===========================================================
The requirement of SFAS No. 87 to adjust the discount rate to reflect current and expected-to-be-available interest rates on high quality fixed income investments resulted in the increase in the Corporation's assumed discount rate from 7.25%, which was used at December 31, 1993, to 8.5% at December 31, 1994. FUNDING STATUS--PENSIONS (in millions)
At December 31 1994 1993 - ------------------------------------------------------------------------------ Actuarial present value of benefit obligation: Vested $(4,412) $(5,068) Nonvested (319) (440) - ------------------------------------------------------------------------------ Accumulated benefit obligation (4,731) (5,508) Effect of projected future compensation levels (273) (333) - ------------------------------------------------------------------------------ Projected benefit obligation for service rendered to date (5,004) (5,841) Plan assets at fair value 3,557 4,226 - ------------------------------------------------------------------------------ Projected benefit obligation in excess of plan assets (1,447) (1,615) Unrecognized net loss 1,736 2,181 Prior service cost (benefit) not yet recognized in net periodic pension cost (136) 14 Unrecognized net transition obligation 250 281 - ------------------------------------------------------------------------------ Prepaid pension cost 403 861 Minimum pension liability (1,577) (2,143) - ------------------------------------------------------------------------------ Unfunded accumulated benefit obligation $(1,174) $(1,282) ==============================================================================
During 1994, the Corporation contributed $310 million to its pension plans. The 1993 pension contribution, which totalled $273 million, consisted primarily of assets of Discontinued Operations. The unfunded accumulated benefit obligation at December 31, 1994 decreased by $108 million compared to December 31, 1993. This decrease resulted from the net effect of numerous factors including 1994 employer contributions, negotiated pension plan changes, the discount rate assumption change, current year service and interest costs, and 1994 actuarial losses. For financial reporting purposes, a pension plan is considered unfunded when the fair value of plan assets is less than the accumulated benefit obligation. When that is the case, a minimum pension liability must be recognized for the sum of the unfunded amount plus any prepaid pension cost. In recognizing such a liability, an intangible asset is usually recorded. However, the amount of the intangible asset may not be greater than the sum of the prior service cost not yet recognized and the unrecognized transition obligation as shown in the Funding Status table. When the liability to be recognized is greater than the intangible asset limit, a charge must be made to shareholders' equity for the difference, net of any tax effects which could be recognized in the future. At December 31, 1994, a minimum pension liability of $1,577 million was recognized for the sum of the unfunded amount of $1,174 million plus the prepaid pension cost of $403 million. An intangible asset of $114 million and a charge to shareholders' equity of $1,463 million, which was reduced to $962 million due to tax deferrals of $501 million, offset the pension liability. As a result of this remeasurement, year-end 1994 shareholders' equity was increased by $253 million from December 31, 1993. At December 31, 1993, a minimum pension liability of $2,143 million was recognized for the sum of the unfunded amount of $1,282 million plus the prepaid pension cost of $861 million. An intangible asset of $295 million and a charge to shareholders' equity of $1,848 million, which was reduced to $1,215 million due to tax deferrals of $633 million, offset the pension liability. 34 35 NOTE 4: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS The Corporation has defined benefit postretirement plans that provide medical, dental and life insurance for eligible retirees and dependents. The components of net periodic postretirement benefit cost follow: NET PERIODIC POSTRETIREMENT BENEFIT COST (in millions)
Year ended December 31 1994 1993 - --------------------------------------------------------------- Service cost, benefits attributed to employee service during the year $ 20 $ 15 Interest cost on accumulated postretirement benefit obligation 93 96 Amortization of unrecognized net loss 4 -- Recognized return on plan assets (1) -- - --------------------------------------------------------------- Net periodic postretirement benefit cost $116 $111 ===============================================================
The adoption of SFAS No. 106 on the immediate recognition basis, concurrent with the adoption of SFAS No. 109 as of January 1, 1992, resulted in a net charge to first quarter 1992 earnings of $742 million, net of $431 million of deferred income tax benefits. SIGNIFICANT POSTRETIREMENT BENEFIT PLAN ASSUMPTIONS
At December 31 1994 1993 - ---------------------------------------------------------- Discount rate 8.5% 7.25% Health care cost trend rates 11%* 12%* Compensation increase rate 4% 4% Long-term rate of return on plan assets 7% 9.75% ========================================================== *Decreasing 1/2% annually from December 31, 1994 and December 31, 1993, to the ultimate rate of 6.5% and 7%, respectively.
The Corporation's accumulated postretirement benefit obligation consists of the following: FUNDING STATUS--POSTRETIREMENT BENEFITS (in millions)
At December 31 1994 1993 - ------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ (893) $ (912) Fully eligible, active plan participants (32) (50) Other active plan participants (253) (398) - ------------------------------------------------------------------------- Total accumulated postretirement benefit obligation (1,178) (1,360) Unrecognized net loss 36 171 Unrecognized prior service benefit (58) -- Plan assets at fair value 12 -- - ------------------------------------------------------------------------- Recorded liability $(1,188) $(1,189) =========================================================================
The accumulated postretirement benefit obligation was calculated using the terms of the Corporation's medical, dental and life insurance plans, including the effects of established maximums on covered costs. The effect of a 1% annual increase in the assumed health care cost trend rates would increase the accumulated postretirement benefit obligation by approximately $67 million and would increase net periodic postretirement benefit cost by approximately $7 million. Certain of the Corporation's non-U.S. subsidiaries have private and government- sponsored plans for retirees. The cost of these plans is not significant to the Corporation. The Corporation provides certain postemployment benefits to former or inactive employees and their dependents during the time period following employment but before retirement. In December 1993, the Corporation adopted retroactive to January 1, 1993, SFAS No. 112, "Employers' Accounting for Postemployment Benefits." Prior to 1993, postemployment benefits were recognized primarily as they were paid. The Corporation's charge for adoption of SFAS No. 112 at January 1, 1993 was $56 million, net of $30 million of deferred taxes, and was immediately recognized as the cumulative effect of a change in accounting for postemployment benefits. At December 31, 1994 and 1993, the Corporation's liability for postemployment benefits totalled $77 million and $91 million, respectively. NOTE 5: INCOME TAXES INCOME TAXES FROM CONTINUING OPERATIONS (in millions)
Year ended December 31 1994 1993 1992 - ----------------------------------------------------------------- Current: Federal $18 $ 138 $150 State 24 19 28 Foreign 28 23 45 - ----------------------------------------------------------------- Total income taxes current 70 180 223 - ----------------------------------------------------------------- Deferred: Federal 28 (211) (27) State (13) 14 -- Foreign (14) (53) (9) - ----------------------------------------------------------------- Total income taxes deferred 1 (250) (36) - ----------------------------------------------------------------- Income taxes (benefit) $71 $ (70) $187 =================================================================
CONSOLIDATED INCOME TAXES (in millions)
Year ended December 31 1994 1993 1992 - ----------------------------------------------------------------- Current: Federal $18 $ 138 $ (19) State 24 19 28 Foreign 28 23 60 - ----------------------------------------------------------------- Total income taxes current 70 180 69 - ----------------------------------------------------------------- Deferred: Federal 28 (294) (1,208) State (13) 14 (138) Foreign (14) (53) 37 - ----------------------------------------------------------------- Total income taxes deferred 1 (333) (1,309) Operating loss carryforward--Federal -- -- (290) - ----------------------------------------------------------------- Income taxes (benefit) $71 $(153) $(1,530) =================================================================
35 36 Deferred federal income taxes for 1993 include a benefit of $62 million resulting from the enactment of an increase in the statutory federal income tax rate from 34% to 35%. Income tax expense (benefit) included in the consolidated financial statements follows: COMPONENTS OF CONSOLIDATED INCOME TAXES (in millions)
Year ended December 31 1994 1993 1992 - ------------------------------------------------------------------------------- Continuing Operations $71 $ (70) $ 187 Discontinued Operations -- -- (64) Estimated loss on disposal of Discontinued Operations -- (53) (818) Cumulative effect of change in accounting principle for postemployment benefits -- (30) -- Cumulative effect of change in accounting principle for postretirement benefits other than pensions -- -- (431) Cumulative effect of change in accounting principle for income taxes -- -- (404) - ------------------------------------------------------------------------------- Income taxes (benefit) $71 $(153) $(1,530) ===============================================================================
In addition to the amounts in the table above, during 1994, 1993 and 1992, $132 million of income tax expense, $378 million of income tax benefit and $255 million of income tax benefit, respectively, were recorded against shareholders' equity as a result of the pension liability adjustment. See note 3 to the financial statements. In January 1992, the Corporation adopted SFAS No. 109. This statement replaced SFAS No. 96 which the Corporation had used to account for income taxes since 1988. The effect of adopting SFAS No. 109 on the Corporation was to permit the recognition of deferred tax benefits as shown in the following table: DEFERRED TAX BENEFITS RECOGNIZED UPON ADOPTION OF SFAS NO. 109 (in millions)
At January 1 1992 - ----------------------------------------------------------- Change related to application of financial basis net operating loss and credit carryforwards $496 State income tax, net of federal effect 12 Valuation allowance for deferred taxes (104) - ----------------------------------------------------------- Deferred tax benefit $404 ===========================================================
The foreign portion of income or loss before income taxes and minority interest in income of consolidated subsidiaries in the consolidated statement of income consisted of losses of $34 million in 1994 and $6 million in 1993 and income of $61 million in 1992. Such income or loss consisted of profits and losses generated from foreign operations and can be subject to both U.S. and foreign income taxes. Deferred federal income taxes have not been provided on cumulative undistributed earnings from foreign subsidiaries, totalling $383 million at December 31, 1994, in which the earnings have been reinvested for an indefinite time. It is not practicable to determine the income tax liability that would result were such earnings repatriated. The amount of withholding taxes that would be payable upon such repatriation is estimated to be $24 million. Income from Continuing Operations includes income of certain manufacturing operations in Puerto Rico which are eligible for tax credits against U.S. federal income tax and partially exempt from Puerto Rican income tax under grants of industrial tax exemptions. These tax exemptions provided net tax benefits of $17 million in 1994, $21 million in 1993 and $21 million in 1992. The exemptions will expire at various dates from 2002 through 2007. Deferred income taxes result from temporary differences in the financial bases and tax bases of assets and liabilities. The types of differences that give rise to significant portions of deferred income tax liabilities or assets are shown in the accompanying table: CONSOLIDATED DEFERRED INCOME TAX SOURCES (in millions)
At December 31 1994 1993 - ---------------------------------------------------------------------- Provisions for expenses and losses $ 812 $ 867 Accumulated depreciation (163) (215) Long-term contracts in process 81 96 Leasing activities (583) (622) Minimum pension liabilities 403 387 Operating losses and credit carryforwards 1,360 1,505 Postretirement and postemployment benefits 477 476 Other deferred tax assets 184 216 Other deferred tax liabilities (90) (115) Valuation allowance for deferred taxes (101) (90) - ---------------------------------------------------------------------- Deferred income taxes, net asset $2,380 $2,505 ======================================================================
The valuation allowance for deferred taxes represents foreign tax credits not anticipated to be utilized and operating loss carryforwards of certain foreign subsidiaries. The net balance of deferred income taxes is intended to offset income taxes on future taxable income expected to be earned by the Corporation's continuing businesses. At December 31, 1994, for federal income tax purposes, there were regular tax net operating loss carryforwards of $472 million which expire by the year 2007, $2,472 million which expire by the year 2008, alternative minimum tax operating loss carryforwards of $123 million which expire by the year 2007 and $2,462 million which expire by the year 2008 and alternative minimum tax credit carryforwards of $261 million which have no expiration date. At December 31, 1994, there were $183 million of net operating loss carryforwards attributable to foreign subsidiaries. Of this total, approximately $28 million has no expiration date. The remaining amount will expire not later than 2001. A valuation allowance has been established for $58 million of the deferred tax benefit related to those loss carryforwards for which it is considered likely that the benefit will not be realized. 36 37 EFFECTIVE TAX (BENEFIT) RATE FOR CONTINUING OPERATIONS
Year ended December 31 1994 1993* 1992* - --------------------------------------------------------------------- Federal statutory income tax (benefit) rate 35.0% (35.0)% 34.0% Increase (decrease) in the tax (benefit) rate resulting from: Adjustment of deferred tax asset for increase in federal income tax rate -- (23.2) -- Income taxes of prior years -- 21.2 -- Write off of intangible assets 5.3 5.8 1.4 Interest on prior years' federal income tax, net of federal effect (7.4) 6.4 -- State income tax, net of federal effect 4.4 9.2 3.4 Lower tax rate on income of foreign sales corporations (4.1) (6.7) (.6) Lower tax rate on net income of Puerto Rican operations (10.5) (8.7) (3.9) Valuation allowance for deferred taxes 6.9 (1.3) 1.1 Adjustment of deferred tax asset included in equity in June 1993 for change in federal income tax rate 1.0 (3.0) -- Loss of foreign tax credit 5.1 4.7 -- Nondeductible expenses 4.5 .9 .4 Other 5.0 -- (1.9) - --------------------------------------------------------------------- Effective tax (benefit) rate for Continuing Operations 45.2% (29.7)% 33.9% ===================================================================== *Certain amounts have been reclassified for comparative purposes.
EFFECTIVE TAX (BENEFIT) RATE FOR CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Year ended December 31 1994 1993 1992 - --------------------------------------------------------------------- Federal statutory income tax (benefit) rate -- (35.0)% (34.0)% Increase in the benefit rate resulting from: State income tax, net of federal effect -- -- (2.8) - --------------------------------------------------------------------- Effective tax (benefit) rate for cumulative effect of changes in accounting principles -- (35.0)% (36.8)% =====================================================================
The federal income tax returns of the Corporation and its wholly owned subsidiaries are settled through the year ended December 31, 1986. The Corporation has reached a tentative agreement with the Internal Revenue Service regarding intercompany pricing adjustments applicable to operations in Puerto Rico for the years 1987 through 1992. Management believes that adequate provisions for taxes have been made through December 31, 1994. NOTE 6: CUSTOMER RECEIVABLES Customer receivables at December 31, 1994 included $197 million which represented the sales value of material shipped under long-term contracts but not billed to the customer and $72 million which represented claims receivable on terminated or nondefinitized government contracts. Such claims are recorded only when collectibility is assured. Billings will occur upon shipment of major components of the contract or upon definitive resolution of the outstanding claims, respectively. Collection of these receivables is expected to be substantially completed within one year. Allowances for doubtful accounts of $59 million and $54 million at December 31, 1994 and 1993, respectively, were deducted from customer receivables. At December 31, 1994 and 1993, approximately 10% and 8%, respectively, of the Corporation's customer receivables were from sales on open account with various agencies of the U.S. government, which is the Corporation's largest single customer. The Corporation performs ongoing credit evaluations of its customers and generally does not require collateral. NOTE 7: INVENTORIES AND COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS INVENTORIES (in millions)
At December 31 1994 1993 - --------------------------------------------------------------- Raw materials $ 158 $ 137 Work in process 1,065 989 Finished goods 156 104 - --------------------------------------------------------------- 1,379 1,230 Long-term contracts in process 877 678 Progress payments to subcontractors 97 124 Recoverable engineering and development costs 437 442 - --------------------------------------------------------------- 2,790 2,474 Inventoried costs related to contracts with progress billing terms (1,249) (925) - --------------------------------------------------------------- Inventories $ 1,541 $1,549 ===============================================================
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
At December 31 1994 1993 - ----------------------------------------------------------- Costs included in inventories $1,143 $ 968 Progress billings on contracts (588) (597) - ----------------------------------------------------------- Uncompleted contracts costs over related billings $ 555 $ 371 =========================================================== Progress billings on contracts $ 579 $ 629 Costs included in inventories (106) 43 - ----------------------------------------------------------- Uncompleted contracts billings over related costs $ 473 $ 672 ===========================================================
Raw materials, work in process and finished goods included contract-related costs of approximately $811 million at December 31, 1994, and $770 million at December 31, 1993. Substantially all costs in long-term contracts in process, progress payments to subcontractors, and recoverable engineering and development costs were contract-related. Inventories other than those related to long-term contracts are generally realized within one year. Inventoried costs do not exceed realizable values. 37 38 NOTE 8: PLANT AND EQUIPMENT PLANT AND EQUIPMENT (in millions)
At December 31 1994 1993 - ------------------------------------------------------------ Land and buildings $ 818 $ 815 Machinery and equipment 3,321 3,275 Construction in progress 196 225 - ------------------------------------------------------------ Plant and equipment, at cost 4,335 4,315 Accumulated depreciation (2,437) (2,351) - ------------------------------------------------------------ Plant and equipment, net $ 1,898 $ 1,964 ============================================================
For the years ended December 31, 1994 and 1993, depreciation expense totalled $275 million and $272 million, respectively. Of these amounts, $252 million and $253 million, respectively, is included in costs of products and services, and $23 million and $19 million, respectively, is included in marketing, administrative and general expenses. NOTE 9: INTANGIBLE AND OTHER NONCURRENT ASSETS INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
At December 31 1994 1993 - ----------------------------------------------------------- Deferred income taxes (note 5) $1,516 $1,502 Goodwill and other acquired intangible assets 1,119 1,131 Intangible pension asset (note 3) 114 295 Undeveloped land 244 247 Joint ventures and other affiliates 100 122 Noncurrent receivables 147 206 Other 332 312 - ----------------------------------------------------------- Intangible and other noncurrent assets $3,572 $3,815 ===========================================================
Goodwill and other acquired intangible assets are shown net of accumulated amortization of $162 million and $139 million at December 31, 1994 and 1993, respectively. Joint ventures and other affiliates include investments in companies over which the Corporation exercises significant influence but does not control. NOTE 10: SHORT-TERM DEBT On August 5, 1994, the Corporation replaced its December 1991 revolver with two revolving credit agreements (revolvers). The facilities have a combined commitment level of $2.5 billion, with $2.0 billion maturing on August 4, 1997 (three-year revolver) and $500 million maturing on August 4, 1995 (364-day revolver). Contemporaneous with entering into the revolvers, outstanding borrowings under the December 1991 revolver were repaid with borrowings from the three-year revolver. Availability under the revolvers is subject to compliance with certain covenants, representations and warranties, including a no material adverse change provision with respect to the Corporation taken as a whole, restrictions on the incurrence of liens, a maximum leverage ratio, minimum interest coverage ratio and minimum consolidated net worth. Certain of these covenants become more restrictive over the terms of the revolvers. At December 31, 1994, the Corporation was in compliance with these covenants. Interest rates for borrowings under the revolvers are determined at the time of each borrowing and are based on one of a variety of floating rate indices plus a margin based on the Corporation's debt ratings. The indices include the following: London Interbank Offer Rate (LIBOR), certificate of deposit rate and prime rate. The cost of the revolvers includes facility fees which are based on the Corporation's debt ratings and are assessed on the revolver commitment level. The interest rates for the borrowings under the revolvers at December 31, 1994 and 1993 were based on LIBOR. There are no compensating balance requirements under the revolvers. As a result of rating agency actions and management's assessment of the capital markets in October 1992, the Corporation discontinued the sale of commercial paper and replaced this debt with borrowings under the December 1991 revolver. SHORT-TERM DEBT--CONTINUING OPERATIONS (in millions)
At December 31 During the Year - ----------------------------------------------------------------------------- Composite Max. Out- Avg. Out- Wtd. Avg. Balance Rate standing standing Rate ------------------- --------------------------------- 1994 Revolving credit facilities $545 6.7% $ 545 $113 4.3% Short-term foreign bank loans 115 6.7% 313 164 5.7% Other 2 - ----------------------------------------------------------------------------- Short-term debt $662 ============================================================================= 1993 Commercial paper $ -- -- $ 78 $ 6 3.9% Revolving credit facility 500 4.0% 1,100 909 4.3% Short-term foreign bank loans 158 7.4% 277 134 8.6% Other 4 - ----------------------------------------------------------------------------- Short-term debt $662 =============================================================================
Average outstanding borrowings for Continuing Operations were determined based on daily amounts outstanding for the revolving credit facilities and commercial paper, and on monthly balances outstanding for short-term foreign bank loans. During the fourth quarter of 1994, $625 million of revolving credit borrowings were transferred from Discontinued Operations to Continuing Operations. 38 39 SHORT-TERM DEBT--DISCONTINUED OPERATIONS (in millions)
At December 31 During the Year - ---------------------------------------------------------------------- Composite Max. Out- Avg. Out- Wtd. Avg. Balance Rate standing standing Rate ------------------- ------------------------------- 1994 Revolving credit facilities $ 374 6.7% $2,355 $ 955 4.8% - ---------------------------------------------------------------------- Short-term debt $ 374 ====================================================================== 1993 Commercial paper $ -- -- $ 131 $ 9 3.7% Revolving credit facility 2,355 4.1% 4,395 3,424 4.2% Other 18 - ---------------------------------------------------------------------- Short-term debt $2,373 ======================================================================
Average outstanding borrowings for Discontinued Operations were determined based on daily amounts outstanding for revolving credit facilities and commercial paper. To manage interest costs on its short-term and long-term debt, Financial Services entered into various types of interest rate and currency exchange agreements. In connection with the fourth quarter 1994 transfer of revolving credit borrowings, $272 million of related fixed rate interest rate swaps were transferred to Continuing Operations. A summary of notional amounts outstanding at December 31, 1994 and 1993 is presented in the table below: INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS NOTIONAL AMOUNTS OUTSTANDING (in millions)
Short-Term Long-Term Debt Debt Total - ------------------------------------------------------------- At December 31, 1994 Continuing Operations $272 $ -- $ 272 Discontinued Operations 25 374 399 - ------------------------------------------------------------- Notional amounts $297 $374 $ 671 ============================================================= At December 31, 1993 Continuing Operations $ -- $ -- $ -- Discontinued Operations 614 712 1,326 - ------------------------------------------------------------- Notional amounts $614 $712 $1,326 =============================================================
The $655 million decrease during 1994 in the total notional amount outstanding was due to the maturity of several agreements. The average remaining maturity of interest rate and currency exchange agreements was 1.5 years and 1.6 years at December 31, 1994 and 1993, respectively. Of the total notional amount outstanding at year-end 1994, $422 million relates to interest rate swaps with rate and maturity characteristics set forth in the table below: CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS (in millions)
At December 31, 1994 Total 1995 1996 1997 1998 1999 - --------------------------------------------------------------------- Fixed rate swaps (pay fixed): Notional amount $272 $ 87 $80 -- $50 $55 Wtd. avg. fixed rate paid 8.83% 8.98% 8.73% -- 8.73% 8.87% Floating rate swaps (pay floating): Notional amount $150 $150 -- -- -- -- Wtd. avg. fixed rate received 8.74% 8.74% -- -- -- -- ======================================================================
Under the majority of the swap agreements, the floating rate received or paid is based on the average 30-day commercial paper rate for the relevant period. This rate was 6.0% on December 31, 1994. The floating rate received or paid on the remaining agreements is based on six month LIBOR and is set on dates specified in the agreements. This rate was 7.0% on December 31, 1994. The remaining $249 million notional amount outstanding at December 31, 1994 consists of a $25 million forward interest rate swap agreement, which is exercisable at the option of a counterparty, a $150 million interest rate floor agreement and a $74 million interest rate and currency swap. At December 31, 1993, interest rate swap agreements in which Financial Services paid a fixed interest rate totalled $575 million and had a weighted average rate of 8.7% with an average remaining maturity of 1.3 years. In addition, those interest rate swap agreements in which Financial Services received a fixed interest rate totalled $430 million at December 31, 1993 and had a weighted average rate of 8.1% with an average remaining maturity of approximately 10 months. The remaining $321 million notional amount outstanding at December 31, 1993 includes $80 million of forward interest rate exchange agreements, a $150 million interest rate floor agreement, $83 million of interest rate and currency exchange agreements and an $8 million basis swap agreement. 39 40 NOTE 11: OTHER CURRENT LIABILITIES OTHER CURRENT LIABILITIES (in millions)
At December 31 1994 1993 - ----------------------------------------------------------- Accrued employee compensation $ 198 $ 262 Income taxes currently payable 241 292 Accrued product warranty 82 83 Accrued restructuring costs 180 230 Liability for business dispositions 112 215 Accrued taxes, interest and insurance 270 257 Other 643 587 - ----------------------------------------------------------- Other current liabilities $1,726 $1,926 ===========================================================
NOTE 12: LONG-TERM DEBT LONG-TERM DEBT--CONTINUING OPERATIONS (in millions)
At December 31 1994 1993 - ----------------------------------------------------------- Medium-term notes due through 2001 $ 95 $ 95 7-3/4% notes due 1996 300 300 8-7/8% notes due 2001 250 250 8-3/8% notes due 2002 348 348 8-5/8% debentures due 2012 273 273 6-7/8% notes due 2003 275 275 7-7/8% debentures due 2023 325 325 Other 37 28 - ----------------------------------------------------------- 1,903 1,894 Current maturities (17) (9) - ----------------------------------------------------------- Long-term debt $1,886 $1,885 ===========================================================
At December 31, 1994, medium-term notes of Continuing Operations had interest rates ranging from 8.5% to 9.4%, with an average interest rate of 8.91% and an average remaining maturity of 3.5 years. In September 1993, the Corporation issued $275 million of 6-7/8% notes due September 1, 2003 and $325 million of 7-7/8% debentures due September 1, 2023. These notes and debentures were offered at a discount and were issued under the Corporation's $1 billion shelf registration, of which $400 million was unused as of December 31, 1994. LONG-TERM DEBT--DISCONTINUED OPERATIONS (in millions)
At December 31 1994 1993 - ----------------------------------------------------------- Medium-term notes due through 2001 $ 424 $1,047 8-7/8% senior notes due 1995 150 150 8-7/8% senior notes due 2014 150 150 Other 74 74 - ----------------------------------------------------------- 798 1,421 Current maturities (230) (774) - ----------------------------------------------------------- Long-term debt $ 568 $ 647 ===========================================================
At December 31, 1994, medium-term notes of Discontinued Operations had interest rates ranging from 5.9% to 9.4%, with an average interest rate of 8.88% and an average remaining maturity of 2.4 years. During 1994, $623 million of medium-term notes were repaid at maturity. In addition, all of the interest rate swaps associated with the Corporation's medium-term notes matured. At December 31, 1994, $4 million of medium-term notes issued on a variable-rate basis had an interest rate of 7.08%, while $420 million of medium-term notes issued on a fixed-rate basis had a weighted average interest rate of 8.89%. At December 31, 1993, $291 million of medium-term notes had been issued either on a variable-rate basis or swapped to a variable-rate basis. A total of $11 million of these notes were issued on a variable-rate basis with an interest rate of 3.85% on December 31, 1993. The remaining $280 million were issued on a fixed-rate basis with a weighted average interest rate of 7.71% and, through interest rate swap agreements, were converted to a floating-rate basis with a weighted average interest rate of 3.69% on December 31, 1993. At December 31, 1993, $756 million of medium-term notes had been issued either on a fixed-rate basis or swapped to a fixed-rate basis. Approximately $706 million of these notes were issued on a fixed-rate basis with a weighted average interest rate of 8.86% on December 31, 1993. The remaining $50 million of these notes had been issued on a floating-rate basis with an interest rate of 4.3% and, through an interest rate swap agreement, were converted to a fixed-rate basis with an interest rate of 5.3% on December 31, 1993. At December 31, 1993, the average interest rate, after the effects of the interest rate swap agreements, was 7.2%, and the average remaining maturity for all medium-term notes was 1.6 years. At December 31, 1994 and 1993, all of the 8-7/8% senior notes due 1995 were subject to an interest rate swap agreement as well as an interest rate floor agreement. The net effect of these agreements reduced the effective interest rate on these notes to 7.4% for both years. None of the Corporation's long-term debt outstanding at December 31, 1994 or 1993 may be redeemed prior to maturity. The scheduled maturities of the Corporation's total long-term debt outstanding at December 31, 1994 for each of the next five years are as follows: 1995--$247 million; 1996--$588 million; 1997--$5 million; 1998--$156 million; and 1999--$47 million. 40 41 NOTE 13: OTHER NONCURRENT LIABILITIES OTHER NONCURRENT LIABILITIES (in millions)
At December 31 1994 1993 - --------------------------------------------------------------------- Postretirement benefits (note 4) $1,188 $1,189 Postemployment benefits (note 4) 77 91 Pension liability (note 3) 1,174 1,282 Accrued restructuring costs 8 156 Liability for business dispositions 75 -- Other 685 735 - --------------------------------------------------------------------- Other noncurrent liabilities $3,207 $3,453 =====================================================================
NOTE 14: SHAREHOLDERS' EQUITY SHAREHOLDERS' EQUITY (in millions)
1994 1993 1992 - ---------------------------------------------------------------------- Preferred stock: Balance at January 1 $ 8 $ 8 $ -- Series B preferred shares issued -- -- 8 Series C preferred shares issued 4 -- -- - ---------------------------------------------------------------------- Balance at December 31 $ 12 $ 8 $ 8 - ---------------------------------------------------------------------- Common stock: Balance at December 31 $ 393 $ 393 $ 393 - ---------------------------------------------------------------------- Capital in excess of par value: Balance at January 1 $ 1,475 $ 1,523 $ 1,039 Redemption of common shares "rights" -- -- (2) Series B preferred shares issued -- -- 535 Series C preferred shares issued 501 -- -- Shares issued under various compensation and benefit plans (37) (37) (42) Shares issued under dividend reinvestment plan (7) (11) (7) - ---------------------------------------------------------------------- Balance at December 31 $ 1,932 $ 1,475 $ 1,523 - ---------------------------------------------------------------------- Common stock held in treasury: Balance at January 1 $ (972) $(1,102) $(1,264) Shares issued under various compensation and benefit plans 87 104 136 Shares issued under dividend reinvestment plan 15 26 26 - ---------------------------------------------------------------------- Balance at December 31 $ (870) $ (972) $(1,102) - ---------------------------------------------------------------------- Minimum pension liability adjustment: Balance at January 1 $(1,215) $ (496) $ -- Pension liability adjustments, net of deferred taxes (note 3) 253 (719) (496) - ---------------------------------------------------------------------- Balance at December 31 $ (962) $(1,215) $ (496) - ---------------------------------------------------------------------- Cumulative foreign currency translation adjustments: Balance at January 1 $ (45) $ (20) $ -- Currency translation activity 7 (25) (20) - ---------------------------------------------------------------------- Balance at December 31 $ (38) $ (45) $ (20) - ---------------------------------------------------------------------- Retained earnings: Balance at January 1 $ 1,401 $ 1,917 $ 3,582 Net income (loss) 77 (326) (1,394) Dividends paid (153) (190) (271) - ---------------------------------------------------------------------- Balance at December 31 $ 1,325 $ 1,401 $ 1,917 - ---------------------------------------------------------------------- Shareholders' equity $ 1,792 $ 1,045 $ 2,223 ======================================================================
In March 1994, the Corporation sold, in a private placement, 36,000,000 depositary shares (the $1.30 Depositary Shares) at $14.44 per share. Each of the $1.30 Depositary Shares represents ownership of one-tenth of a share of the Corporation's $1.00 par value Series C Conversion Preferred Stock (Series C Preferred) and entitles the owner to all of the proportionate rights, preferences and privileges of the Series C Preferred. A total of 3,600,000 Series C Preferred shares were deposited. The net proceeds to the Corporation, after commissions, fees and out-of-pocket expenses, totalled $505 million. As a result, the par value of Series C Preferred was established for $4 million, and capital in excess of par was increased by $501 million. The annual dividend rate for each $1.30 Depositary Share is $1.30 (equivalent to $13.00 for each Series C Preferred), payable quarterly in arrears on the first day of March, June, September and December. Dividends are cumulative and must be declared by the Board of Directors to be payable. Payments commenced on June 1, 1994. Each $1.30 Depositary Share will automatically convert into one share of common stock on June 1, 1997 unless called on May 30, 1997 by the Corporation or redeemed at any time prior to June 1 by the holder. If called by the Corporation, each $1.30 Depositary Share will convert into common stock at a rate between .885 and 1 share. If redeemed by the holder, each $1.30 Depositary Share will convert into .885 of a share of common stock. Conversion of the outstanding $1.30 Depositary Shares (and the Series C Preferred) will also occur upon certain mergers, consolidations or similar extraordinary transactions involving the Corporation or in connection with certain events, as described in the Offering Memorandum. In June 1992, the Corporation sold 32,890,000 depositary shares (the $1.53 Depositary Shares) at $17.00 per share. Each of the $1.53 Depositary Shares represents ownership of one-quarter of a share of the Corporation's $1.00 par value Series B Conversion Preferred Stock (Series B Preferred) and entitles the owner to all of the proportionate rights, preferences and privileges of the Series B Preferred. A total of 8,222,500 Series B Preferred shares were deposited. The net proceeds to the Corporation from the sale of the $1.53 Depositary Shares, after commissions, fees and out-of-pocket expenses, totalled $543 million. As a result, the par value of Series B Preferred was established for $8 million, and capital in excess of par value was increased by $535 million. The annual dividend rate for each $1.53 Depositary Share is $1.53 (equivalent to $6.12 for each Series B Preferred), payable quarterly in arrears on the first day of March, June, September and December. Dividends are cumulative and must be declared by the Board of Directors to be payable. Payments commenced on September 1, 1992. 41 42 On September 1, 1995, each of the outstanding $1.53 Depositary Shares will automatically convert into (i) one share of common stock (equivalent to four shares for each Series B Preferred) subject to adjustment if certain events occur, and (ii) the right to receive in cash all accrued and unpaid dividends thereon, or, in certain circumstances, a number of shares of common stock equal to 110% of such cash amount divided by the market value of the common stock. Conversion of the outstanding $1.53 Depositary Shares (and the Series B Preferred) will also occur upon certain mergers, consolidations or similar extraordinary transactions involving the Corporation or in connection with certain other events, as described in the prospectus. Prior to September 1, 1995, the Corporation may call the outstanding Series B Preferred (and thereby the $1.53 Depositary Shares) for redemption. Upon any such redemption, each owner of $1.53 Depositary Shares will receive, in exchange for each $1.53 Depositary Share, shares of common stock having a market value initially equal to $26.23 (equivalent to $104.92 for each Series B Preferred), declining by $.002095 (equivalent to $.008380 for each Series B Preferred) on each day following the date of issue of the Series B Preferred to $23.93 (equivalent to $95.72 for each Series B Preferred) on July 1, 1995, and equal to $23.80 (equivalent to $95.20 for each Series B Preferred) thereafter (the Call Price), plus an amount in cash equal to all proportionate accrued and unpaid dividends thereon. At December 31, 1994 and 1993, 8,222,500 shares of Series B Preferred were issued and outstanding. At December 31, 1994, 3,600,000 shares of Series C Preferred were issued and outstanding. COMMON SHARES (shares in thousands)
Issued In Treasury Outstanding - ----------------------------------------------------------------------- Balance at January 1, 1992 392,998 53,762 339,236 Shares issued for dividend reinvestment plan -- (1,113) 1,113 Shares issued for employee plans -- (6,046) 6,046 Other -- (47) 47 - ----------------------------------------------------------------------- Balance at December 31, 1992 392,998 46,556 346,442 Shares issued for dividend reinvestment plan -- (1,112) 1,112 Shares issued for employee plans -- (4,540) 4,540 Other 82 -- 82 - ----------------------------------------------------------------------- Balance at December 31, 1993 393,080 40,904 352,176 Shares issued for dividend reinvestment plan -- (621) 621 Shares issued for employee plans -- (3,975) 3,975 Other -- (20) 20 - ----------------------------------------------------------------------- Balance at December 31, 1994 393,080 36,288 356,792 =======================================================================
Earnings (loss) per common share is computed by dividing income, after deducting the preferred dividend requirements, by the weighted average number of common shares outstanding during the year plus the weighted average common stock equivalents. Common stock equivalents consist of shares subject to stock options, shares potentially issuable under deferred compensation programs and the Series B Preferred. For this computation, net income or loss was adjusted for the after-tax interest expense applicable to the deferred compensation programs. For the calculation of primary and fully diluted earnings per share, the Series B Preferred are considered common stock equivalents at a rate of four Series B Preferred to one common share. The Series C Preferred are considered outstanding common stock at a rate of ten Series C Preferred to one common share. When the Series B Preferred have an anti-dilutive effect on earnings per share, the related common stock equivalent shares are excluded from weighted average shares outstanding and the dividend requirement is deducted from net income in computing earnings available to common shareholders. During 1994 and 1993, the Series B Preferred shares were anti-dilutive for earnings per share calculations. During 1992, the Series B Preferred shares were dilutive for the earnings per share calculation in the second quarter, and anti-dilutive for the third and fourth quarters and for the full year. In accordance with prevalent practice at the time of issuance, the Series C Preferred were treated as outstanding common stock for the calculation of earnings per share during 1994. If the Series C Preferred had been treated as common stock equivalents for the calculation of earnings per share, the Corporation's 1994 per share results would have been a loss of $.02. The weighted average number of common shares used for computing earnings or loss per share was 383,736,000 in 1994, 352,902,000 in 1993 and 346,103,000 in 1992. NOTE 15: STOCK OPTIONS AND OTHER LONG-TERM INCENTIVE COMPENSATION AWARDS The 1993, 1991 and 1984 Long-Term Incentive Plans provide for the granting of stock options and other performance awards to employees of the Corporation. At December 31, 1994 and 1993, approximately 7.5 million and 4 million shares, respectively, had been authorized for awards under the 1993 Plan. Shares available for stock options and other awards under the 1993 Plan at December 31, 1994 and 1993 totalled 3,435,107 and 1,787,500, respectively. At December 31, 1994 and 1993, an aggregate of 22.2 million and 19.2 million shares, respectively, had been authorized for awarding under the 1991 and 1984 Plans. Shares available for stock options and other awards under the 1991 and 1984 Plans at December 31, 1994 and 1993 totalled 1,815,457 and 2,141,708, respectively. 42 43 The option price under the Plans may not be less than the fair market value of the shares on the grant date. The options were granted for terms of 10 years and generally become exercisable in whole or in part after the commencement of the second year of the term. Generally, options outstanding under the 1984, 1991 and 1993 Plans, except those granted during 1994, were exercisable at December 31, 1994. Options granted during 1994 under the 1993 Plan will not be exercisable until 1995. Outstanding options have expiration dates ranging from 1995 through 2004. STOCK OPTION INFORMATION (shares in thousands)
1994 1993 1992 - -------------------------------------------------------------- Shares subject to option: Balance at January 1 16,082 11,675 10,227 Options granted 5,079 5,230 1,821 Options exercised (24) (67) (262) Options terminated (633) (756) (111) - -------------------------------------------------------------- Balance at December 31 20,504 16,082 11,675 - -------------------------------------------------------------- Weighted average option price in dollars: At January 1 $20.70 $22.81 $23.56 Options granted 11.89 15.90 17.45 Options exercised 10.40 12.37 14.94 Options terminated 16.59 20.84 22.59 At December 31 18.66 20.70 22.81 ==============================================================
During 1994, 1993 and 1992, Equity Plus dollar grants totalling approximately $17 million for the 1992 to 1994 measurement period were granted to employees of the Corporation. Equity Plus dollar grants have the potential to increase in value through both financial performance and stock price appreciation. Payment of these grants is approved by a committee of the Board of Directors and is contingent on achieving performance targets over the measurement period. Certain of these grants were prorated or cancelled upon termination of employment. In February 1995, 154,300 shares of Westinghouse common stock and cash payments totalling $81,000 were issued to employees, and deferrals with future principal payments of $1,761,000 or 127,500 shares of Westinghouse common stock were made for these Equity Plus grants. NOTE 16: CONTINGENT LIABILITIES AND COMMITMENTS Uranium Settlements The Corporation had previously provided for the estimated future costs for the resolution of all uranium supply contract suits and related litigation. The remaining uranium reserve balance includes assets required for certain settlement obligations and reserves for estimated future costs. The reserve balance at December 31, 1994, is deemed adequate considering all facts and circumstances known to management. The future obligations require providing the remainder of the fuel deliveries running through 2013 and the supply of equipment and services through approximately 1995. Variances from estimates which may occur are considered in determining if an adjustment of the liability is necessary. Litigation Philippines In December 1988, a 15-count lawsuit was filed against the Corporation alleging bribery and other fraudulent conduct in connection with the construction of a nuclear power plant in the Philippines. Of the 15 claims, 14 were stayed pending arbitration before the International Chamber of Commerce (ICC). With respect to the remaining count alleging bribery, a jury verdict was rendered in favor of the Corporation on May 18, 1993, but is expected to be appealed. A similar finding was made by the ICC in 1991. Arbitration proceedings before the ICC on issues relating to the construction of the plant were concluded in October 1994, and the parties await a decision. Steam Generators The Corporation has been defending various lawsuits brought by utilities claiming a substantial amount of damages in connection with alleged tube degradation in steam generators sold by the Corporation as components of nuclear steam supply systems. Settlement agreements have been entered resolving six litigation claims. These agreements generally require the Corporation to provide certain products and services at prices discounted at varying rates. Two cases were resolved in favor of the Corporation after trial or arbitration, although an appeal has been filed in one of the cases. Four lawsuits are pending. The Corporation is also a party to six tolling agreements with utilities or utility plant owners' groups. The tolling agreements delay initiation of any litigation for various specified periods of time and permit the parties time to engage in discussions. Securities Class Actions--Financial Services The Corporation is defending derivative and class action lawsuits alleging federal securities law and common law violations arising out of purported misstatements or omissions contained in the Corporation's public filings concerning the financial condition of the Corporation and certain of its former subsidiaries in connection with charges to earnings of $975 million in 1990 and $1,680 million in 1991 and a public offering of Westinghouse common stock in 1991. 43 44 Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in each of the foregoing cases and although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has meritorious defenses to the litigation described above, and management believes that the litigation should not have a material adverse effect on the financial condition of the Corporation. Environmental Matters Compliance with federal, state and local regulations relating to the discharge of substances into the environment, the disposal of hazardous wastes and other related activities affecting the environment have had and will continue to have an impact on the Corporation. While it is difficult to estimate the timing and ultimate costs to be incurred in the future due to uncertainties about the status of laws, regulations, technology and information available for individual sites, management has estimated the total probable and reasonably possible remediation costs that could be incurred by the Corporation based on the facts and circumstances currently known. PRP Sites With regard to remedial actions under federal and state Superfund laws, the Corporation has been named as a potentially responsible party (PRP) at numerous sites located throughout the country. At many of these sites, the Corporation is either not a responsible party or its site involvement is very limited or de minimis. However, the Corporation may have varying degrees of cleanup responsibilities at 54 sites. With regard to cleanup costs at these sites, in many cases the Corporation will share these costs with other responsible parties and the Corporation believes that any liability incurred will be satisfied over a number of years. Management believes that the Corporation's total remaining probable costs for remediation of these sites as of December 31, 1994 are approximately $73 million, all of which has been accrued. Bloomington Sites The Corporation is a party to a 1985 Consent Decree relating to remediation of six sites in Bloomington, Indiana and has additional responsibility for two other sites in Bloomington. In the Consent Decree, the Corporation agreed to construct and operate an incinerator, which would be permitted under federal and state law, to burn excavated material. On February 8, 1994, the Consent Decree parties filed with the court a status report advising of the parties' intention to investigate alternatives. The Corporation believes it is probable that the Consent Decree will be modified to an alternate remedial action, which could include a combination of containment, treatment, remediation and monitoring. As a result, the Corporation estimates that its cost to implement the most reasonable and likely alternative would total approximately $70 million for the eight sites, all of which has been accrued. Approximately $18 million of this estimate represents the present value, assuming a 5% discount rate, of operating and maintenance costs which will be incurred over an approximate 30-year period. The undiscounted cost of operating and maintenance expenditures approximates $46 million. The remaining portion of the $70 million estimate represents site construction and other related costs and is valued as of the year of expenditure. Other alternatives, while considered less likely, could cause such costs to be as much as $125 million. The parties recognize that at the end of the process, they may conclude that the remedy currently provided in the Consent Decree is the most appropriate. The parties also recognize that the Consent Decree shall remain in full force during this process. Other The Corporation is involved with several administrative actions alleging violations of federal, state or local environmental regulations. For these matters the Corporation has estimated its remaining reasonably possible costs and determined them to be insignificant. The Corporation currently manages under contract several government-owned facilities, which among other things are engaged in the remediation of hazardous and nuclear wastes. To date, under the terms of the contracts, the Corporation is not responsible for costs associated with environmental liabilities, including environmental cleanup costs, except under certain circumstances associated with negligence and willful misconduct. There are currently no known claims for which the Corporation believes it is responsible. In 1994, the U.S. Department of Energy (DOE) announced its intention to renegotiate its existing contracts for maintenance and operation of DOE facilities to further address environmental issues. The Corporation has or will have responsibilities for environmental closure activities, such as dismantling incinerators or decommissioning nuclear licensed sites. The Corporation has estimated the total potential cost to be incurred for these actions to be approximately $112 million, of which $40 million had been accrued at December 31, 1994. The Corporation's policy is to accrue these costs over the estimated life of the individual facilities, which in most cases is approximately 20 years. The anticipated annual costs currently being accrued are $5 million. As part of the agreements for the sales of certain of its businesses or sites, the Corporation has agreed to assume obligations for remediation as a result of contamination caused during the Corporation's operation of the sites. The Corporation has provided for all known environmental liabilities related to these agreements. 44 45 Capital expenditures related to environmental remediation activities in 1994 and 1993 totalled $12 million and $5 million, respectively. Operating expenses which are recurring and associated with managing hazardous substances and pollution in ongoing operations in 1994 and 1993 totalled $25 million and $17 million, respectively. Management believes that the Corporation has adequately provided for its present environmental obligations and that complying with existing government regulations will not materially impact the Corporation's financial position, liquidity or results of operations. Insurance Recoveries The Corporation has filed actions against over 100 of its insurance carriers seeking recovery for environmental, product and property damage liabilities, and certain other matters. The Corporation has settled with several of these carriers and has received recoveries related to these actions. Amounts received to date generally have been applied to cover obligations assumed through the settlements or litigation costs. The Corporation has not accrued for any future insurance recoveries. Financing Commitments Discontinued Operations Financial Services commitments with off-balance-sheet credit risk represent financing commitments to provide funds, including loan or investment commitments, guarantees, standby letters of credit and standby commitments, generally in exchange for fees. The remaining commitments have fixed expiration dates from 1995 through 2002. At December 31, 1994, Financial Services commitments with off-balance-sheet credit risk totalled $80 million, compared to $111 million at year-end 1993. Of the $80 million of commitments at December 31, 1994, $71 million were guarantees, credit enhancements and other standby agreements and $9 million were commitments to extend credit. Of the $111 million of commitments at year-end 1993, $90 million were guarantees, credit enhancements and other standby agreements and $21 million were commitments to extend credit. Management expects the remaining commitments to either expire unfunded, be assumed by the purchaser in asset dispositions or be funded with the resulting assets being sold shortly after funding. Continuing Operations WCI Communities, Inc. (WCI) was contingently liable at December 31, 1994 under guarantees for $55 million of sewer and water district borrowings. The proceeds of the borrowings were used for sewer and water improvements on residential and commercial real estate projects of WCI. Management expects these borrowings to be repaid as the projects are completed and sold, and the guarantees for such borrowings to expire unfunded. In the ordinary course of business, standby letters of credit are issued by commercial banks on behalf of the Corporation related to performance obligations primarily under contracts with customers. Other Commitments The Corporation's other commitments consisting primarily of those for the purchase of plant and equipment totalled approximately $46 million at December 31, 1994. NOTE 17: LEASES The Corporation has commitments under operating leases for certain machinery and equipment and facilities used in various operations. Rental expense for Continuing Operations in 1994, 1993 and 1992 was $182 million, $220 million and $225 million, respectively. These amounts include immaterial amounts for contingent rentals. Rental expense for 1994 included $18 million of sublease income, which was not material in 1993 or 1992. MINIMUM RENTAL PAYMENTS--CONTINUING OPERATIONS (in millions)
At December 31 1994 - ----------------------------------------------------------- 1995 $ 148 1996 130 1997 116 1998 104 1999 95 Subsequent years 797 - ----------------------------------------------------------- Minimum rental payments $1,390 ===========================================================
NOTE 18: OTHER INCOME AND EXPENSES, NET OTHER INCOME AND EXPENSES, NET (in millions)
Year ended December 31 1994 1993 1992 - ------------------------------------------------------------------- Interest on securities $ 15 $ 17 $ 18 Miscellaneous interest income 2 7 10 Gain (loss) on disposition of other assets 25 15 (17) Operating results--nonconsolidated affiliates (5) (7) (2) Foreign currency transaction and high-inflation translation effect (5) 5 (6) Estimated loss on disposition of non-strategic businesses (17) (195) -- Pension settlement loss (308) -- -- Other 8 (7) (21) - ------------------------------------------------------------------- Other income and expenses, net $(285) $(165) $(18) ===================================================================
The Corporation recognized a pension settlement loss of $308 million during the fourth quarter of 1994. This noncash charge to income represents the pro-rata portion of unrecognized losses associated with the pension obligation that was settled. See note 3 to the financial statements. The gain on disposition of other assets for the year ended December 31, 1994 includes a gain of $32 million from the sale of two Sacramento radio stations and a gain of $10 million from the sale of an investment in a shopping center development joint venture at WCI. The 1993 gain on disposition of other assets includes a gain of $21 million on the sale of an equity participation in a production company. See note 19 to the financial statements. 45 46 The expected losses on disposition of non-strategic businesses of $17 million and $195 million were recorded for the years ended December 31, 1994 and 1993, respectively, to reflect the Corporation's announced plan to dispose of these businesses. All items in the other category are less than $10 million each. NOTE 19: RESTRUCTURING, MERGERS, ACQUISITIONS AND DIVESTITURES Restructuring of Operations An overview of the Corporation's recent restructuring actions follows: Restructuring of Operations--1993 Initiative Shortly after joining the Corporation in June 1993, Chairman and Chief Executive Officer Michael Jordan initiated an extensive review by management of all of the Corporation's businesses. As a result of this review, management developed a plan to restructure its continuing businesses to improve productivity and operating performance. This plan was expected to result in the reduction of approximately 6,000 employees over the subsequent two years; approximately 2,600 through normal attrition and 3,400 through involuntary separations. Generally, separated employees receive benefits under the Corporation's Employee Security and Protection (ES&P) Plan, including permanent job separation benefits, retraining and outplacement assistance. The amount included for these benefits in the restructuring charge represents the incremental cost of such benefits over those amounts previously accrued under SFAS No. 112. The 1993 restructuring initiative involved substantially all of the Corporation's continuing businesses. For segment reporting purposes, a $104 million charge for corporate restructuring was allocated to the operating business segments. See note 20 to the financial statements. A summary of restructuring charges by business segment follows: RESTRUCTURING COSTS--1993 INITIATIVE (dollars in millions)
No. of Involuntary Business Business Segment Separations Segment Charge - ----------------------------------------------------------------- Broadcasting 68 $ 12 Electronic Systems 971 137 Government & Environmental Services 76 12 Energy Systems 483 45 Power Generation 1,312 126 The Knoll Group 27 9 WCI Communities, Inc. 56 4 Other Businesses 76 5 Corporate and Other 284 -- - ----------------------------------------------------------------- Total 3,353 $350 =================================================================
Expenditures based on the Corporation's current estimates are expected to total $228 million for incremental employee separation and related costs, $68 million for asset writedowns and $54 million for facility closure and rationalization costs. Employee costs primarily include severance, outplacement services and pension curtailment costs. The workforce reductions result primarily from the closing or consolidation of certain production facilities and the consolidation, centralization or redesign of administrative support functions. Asset writedowns are also attributable to management's plans to exit certain projects or to reengineer processes. Certain assets that are considered to be redundant or no longer required due to a process change or exit strategy have been written down to their net realizable value. Facility closure and rationalization costs include costs expected to be incurred from the consolidation of manufacturing facilities or product lines and closing of support offices. Through December 31, 1994, employee reductions as a result of implementing the 1993 restructuring initiative totalled 3,181. Completion of the remaining involuntary separations is expected in 1995. The following table is a reconciliation of accrued restructuring costs related to the 1993 initiative for the year ended December 31, 1994:
ACCRUED RESTRUCTURING COSTS--1993 INITIATIVE (in millions) - ----------------------------------------------------------- Balance at December 31, 1993 $350 Separation costs (171) Pension curtailment costs (22) Asset writedowns (58) Facility closure/rationalization (18) - ----------------------------------------------------------- Balance at December 31, 1994 $ 81 ===========================================================
Restructuring of Operations--1994 Initiative During the fourth quarter of 1994, management approved additional restructuring projects totalling $113 million primarily for costs associated with approximately 1,200 additional employee separations. Certain amounts accrued for restructuring in 1992 and miscellaneous adjustments were applied to these program costs to reduce the required restructuring charge to $71 million. At December 31, 1994, 534 employee separations were completed. While the remainder of the employees generally were notified of the pending actions, completion of the separations is not expected until the first half of 1995. Separated employees generally receive benefits under the Corporation's ES&P Plan. The following table presents the restructuring charges related to each business segment: 46 47 RESTRUCTURING COSTS--1994 INITIATIVE (dollars in millions)
No. of Involuntary Employee Asset Facility Closure & Business Segment Separations Separation Costs Writedowns Rationalization Costs Adjustments Total - ----------------------------------------------------------------------------------------------------------------------------------- Broadcasting -- $-- $-- $-- $ (2) $ (2) Electronic Systems 65 6 -- -- 5 11 Government & Environmental Services 57 2 2 -- -- 4 Energy Systems 400 26 -- -- -- 26 Power Generation -- -- -- -- (5) (5) The Knoll Group 595 25 30 11 (26) 40 WCI Communities, Inc. -- -- -- -- (3) (3) Corporate and Other 77 11 -- -- (11) -- - ----------------------------------------------------------------------------------------------------------------------------------- Total 1,194 $70 $32 $11 $(42) $71 ===================================================================================================================================
The asset writedowns and facility closure costs related to the 1994 initiative are specifically associated with exiting certain product lines and facilities. Adjustments in the table above include amounts that were redeployed from the 1992 restructuring program and minor modifications of the 1993 restructuring costs based on actual spending to date and estimated remaining costs under those programs. Mergers, Acquisitions and Divestitures In December 1994, the Corporation filed a Schedule 13D with the Securities and Exchange Commission wherein it announced its intention to consider the sale of the Corporation's 62% ownership interest in MICROS Systems, Inc. (MICROS), which is included in the Corporation's Electronic Systems segment. MICROS had sales for the year ended December 31, 1994 of approximately $100 million. In August 1994, the Corporation signed a letter of intent to sell Aptus, Inc., an environmental services subsidiary, for a combination of cash and securities. In July 1994, Westinghouse Broadcasting Company (Group W) and CBS, Inc. (CBS) announced an agreement to enter into a comprehensive strategic alliance that would establish long-term station affiliations between CBS and all of Group W's television stations; form new, jointly held entities that would expand both companies' distribution and programming capabilities nationwide; and merge their advertising sales representation operations. The agreement is subject to the execution of definitive documentation and approval by the Federal Communications Commission. In June 1994, the Corporation sold its 40% interest in a shopping center development joint venture for net proceeds of $13 million, resulting in a gain of $10 million. In May 1994, the Corporation acquired the Norden Unit of United Technologies Corporation. Norden manufactures airborne and shipboard radar systems, air traffic control systems, and surveillance and intelligence management systems for underseas applications. In connection with its announced plan to dispose of certain non-strategic businesses, during 1994 the Corporation completed the sales of Gladwin Corporation and Controlmatic. In January 1994, the Corporation sold its KFBK-AM and KGBY-FM radio stations located in Sacramento, California, for net proceeds of $48 million, resulting in a gain of $32 million. NOTE 20: SEGMENT INFORMATION Westinghouse is a diversified, global, technology-based corporation operating in the principal business arenas of television and radio broadcasting, defense electronics, environmental services, transport refrigeration and the electric utility markets. The Corporation's continuing businesses are aligned for reporting purposes into the following eight segments: Broadcasting, Electronic Systems, Government & Environmental Services, Thermo King, Energy Systems, Power Generation, Knoll and WCI. Results of international manufacturing entities, export sales and foreign licensee income are included in the financial information of the segment that has operating responsibility. Broadcasting provides a variety of communications services consisting primarily of commercial broadcasting, program production and distribution. It sells advertising time to radio, television and cable advertisers through national and local sales organizations. Broadcasting currently owns and operates five network affiliated television broadcasting stations and 16 radio stations. Broadcasting also provides programming and distribution services to the cable television industry. Group W Satellite Communications (GWSC) provides sports programming and the marketing and advertising for two country music entertainment channels. Westinghouse Communications, which is included in GWSC, provides a comprehensive range of telecommunications services to business and industry. The Electronic Systems segment is a world leader in the research, development, production and support of advanced electronic systems for the Department of Defense (DoD), Federal Aviation Administration, other government agencies and U.S. allies. Products include surveillance and fire control radars, command and control systems, electronic countermeasures equipment, electro- optical systems, spaceborne sensors, missile launching and 47 48 handling equipment, anti-submarine warfare and communications equipment. The group also engages in related non-DoD markets such as air traffic control, security and information systems. The Government & Environmental Services segment combines the Corporation's toxic, hazardous and radioactive waste services, the management and operation of several government-owned facilities and the U.S. naval nuclear reactors program. Thermo King is a leading supplier of mobile temperature control equipment for trucks, trailers and seagoing containers, as well as air conditioning for buses and rail cars. The Energy Systems segment serves the worldwide nuclear energy market and is a leader in designing, manufacturing and servicing nuclear power plants. Energy Systems is also a leading supplier of reload nuclear fuel and distributed control systems. The Power Generation segment designs, manufactures and services steam and combustion turbine generators. In addition to serving the regulated electric utility industry, Power Generation also supplies, services and operates power plants for independent power producers and other non-utility customers worldwide. Knoll designs, manufactures and distributes office furniture to an expanding global market. WCI develops land into master-planned luxury communities primarily in Florida and California. Other Businesses segment is a diverse group of businesses providing a wide range of goods and services to wholesale, industrial, utility and governmental customers. These businesses are deemed to be non-strategic and are expected to be sold. The Corporate and Other segment includes corporate activities that are managed for the benefit of the entire Corporation. Segment sales of products and services include products that are transferred between segments generally at inventory cost plus a margin. Segment operating profit or loss consists of sales of products and services less segment operating expenses which include costs of products and services, marketing, administrative and general expenses, depreciation and amortization, and restructuring costs. In 1994, a $71 million charge, net of adjustments, was recorded in the fourth quarter for restructuring. Prior to this provision, operating profit totalled $201 million for Broadcasting, $176 million for Electronic Systems, $62 million for Government & Environmental Services, $33 million for Energy Systems, $105 million for Power Generation, $65 million for WCI and a loss of $27 million for Knoll. In 1993, a $750 million charge was recorded in the fourth quarter for restructuring and other actions of which $555 million was charged to operating profit. Prior to that provision, operating profit totalled $157 million for Broadcasting, $220 million for Electronic Systems, $65 million for Government & Environmental Services, $111 million for Energy Systems, $103 million for Power Generation, $65 million for WCI and losses of $30 million for Knoll, $59 million for Other Businesses and $40 million for Corporate and Other. In 1992, a $36 million charge was recorded in Continuing Operations for corporate restructuring related to the previous strategy to sell Knoll and WCI. Prior to that charge, the operating loss for Knoll was $14 million and the operating profit for WCI was $97 million. SALES OF PRODUCTS AND SERVICES AND SEGMENT OPERATING PROFIT FROM CONTINUING OPERATIONS (in millions)
Sales of Products and Services Segment Operating Profit (Loss) - ----------------------------------------------------------------------------------------------------------------------------- Year ended December 31 1994 1993 1992 1994 1993 1992 ---------------------------------- -------------------------------- Broadcasting $ 870 $ 812 $ 814 $203 $ 145 $165 Electronic Systems 2,467 2,597 2,855 165 83 225 Government & Environmental Services 389 338 370 58 33 100 Thermo King 877 719 705 130 109 103 Energy Systems 1,235 1,314 1,325 7 (59) 116 Power Generation 1,715 1,787 1,856 110 (23) 121 The Knoll Group 567 510 578 (67) (39) (40) WCI Communities, Inc. 248 253 235 68 61 87 Other Businesses 497 544 564 (27) (64) (14) Corporate and Other 148 164 139 (28) (100) (70) Intersegment Sales (165) (163) (190) -- -- -- - ----------------------------------------------------------------------------------------------------------------------------- Total $8,848 $8,875 $9,251 $619 $ 146 $793 =============================================================================================================================
48 49 OTHER FINANCIAL INFORMATION (in millions)
Identifiable Assets Depreciation and Amortization Capital Expenditures - -------------------------------------------------------------------------------------------------------------------------------- At and for the year ended December 31 1994 1993 1992 1994 1993 1992 1994 1993 1992 ------------------------- ----------------------- ---------------------- Broadcasting $ 811 $ 808 $ 865 $ 35 $ 35 $ 34 $ 38 $ 25 $ 24 Electronic Systems 1,323 1,405 1,355 84 76 79 56 44 67 Government & Environmental Services 472 456 433 23 18 12 23 24 27 Thermo King 351 297 281 13 12 12 19 15 10 Energy Systems 884 821 924 49 50 51 42 44 40 Power Generation 1,258 1,168 985 46 46 43 51 37 41 The Knoll Group 639 630 656 28 30 30 21 19 28 WCI Communities, Inc. 718 761 725 2 1 1 2 1 2 Other Businesses 282 391 385 11 16 14 4 25 13 Corporate and Other 3,886 3,816 3,236 29 27 25 3 3 7 - -------------------------------------------------------------------------------------------------------------------------------- Continuing Operations 10,624 10,553 9,845 $320 $311 $301 $259 $237 $259 - -------------------------------------------------------------------------------------------------------------------------------- Discontinued Operations 1,797 4,495 8,625 - ----------------------------------------------------------------- Total $12,421 $15,048 $18,470 =================================================================
Assets not identified to segments in the table above principally include cash and marketable securities, deferred income taxes, prepaid pension cost and the intangible pension asset. Included in income from Continuing Operations is income of subsidiaries located outside the U.S. These subsidiaries reported losses of $10 million in 1994, $21 million in 1993 and income of $32 million in 1992. Subsidiaries located outside the U.S. comprised 5% of total assets of Continuing Operations in 1994, 6% in 1993 and 5% in 1992. Subsidiaries located outside the U.S. comprised 4% of total liabilities of Continuing Operations in 1994 and 2% in 1993 and 1992. FINANCIAL INFORMATION BY GEOGRAPHIC AREA (in millions)
At and for the year ended December 31 1994 1993 1992 - ------------------------------------------------------------------------------ Sales of products and services from Continuing Operations: U.S. $ 7,875 $ 7,928 $8,218 Outside the U.S. 973 947 1,033 - ------------------------------------------------------------------------------ Sales of products and services $ 8,848 $ 8,875 $9,251 - ------------------------------------------------------------------------------ Operating profit (loss) from Continuing Operations: U.S. $ 590 $ 154 $ 719 Outside the U.S. 29 (8) 74 - ------------------------------------------------------------------------------ Operating profit $ 619 $ 146 $ 793 - ------------------------------------------------------------------------------ Segment identifiable assets of Continuing Operations: U.S. $10,040 $ 9,969 $9,354 Outside the U.S. 584 584 491 - ------------------------------------------------------------------------------ Segment identifiable assets $10,624 $10,553 $9,845 ==============================================================================
The Corporation sells products manufactured domestically to customers throughout the world using domestic divisions and subsidiaries doing business primarily outside the U.S. Generally, products manufactured outside the U.S. are sold outside the U.S. SALES FROM PRODUCTS AND SERVICES SOLD OUTSIDE THE U.S. FROM CONTINUING OPERATIONS (in millions)
Year ended December 31 1994 1993 1992 - ---------------------------------------------------------------------- % of % of % of Amount Sales Amount Sales Amount Sales -------------- ------------- ------------- Subsidiaries outside the U.S.: Europe, Africa, Middle East $ 564 6.4% $ 618 7.0% $ 685 7.4% Canada 300 3.4% 261 2.9% 281 3.0% All other 109 1.2% 68 0.8% 67 0.7% - ---------------------------------------------------------------------- Total $ 973 11.0% $ 947 10.7% $1,033 11.1% ====================================================================== U.S. exports: Europe, Africa, Middle East $ 646 7.3% $ 538 6.1% $ 667 7.2% Asia-Pacific 732 8.3% 429 4.8% 525 5.7% All other 235 2.6% 371 4.2% 175 1.9% - ---------------------------------------------------------------------- Total $1,613 18.2% $1,338 15.1% $1,367 14.8% ======================================================================
The largest single customer of the Corporation is the U.S. government and its agencies, whose purchases accounted for 26% of sales of products and services from Continuing Operations during 1994 and 30% in 1993 and 1992. Of the 1994 purchases, 81% were from the Electronic Systems segment. No other customer made purchases totalling 10% or more of sales of products and services. 49 50 RESEARCH AND DEVELOPMENT FROM CONTINUING OPERATIONS (in millions)
Year ended December 31 1994 1993 1992 - ----------------------------------------------------------- Westinghouse-sponsored: Electronic Systems $ 80 $100 $ 96 Energy Systems 21 19 25 Power Generation 45 40 33 Other 16 14 8 Customer-sponsored: Electronic Systems 481 494 501 Energy Systems 41 47 68 Power Generation 6 5 2 Other 52 50 45 - ----------------------------------------------------------- Total research and development expenditures $742 $769 $778 ===========================================================
NOTE 21: FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments has been determined by the Corporation using the best available market information and appropriate valuation methodologies. However, considerable judgment was necessary in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Corporation could realize in a current market exchange or the value that ultimately will be realized by the Corporation upon maturity or disposition. Additionally, because of the variety of valuation techniques permitted under SFAS No. 107, "Disclosures about Fair Values of Financial Instruments," comparability of fair values among entities may not be meaningful. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUING OPERATIONS (in millions)
At December 31 1994 1993 - ------------------------------------------------------------------------ Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value -------------------- ------------------ Assets: Cash and cash equivalents $ 338 $ 338 $ 637 $ 637 Noncurrent customer and other receivables 147 132 206 183 - ----------------------------------------------------------------------- Liabilities: Short-term debt 662 662 662 662 Current maturities of long-term debt 17 17 9 9 Long-term debt 1,886 1,721 1,885 1,888 - ----------------------------------------------------------------------- Off-balance-sheet financial instruments--gains (losses): Interest rate swap agreements -- (4) -- -- Financial guarantees -- -- -- (2) Foreign currency exchange contracts -- (6) -- -- ========================================================================
FAIR VALUE OF FINANCIAL INSTRUMENTS--DISCONTINUED OPERATIONS (in millions)
At December 31 1994 1993 - ------------------------------------------------------------------------ Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value ------------------ -------------------- Assets: Cash and cash equivalents $ 6 $ 6 $ 611 $ 611 Portfolio investments: Real estate 297 326 235 235 Corporate 9 1 118 118 - --------------------------------------------------------------------- Liabilities: Short-term debt 374 374 2,373 2,373 Current maturities of long-term debt 230 228 774 789 Long-term debt 568 649 647 753 - --------------------------------------------------------------------- Off-balance-sheet financial instruments--gains (losses): Interest rate and currency exchange agreements : Unrealized gains -- 82 -- 82 Unrealized losses -- (5) -- (50) Financing commitments -- -- -- -- =====================================================================
The following methods and assumptions were used to estimate the fair value of financial instruments for which it was practicable to estimate that value. Cash and Cash Equivalents The carrying amount for cash and cash equivalents approximates fair value. Noncurrent Customer and Other Receivables The fair value of noncurrent customer and other receivables is estimated by discounting the expected future cash flows at interest rates commensurate with the creditworthiness of the customers and other third parties. 50 51 Portfolio Investments At December 31, 1994, the fair value of portfolio investments, which are primarily real estate investments, was determined using financial information prepared by independent third parties, discounted cash flow projections, financial statements for investee companies and letters of intent or other asset sale agreements. At December 31, 1993, the fair value of portfolio investments was determined as follows: Except for the Corporation's investment in LW Real Estate Investments, L.P., which is valued at cost, the real estate portfolio, including receivables, real estate properties and real estate investments in partnerships and other entities, was valued using the Resolution Trust Corporation's DIV method. The corporate portfolio, including receivables, investments in partnerships and other entities and nonmarketable equity securities, was valued using various valuation techniques, including trading desk values, which arise from actual or proposed current trades of identical or similar assets, plus other factors. Short-term Debt The carrying amount of the Corporation's borrowings under the revolving credit facilities and other arrangements approximate fair value. Long-term Debt The fair value of long-term debt has been estimated using quoted market prices or discounted cash flow methods based on the Corporation's current borrowing rates for similar types of borrowing arrangements with comparable terms and maturities. Interest Rate and Currency Exchange Agreements The fair value of interest rate and currency exchange agreements is the amount that the Corporation would receive or pay to terminate the agreements, based on quoted market prices or discounted cash flow methods, considering current interest rates, currency exchange rates and remaining maturities. Financial Guarantees The fair value of guarantees is based on the estimated cost to terminate or otherwise settle the obligations with the counterparties. Financing Commitments Most of the unfunded commitments relate to, and are inseparable from, specific portfolio investments. When establishing the fair value for those portfolio investments, consideration was given to the related financing commitments. Foreign Currency Exchange Contracts The fair value of foreign exchange contracts is based on quoted market prices to terminate the contracts. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1994 Quarter Ended 1993 Quarter Ended - ------------------------------------------------------------------------------------------------------------------------------------ (in millions except per share amounts) Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31 ----------------------------------------- ---------------------------------------- Sales of products and services $2,768 $2,229 $2,108 $1,743 $2,641 $2,060 $2,154 $2,020 Gross profit 760 525 540 394 644 481 552 468 Income (loss) from Continuing Operations (107) 73 75 36 (383) 65 84 59 Income (loss) from Discontinued Operations -- -- -- -- (95) -- -- -- Cumulative effect of changes in accounting principles -- -- -- -- -- -- -- (56) Net income (loss) (107) 73 75 36 (478) 65 84 3 Per share of common stock: Income (loss) from Continuing Operations (.30) .15 .16 .07 (1.11) .15 .20 .14 Income (loss) from Discontinued Operations -- -- -- -- (.27) -- -- -- Cumulative effect of changes in accounting principles -- -- -- -- -- -- -- (.16) Net income (loss) (.30) .15 .16 .07 (1.38) .15 .20 (.02) Dividends paid .05 .05 .05 .05 .10 .10 .10 .10 New York Stock Exchange market price per share: High 14-5/8 14-3/8 13-1/4 15-1/4 14-5/8 17-1/8 16-3/8 15-3/4 Low 11-3/4 11-1/2 10-7/8 11-1/2 12-7/8 12-3/4 14 13 ====================================================================================================================================
51 52 FIVE-YEAR SUMMARY SELECTED FINANCIAL AND STATISTICAL DATA (UNAUDITED) (in millions except per share amounts)
1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------- Sales of products and services $ 8,848 $ 8,875 $ 9,251 $ 9,409 $ 9,198 Other income and expenses, net (285) (165) (18) (19) 157 Interest expense (177) (217) (225) (231) (221) Income (loss) from Continuing Operations before income taxes 157 (236) 550 496 1,114 Income taxes (71) 70 (187) (159) (307) Income (loss) from Continuing Operations 77 (175) 357 335 804 Income (loss) from Discontinued Operations -- (95) (1,413) (1,421) (536) Cumulative effect of changes in accounting principles (1) -- (56) (338) -- -- Net income (loss) 77 (326) (1,394) (1,086) 268 - ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from Continuing Operations as a percentage of sales .9% (2.0)% 3.9% 3.6% 8.7% - ------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Continuing Operations $ .07 $ (.64) $ .95 $ 1.07 $ 2.74 Discontinued Operations -- (.27) (4.08) (4.53) (1.83) Cumulative effect of changes in accounting principles (1) -- (.16) (.98) -- -- Earnings (loss) per common share .07 (1.07) (4.11) (3.46) .91 Dividends per common share .20 .40 .72 1.40 1.35 - ------------------------------------------------------------------------------------------------------------------------------- Total assets--Continuing Operations $10,624 $10,553 $ 9,845 $ 9,414 $ 9,321 Total assets--Discontinued Operations 1,797 4,495 8,625 10,403 12,268 Total assets 12,421 15,048 18,470 19,817 21,589 Long-term debt--Continuing Operations 1,886 1,885 1,341 1,275 916 Long-term debt--Discontinued Operations 568 647 1,602 2,459 5,116 Shareholders' equity 1,792 1,045 2,223 3,750 3,895 - ------------------------------------------------------------------------------------------------------------------------------- Average common and common equivalent shares outstanding 383,736,249 352,901,670 346,103,408 313,984,242 293,591,984 Market price range per share $15-1/4--10-7/8 $17-1/8--12-3/4 $20-7/8--9-3/4 $31--13-3/4 $39-3/8--24-1/4 Common shareholders at year end 125,376 125,806 127,559 120,833 101,157 Average number of employees 84,399 103,063 109,050 113,664 115,774 ===============================================================================================================================
Previously reported amounts have been restated to segregate the results of Discontinued Operations from Continuing Operations. (1) See notes 1, 4 and 5 to the financial statements. 52 53 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Part of the information concerning executive officers required by this item is set forth in Part I pursuant to General Instruction G to Form 10-K and part is incorporated herein by reference to "Security Ownership" in the Proxy Statement. The information as to directors is incorporated herein by reference to "Election of Directors" in the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is incorporated herein by reference to "Executive Compensation" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated herein by reference to "Security Ownership" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is incorporated herein by reference to "Transactions Involving Directors and Executive Officers" in the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (A)(1) FINANCIAL STATEMENTS The financial statements required by this item are listed under Item 8, which list is incorporated herein by reference. (A)(2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedule for Westinghouse Electric Corporation and the Report of Independent Accountants thereon are included in Part IV of this report:
PAGE ----- Reports of Independent Accountants on Financial Statement Schedules 55 For the three years ended December 31, 1994: Schedule VIII -- Valuation and Qualifying Accounts 56
Other schedules are omitted because they are not applicable or because the required information is included in the financial statements or notes thereto. (A) EXHIBITS (3) Articles of Incorporation and Bylaws (a) The Restated Articles of the Corporation are incorporated herein by reference to Exhibit 3(b) to Form 10-Q for the quarter ended March 31, 1994. (b) Amendments to the Bylaws of the Corporation. (c) The Bylaws of the Corporation, as amended to January 25, 1995.
53 54 (4) Rights of Security Holders Except as set forth below, there are no instruments with respect to long-term debt of the Corporation that involve securities authorized thereunder exceeding 10% of the total assets of the Corporation and its subsidiaries on a consolidated basis. The Corporation agrees to provide to the Securities and Exchange Commission, upon request, a copy of instruments defining the rights of holders of long-term debt of the Corporation and its subsidiaries. (a) Form of Senior Indenture, dated as of November 1, 1990, between the Corporation and Citibank, N.A. is incorporated herein by reference to Exhibit 4.1 to the Corporation's Registration Statement No. 33-41417. (10) Material Contracts (a*) The Annual Performance Plan is incorporated herein by reference to Exhibit 10(a) to Form 10-K/A for the year ended December 31, 1992. (b*) The 1993 Long-Term Incentive Plan is incorporated herein by reference to Exhibit 10(b) to Form 10-K for the year ended December 31, 1993. (c*) The 1984 Long-Term Incentive Plan as amended is incorporated herein by reference to Exhibit 10(b) to Form 10-Q for the quarter ended June 30, 1993. (d*) The Westinghouse Executive Pension Plan, as amended. (e*) The Deferred Stock and Compensation Plan for Directors is incorporated herein by reference to Exhibit 10(i) to Form 10-K/A for the year ended December 31, 1992. (f*) The Advisory Director's Plan is incorporated herein by reference to Exhibit 10(k) to Form 10-K for the year ended December 31, 1989. (g) The Directors Charitable Giving Program. (h*) The 1991 Long-Term Incentive Plan, as amended. (i*) Employment Agreement between the Corporation and Michael H. Jordan is hereby incorporated by reference to Exhibit 10 to the Corporation's Form 8-K, dated September 1, 1993. (j*) Employment Agreement between the Corporation and Fredric G. Reynolds. (k) 364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of August 5, 1994 among the Corporation as borrower, the Co-Agents and Lenders named therein, and Chemical Bank as Administrative Agent is incorporated herein by reference to Exhibit 10(r) to Form 10-Q for the quarter ended June 30, 1994. (l) Three Year Competitive Advance and Revolving Credit Facility Agreement dated as of August 5, 1994 among the Corporation as borrower, the Co-Agents and Lenders named therein, and Chemical Bank as Administrative Agent is incorporated herein by reference to Exhibit 10(s) to Form 10-Q for the quarter ended June 30, 1994.
* Identifies management contract or compensatory plan or arrangement. (11) Computation of Per Share Earnings (12)(a) Computation of Ratio of Earnings to Fixed Charges (12)(b) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends (21) Subsidiaries of the Registrant (23) Consent of Independent Accountants (24) Powers of Attorney and Extract of Resolution of Board of Directors (27) Financial Data Schedule
(B) REPORTS ON FORM 8-K: No reports on Form 8-K were filed during the quarter ended December 31, 1994. 54 55 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Westinghouse Electric Corporation Our audits of the consolidated financial statements referred to in our report dated January 31, 1995 appearing on page 26 of this Form 10-K of Westinghouse Electric Corporation (which report and consolidated financial statements are included in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Price Waterhouse LLP 600 Grant Street Pittsburgh, Pennsylvania 15219-9954 January 31, 1995 55 56 SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31 ---------------------- 1994 1993 1992 ---- ---- ---- (IN MILLIONS) Customer receivables from Continuing Operations--allowance for doubtful accounts-- Balance at beginning of year.................................... $ 54 $ 50 $ 58 Charged to costs and expenses................................... 13 14 20 Charged to the allowance........................................ (10) (11) (20) Other........................................................... 2 1 (8) ---- ---- ---- Balance at end of year(a).................................. $ 59 $ 54 $ 50 ==== ==== ==== Deferred income taxes -- valuation allowance: Balance at beginning of year.................................... $ 90 $ 94 $104 Charged (credited) to costs and expenses........................ 11 (4) (10) ---- ---- ---- Balance at end of year..................................... $101 $ 90 $ 94 ==== ==== ==== - --------- (a) at December 31, 1994, 1993 and 1992, all amounts were classified as current.
56 57 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 7th day of March, 1995. WESTINGHOUSE ELECTRIC CORPORATION By: /s/ Fredric G. Reynolds -------------------------------- Fredric G. Reynolds Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature and Title ------------------- Frank C. Carlucci, Director Gary M. Clark, President and Director George H. Conrades, Director William H. Gray, III, Director Michael H. Jordan, Chairman and Chief Executive Officer (principal executive officer) and Director David T. McLaughlin, Director By: /s/ Fredric G. Reynolds Rene C. McPherson, Director --------------------------- Richard M. Morrow, Director Fredric G. Reynolds Paula Stern, Director Attorney-In-Fact Richard R. Pivirotto, Director March 7, 1995 Fredric G. Reynolds, Executive Vice President and Chief Financial Officer (principal financial officer) Robert D. Walter, Director Louis J. Valerio, Vice President and Controller (principal accounting officer) Original powers of attorney authorizing Michael H. Jordan, Fredric G. Reynolds, and Louis J. Valerio, individually, to sign this report on behalf of the listed directors and officers of the Corporation and a certified copy of a resolution of the Board of Directors of the Corporation authorizing each of said persons to sign on behalf of the Corporation have been filed with the Securities and Exchange Commission and are included as Exhibit 24 to this report. 57 58 EXHIBIT INDEX
SEQUENTIAL PAGE NO. ---------- Exhibits (3) Articles of Incorporation and Bylaws (a) The Restated Articles of the Corporation, as amended..................... * (b) Amendments to the Bylaws of the Corporation ............................. 59 (c) The Bylaws of the Corporation, as amended................................ 60 (4) Riqhts of Security Holders (a) Form of Senior Indenture................................................. * (10) Material Contracts (a) The Annual Performance Plan.............................................. * (b) The 1993 Long-Term Incentive Plan........................................ (c) The 1984 Long-Term Incentive Plan........................................ * (d) The Westinghouse Executive Pension Plan, as amended...................... 99 (e) The Deferred Stock and Compensation Plan for Directors................... * (f) The Advisory Director's Plan............................................. * (g) The Directors Charitable Giving Program.................................. 117 (h) The 1991 Long-term Incentive Plan, as amended............................ 122 (i) Employment Agreement with Michael H. Jordan.............................. * (j) Employment Agreement with Fredric G. Reynolds............................ 153 (k) 364-Day Competitive Advance and Revolving Credit Facility Agreement...... * (l) Three Year Competitive Advance and Revolving Credit Facility Agreement... * (11) Computation of Per Share Earnings............................................... 155 (12) Computation of Ratios (a) Ratio of Earnings to Fixed Charges....................................... 156 (b) Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends................................................................ 157 (21) Subsidiaries of the Registrant.................................................. 158 (23) Consent of Independent Accountants.............................................. 159 (24) Powers of Attorney and Extract of Resolution of Board of Directors.............. 160 (27) Financial Data Schedule......................................................... 172
- -------------------------------------------------------------------------------- * Incorporated by reference 58 EX-3.B 2 WESTINGHOUSE 10-K405 1 ARTICLE II Exhibit 3(b) Paragraph 7 "There shall be a Compensation Committee, an Audit Review Committee, a Committee on Environment and Health, and a Nominating and Governance Committee. The Compensation Committee may determine to retain an independent compensation consultant to assist it in carrying out its duties. Each of these committees shall consist of not less than three members of the Board of Directors, at least three of whom, on the date of their appointment to the committee, are Independent Directors. All members of the Compensation Committee and the Nominating and Governance Committee must, on the date of their appointment to said committee, be Independent Directors. With respect to each such committee, the Board of Directors shall, by one or more resolutions adopted by a majority of the whole Board, determine the duties and responsibilities, determine the number of members, appoint the members and the committee chair and fill each vacancy occurring in the membership." 59 EX-3.C 3 WESTINGHOUSE 10-K405 1 Exhibit 3(c) BY-LAWS OF WESTINGHOUSE ELECTRIC CORPORATION ---------------- AS AMENDED TO JANUARY 25, 1995 ---------------- 60 2
TABLE OF CONTENTS Page Article I Meetings of Stockholders............................... 1 Article II Board of Directors - Committees - Their Powers and Duties................................ 7 Article III Contributions.......................................... 11 Article IV Election and Term of Chairman of the Board and Officers................................. 11 Article V Meetings of Directors.................................. 12 Article VI Chairman of the Board.................................. 15 Article VII President; Chief Executive Officer..................... 15 Article VIII Secretary.............................................. 16 Article IX Treasurer.............................................. 17 Article X Controller............................................. 18 Article XI Assistant Secretary, Assistant Treasurer, Assistant Controller and Other Officers................ 19 Article XII Corporate Seal......................................... 20 Article XIII Certificates of Stock.................................. 20 Article XIV Transfers of Stock..................................... 21 Article XV Fiscal Year............................................ 22 Article XVI Employees' Stock Purchases and Stock Option Plans........................................... 22 Article XVII Indemnification........................................ 25 Article XVIII Director Liability..................................... 35 Article XIX Pennsylvania Opt Out................................... 35 Article XX Amendments............................................. 36 Article XXI Confidentiality in Voting.............................. 37
-i- 3 BY-LAWS OF WESTINGHOUSE ELECTRIC CORPORATION --------------- ARTICLE I. Meetings of Stockholders The annual meeting of the stockholders of the Corporation shall be held on such date and at such hour as the Board of Directors may designate and on any subsequent day or days to which such meeting may be adjourned, for the purpose of electing directors and for the transaction of such other business as may lawfully come before the meeting. If for any reason the annual meeting shall not have been held on the day designated by the Board or on the day specified above, the Board of Directors shall cause the annual meeting to be called and held as soon thereafter as may be convenient. Special meetings of the stockholders of the Corporation may be called by the Board of Directors or by the Chairman to be held on such date as the Board or the Chairman shall determine. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by -1- 4 or at the direction of the Board of Directors or (iii) brought before the meeting by a stockholder in accordance with the procedure set forth below. For business to be properly brought before an annual meeting by a stockholder, the stockholder must be entitled by Pennsylvania law to present such business and must have given written notice of such business, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation, not later than 90 days in advance of such meeting; provided, however, that if such annual meeting of stockholders is held on a date other than the last Wednesday of April, such written notice must be given within ten days after the first public disclosure, which may include any public filing by the Corporation with the Securities and Exchange Commission, of the date of the annual meeting. Any such notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, and in the event that such business includes a proposal to amend the By-laws of the Corporation, the language of the proposed amendment, (b) the name and address of the stockholder proposing such business, (c) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business and (d) any material interest of any stockholder in such business. No -2- 5 business shall be conducted at an annual meeting except in accordance with this paragraph, and the chairman of any annual meeting of stockholders may refuse to permit any business to be brought before such annual meeting without compliance with the foregoing procedures. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Any stockholder entitled to vote for the election of directors may nominate at a meeting persons for election as directors only if written notice of such stockholder's intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, 90 days in advance of such meeting (provided that if such annual meeting of stockholders is held on a date other than the last Wednesday of April, such written notice must be given within ten days after the first public disclosure, which may include any public filing by the Corporation with the Securities and Exchange Commission, of the date of the annual meeting), and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first -3- 6 given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of each person to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice as directors; (c) a description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission were such nominee to be nominated by the Board of Directors; and (e) the consent of each proposed nominee to serve as a director of the Corporation if so elected. The chairman of any meeting of stockholders to elect directors may refuse to permit the nomination of any person to be made without compliance with the foregoing procedure. Every meeting of the stockholders, annual or special, shall be held at such place within or without the Commonwealth of Pennsylvania as the Board of Directors may designate or, in the absence of such designation, at the registered office of the Corporation in the Commonwealth of Pennsylvania. -4- 7 Written notice of every meeting of the stockholders shall be given by, or at the direction of, the person authorized to call the meeting, to each stockholder of record entitled to vote at the meeting, at his address appearing on the books of the Corporation. The notice of every meeting of the stockholders shall specify the place, day and hour of the meeting and, in the case of a special meeting, the matter or matters to be acted upon at such meeting. Only the matter or matters specified in the notice of a special meeting shall be acted upon thereat. All notices of meetings of the stockholders shall be provided in accordance with Pennsylvania law. The notice of every meeting of the stockholders may be accompanied by a form of proxy approved by the Board of Directors in favor of such person or persons as the Board of Directors may select. Except as otherwise provided by law or by the Restated Articles of the Corporation, as from time to time amended, (hereinafter called the Articles of the Corporation) or by these By-laws, the presence in person or by proxy of stockholders entitled to cast at least a majority of the votes that all stockholders are entitled to cast on a particular matter shall constitute a quorum at the meeting of stockholders, and all questions shall be decided by a majority of the votes cast, in person or by proxy, at a duly organized meeting by the holders of shares entitled to vote thereon. The stockholders present at any duly organized meeting may continue to do business until -5- 8 adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Any meeting of the stockholders may be adjourned from time to time, without notice other than by announcement at the meeting at which such adjournment is taken, and at any such adjourned meeting at which a quorum shall be present any action may be taken that could have been taken at the meeting originally called; provided that any meeting at which directors are to be elected shall be adjourned only from day to day, or for such longer periods, not exceeding fifteen days each, as the holders of a majority of the shares present in person or by proxy shall direct, until such directors have been elected. If a meeting cannot be organized because of lack of a quorum, those present may, except as otherwise provided by law, adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At each meeting, each stockholder entitled to vote may vote in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact and filed with the Secretary of the Corporation. Except as otherwise provided by law or the Articles of the Corporation or these By-laws, each holder of record of shares of any class of the Corporation shall -6- 9 be entitled to one vote, on each matter submitted to a vote at a meeting of the stockholders, and in respect of which shares of such class shall be entitled to be voted, for every share of such class standing in his name on the books of the Corporation. ARTICLE II. Board of Directors - Committees - Their Powers and Duties The business, affairs and property of the Corporation shall be managed and controlled by a Board of Directors, which, except as otherwise provided by law or the Articles of the Corporation, shall exercise all the powers of the Corporation. The number, qualifications, manner of election, time and place of meeting, compensation and powers and duties of the directors of the Corporation shall be fixed from time to time by or pursuant to these By-laws. Nominees for election to the Board of Directors who qualify as Independent Directors on the date of their nomination shall be such that the majority of all directors holding office immediately after such nomination, assuming the election of such nominees, shall be Independent Directors. The number of directors which shall constitute the Board of Directors shall be fixed from time to time by a vote of a majority of the Board of Directors, provided, however, that the number of directors of the Corporation shall be not less than three nor more than twenty-four. The stockholders shall, at -7- 10 each annual meeting, elect directors, each of whom shall serve until the annual meeting of stockholders next following his election and until his successor is elected and shall qualify; provided, however, that directors with terms expiring at the annual meetings of stockholders to be held in 1994 and 1995 shall serve until the expiration of their respective terms. Each election of directors by the stockholders shall be conducted by one or three judges of election appointed by the Board of Directors in advance of the meeting to act at that meeting and at any adjournment thereof. If any or all of such appointees shall fail to appear or fail or refuse to act, the vacancy or vacancies shall be filled by the Board of Directors or the presiding officer of the meeting. No person who is a candidate for office to be filled at the meeting shall act as a judge. Except as the law may otherwise provide, the stockholders shall not remove any director from office without assigning any cause (as such term is defined in the Articles of Incorporation) prior to the expiration of the term of office unless holders of at least 80% of the shares of capital stock of the Corporation entitled to vote thereon, vote to remove the director from office. In case of any vacancy in the Board of Directors through death, resignation, disqualification, removal, increase in the number of directors or other cause, the remaining directors, though less than a quorum, by affirmative vote of a majority -8- 11 thereof or by a sole remaining director, may fill such vacancy to serve for the balance of the unexpired term and until his successor shall have been elected and qualified; provided, however, that any director elected to fill a vacancy for a director having a term expiring at the annual meeting of stockholders to be held in 1994 or 1995 shall serve only until the annual election of stockholders next following his election. There shall be a Compensation Committee, an Audit Review Committee, a Committee on Environment and Health, and a Nominating and Governance Committee. The Compensation Committee may determine to retain an independent compensation consultant to assist it in carrying out its duties. Each of these committees shall consist of not less than three members of the Board of Directors, at least three of whom, on the date of their appointment to the committee, are Independent Directors. All members of the Compensation Committee and the Nominating and Governance Committee must, on the date of their appointment to said committee, be Independent Directors. With respect to each such committee, the Board of Directors shall, by one or more resolutions adopted by a majority of the whole Board, determine the duties and responsibilities, determine the number of members, appoint the members and the committee chair and fill each vacancy occurring in the membership. The Board of Directors may from time to time appoint such further standing or special committees as it may deem in the best interest of the Corporation, but no such committee shall -9- 12 have any powers, except such as are expressly conferred upon it by the Board. Each committee referred to in this Article II shall act only as a committee and the individual members shall have no power as such. Each director shall be entitled to receive from the Corporation such annual and meeting fees as the Board of Directors shall from time to time determine and to be reimbursed for his reasonable expenses in connection with attendance at meetings. Nothing herein contained shall preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving compensation therefor. For purposes of this Article II, the term "Independent Director" shall mean a director who: (a) is not and has not been employed by the Corporation or a subsidiary in an executive capacity within the five years immediately prior to the annual meeting at which he will be voted upon; (b) is not an employee or five percent or more owner of an entity that is a regular advisor or consultant to the Corporation or its subsidiaries; (c) is not an employee or five percent or more owner of a significant customer or supplier of the Corporation or its subsidiaries; (d) does not have a personal services contract with the Corporation or its subsidiaries; (e) is not employed by a tax-exempt organization that receives significant contributions from the Corporation or its subsidiaries; and (f) is not a spouse, parent, sibling, child, parent-in-law, brother -10- 13 or sister-in-law or son or daughter-in-law of an officer of the Corporation. The Board of Directors shall have the exclusive right and power to interpret and apply the provisions of this Article II, including, without limitation, the adoption of written definitions of terms used in and guidelines for its application (any such definitions and guidelines shall be filed with the Secretary, and such definitions and guidelines as may prevail shall be made available to any stockholder upon written request). Any such definitions or guidelines and any other interpretation or application of the provisions of this Article II made in good faith shall be binding and conclusive. ARTICLE III. Contributions The Board of Directors shall have the power, at any time and from time to time, to make contributions and donations for the public welfare or for religious, charitable, scientific or educational purposes. ARTICLE IV. Election and Term of Chairman of the Board and Officers The Board of Directors shall elect a Chairman of the Board, who may be designated an officer of the Corporation, a President or a Chief Executive Officer or both, such Vice Presidents as -11- 14 may from time to time be necessary or desirable, a Secretary, a Treasurer and a Controller. There shall also be one or more assistant secretaries, treasurers and controllers and such other officers and assistant officers as the Board may deem appropriate. The Board of Directors shall elect and fix the compensation of all officers, except assistant officers. The term of office for all officers shall be until the organization meeting of the Board of Directors following the next annual meeting of shareholders and until their respective successors are elected or appointed and shall qualify, or until their earlier death, resignation or removal. The Chairman of the Board or any officer may be removed from office, either with or without cause, at any time by the affirmative vote of the majority of the members of the Board then in office. A vacancy in any office arising from any cause may be filled for the unexpired term by the Board. ARTICLE V. Meetings of Directors Regular meetings of the Board of Directors shall be held without notice at such place or places either within or without the Commonwealth of Pennsylvania, at such hour and on such day as may be fixed by resolution of the Board of Directors. The Board of Directors shall meet for organization at its first regular meeting after the annual meeting of stockholders or at a special meeting of the Board of Directors called after -12- 15 the annual meeting of stockholders and prior to said first regular meeting. If no special meeting of the Board of Directors for organization shall be called, all provisions of these By-laws in respect of notice of special meetings of the Board of Directors shall apply to the first regular meeting of the Board of Directors held after the annual meeting of stockholders. Special meetings of the Board of Directors shall be held, whenever called by the Chairman or by four directors or by resolution adopted by the Board of Directors, at such place or places either within or without the Commonwealth of Pennsylvania as may be stated in the notice of the meeting. Written notice of the time and place of, and general nature of the business to be transacted at, all special meetings of the Board of Directors, and written notice of any change in the time or place of holding the regular meetings of the Board of Directors, shall be given to each director either personally or by mail, telegraph or any type of electronic communication at least two days before the day of the meeting; provided, however, that notice of any meeting need not be given to any director if waived by him in writing, or if he shall be present at such meeting. Except as otherwise provided in these By-laws, a majority of the directors in office shall constitute a quorum of the Board competent to transact business; but a lesser number may adjourn from day to day until a quorum is present. Except as otherwise -13- 16 provided in these By-laws, all questions shall be decided by a vote of a majority of the directors present. All or any number less than all of the directors may participate in a meeting of the Board of Directors or of a committee of the Board of Directors by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Each committee referred to or provided for in these By-laws shall have authority, except as may otherwise be required by law or by resolution of the Board of Directors, to fix its own rules of procedure and to meet where and as provided by such rules. The presence at any meeting of any such committee of a majority of the members, including alternate members thereof, shall be necessary to constitute a quorum for the transaction of business and in every case the affirmative vote of a majority of such members present at any meeting shall be necessary for the adoption of any resolution of such committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof, including alternate members, present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. -14- 17 ARTICLE VI. Chairman of the Board The Chairman of the Board shall preside at all meetings of the Board of Directors at which he is present and shall call meetings of the Board and Board Committees when he deems them necessary. Unless otherwise precluded from doing so by these By-laws, he may be a member of the committees of the Board. He shall act as chairman at all meetings of the shareholders at which he is present unless he elects that the Chief Executive Officer shall so preside. The Chairman of the Board may be designated by the Board as an officer of the Corporation and may be elected by the Board as the Chief Executive Officer. The Chairman of the Board shall perform all duties as may be assigned to him by the Board of Directors. ARTICLE VII. President; Chief Executive Officer The President shall have such powers and duties as may, from time to time, be prescribed by the Board of Directors or the Chairman of the Board. Unless the Board of Directors shall otherwise direct, the President shall be the Chief Executive Officer of the Corporation. In the absence of the Chairman of the Board, the President or, if none, the Chief Executive Officer shall perform the duties and have the powers of the Chairman of the Board, as determined by the Board of Directors. -15- 18 The Chief Executive Officer shall have general charge of the affairs of the Corporation, subject to the control of the Board of Directors. He may appoint all officers and employees of the Corporation for whose election no other provision is made in these By-laws, and may discharge or remove any officer or employee, subject to action thereon by the Board of Directors as required by these By-laws. He shall be the officer through whom the Board delegates authority to corporate management, and shall be responsible to see that all orders and resolutions of the Board are carried into effect by the proper officers or other persons. He shall also perform all duties as may be assigned to him by the Board of Directors. ARTICLE VIII. Secretary The Secretary shall attend meetings of the shareholders and the Board of Directors, shall keep minutes thereof in suitable books, and shall send out all notices of meetings as required by law or by these By-Laws. He shall, in general, perform all duties incident to the office of the Secretary and perform such other duties as may be assigned to him by the Board, the Chairman of the Board or the President. -16- 19 ARTICLE IX. Treasurer The Treasurer shall have custody of, and shall manage and invest, all moneys and securities of the Corporation, and shall have such powers and duties as generally pertain to the office of Treasurer. To the extent not invested, the Treasurer shall deposit all moneys in such banks or other places of deposit as the Board of Directors may from time to time designate or as may be designated by any officer or officers of the Corporation so authorized by resolution of the Board of Directors. Unless otherwise provided by the Board of Directors, all checks, drafts, notes and other orders for the payment of money from a disbursing account shall be signed by the Treasurer or such person or persons as may be designated by name by the Treasurer in writing. The Treasurer's signature and, if authorized by the Treasurer in writing, the signature of such person or persons as may be designated by the Treasurer as provided above, to a check, draft, note or other order for the payment of money from a disbursing account may be by facsimile or other means. Procedures for withdrawal of moneys from accounts other than disbursing accounts shall require the approval and signature of the Treasurer, an assistant treasurer or such person or persons as may be designated by name by the Treasurer in writing and also of the Controller, an assistant controller or such person -17- 20 or persons as may be designated by name by the Controller in writing. The Treasurer shall have such other powers and perform such other duties as may be assigned by the Board of Directors. The Chief Financial Officer of the Corporation shall have all of the powers granted to the Treasurer under these by-laws, including the power to sign any check, draft, note or other order for the payment of money from a disbursing account, including by facsimile signature or other means. ARTICLE X. Controller The Controller shall have general charge of the Accounting Department of the Corporation and its controlled companies. He shall prescribe and supervise a system of accounting and internal auditing that shall be adopted and followed by the Corporation and its controlled companies. He, or some other person or persons designated by him by name, in writing, shall prepare and certify all vouchers and payrolls. As provided in Article IX, procedures for withdrawal of moneys from accounts other than disbursing accounts shall require the approval and signature of the Controller, an assistant controller or such person or persons as may be designated by name by the Controller in writing. The Controller shall at the close of each month present for the information of the Board of Directors a complete -18- 21 statement of the Corporation's financial affairs and of its operations for the preceding month and for the months elapsed since the commencement of the fiscal year. He shall also present full statements of the properties owned and controlled by the Corporation, under appropriate headings, as the Board of Directors may at any time require. He shall carefully preserve and keep in his custody in the office of the Corporation, contracts, leases, assignments and other valuable instruments in writing. He shall be charged with the duty of verification of all property of the Corporation and of its controlled companies and the supervision of the taking of all inventories. ARTICLE XI. Assistant Secretary, Assistant Treasurer, Assistant Controller and Other Officers In the event of the absence or inability to serve of the Secretary, an assistant secretary shall perform all the duties of the Secretary; in the event of the absence or inability to serve of the Treasurer, an assistant treasurer shall perform all the duties of the Treasurer; and in the event of the absence or inability to serve of the Controller, an assistant controller shall perform all the duties of the Controller. The powers and duties of other officers of the Corporation shall be such as may, from time to time, be prescribed by the Board of Directors, the Chairman of the Board, the President or the Chief Executive Officer. -19- 22 In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board, or in the absence of action by the Board, the Chief Executive Officer, or in his absence, the President, or in his absence, the Chairman of the Board, may delegate for the time being the powers and duties of any officer to any other officer or to any director. ARTICLE XII. Corporate Seal The Corporation shall have a corporate seal, which shall contain within a circle the name of the Corporation, together with the following: "Incorporated 1872". ARTICLE XIII. Certificates of Stock The shares of stock of the Corporation shall be represented by certificates of stock, signed by the President or one of the Vice Presidents or other officer designated by the Board of Directors, countersigned by the Treasurer or an assistant treasurer and sealed with the corporate seal of the Corporation; and if such certificates of stock are signed or countersigned by a corporate transfer agent or a corporate registrar of this Corporation, such signature of the President, Vice President or other officer, such counter-signature of the Treasurer or -20- 23 assistant treasurer, and such seal, or any of them, may be executed in facsimile, engraved or printed. ARTICLE XIV. Transfers of Stock Transfers of shares of stock of the Corporation shall be made on the books of the Corporation by the holder of record thereof or his legal representative, acting by his attorney-in-fact duly authorized by written power of attorney filed with the Secretary of the Corporation, or with one of its transfer agents, and on surrender for cancellation of the certificate or certificates for such shares. Except as otherwise provided in these By-laws, the person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. The Corporation may have one or more transfer offices of agencies and registrars for the transfer and registration of shares of stock of the Corporation. The Board of Directors may fix in advance a time, which shall not be more than ninety days prior to the date of any meeting of stockholders, or the date for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date, for the determination of the stockholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any -21- 24 such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of shares; and in such case only stockholders of record at the time so fixed as a record date shall be entitled to notice of, or to vote at, such meeting or to vote at any adjournment thereof, or to receive payment of such dividend or distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of stock on the books of the Corporation after any such record date fixed as aforesaid. ARTICLE XV. Fiscal Year The fiscal year of the Corporation shall be the calendar year. ARTICLE XVI. Employees' Stock Purchases and Stock Option Plans Shares of Common Stock of the Corporation may be reserved, from time to time, by the Board of Directors for offering for sale, pursuant to one or more plans, to employees, including assistant officers, of the Corporation and to employees, including officers, of its subsidiaries, on an installment payment basis, either by deductions from pay or by direct cash payments, or otherwise. Shares so reserved may be offered for sale, from time to time, pursuant to such plan or plans, but may -22- 25 be issued only after completion of payment therefor. Except for shares acquired pursuant to a plan for the deferral of director fees, directors, other than employee directors, will not be eligible to purchase shares hereunder. The Board of Directors may determine, with respect to any plan, the class or classes of employees eligible to participate therein, the number of shares to be offered, the number of shares which the respective employees may elect to purchase (which may, but need not, be fixed in proportion to their compensation) and the price at which the shares will be offered for sale. The price so determined by the Board (i) may be a fixed price, or (ii) may be a price determined by the average market price of the shares for a designated period or periods, or (iii) may be a price less than such average market price by a fixed amount or a specified percentage thereof. In any event, the price determined by the Board shall not be less than the par value of the shares. Each such plan shall set forth the terms and conditions upon which an employee may elect to purchase shares thereunder, upon which any such election may be cancelled by the employee or terminated by the Corporation, and upon which funds credited to the employee's account shall be refunded to him or applied to the purchase of shares. Subject to the foregoing, the Board of Directors may prescribe the terms and conditions of each plan. -23- 26 Shares of Common Stock of the Corporation may also be reserved, from time to time, by the Board of Directors for sale upon the exercise of options granted pursuant to one or more plans to officers and other employees of the Corporation and its subsidiaries, but not including any director who is not also such an officer or employee. Any such plan shall be administered by a committee consisting of three or more members of the Board of Directors who are not eligible to receive options under the plan. The members of any such committee shall be appointed by the Board of Directors and shall have plenary authority to determine the individuals to whom and the time or times at which options shall be granted; to determine the number of shares to be subject to each option; to determine the duration of such options; to determine the purchase price of the Common Stock under any such option, which may be less than the fair market value of the stock at the time of the granting of the option and which, upon the exercise of any option, shall be paid in full with respect to the shares then purchased under such option; to determine the terms and provisions of the respective option agreements, which need not be identical, and which may include such terms and provisions as shall be necessary or desirable under tax law and to make such other determinations as shall be deemed to be necessary or advisable for the administration of such plan. Any such plan shall contain such other terms and conditions as the Board of Directors may prescribe. -24- 27 ARTICLE XVII. Indemnification A. Indemnification Provisions Applicable to Proceedings Not Covered by Section B. of this Article. Every person who is or was a director, officer or employee of the Corporation, or of any other corporation which he serves or served as such at the request of the Corporation, shall, in accordance with this Article XVII but not if prohibited by law, be indemnified by the Corporation as hereinafter provided against reasonable expense and any liability paid or incurred by him in connection with or resulting from any threatened or actual claim, action, suit or proceeding (whether brought by or in the right of the Corporation or such other corporation or otherwise), civil, criminal administrative or investigative, in which he may be involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the Corporation or such other corporation, whether or not he continues to be such at the time such expense or liability shall have been paid or incurred. As used in this Article XVII, the term "expense" shall mean counsel fees and disbursements and all other expenses (except any liability) relating to any such claim, action, suit or proceeding, and the term "liability" shall mean amounts of judgments, fines or penalties against, and amounts paid in -25- 28 settlement by, a director, officer or employee with respect to any such claim, action, suit or proceeding. Any person referred to in the first paragraph of this Article XVII who has been wholly successful, on the merits or otherwise, with respect to any claim, action, suit or proceeding of the character described in such first paragraph shall be reimbursed by the Corporation for his reasonable expense. Any other person claiming indemnification under the first paragraph of this Article XVII shall be reimbursed by the Corporation for his reasonable expense and for any liability (other than any amount paid to the Corporation) if a Referee shall deliver to the Corporation his written finding that such person acted, in good faith, in what he reasonably believed to be the best interests of the Corporation, and in addition with respect to any criminal action or proceeding, reasonably believed that his conduct was lawful. The termination of any claim, action, suit or proceeding by judgment, settlement (whether with or without court approval), adverse decision or conviction after trial or upon a plea of guilty or of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the foregoing standards of conduct. The person claiming indemnification shall at the request of the Referee appear before him and answer questions which the Referee deems relevant and shall be given ample opportunity to present to the Referee evidence upon which he relies for indemnification; and the Corporation shall, at the -26- 29 request of the Referee, make available to the Referee facts, opinions or other evidence in any way relevant for his finding which are within the possession or control of the Corporation. As used in this Article XVII, the term "Referee" shall mean independent legal counsel (who may be regular counsel of the Corporation), or other disinterested person or persons, selected to act as such hereunder by the Board of Directors of the Corporation, whether or not a disinterested quorum exists. Any expense incurred with respect to any claim, action, suit or proceeding of the character described in the first paragraph of this Article XVII may be advanced by the Corporation prior to the final disposition thereof upon receipt of an undertaking made by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not indemnified under this Article XVII. The rights of indemnification provided in this Article XVII shall be in addition to any rights to which any such director, officer or employee may otherwise be entitled by contract or as a matter of law and, in the event of such person's death, such rights shall extend to his heirs and legal representatives. B. Indemnification Provisions Applicable to Proceedings Based on Acts or Omissions on or after January 27, 1987. SECTION 1. Right to Indemnification and Effect of Amendments. (a) Right to Indemnification. The Corporation, unless prohibited by applicable law, shall indemnify any person who is -27- 30 or was a director or officer of the Corporation and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding) (whether or not the indemnified liability arises or arose from any threatened, pending or completed Proceeding by or in the right of the Corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (a Covered Entity) against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding; provided, however, that except as provided in Section 4(c) of this Article, the foregoing shall not apply to a director or officer of the Corporation with respect to a Proceeding that was commenced by such director or officer. Any director or officer of the Corporation entitled to indemnification as provided in this Section 1, is hereinafter called an "Indemnitee". Any right of an Indemnitee to indemnification shall be a contract right and shall include the right to receive, prior to the conclusion of any Proceeding, payment of any expenses incurred by the Indemnitee in connection -28- 31 with such Proceeding, consistent with the provisions of applicable law as then in effect and the other provisions of this Article. (b) Effect of Amendments. Neither the alteration, amendment or repeal of, nor the adoption of a provision inconsistent with, any provision of this Article (including, without limitation, this Section 1(b)) shall adversely affect the rights of any director or officer under this Article with respect to any Proceeding commenced or threatened, or any alleged act or omission, prior to such alteration, amendment, repeal or adoption of an inconsistent provision, without the written consent of such director or officer. SECTION 2. Insurance; Contracts and Funding. The Corporation may purchase and maintain insurance to protect itself and any indemnified person against any expenses, judgments, fines and amounts paid in settlement as specified in Section 1 or Section 5 of this Article or incurred by any indemnified person in connection with any Proceeding referred to in such Sections, to the fullest extent permitted by applicable law as then in effect. The Corporation may enter into contracts with any director, officer, employee or agent of the Corporation or of any Covered Entity in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to insure the payment of such amounts as may -29- 32 be necessary to effect indemnification as provided in this Article. SECTION 3. Indemnification and Not Exclusive Right. The right of indemnification provided in this Article shall not be exclusive of any other rights to which any indemnified person may otherwise be entitled, and the provisions of this Article shall inure to the benefit of the heirs and legal representatives of any indemnified person under this Article and shall be applicable to Proceedings arising from acts or omissions occurring on or after January 27, 1987. SECTION 4. Advancement of Expenses; Request for Indemnification; Remedies; Presumptions and Defenses. In furtherance, but not in limitation of the foregoing provisions, the following procedures, presumptions and remedies shall apply with respect to advancement of expenses and the right to indemnification under this Article: (a) Advancement of Expenses. All reasonable expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding (including any Proceeding commenced by the Indemnitee under Section 4(c) but excluding any other Proceeding commenced by the Indemnitee) shall be advanced to the Indemnitee by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the expenses -30- 33 incurred by the Indemnitee and, if required by law at the time of such advance, shall include or be accompanied by an undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the Indemnitee is not entitled to be indemnified against such expenses pursuant to this Article. (b) Request for Indemnification. To obtain indemnification under this Article, an Indemnitee shall submit to the Secretary of the Corporation a written request, including such documentation and information as is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification (the Supporting Documentation). (c) Remedies; Presumptions and Defenses. If (i) expenses are not advanced in full within 20 days after receipt by the Corporation of the statement or statements and the undertaking (if an undertaking is required by law, By-law, agreement or otherwise at the time of such advance) required by Section 4(a) of this Article, or (ii) indemnification is not paid in full within 60 days after receipt by the Corporation of the written request for indemnification and Supporting Documentation required by Section 4(b) of this Article, then the person claiming advancement of expenses or indemnification shall be entitled to seek judicial enforcement of the Corporation's obligation to pay such advancement of expenses or indemnification. It shall be a defense to any Proceeding -31- 34 seeking judicial enforcement of the Corporation's obligation to pay indemnification that the conduct of the person claiming indemnification was such that under Pennsylvania law the Corporation is prohibited from indemnifying such person for the amount claimed. The Corporation shall have the burden of proving such defense. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel and its stockholders) to have made a determination prior to the commencement of such Proceeding that indemnification is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that such indemnification is prohibited by law, shall be a defense to a Proceeding seeking enforcement of the provisions of this Article or create a presumption that such indemnification is prohibited by law. The only defense to any such Proceeding to receive payment of expenses in advance shall be failure to make an undertaking to reimburse, if such an undertaking is required by law, By-law, agreement or otherwise. Notwithstanding the foregoing, the Corporation may bring an action, in an appropriate court in the Commonwealth of Pennsylvania or any other court of competent jurisdiction, contesting the right of a person claiming advancement of expenses or indemnification to receive such advancement or indemnification hereunder because such advancement or indemnification is prohibited by law; provided, however, that in any such action the Corporation shall have the -32- 35 burden of proving that such advancement or indemnification is prohibited by law. The Corporation shall be precluded from asserting in any action or Proceeding commenced pursuant to this Section 4(c) that the procedure and presumptions of this Article are not valid, binding and enforceable and shall stipulate in any such court that the Corporation is bound by all the provisions of this Article. If the person claiming advancement of expenses or indemnification, pursuant to this Section 4(c), seeks to enforce his rights under, or to recover damages for breach of this Article, that person shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any expenses actually and reasonably incurred by such person if such person prevails in such Proceeding. If it shall be determined in such Proceeding that such person is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by such person in connection with such Proceeding shall be prorated accordingly. SECTION 5. Indemnification of Employees and Agents. Notwithstanding any other provision or provisions of this Article, the Corporation, unless prohibited by applicable law, may indemnify any person other than a director or officer of the Corporation who is or was an employee or agent of the Corporation and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to -33- 36 be made so involved in any threatened, pending or completed Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of a Covered Entity against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding. The Corporation may also advance expenses incurred by such employee or agent in connection with any such Proceeding, consistent with the provisions of applicable law as then in effect. SECTION 6. Severability. If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article (including, without limitation, all portions of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, all portions of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. -34- 37 ARTICLE XVIII. Director Liability To the fullest extent that the law of the Commonwealth of Pennsylvania, as it exists on January 27, 1987, or as it may thereafter be amended, permits the elimination of the liability of directors, no director of the Corporation shall be liable for monetary damages for any action taken, or any failure to take any action. This Article shall not apply to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any act or failure to act on the part of such director occurring prior to such amendment or repeal. ARTICLE XIX. Pennsylvania Opt Out A. "Subsections (e) through (g) of Section 1721, "Board of Directors," of Title 15 of the Pennsylvania Consolidated Statutes, or any successor subsections thereto, shall not be applicable to the Corporation. B. Subchapter G, "Control-Share Acquisitions," of Chapter 25, Title 15 of the Pennsylvania Consolidated Statutes, or any -35- 38 successor subchapter thereto, shall not be applicable to the Corporation. C. Subchapter H, "Disgorgement By Certain Controlling Shareholders Following Attempts to Acquire Control," of Chapter 25, Title 15 of the Pennsylvania Consolidated Statutes, or any successor subchapter thereto, shall not be applicable to the Corporation." ARTICLE XX. Amendments The By-laws of the Corporation, regardless of whether adopted by the stockholders or by the Board of Directors, may be altered, amended or repealed by the Board of Directors, to the extent permitted by applicable law, or, subject to the third paragraph of Article I hereof, by the stockholders. Such action at a meeting of the Board of Directors shall be taken by the affirmative vote of a majority of the members of the Board of Directors in office at the time; and such action by the stockholders shall be taken by the affirmative vote of the holders of 80% of the shares of capital stock of the Corporation entitled to vote thereon. These By-laws are subject to any requirements of law, any provisions of the Articles of the Corporation, as from time to time amended, and any terms of any series of preferred stock or any other securities of the Corporation. -36- 39 ARTICLE XXI. Confidentiality in Voting Stockholders shall be provided permanent confidentiality in all voting, except as necessary to meet applicable legal requirements. The Corporation shall engage the services of an independent third party to receive, inspect, count and tabulate proxies. A representative of the independent third party shall also act as a judge of election at the annual meeting of stockholders. -37- EX-10.D 4 WESTINGHOUSE 10-K405 1 Exhibit 10(d) WESTINGHOUSE EXECUTIVE PENSION PLAN As Amended and Restated Effective January 1, 1995 99 2 TABLE OF CONTENTS
PAGE ---- Section 1 - Definitions 1 Section 2 - Qualification for Benefits; Mandatory Retirement 4 Section 3 - Calculation of Executive Pension 4 Supplement Section 4 - Death in Active Service 5 Section 5 - Payment of Benefits 6 Section 6 - Plan Costs 7 Section 7 - Conditions to Receipt of Executive 7 Pension Supplement Section 8 - Administration 7 Section 9 - Modification or Termination 8 Section 10 - Miscellaneous 9 Section 11 - Creditors' Claims 9 Section 12 - Change in Control 9 Section 13 - Governing Law 12 Section 14 - Severability 12 Section 15 - Authority to Expand Benefits 12 Appendix A - Executive Buy Back 13 Appendix B - Rehired Executives 14
3 WESTINGHOUSE EXECUTIVE PENSION PLAN WHEREAS, Westinghouse Electric Corporation ("Westinghouse") established the Westinghouse Executive Pension Plan (the "Plan") in order to provide supplemental pension benefits for its eligible employees and their beneficiaries; and WHEREAS, the Plan has been established by Westinghouse primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; and WHEREAS, the Board of Directors of Westinghouse has determined to amend the Plan in certain respects; NOW, THEREFORE, the Plan is hereby amended and restated in its entirety, effective as of January 1, 1995, as follows: SECTION 1. DEFINITIONS (a) ADMINISTRATIVE MANAGERS. Administrative Managers means the persons or entities identified from time to time by the chief executive officer of Westinghouse to serve as administrative managers for the Plan, the Westinghouse Pension Plan and certain other plans, and to have authority with respect to administration and all other fiduciary matters with respect to such plans that are not within the authority of the Financial Managers. (b) AVERAGE ANNUAL COMPENSATION. Average Annual Compensation means the amount determined by multiplying 12 times the average of the five highest of the Executive's December 1 monthly base salaries during the ten year period immediately preceding the earliest of the Executive's date of death, the Executive's actual retirement date or the Executive's Normal Retirement Date, and adding to that product the average of the Executive's five highest annual incentive compensation awards paid under the Westinghouse Annual Incentive Programs or equivalent annual program or programs during the ten-year period ending with the earliest of the year of the Executive's death, the year of the Executive's actual retirement date or the year of the Executive's Normal Retirement Date. (c) BOARD. Board means the Board of Directors of Westinghouse. (d) DEFINED CONTRIBUTION PLAN. When used in the Plan, the term "defined contribution plan" shall not include (1) the Westinghouse Savings Program or any similar program of an Employer or a Designated Entity or (2) any amount received pursuant to a cash or deferred arrangement (as that term is defined in the Internal Revenue Code of 1986, as amended) maintained by Westinghouse, an Employer or a Designated Entity. -1- 4 (e) DESIGNATED ENTITY. Designated Entity means an Affiliated Entity or other entity that has been and is still designated by the Managers as participating in the Plan. (f) EMPLOYER. Employer means a participating Employer under the Westinghouse Pension Plan. (g) EXECUTIVE. Executive means any Employee who is employed in a corporate grade 40 or above position or a comparable position with Westinghouse, an Employer or a Designated Entity, or in a position with Westinghouse, an Employer or a Designated Entity that is otherwise determined by the chief executive officer of Westinghouse or the Managers to be eligible as an Executive position under the Plan based upon the duties and responsibilities of the position, and the Employee has been so notified in writing. By participating in the Westinghouse Executive Pension Plan, an Executive is also deemed to be a "bona fide executive" and/or "high policymaking employee," as defined under the federal Age Discrimination in Employment Act, as amended. (h) EXECUTIVE BENEFIT SERVICE. Executive Benefit Service means the Executive's total years of Eligibility Service if: (1) the Executive was making the Maximum Contribution during each of those years; or (2) the Executive (i) was making the Maximum Contribution during each of those years after the date he or she first became an Executive and (ii) has complied with the provisions of the Executive Buy Back process (as set forth in Appendix A of the Plan) as to those years prior to his or her first becoming an Executive. The Executive Benefit Service of an Executive who did not make the Maximum Contribution during those years prior to the date he or she first became an Executive and has not complied with the Executive Buy Back process will be based solely on the period(s) of Eligibility Service during which he or she made the Maximum Contribution. (i) EXECUTIVE PENSION BASE. Executive Pension Base means the amount determined by multiplying 1.47 percent times Average Annual Compensation times the number of years of Executive Benefit Service accrued to the earliest of the Executive's actual retirement date, the Executive's Normal Retirement Date or the date of the Executive's death. (j) EXECUTIVE PENSION SUPPLEMENT. Executive Pension Supplement means the pension calculated pursuant to Sections 3 and 4 of this Plan. There will be no Executive Pension Supplement payable if the Executive's Qualified Plan Benefit equals or exceeds his or her Executive Pension Base. (k) FINANCIAL MANAGERS. Financial Managers means the persons or entities identified from time to time by the chief executive officer of Westinghouse to serve as financial managers for the Plan, the Westinghouse Pension Plan and certain other plans, and to have authority with respect to establishing investment policy, appointing, -2- 5 directing, providing guidelines to and monitoring the performance of investment managers and trustees, establishing funding and actuarial policies and practices, and managing the funding, cost and financial aspects of such plans. (l) MANAGERS. Managers means the Financial Managers and the Administrative Managers. (m) MAXIMUM CONTRIBUTION. Maximum Contribution means: (1) during such time as the Employee was eligible to participate in the Westinghouse Pension Plan, the Employee contributed the maximum amount the Employee was permitted to contribute to the Westinghouse Pension Plan, and (2) during such time as the Employee was employed by a Designated Entity, the Employee (i) contributed the maximum amount the Employee was permitted to contribute, if any, to that Designated Entity's defined benefit pension or defined contribution plan, if any, and (ii) paid Westinghouse an amount of each of his or her annual incentive compensation awards based on the maximum Westinghouse Pension Plan contribution formula applied to 50% of said awards. (n) PLAN. Plan means the Westinghouse Executive Pension Plan. (o) QUALIFIED PLAN BENEFIT. Qualified Plan Benefit means (1) the annual amount of pension the Executive has accrued under the Westinghouse Pension Plan and any applicable defined benefit pension plan of a Designated Entity based on Credited Service accumulated up to the earlier of the Executive's actual retirement date or death, (2) the amount the Executive is entitled to receive on a life annuity basis for retirement under any applicable defined contribution plan of a Designated Entity, and (3) in any case where service included in the Executive's Eligibility Service also entitles that Executive to benefits under one or more retirement plans (whether a defined benefit or defined contribution plan or both) of another company, the amount the Executive is entitled to receive on a life annuity basis for retirement from those plans; provided, the method of benefit measurement, in the case of (2) and (3) above, shall be on the basis of procedures determined by the Administrative Managers on a plan-by- plan basis. The Qualified Plan Benefit does not include any early pension retirement supplement or any amount received pursuant to a cash or deferred arrangement (as that term is defined in the Internal Revenue Code of 1986, as amended) maintained by Westinghouse, an Employer or a Designated Entity or any amount received pursuant to the Westinghouse Savings Program or any similar program of an Employer or a Designated Entity. (p) RETIREMENT ELIGIBLE. Retirement Eligible means that the Executive is accruing Eligibility Service and (i) has attained age 65 and completed five or more years of Eligibility Service, (ii) has attained age 60 and completed 10 or more years of Eligibility Service, (iii) has attained age 58 and completed 30 or more years of Eligibility Service, or (iv) has satisfied the requirements for an -3- 6 immediate pension under the Special Retirement Pension provisions of the Westinghouse Pension Plan. (q) WESTINGHOUSE. Westinghouse means Westinghouse Electric Corporation. (r) WESTINGHOUSE ANNUAL INCENTIVE PROGRAMS. Westinghouse Annual Incentive Programs means the Westinghouse Annual Performance Plan, the Westinghouse Annual Incentive Plan, and the former Westinghouse By-law XVI Incentive Compensation Program. (s) WESTINGHOUSE PENSION PLAN DEFINITIONS. Terms used in this Plan which are defined in the Westinghouse Pension Plan, as amended, shall have the same meanings unless otherwise expressly stated in this Plan. SECTION 2. QUALIFICATION FOR BENEFITS; MANDATORY RETIREMENT (a) QUALIFICATION FOR BENEFITS. Subject to Section 8 and other applicable provisions hereof, if any, each Executive shall be entitled to the benefits of this Plan on separation of service from Westinghouse, an Employer or a Designated Entity, provided that such Executive: (i) has been employed in a position that meets the definition of Executive for five or more continuous years immediately preceding the earlier of the Executive's actual retirement date or the Executive's Normal Retirement Date; (ii) has made the Maximum Contribution during each year of Eligibility Service from the date he or she first became an Executive until the earliest of his or her date of death, actual retirement date or Normal Retirement Date; (iii) is a participant in the Westinghouse Pension Plan or in the defined benefit or defined contribution plan of a Designated Entity, if any; and (iv) is Retirement Eligible on the date of voluntary or involuntary separation of service from Westinghouse, an Employer or a Designated Entity or, in the case of a Surviving Spouse benefit, satisfies the requirements for benefits under Section 4 of the Plan. (b) MANDATORY RETIREMENT. Pursuant to this Plan, Westinghouse shall be entitled, at its option, to retire any Executive who has attained sixty-five years of age and who, for the two-year period immediately before his or her retirement, has participated in this Plan, if such Executive is entitled to an immediate nonforfeitable annual retirement benefit from a pension, profit-sharing, savings or deferred compensation plan, or any combination of such plans, of Westinghouse, an Employer or any Affiliated Entity, which equals, in the aggregate, at least $44,000. The calculation of such $44,000 (or greater) amount shall be performed in a manner consistent with 29 U.S.C.A. Section 631(c)(2). SECTION 3. CALCULATION OF EXECUTIVE PENSION SUPPLEMENT The Executive Pension Supplement for an Executive who meets the qualifications of Section 2 of the Plan retiring on an Early, Normal or Special Retirement Date shall be calculated as follows: -4- 7 (a) If the Executive (i) has attained age 60 and completed 10 or more years of Eligibility Service, (ii) has attained age 65, or (iii) has satisfied the eligibility requirements for an immediate pension under the Special Retirement Pension provisions of the Westinghouse Pension Plan, the Executive Pension Supplement is determined by subtracting the Executive's Qualified Plan Benefit that would be payable if he or she elected a Life Annuity Option (after any reduction for early retirement, if applicable) from his or her Executive Pension Base. (b) If the Executive has not met the requirements of Section 3(a) above but has attained age 58 and completed 30 or more years of Eligibility Service, the Executive Pension Supplement is determined by subtracting the Executive's Qualified Plan Benefit that would be payable if he or she elected a Life Annuity Option (before any reduction for retirement prior to age 60) from his or her Executive Pension Base. SECTION 4. DEATH IN ACTIVE SERVICE (a) ELIGIBILITY FOR AN IMMEDIATE BENEFIT. If an Executive dies in active service and, on his or her date of death, satisfies the requirements of the Surviving Spouse Benefit for Death Before Retirement provisions of the Westinghouse Pension Plan and satisfied the requirements of Section 2(ii) and (iii) at the time of death, a Surviving Spouse benefit shall also be payable under this Plan if his or her Executive Pension Base exceeds his or her Qualified Plan Benefit. The duration portion of the requirement of Section 2(i) of the Plan that the Executive be employed in a position that meets the definition of Executive for five or more continuous years is waived in this case. The Surviving Spouse Benefit under this Section 4(a) shall be the Executive Pension Supplement reduced in the same manner as though the benefit were payable under the Westinghouse Pension Plan. For purposes of this paragraph, the Executive Pension Supplement shall be calculated as follows: (i) If the Executive had attained age 60 or if the Executive had completed 30 years of Eligibility Service, the Executive Pension Supplement would be calculated as described in Section 3(a); (ii) If the Executive did not meet either of the requirements set forth in subparagraph (i) above, the Executive Pension Supplement would be 80% of the difference between the Executive Pension Base and the unreduced Qualified Plan Benefit. (b) ELIGIBILITY FOR A DEFERRED BENEFIT. If an Executive dies in active service who does not satisfy the requirements of Section 4(a) above but who satisfies the requirements of the Surviving Spouse Benefit for Certain Vested Employees provisions of the Westinghouse Pension Plan and satisfied the requirements of Section 2(ii) and -5- 8 (iii) at the time of death, a Surviving Spouse benefit shall also be payable under this Plan if his or her Executive Pension Base exceeds his or her Qualified Plan Benefit. The duration portion of the requirement of Section 2(i) of the Plan that the Executive be employed in a position that meets the definition of Executive for five or more continuous years is waived in this case. The Surviving Spouse benefit under this Section 4(b) shall be the Executive Pension Supplement reduced in the same manner as though the benefit were payable under the Westinghouse Pension Plan. For purposes of this paragraph, the Executive Pension Supplement shall be calculated by subtracting the Executive's Qualified Plan Benefit (before any reductions) from his or her Executive Pension Base. SECTION 5 - PAYMENT OF BENEFITS No benefits shall be payable under this Plan to any Executive whose employment terminates for any reason other than death prior to satisfying the definition of Retirement Eligible hereunder. The Executive Pension Supplement shall be paid in monthly installments, each equal to 1/12th of the annual amount determined in Section 3 or 4, whichever is applicable. If the Executive or Surviving Spouse is eligible for Plan benefits, such payments shall commence at the same time as payments under the Westinghouse Pension Plan, if any. If the Executive or Surviving Spouse is eligible for Plan benefits and is receiving payments from a defined benefit or defined contribution plan of a Designated Entity and not from the Westinghouse Pension Plan, payments shall commence at the same time as payments under the Designated Entity's plan provided the requirements of Section 2(iv) have been met. The payments shall be payable for the life of the Executive or the Executive's Surviving Spouse, as the case may be. Unless the Financial Managers determine otherwise, the Executive may elect that the Executive Pension Supplement determined in Section 3 be paid in accordance with any of the optional forms of payment, other than as a lump sum, then available under the Westinghouse Pension Plan, subject to the same reductions or other provisions that apply to the elected form of payment under the Westinghouse Pension Plan. Any election hereunder as to optional forms of payment may be revoked prior to the effective date of such election, but may not be revoked on or after the Executive's actual retirement date for any reason. All elections hereunder become effective on the Executive's actual retirement date. Regardless of the form of payment elected by the Executive, after the Executive retires and begins receiving an Executive Pension Supplement a minimum of 60 times the monthly payment he or she would have received on a life annuity basis is guaranteed hereunder. Surviving Spouse benefits under this Plan will be paid in accordance with the form of payment made for Surviving Spouse -6- 9 Benefits under the Westinghouse Pension Plan. Once a Surviving Spouse Benefit determined under Section 4(a) has commenced, a minimum of 60 times the monthly benefit payable to the Surviving Spouse is guaranteed hereunder. In the event that an Executive retires or otherwise ceases to be an Employee of Westinghouse, an Employer or a Designated Entity and is later rehired by one of those entities, the additional provisions set forth in Appendix B to the Plan will apply. SECTION 6 - PLAN COSTS Benefits payable under the Plan and any expenses in connection therewith will be paid by Westinghouse to the extent they are not available to be paid from any trust fund established by Westinghouse to help defray the costs of providing Plan benefits. SECTION 7 - CONDITIONS TO RECEIPT OF EXECUTIVE PENSION SUPPLEMENT Payments of benefits under this Plan to Executives are subject to the condition that the recipient shall not engage directly or indirectly in any business which is at the time competitive with any business or part thereof, or activity then conducted by, Westinghouse, any of its subsidiaries or any other corporation, partnership, joint venture or other entity of which Westinghouse directly or indirectly holds a 10% or greater interest (together, the "Company") in the area in which such business, or part thereof, or activity is then being conducted by the Company, unless such condition is specifically waived with respect to such recipient by the Westinghouse Board of Directors. Breach of the condition contained in the preceding sentence shall be deemed to occur immediately upon an Executive's engaging in competitive activity. Payments suspended for breach of the condition shall not thereafter be resumed whether or not the Executive terminates the competitive activity. A recipient shall be deemed to be engaged in such a business indirectly if he or she is an employee, officer, director, trustee, agent or partner of, or a consultant or advisor to or for, a person, firm, corporation, association, trust or other entity which is engaged in such a business or if he or she owns, directly or indirectly, in excess of five percent of any such firm, corporation, association, trust or other entity. The ongoing condition of this Section 7 shall not apply to an Executive age 65 or older. SECTION 8 - ADMINISTRATION This Plan shall be administered by the Administrative Managers. The Administrative Managers shall have the right to make reasonable rules from time to time regarding the Plan. All such rules shall be consistent with the policy provided herein, and the Plan shall be further subject to such reasonable interpretations as may be made from time to time by the Administrative Managers, which interpretations shall in all cases be final and not be subject to appeal. -7- 10 In accordance with the provisions of Section 503 of the Employee Retirement Income Security Act of 1974, the Administrative Managers shall provide a procedure for handling claims of participants or their beneficiaries under this Plan. Such procedure shall be in accordance with regulations issued by the Secretary of Labor and shall provide adequate written notice within a reasonable period of time with respect to the denial of any such claim as well as a reasonable opportunity for a full and fair review of any such denial. The Board may authorize the establishment of one or more trusts and the appointment of a trustee or trustees ("Trustee") to hold any and all assets of the Plan in trust. SECTION 9 - MODIFICATION OR TERMINATION (a) Westinghouse reserves the right, at any time and from time to time, without notice, to suspend or terminate the Plan or to amend, in whole or in part, any and all provisions of the Plan, acting as follows: (i) The Board may suspend the Plan, terminate the Plan, or adopt Plan amendments that amend any and all provisions of the Plan in whole or in part; (ii) The Compensation Committee of the Board may adopt Plan amendments that amend any and all provisions of the Plan in whole or in part; (iii) The Managers may adopt Plan amendments that amend any and all provisions of the Plan in whole or in part, provided that no amendments may be adopted by the Managers that would materially change any Plan benefits or materially increase the costs of the Plan; and (iv) The Administrative Managers may adopt Plan amendments that relate solely to the administration of the Plan and do not materially change any Plan benefits or materially increase the costs of the Plan. Any such change, termination or suspension shall be effective at such time as is specified by the Board, the Compensation Committee, the Managers, or the Administrative Managers, as applicable, or, if no such time is so specified, upon the adoption thereof. (b) Notwithstanding the above, no such change or termination may adversely affect (i) the benefits of any Executive who retires prior to such change or termination or (ii) the right of any then current Executive to receive upon retirement (or to have a Surviving Spouse or beneficiary receive upon the Executive's death), an Executive Pension Supplement, calculated as of the effective date of such change or termination, under the Plan provided that the Executive meets the following two conditions: (1) at the time of such change or termination the Executive has vested pension benefits under the -8- 11 Westinghouse Pension Plan and/or any applicable pension plan of a Designated Entity, and (2) at the date of such change or termination and at the date of actual retirement or death the Executive has occupied, for the then required period next preceding such dates, a position that meets the definition of Executive in Section 1(g) of this Plan as in effect at the date of such change or termination. SECTION 10 - MISCELLANEOUS (a) No Executive, former Executive or Surviving Spouse shall have the right to anticipate, alienate, sell, transfer, assign, pledge, encumber, or otherwise subject to lien any of the benefits provided under this Plan. Such rights may not be subject to the debts, contracts, liabilities, engagements or torts of the Executive, former Executive or Surviving Spouse of an Executive. (b) If, in the opinion of Westinghouse, a person to whom a benefit is payable is unable to care for his or her affairs because of illness, accident or any other reason, any payment due the person, unless prior claim therefore shall have been made by a duly qualified guardian or other duly appointed and qualified representative of such person, may be paid to some member of the person's family, or to some other party who, in the opinion of Westinghouse, has incurred expense for such person. Any such payment shall be a payment for the account of such person and shall be a complete discharge of Westinghouse's liability under this Plan. (c) Westinghouse, in adopting this Plan, shall not be held to create or vest in any Executive or any other person any interest, pension or benefits other than the benefits specifically provided herein, or to confer upon any Executive the right to remain in the service of Westinghouse. SECTION 11 - CREDITORS' CLAIMS Any assets purchased by Westinghouse to provide benefits under this Plan shall at all times remain subject to the claims of general creditors of Westinghouse and any Executive, former Executive or Surviving Spouse of an Executive participating in the Plan has only an unsecured promise to pay benefits from Westinghouse. SECTION 12 - CHANGE IN CONTROL A. The term "Change in Control" means the occurrence of one or more of the following events: (a) there shall be consummated (i) any consolidation or merger of Westinghouse in which Westinghouse is not the continuing or surviving corporation or pursuant to which shares of Westinghouse's Common Stock would be converted into cash, securities or other property, other than a merger of Westinghouse in which the holders of Westinghouse's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving -9- 12 corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of Westinghouse, or (b) the stockholders of Westinghouse shall approve any plan or proposal for the liquidation or dissolution of Westinghouse, or (c) (i) any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation or other entity shall purchase any Common Stock of Westinghouse (or securities convertible into Westinghouse Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Westinghouse Common Stock (or securities convertible into Westinghouse Common Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than Westinghouse or any benefit plan sponsored by Westinghouse or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Westinghouse representing twenty percent or more of the combined voting power of Westinghouse's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board of Directors of Westinghouse shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board of Directors of Westinghouse shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. B. Notwithstanding any other provision of this Plan, upon a Change in Control, as defined above, the following shall apply: (i) all Executives shall be deemed vested; (ii) an amount sufficient to fund all unpaid benefits and any Surviving Spouse Benefits payable under this Plan, shall be paid immediately by Westinghouse to the Trustee pursuant to a trust agreement for the Westinghouse Executive Pension Plan Trust for payment of such benefits at the earliest date available in accordance with the provisions hereof and on such other terms as a committee composed of the Chief Executive Officer, the Chief Financial Officer and the Chief Legal Officer of Westinghouse, shall deem appropriate (including a direction to the Trustee to pay immediately all benefits on a present value basis and/or such other terms as they may deem appropriate). Notwithstanding this funding, Westinghouse shall be obligated to pay benefits to Executives and to Surviving Spouses of Executives to the extent such funding proves to -10- 13 be insufficient. To the extent such funding proves to be more than sufficient, the excess shall revert to Westinghouse. Upon a Change in Control, for any Executive in the Plan who is involuntarily separated and who is not then eligible for a Normal or Special Retirement Pension under the Westinghouse Pension Plan, such separation shall be deemed to be a separation due to a Permanent Job Separation, and the Special Retirement Pension provisions under the Westinghouse Pension Plan shall be used for purposes of determining eligibility and payment of benefits to such Executive under the Plan. The present value of benefits payable by the Trustee shall be calculated for specific groups of Executives at the time of the Change in Control as follows: a. The present value of the benefits payable from this Plan to Executives who have retired at the time of the Change in Control (as well as benefits payable from this Plan to any Surviving Spouse of an Executive) shall be calculated by using the PBGC immediate discount rate established and in effect for the beginning of the calendar year in which the Change in Control occurs. b. The present value of the benefits payable from this Plan to Executives who are eligible to retire under the terms of this Plan at the time of the Change in Control shall be calculated by using the PBGC immediate discount rates established and in effect at the beginning of the calendar year in which the Change in Control occurs, assuming a pension which is immediately payable at the time of the Change in Control. c. The present value of the benefits payable from this Plan to Executives who have completed at least thirty (30) years of service with Westinghouse, an Employer or a Designated Entity but have not yet attained age 58 at the time of the Change in Control shall be calculated by using the PBGC deferred discount rates established and in effect for the beginning of the calendar year in which the Change in Control occurs, assuming a pension which is payable at age 58. d. The present value of benefits payable from this Plan to Executives who have completed at least ten (10) years of service with Westinghouse, an Employer or a Designated Entity but less than thirty (30) years of service at the time of the Change in Control, but have not yet attained age 60 at the time of the Change in Control, shall be calculated by using the PBGC deferred discount rates established and in effect for the beginning of the calendar year in which the Change in Control occurs, assuming a pension which is payable at age 60. -11- 14 e. The present value of benefits payable from this Plan to Executives who have completed less than ten (10) years of service with Westinghouse, an Employer or a Designated Entity at the time of the Change in Control shall be calculated by using the PBGC deferred discount rates established and in effect for the beginning of the calendar year in which the Change in Control occurs, assuming a pension which is payable at age 65. In calculating the benefit payable to each Executive, any offset for the Westinghouse Pension Plan or other qualified plan in which the Executive participates, shall be based upon the last official pension file data available, adjusted to the date of any Change in Control by assuming that the most recent salary reflected in the pension file remains constant. Notwithstanding any provision of this Plan, this Plan may not be (a) amended such that future benefits would be reduced, (b) suspended or (c) terminated (i) as to the further accrual of benefits, at any time following a Change in Control; and (ii) as to the payment of benefits, at any time prior to the last payment, determined in accordance with the provisions of this Plan, to each Executive, former Executive receiving benefits under the Plan, or eligible spouse. SECTION 13 - GOVERNING LAW To the extent not preempted by federal law, the law of the Commonwealth of Pennsylvania shall govern the construction and administration of the Plan. SECTION 14 - SEVERABILITY If any provision of this Plan or the application thereof to any circumstance or person is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. SECTION 15 - AUTHORITY TO EXPAND BENEFITS The Board or the Compensation Committee of the Board may, from time to time and without notice, by resolution of the Board or of the Compensation Committee of the Board, authorize the payment of benefits or expand the benefits otherwise payable or to be payable hereunder to any one or more individuals. -12- 15 APPENDIX A EXECUTIVE BUY BACK The Executive Buy Back process permits newly eligible Executives to "buy back" past years of Executive Benefit Service under the Plan for periods of time during which they did not make the Maximum Contribution. If an Employee did not make the Maximum Contribution during each of the years of his or her Eligibility Service prior to the time he or she first became an Executive, the Employee will be permitted to pay an amount equal to the Maximum Contributions that would have been payable during the ten years prior to the date he or she first became an Executive (or such lesser period from the later of January 1, 1985 or the date the Employee was employed by Westinghouse, an Employer or a Designated Entity) plus compounded interest on that amount in order to "buy back" his or her non-contributory years of service. Upon qualifying as an Executive, an Executive will be offered an Executive Buy Back opportunity at the time he or she first becomes an Executive. The actual terms of the Executive Buy Back will be determined from time to time by the Administrative Managers. This election will be offered one time to the Executive and his or her decision whether or not to "buy back" will be irrevocable. Executive Buy Back payments will be made to Westinghouse and will not be deposited into the Westinghouse Pension Plan Trust. Any Executive Buy Back payments made by the Executive will not increase the Executive's Qualified Plan Benefit. If, at some point, an Employee is no longer an Executive or otherwise becomes ineligible to receive an Executive Pension Supplement, any Executive Buy Back payments the Employee has made (including any interest the Employee paid) plus any other amount as defined in Section 1(m)(ii) in the definition of Maximum Contribution paid by the Employee to Westinghouse will be refunded, with interest, at such time as the Employee meets one of the following criteria: termination or retirement from Westinghouse, an Employer or a Designated Entity; or death; provided, however, no refund shall be made if the Employee is an eligible Executive, whether or not the amount of his or her Executive Pension Supplement exceeds zero. All interest rates will be determined at the discretion of Westinghouse. -13- 16 APPENDIX B REHIRED EXECUTIVES SECTION 1 - RETIRED EXECUTIVES REHIRED AS EXECUTIVES If an Executive who retired from Westinghouse, an Employer or a Designated Entity and who received or is receiving an Executive Pension Supplement as a lump sum or on a monthly basis is rehired in an Executive position by Westinghouse, an Employer or a Designated Entity, the following provisions apply: (a) For an Executive who elected a monthly Executive Pension Supplement, the Plan will: (i) suspend all Executive Pension Supplement payments; and (ii) if, but only if, the Executive is Retirement Eligible at the time of subsequent actual retirement: (1) restore previous years of Eligibility Service and Executive Benefit Service accrued prior to the Executive's retirement; and (2) recalculate the Executive's Executive Pension Supplement in accordance with the Plan at his or her subsequent actual retirement date as long as the Executive then meets all Plan benefit qualification requirements. The Executive, having previously met the five years of continuous service as an Executive requirement prior to his or her first retirement, need not again meet that requirement. The Executive's Average Annual Compensation will be computed without regard to the break in service, using zero for any periods during which the Executive was a retiree. In addition, if the Executive elected to take a lump sum Qualified Plan Benefit with respect to his or her initial retirement, then in any subsequent calculation of the Executive's Executive Pension Supplement, the Executive's Executive Pension Base will be reduced by both the Executive's Qualified Plan Benefit received at the time of the initial retirement and the Executive's Qualified Plan Benefit accrued from the date of rehire through the date of his or her subsequent retirement. -14- 17 (b) For an Executive who elected a lump sum Executive Pension Supplement and who is Retirement Eligible at the time of subsequent actual retirement, the Plan will: (i) restore previous years of Eligibility Service but not previous years of Executive Benefit Service; and (ii) calculate the Executive's additional Executive Pension Supplement at his or her subsequent actual retirement date on the basis of years of service after the rehire in accordance with the Plan as long as the Executive then meets all Plan benefit qualification requirements. As under Section 1(a) of this Appendix B, the Executive, having previously met the five years of continuous service as an Executive requirement prior to his or her first retirement, need not again meet that requirement. The Executive's Average Annual Compensation will be computed without regard to the break in service, using zero for any periods during which the Executive was a retiree. In addition, if the Executive elected a monthly Qualified Plan Benefit with respect to his or her initial retirement, then the Executive's Qualified Plan Benefit accrued from the date of rehire through the subsequent date of actual retirement will be subtracted from the Executive's Executive Pension Base in calculating the Executive's additional Executive Pension Supplement at his or her subsequent retirement. SECTION 2 - FORMER EXECUTIVES WITH VESTED PENSIONS REHIRED AS EXECUTIVES If the employment of an Executive of Westinghouse, an Employer or a Designated Entity who was eligible only for a vested pension under the relevant qualified defined benefit or defined contribution plan, if any, was terminated and the Executive is rehired by Westinghouse, an Employer or a Designated Entity, the following provisions apply: (i) restore previous years of Eligibility Service and Executive Benefit Service accrued prior to the Executive's termination of employment; (ii) the Executive must meet the five years of continuous service as an Executive requirement prior to a subsequent actual retirement counting only years of service after the rehire; and -15- 18 (iii) only base salary and incentive awards earned after the rehire will be used in computing Average Annual Compensation. In addition, if the Executive elected to take his or her Vested Pension as a lump sum, in any calculation of an Executive Pension Supplement at actual retirement the Executive's Executive Pension Base will be reduced by both the Executive's Qualified Plan Benefit at the time of the initial termination of employment and the Executive's Qualified Plan Benefit accrued from the date of rehire through the date of actual retirement. SECTION 3 - RETIRED EXECUTIVES REHIRED IN NON-EXECUTIVE POSITIONS If an Executive who retired from Westinghouse, an Employer or a Designated Entity and who received or is receiving an Executive Pension Supplement as a lump sum or on a monthly basis is rehired by Westinghouse, an Employer or a Designated Entity in a non-Executive position, the following provisions apply: (a) For a former Executive who elected a monthly Executive Pension Supplement, the Plan will: (i) suspend all Executive Pension Supplement payments; and (ii) if, but only if, the former Executive is still Retirement Eligible at time of subsequent actual retirement, recommence Executive Pension Supplement payments at the time of the Executive's subsequent actual retirement without recalculation of amount. At subsequent actual retirement, the former Executive may re-select any form of payment of his or her Executive Pension Supplement then permitted under the Plan. (b) For a former Executive who elected to take his or her Executive Pension Supplement as a lump sum, no further benefits will be paid by the Plan. -16- EX-10.G 5 WESTINGHOUSE 10-K405 1 Exhibit 10(g) DIRECTOR'S CHARITABLE GIVING PROGRAM 1. PURPOSE The purpose of the Director's Charitable Giving Program (the "Program") established hereby for non-employee members of the Board of Directors, the Chairman and Chief Executive Officer and his immediate predecessor (the "Directors") of the Westinghouse Electric Corporation (the "Company") is to provide a unique opportunity for the Company and the Directors to jointly participate in a program of charitable giving. 2. ADMINISTRATION The Program shall be administered by a Committee of the Company consisting of the Chief Operating Officer, the Chief Financial Officer and the Chief Legal Officer of the Company (the "Committee"). The Committee shall have full power and authority to adopt, alter and repeal any administrative rules, regulations and practices governing the operation of the Program as it shall deem advisable and to interpret the terms and provisions of the Program. All decisions, interpretations or resolutions of the Committee shall be conclusive and binding on all interested parties. 3. ELIGIBILITY All current non-employee Directors, the Chairman and Chief Executive Officer of the Company and his immediate predecessor shall be eligible to participate in the Program. Any person who becomes a non-employee Director of the Company after the effective date of the Program shall be eligible to participate after the completion of five years of service as a Director. 117 2 4. CHARITABLE DONATION The Company will make a tax-deductible charitable donation in the total amount of $500,000 on behalf of each Director at the time of the Director's death to the charitable or other non-profit organizations (the "Charity") as selected by the Director. Initially, to fund such donation, the Company will purchase a life insurance policy or policies insuring the lives of the Directors. The Company will pay the premiums for each life insurance policy and will be the owner and beneficiary thereof. The Company and each Director shall execute a written agreement containing such terms and conditions as the Committee may determine are necessary and appropriate in furtherance of the Program. 5. DESIGNATION OF CHARITABLE/NON-PROFIT ORGANIZATION (a) Each Director may designate not more than two Charities as donees of the $500,000 contribution to be made by the Company by filing with the Secretary of the Company, a written designation in a form approved by the Committee, which shall be confirmed in writing by the Secretary. In the event a Director shall select two donees, each donation shall be in the amount of $250,000. (b) Each such Charity designated as a donee in the manner described herein must be a tax-exempt organization qualified as such under Section 501(c)(3) of the Internal Revenue Code, as amended. (c) Each designated Charity shall be sent a written notification of such designation in a form approved by the Committee. -2- 3 (d) Prior to death, the designation of a Charity as done by a Director as described herein may be revoked by the Director at any time by filing a written revocation or by filing a new written designation form with the Secretary of the Company, which shall be confirmed in writing by the Secretary. 6. AMENDMENT AND DISCONTINUANCE The Company may at any time amend, suspend, or discontinue the Program. 7. CHANGE IN CONTROL In the event of a Change in Control as defined herein, donations to charities or other non-profit organizations contemplated hereby may be made as the Committee may determine as of the date of such Change in Control and then paid on such basis and in such form as the Committee may prescribe. A Change in Control shall mean the occurrence of one or more of the following events: (a) there shall be consummated (i) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, or (b) the stockholders of the Corporation shall approve of any plan or proposal for the -3- 4 liquidation or dissolution of the Corporation, or (c) (i) any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation or other entity shall purchase any Common Stock of the Corporation (or securities convertible into the Corporation's Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Common Stock (or securities convertible into Common Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty percent or more of the combined voting power of the Corporation's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the election or nomination for election of each new director during such two-year period as approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. -4- 5 8. EFFECTIVE DATE The effective date of the Program is July 28, 1988. -5- EX-10.H 6 WESTINGHOUSE 10-K405 1 Exhibit 10(h) 1991 LONG-TERM INCENTIVE PLAN (as amended as of January 26, 1995) ARTICLE I GENERAL 1.1 PURPOSE The purposes of the 1991 Long-Term Incentive Plan ("Plan") for eligible employees of Westinghouse Electric Corporation ("Corporation") and its Subsidiaries (the Corporation and its Subsidiaries severally and collectively referred to in the Plan as the "Company") are to foster and promote the long-term financial success of the Company and materially increase stockholder value by (i) attracting and retaining employees of outstanding ability, (ii) strengthening the Company's capability to develop, maintain and direct a high performance team, (iii) motivating employees, by means of performance-related incentives, to achieve long-range performance goals, (iv) providing incentive compensation opportunities competitive with those of other major companies and (v) enabling employees to participate in the long-term growth and financial success of the Company. 1.2 ADMINISTRATION (a) The Plan shall be administered by a committee of the Board of Directors of the Corporation ("Committee") which shall consist 122 2 of three or more members. The members shall be appointed by the Board of Directors, and any vacancy on the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of its meetings and of any action taken by it without a meeting. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present shall be the acts of the Committee. Any action that may be taken at a meeting of the Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee. The Committee shall make appropriate reports to the Board of Directors concerning the operations of the Plan. (b) Subject to the limitations of the Plan, the Committee shall have the sole and complete authority: (i) to select in accordance with Section 1.3 persons who shall participate in the Plan ("Participant" or "Participants"), including the right to delegate authority to select Participants, (ii) to make Awards and payments in such forms and amounts as it shall determine, including the right to delegate authority to make Awards within limits approved by the Committee; (iii) to impose such limitations, restrictions, terms and conditions upon such Awards as it shall deem appropriate, (iv) to interpret the Plan and the terms of any document relating to the Plan and to adopt, amend and rescind administrative guidelines and other rules and 3 regulations relating to the Plan, (v) to amend or cancel an existing Award in whole or in part, except that the Committee may not, unless otherwise provided in the Plan, or unless the Participant affected thereby consents, take any action under this clause that would adversely affect the rights of such Participant with respect to the Award and except that the Committee may not take any action to amend any outstanding Option under the Plan in order to decrease the Option Price under such Option or to cancel and replace any such Option with an Option with a lower Option Price and (vi) to make all other determinations and to take all other actions necessary or advisable for the interpretation, implementation and administration of the Plan. The Committee's determinations on matters within its authority shall be conclusive and binding upon the company and all other persons. (c) The Committee shall act with respect to the Plan on behalf of the Corporation and on behalf of any subsidiary issuing stock under the Plan, subject to appropriate action by the board of directors of any such Subsidiary. All expenses associated with the Plan shall be borne by the Corporation subject to such allocation to its Subsidiaries and operating units as it deems appropriate. 4 1.3 SELECTION FOR PARTICIPATION Participants selected by the Committee or its delegatees shall be Eligible Persons (as defined below). "Eligible Persons" are persons who are employees of the Company ("Employee" or "Employees"). In making this selection and in determining the form and amount of Awards, the Committee may give consideration to the functions and responsibilities of the Eligible Person, his or her past, present and potential contributions to the Company and other factors deemed relevant by the Committee. 1.4 TYPES OF AWARDS UNDER PLAN Awards ("Awards") under the Plan may be in the form of any one or more of the following: (i) Non-statutory Stock Options ("NSOs" or "Options"), as described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited Stock Appreciation Rights ("Limited Rights"), as described in Article III, (iii) Performance Awards ("Performance Awards") as described in Article IV, and (iv) Restricted Stock ("Restricted Stock") as described in Article V. 1.5 SHARES SUBJECT TO THE PLAN Shares of stock issued under the Plan may be in whole or in part authorized and unissued or treasury shares of the Corporation's common stock, par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in Section 8.12(d) (Common Stock 5 and Formula Value Stock severally and collectively referred to in the Plan as "Stock"). The maximum number of shares of Stock which may be issued for all purposes under the Plan shall be 16,500,000. Except as otherwise provided below, any shares of Stock subject to an Option or other Award which is canceled or terminates without having been exercised shall again be available for Awards under the Plan. Shares subject to an option canceled upon the exercise of an SAR shall not again be available for Awards under the Plan except to the extent the SAR is settled in cash. To the extent that an Award is settled in cash, shares of Stock subject to that Award shall again be available for Awards. Shares of Stock tendered by a Participant or withheld by the Company to pay the exercise price of an Option or to satisfy the tax withholding obligations of the exercise or vesting of an Award shall be available again for Awards under the Plan. Shares of Restricted Stock forfeited to the Company in accordance with the Plan and the terms of the particular Award shall be available again for Awards under the Plan. No fractional shares shall be issued, and the Committee shall determine the manner in which fractional share value shall be treated. 6 ARTICLE II STOCK OPTIONS 2.1 AWARD OF STOCK OPTIONS The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to any Participant Options to purchase Stock. The Committee may provide with respect to any option to purchase Stock that, if the Participant, while an Eligible Person, exercises the option in whole or in part using already-owned Stock, the Participant will, subject to this Section 2.1 and such other terms and conditions as may be imposed by the Committee, receive an additional option ("Reload Option"). The Reload Option will be to purchase, at Fair Market Value as of the date the original option was exercised, a number of shares of Stock equal to the number of whole shares used by the Participant to exercise the original option. The Reload Option will be exercisable only between the date of its grant and the date of expiration of the original option. A Reload Option shall be subject to such additional terms and conditions as the Committee shall approve, which terms may provide that the Committee may cancel the Participant's right to receive the Reload Option and that the Reload Option will be 7 granted only if the Committee has not canceled such right prior to the exercise of the original option. Such terms may also provide that, upon the exercise by a Participant of a Reload Option while an Eligible Person, an additional Reload Option will be granted with respect to the number of whole shares used to exercise the first Reload Option. 2.2 STOCK OPTION AGREEMENTS The award of an option shall be evidenced by a written agreement ("Stock Option Agreement") in such form and containing such terms and conditions as the Committee may from time to time determine. 2.3 OPTION PRICE The purchase price of Stock under each Option ("Option Price") shall be not less than the Fair Market Value of such Stock on the date the Option is awarded. 2.4 EXERCISE AND TERM OF OPTIONS (a) Except as otherwise provided in the Plan, Options shall become exercisable at such time or times as the Committee may specify. The Committee may at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. 8 (b) The Committee shall establish procedures governing the exercise of options and shall require that written notice of exercise be given. Stock purchased on exercise of an option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so provided by the Committee (i) through the delivery of shares of Stock which are then outstanding and which have a Fair Market Value on the last business day preceding the date of exercise equal to the exercise price, (ii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iii) by any combination of the permissible forms of payment. 2.5 TERMINATION OF ELIGIBILITY In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, each of his or her outstanding Options shall be exercisable by the Participant (or his or her legal representative or designated beneficiary), to the extent that such Option was then exercisable, at any time prior to an expiration date established by the Committee at the time of award, but in no event after such expiration date. If the Participant ceases to be an Eligible Person for any other 9 reason, all of the Participant's then outstanding Options shall terminate immediately. ARTICLE III STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS 3.1 AWARD OF STOCK APPRECIATION RIGHT (a) An SAR is an Award entitling the recipient on exercise to receive an amount, in cash or Stock or a combination thereof (such form to be determined by the Committee), determined in whole or in part by reference to appreciation in Stock value. (b) In general, an SAR entitles the Participant to receive, with respect to each share of Stock as to which the SAR is exercised, the excess of the share's Fair Market Value on the date of exercise over its Fair Market Value on the date the SAR was granted. (c) SARs may be granted in tandem with options granted under the Plan ("Tandem SARS") or independently of Options ("Independent SARs"). An SAR granted in tandem with an NSO may be granted either at or after the time the option is granted. (d) SARs awarded under the Plan shall be evidenced by either a Stock Option Agreement (when SARs are granted in tandem with an 10 Option) or a separate agreement between the Company and the Participant. (e) Except as otherwise provided herein, a Tandem SAR shall be exercisable only at the same time and to the same extent and subject to the same conditions as the option related thereto is exercisable, and the Committee may prescribe additional conditions and limitations on the exercise of the SAR. The exercise of a Tandem SAR shall cancel the related Option. Tandem SARs may be exercised only when the Fair Market Value of Stock to which it relates exceeds the Option Price. (f) Except as otherwise provided herein, an Independent SAR will become exercisable at such time or times, and on such conditions, as the Committee may specify, and the Committee may at any time accelerate the time at which all or any part of the SAR may be exercised. The Committee may provide, under such terms and conditions as it may deem appropriate, for the automatic grant of additional SARs upon the full or partial exercise of an Independent SAR. Any exercise of an Independent SAR must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by any other documents required by the Committee. 11 (g) Except as otherwise provided herein, all SARs shall automatically be exercised on the last trading day prior to the expiration date established by the Committee at the time of the award for the SAR, or, in the case of a Tandem SAR, for the related Option, so long as exercise on such date will result in a payment to the Participant. (h) Unless otherwise provided by the Committee, no SAR shall become exercisable or shall be automatically exercised for six months following the date on which it was granted. (i) At the time of award of an SAR, the Committee may limit the amount of the payment that may be made to a Participant upon the exercise of the SAR. The Committee may further determine that, if the amount to be received by a Participant in any year is limited pursuant to this provision, payment of all or a portion of the amount that is unpaid as a result of the limitation may be made to the Participant at a subsequent time. No such limitation shall require a Participant to return to the Company any amount theretofore received by him or her upon the exercise of an SAR. (j) Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Stock, or partly in cash and partly in Stock, as the Committee shall determine. To the extent that payment is made in Stock, the 12 shares shall be valued at their Fair Market Value on the date of exercise of the SAR. (k) Each SAR shall expire on a date determined by the Committee or earlier upon the occurrence of the first of the following: (i) in the case of a Tandem SAR, termination of the related option, (ii) expiration of a period of six months after the Participant's ceasing to be an Eligible Person as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, or (iii) the Participant ceasing to be an Eligible Person for any other reason. 3.2 LIMITED RIGHTS (a) The Committee may award Limited Rights pursuant to the provisions of this Section 3.2 to the holder of an Option to purchase Common Stock granted under the Plan (a "Related Option") with respect to all or a portion of the shares subject to the Related Option. A Limited Right may be exercised only during the period beginning on the first day following a Change in Control, as defined in Section 7.2 of the Plan, and ending on the thirtieth day following such date. Each Limited Right shall be exercisable only to the same extent that the Related Option is exercisable, and in no event after the termination of the Related Option. In no event shall a Limited Right be exercised during 13 the first six months after the date of grant of the Limited Right. Limited Rights shall be exercisable only when the Fair Market Value (determined as of the date of exercise of the Limited Rights) of each share of Common Stock with respect to which the Limited Rights are to be exercised shall exceed the Option Price per share of Common Stock subject to the Related option. (b) Upon the exercise of Limited Rights, the Related Option shall be considered to have been exercised to the extent of the number of shares of Common Stock with respect to which such Limited Rights are exercised. Upon the exercise or termination of the Related Option, the Limited Rights with respect to such Related Option shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the Related Option was so exercised or terminated. (c) The effective date of the grant of a Limited Right shall be the date on which the Committee approves the grant of such Limited Right. Each grantee of a Limited Right shall be notified promptly of the grant of the Limited Right in such manner as the Committee shall prescribe. (d) Upon the exercise of Limited Rights, the holder thereof shall receive in cash an amount equal to the product computed by 14 multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter defined), or (y) the highest reported closing sales price of a share of Common Stock on the New York Stock Exchange at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised, over (b) the Option Price per share of Common Stock subject to the Related Option, by (ii) the number of shares of Common Stock with respect to which such Limited Rights are being exercised. (e) For purposes of this Section 3.2, the term "Minimum Price Per Share" shall mean the highest gross price (before brokerage commissions and soliciting dealers' fees) paid or to be paid for a share of Common Stock (whether by way of exchange, conversion, distribution upon liquidation or otherwise) in any Change in Control which is in effect at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised. For purposes of this definition, if the consideration paid or to be paid in any such Change in Control shall consist, in whole or in part, of consideration other than cash, the Board shall take such action, as in its judgement it deems appropriate, to establish the cash value of such consideration. 15 ARTICLE IV PERFORMANCE AWARDS 4.1 NATURE OF PERFORMANCE AWARDS A Performance Award provides for the recipient to receive an amount in cash or Stock or a combination thereof (such form to be determined by the Committee) following the attainment of Performance Goals. Performance Goals may be related to personal performance, corporate performance (including corporate stock performance), departmental performance or any other category of performance deemed by the Committee to be important to the success of the Company. The Committee shall determine the Performance Goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. Regardless of the degree to which Performance Goals are attained, a Performance Award shall be paid only when, if and to the extent that the Committee determines to make such payment. 4.2 OTHER AWARDS SUBJECT TO PERFORMANCE CONDITION The Committee may, at the time any Award described in this Plan is granted, impose the condition (in addition to any conditions specified or authorized in the Plan) that Performance Goals be met prior to the Participant's realization of any payment or benefit under the Award. 16 ARTICLE V RESTRICTED STOCK 5.1 AWARD OF RESTRICTED STOCK The Committee may award to any Participant shares of Stock subject to this Article V and such other terms and conditions as the Committee may prescribe, such Stock referred to herein as "Restricted Stock." Each certificate for Restricted Stock shall be registered in the name of the Participant and deposited by him or her, together with a stock power endorsed in blank, with the Corporation. 5.2 RESTRICTED STOCK AGREEMENT Shares of Restricted Stock awarded under the Plan shall be evidenced by a written agreement in such form and containing such terms and conditions as the Committee may determine. 5.3 RESTRICTION PERIOD At the time of award, there shall be established for each Participant a "Restriction Period" of such length as shall be determined by the Committee. The Restriction Period may be waived by the Committee. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as hereinafter provided, during the Restriction Period. Subject to such restriction on transfer, the Participant as owner 17 of such shares of Restricted Stock shall have the rights of the holder of such Restricted Stock, except that the Committee may provide at the time of the Award that any dividends or other distributions paid on such Stock during the Restriction Period shall be accumulated and held by the Company and shall be subject to forfeiture under Section 5.4. Upon the expiration or waiver by the Committee of the Restriction Period, the Corporation shall redeliver to the Participant (or his or her legal representative or designated beneficiary) the shares deposited pursuant to Section 5.1. 5.4 TERMINATION OF ELIGIBILITY In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee, or as a result of his or her death, retirement or disability, the restrictions imposed under this Article V shall lapse with respect to such number of shares theretofore awarded to him or her as shall be determined by the Committee. All other shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividends or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. 18 In the event the Participant ceases to be an Eligible Person for any other reason, all shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividend or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. ARTICLE VI DEFERRAL OF PAYMENTS 6.1 DEFERRAL OF AMOUNTS If the Committee makes a determination to designate Awards or, from time to time, groups or types of Awards, eligible for deferral hereunder, a Participant may, subject to such terms and conditions and within such limits as the Committee may from time to time establish, elect to defer the receipt of amounts due to him or her under the Plan. Amounts so deferred are referred to herein as "Deferred Amounts." The Committee may also permit amounts now or hereafter deferred or available for deferral under any present or future incentive compensation program or deferral arrangement of the Company to be deemed Deferred Amounts and to become subject to the provisions of this Article. Awards which are so deferred will be deemed to have been awarded in cash and the cash deferred as Deferred Amounts. 19 The period between the date on which the Participant's Deferred Amount would have been payable absent deferral and the final payment of such Deferred Amount shall be referred to herein as the "Deferral Period." 6.2 INVESTMENT DURING DEFERRAL PERIOD Unless otherwise determined by the Committee, and subject to such changes as the Committee may determine, the Deferred Amount will be treated during the Deferral Period as if it were invested in putative convertible debentures with a fixed interest rate, compounded annually, for the entire Deferral Period. For purposes of determining the value of the Deferred Amount at the time of payment, each putative debenture will be deemed to be convertible into Common Stock at a conversion rate computed by reference to the Fair Market Value of the Common Stock on the last trading day prior to the regular January meeting of the Board of Directors on or preceding the date of deferral. Payment of Deferred Amounts may be made in cash, Stock, or partly in cash and partly in Stock, in the Committee's sole discretion. 6.3 PARTICIPANT REPORTS Annually, each Participant who has a Deferred Amount will receive a report setting forth all of his or her then Deferred Amounts and the yield thereon to date. 20 6.4 PAYMENT OF DEFERRED AMOUNTS Payment of Deferred Amounts will be made at such time or times, and may be in cash, Stock, or partly in cash and partly in Stock, as the Committee shall from time to time determine. The limitations respecting the issuance of Stock or other limitations on aggregate awards payable contained in the Annual Performance Plan of the Corporation, Article XVI of the by-laws of the Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan hereafter adopted by the stockholders shall be limitations applicable to the payment of any Deferred Amounts under this Article VI. 6.5 ALTERNATIVE VALUATION ELECTION Unless otherwise determined by the Committee, a Participant may, at a time established by the committee, but prior to such Participant's ceasing to be an Eligible Person, elect to establish the ultimate payable value of each Deferred Amount by reference to the Fair Market Value of the Common Stock as of the day on which an alternate valuation election is received by the corporation in accordance with procedures established by the Committee. Notwithstanding the establishment of the ultimate payable value resulting from the alternate valuation election by the Participant, the yield will continue as though no such election 21 had been made and will continue to be subject to the limitations set forth in Section 6.2, and Deferred Amounts and the yield thereon will be paid as otherwise provided in this Article. ARTICLE VII CHANGES IN CONTROL 7.1 EFFECT OF CHANGE IN CONTROL Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, as defined in Section 7.2: (i) all Options and, subject to the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but not SARS, outstanding and unexercised on the date of the Change in Control shall become immediately exercisable; (ii) all Performance Awards shall be deemed to have been earned on such basis as the Committee may prescribe and then paid on such basis, at such time and in such form as the Committee may prescribe, or deferred in accordance with the elections of Participants; (iii) all Restricted Stock shall be deemed to be earned and the Restriction Period shall be deemed expired on such terms and conditions as the Committee may determine; and (iv) all amounts deferred under this Plan shall be paid to a trustee or otherwise on such terms as the Committee may prescribe or permit. 22 7.2 DEFINITION OF CHANGE IN CONTROL The term "Change in Control" means the occurrence of one or more of the following events: (a) there shall be consummated (i) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, or (b) the stockholders of the Corporation shall approve any plan or proposal for the liquidation or dissolution of the Corporation, or (c) (i) any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation or other entity shall purchase any Common Stock of the Corporation (or securities convertible into Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Common Stock (or securities convertible into Common Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its 23 subsidiaries) shall be the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty percent or more of the combined voting power of the Corporation's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the election or nomination for election of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. ARTICLE VIII GENERAL PROVISIONS 8.1 NON-TRANSFERABILITY No Option, SAR, Performance Award or share of Restricted Stock or Deferred Amount under the Plan shall be transferable by 24 the Participant other than by will or the applicable laws of descent and distribution. All Awards and Deferred Amounts shall be exercisable or received during the Participant's lifetime only by such Participant or his or her legal representative. Any transfer contrary to this Section 8.1 will nullify the option, SAR, Performance Award or share of Restricted Stock, and any attempted transfer of a Deferred Amount contrary to this Section 8.1 will be void and of no effect. 8.2 BENEFICIARIES The Committee may establish procedures not inconsistent with Section 8.1 under which a Participant may designate a beneficiary or beneficiaries to receive amounts due under an Award or with respect to Deferred Amounts in the event of the Participant's death. 8.3 ADJUSTMENTS UPON CHANGES IN STOCK If there shall be any change in the Stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split up, dividend in kind or other change in the corporate structure or distribution to the stockholders, appropriate adjustments may be made by the Board of Directors of the Company (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and 25 the price per share subject to outstanding Options or which may be issued under outstanding Performance Awards or Awards of Restricted Stock. Appropriate adjustments may also be made by the Board of Directors or the Committee in the terms of any Awards under the Plan to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance targets and changes in the length of Performance Periods. 8.4 CONDITIONS OF AWARDS (a) The rights of a Participant with respect to any Award received under this Plan shall be subject to the conditions that, until the Participant has fully received all payments, transfers and other benefits under the Award, he or she shall (i) not engage, either directly or indirectly, in any manner or capacity as advisor, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any business or activity which is at the time competitive with any business or activity conducted by the Company and (ii) be available, unless he or she shall have died, at reasonable times for consultations at the request of the Company's management with respect to phases of the business with which he or she is or was actively connected during his or her employment, but such consultations shall not (except in the case of a Participant whose active service was outside the United States) be required to be performed at any place or places outside of the United States of America or during 26 usual vacation periods or periods of illness or other incapacity. In the event that either of the above conditions is not fulfilled, the Participant shall forfeit all rights to any unexercised option or SAR, or any Performance Award or Stock held which has not yet been determined by the Committee to be payable or unrestricted (and any unpaid amounts equivalent to dividends or other distributions or amounts equivalent to interest relating thereto) as of the date of the breach of condition. Any determination by the Board of Directors of the Corporation, which shall act upon the recommendation of the Chief Executive Officer, that the Participant is, or has, engaged in a competitive business or activity as aforesaid or has not been available for consultations as aforesaid shall be conclusive. b) This Section 8.4 shall not apply to Limited Rights. 8.5 USE OF PROCEEDS All cash proceeds from the exercise of options shall constitute general funds of the Company. 8.6 TAX WITHHOLDING The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). 27 In the case of an Award pursuant to which Stock may be delivered, the Committee will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Stock. If and to the extent that such withholding is required, the Committee may permit the Participant or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. In the alternative, the Committee may, at the time of grant of any such Award, require that the Company withhold from any shares to be delivered Stock with a value calculated to satisfy applicable tax withholding requirements. 8.7 NON-UNIFORM DETERMINATIONS The Committee's determinations under the Plan, including without limitation, (i) the determination of the Participants to receive Awards, (ii) the form, amount, timing and payment of such Awards, (iii) the terms and provisions of such Awards and (iv) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, Awards under the Plan, whether or not such Participants are similarly situated. 28 8.8 LEAVES OF ABSENCE; TRANSFERS The Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect to any leave of absence from the Company granted to a Participant. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall be treated as if the Participant ceased to be an employee and (ii) the impact, if any, of any such leave of absence on Awards under the Plan. In the event a Participant transfers within the Company, such Participant shall not be deemed to have ceased to be an employee for purposes of the Plan. 8.9 GENERAL RESTRICTION (a) Each Award under the Plan shall be subject to the condition that, if at any time the Committee shall determine that (i) the listing, registration or qualification of shares of Stock upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government or regulatory body or (iii) an agreement by the Participant with respect thereto, is necessary or desirable, then such Award shall not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free from any conditions not acceptable to the Committee. 29 (b) Shares of Common Stock for use under the provisions of this Plan shall not be issued until they have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and such other exchanges, if any, as the Board of Directors of the Corporation shall determine, and a registration statement under the Securities Act of 1933 with respect to such shares shall have become, and be, effective. 8.10 EFFECTIVE DATE The Plan shall be deemed effective as of December 4, 1991. No Award may be granted under the Plan after the Plan is terminated pursuant to Section 8.11, but Awards previously made may extend beyond that date and Reload Options and additional Reload Options provided for with respect to original options outstanding prior to that date may continue unless the Committee otherwise provides and subject to such additional terms and conditions as the Committee may provide, and the provisions of Article VI of the Plan shall survive and remain effective as to all present and future Deferred Amounts until such later date as the Committee or the Board of Directors shall determine. The adoption of the Plan shall not preclude the adoption by appropriate means of any other stock option or other incentive plan for employees. 30 8.11 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN The Board of Directors may at any time or times amend the Plan for any purpose which may at the time be permitted by law, or may at any time suspend or terminate the Plan as to any further grants of Awards. 8.12 CERTAIN DEFINITIONS (a) Unless otherwise determined by the Committee, the terms "retirement" and "disability" as used under the Plan shall be construed by reference to the provisions of the Westinghouse Pension Plan or other similar plan or program of the Company applicable to a Participant. (b) The term "Fair Market Value" as it relates to Common Stock means the mean of the high and low prices of the Common Stock as reported by the Composite Tape of the New York Stock Exchange (or such successor reporting system as shall be selected by the Committee) on the relevant date or, if no sale of the Common Stock shall have been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales. The term "Fair Market Value" as it relates to Formula Value Stock shall mean the value determined by the Committee. (c) The term "Subsidiary" shall mean, unless the context otherwise requires, any corporation (other than the Corporation) 31 in an unbroken chain of corporations beginning with the corporation if each of the corporations other than the last corporation in such chain owns stock possessing at least 50% of the voting power in one of the other corporations in such chain. (d) "Formula Value Stock" means shares of a class or classes of stock the value of which is derived from a formula established by the Committee which reflects such financial measures as the Committee shall determine. Such shares shall have such other characteristics as shall be determined at time of their authorization. EX-10.J 7 WESTINGHOUSE 10-K405 1 Exhibit 10(j) January 31, 1994 Mr. Fredric G. Reynolds 5400 Preston Oaks Road, Apt. 4035 Dallas, Texas 75240 Dear Fred, This letter confirms Westinghouse's offer of employment to you for the position of Senior Vice President, Chief Financial Officer. Provisions of the offer are as follows: BASE SALARY - Your annualized base salary for 1994 will be $350,000 paid in accordance with the regular payroll practices of the Corporation. ANNUAL INCENTIVE AWARDS - You will be eligible to participate in the Corporation's annual incentive plan for executives. For this position, award opportunities typically range between $150,000 and $250,000. Awards are generally based on: 1) Westinghouse's financial performance against objectives, 2) Corporate Development's performance on strategic initiatives and 3) evaluation of individual contributions. For each of fiscal years 1994 and 1995, a minimum annual incentive award of $150,000 will be paid if you are actively employed by the Corporation at the time annual incentive payments are made in January 1995 and 1996, respectively. LONG-TERM INCENTIVES - The Corporation will provide a one-time non-qualified stock option grant of 150,000 shares. The option price will be the fair market value, as defined in the plan, of Westinghouse common stock on the day the Management Compensation Policy Committee of the Board ("MCPC") authorizes the grant. The other option terms will be consistent with the standard Westinghouse stock option provisions of the options granted by the MCPC in May 1993 under the new plan, including a provision vesting the options after one year of employment from the grant date. In addition, an Equity Plus Grant will be made to you with a target value of $75,000 for the 1992-1994 performance cycle, subject to the measurements, terms and requirements applicable to grants to other executives in connection with the 1992-1994 Equity Plus Grants. You will have an opportunity to defer any amounts earned in accordance with the applicable deferral provisions (which currently provide for 153 2 Mr. Fredric G. Reynolds January 31, 1994 page -2- deferral of up to 100% of any amounts earned). Both of the above grants are subject to shareholder approval of the new long-term incentive plan. You will also be eligible for long-term incentive grants applicable to your position. These grants are typically made in the second quarter of each year. EMPLOYEE BENEFITS - Westinghouse will reimburse you for the cost of COBRA coverage to extend your current health care plan for the three month waiting period until you and your eligible dependents are eligible to be covered by Westinghouse's plan. During your employment, the standard Westinghouse benefit programs (including pension, disability, life insurance, savings, relocation program) and perquisites applicable to this position will be extended to you. SEPARATION - If you are terminated for any reason, other than for gross misconduct, gross neglect of duties, or malfeasance, you will be entitled to receive each month after termination, for a period of twelve months, an amount equal to your then applicable monthly base salary, which will be in lieu of any other Westinghouse salary continuation programs. In addition, the Corporation would arrange for an outplacement service with a firm to be selected by Westinghouse. I'm pleased that you will be joining Westinghouse and am looking forward to a long and successful association. I believe you will make an important contribution to Westinghouse and that Westinghouse will be able to provide you with opportunities that will fulfill your future career aspirations. Congratulations and welcome aboard! Sincerely, EX-11 8 WESTINGHOUSE 10-K405 1 EXHIBIT (11) WESTINGHOUSE ELECTRIC CORPORATION COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED DECEMBER 31 ------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- EQUIVALENT SHARES: Average shares outstanding.................... 354,580,674 349,416,570 342,637,241 Additional shares due to: Stock options................................. 3,964,508 3,485,100 3,466,167 Series C preferred shares..................... 25,191,067 -- -- ----------- ----------- ----------- Total equivalent shares.................. 383,736,249 352,901,670 346,103,408 =========== =========== =========== ADJUSTED EARNINGS (IN MILLIONS): Income (loss) from Continuing Operations...... $ 77 $ (175) $ 357 Less: Series B preferred stock dividends...... 50 50 28 ----------- ----------- ----------- Adjusted income (loss) from Continuing Operations.................................. 27 (225) 329 Loss from Discontinued Operations............. -- (95) (1,413) Cumulative effect of changes in accounting principles....................... -- (56) (338) ----------- ----------- ----------- Adjusted net income (loss) after cumulative effect of changes in accounting principles.................................. $ 27 $ (376) $ (1,422) =========== =========== =========== EARNINGS (LOSS) PER SHARE: From Continuing Operations.................... $ 0.07 $ (0.64) $ 0.95 From Discontinued Operations.................. -- (0.27) (4.08) From cumulative effect of changes in accounting principle........................ -- (0.16) (0.98) ----------- ----------- ----------- Earnings (loss) per share (a)............ $ 0.07 $ (1.07) $ (4.11) =========== =========== =========== - --------- (a) For earnings per share using an alternative treatment for the Series C Preferred Shares, see note 14 to the financial statements included in Part II, Item 8 of this report.
155 EX-12.A 9 WESTINGHOUSE 10-K405 1 EXHIBIT (12)(A) WESTINGHOUSE ELECTRIC CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES ($ IN MILLIONS)
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1994 1993 1992 1991 1990 ----- ----- ----- ----- ------ Income (loss) before income taxes and minority interest............................. $ 157 $(236) $ 550 $ 496 $1,106 Less: Equity in loss of 50 percent or less owned affiliates.............................. (5) (7) (2) (19) (4) Add: Dividends from affiliates.................. -- -- -- 2 -- Fixed charges excluding capitalized interest.................................. 212 253 270 271 283 ----- ----- ----- ----- ------ Earnings as adjusted............................ $ 374 $ 24 $ 822 $ 788 $1,393 ===== ===== ===== ===== ====== Fixed charges: Interest expense........................... $ 177 $ 217 $ 225 $ 231 $ 221 Rental expense............................. 35 36 45 40 62 Capitalized interest....................... -- 3 15 23 -- ----- ----- ----- ----- ------ Total fixed charges............................. $ 212 $ 256 $ 285 $ 294 $ 283 ===== ===== ===== ===== ====== Ratio of earnings to fixed charges.............. 1.76x (a) 2.88x 2.68x 4.92x ===== ===== ===== ===== ====== - ------- (a) Additional income before income taxes and minority interest of $232 million would be necessary to attain a ratio of earnings to fixed charges of 1.00x for the year ended December 31, 1993.
156 EX-12.B 10 WESTINGHOUSE 10-K405 1 EXHIBIT (12)(B) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS ($ IN MILLIONS)
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1994 1993 1992 1991 1990 ----- ----- ----- ----- ------ Income (loss) before income taxes and minority interest............................. $ 157 $(236) $ 550 $ 496 $1,106 Less: Equity in loss of 50 percent or less owned affiliates.............................. (5) (7) (2) (19) (4) Add: Dividends from affiliates.................. -- -- -- 2 -- Combined fixed charges and preferred dividends, excluding capitalized interest................................. 369 325 313 271 283 ----- ----- ----- ----- ------ Earnings as adjusted............................ $ 531 $ 96 $ 865 $ 788 $1,393 ===== ===== ===== ===== ====== Combined fixed charges and preferred dividends: Interest expense........................... $ 177 $ 217 $ 225 $ 231 $ 221 Rental expense............................. 35 36 45 40 62 Capitalized interest....................... -- 3 15 23 -- Pre-tax earnings required to cover preferred dividend requirements (a)...... 157 72 43 -- -- ----- ----- ----- ----- ------ Total combined fixed charges and preferred dividends........................... $ 369 $ 328 $ 328 $ 294 $ 283 ===== ===== ===== ===== ====== Ratio of earnings to combined fixed charges and preferred dividends........................... 1.44x (b) 2.64x 2.68x 4.92x ===== ===== ===== ===== ====== - --------- (a) Dividend requirement divided by 100% minus effective income tax rate. (b) Additional income before income taxes and minority interest of $232 million would be necessary to attain a ratio of earnings to combined fixed charges and preferred dividends of 1.00x for the year ended December 31, 1993.
157 EX-21 11 WESTINGHOUSE 10-K405 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Included in the financial statements of the Corporation are consolidated subsidiaries owned, directly or indirectly, more than 50% by the Corporation. Equity in undistributed earnings of nonconsolidated subsidiaries and affiliated companies, 20% to 50% owned, is also included in the results of operations of the Corporation. Listed below are certain subsidiaries of the Corporation. The remaining subsidiaries and affiliated companies not listed below, when considered in the aggregate, would not constitute a significant subsidiary.
INCORPORATED VOTING POWER UNDER LAWS OWNED BY NAME OF IMMEDIATE PARENT ---- ------------ ---------------- Aptus, Inc. Delaware 100% The Knoll Group, Inc. Delaware 100% Knoll North America, Inc. Delaware 100% Knoll Overseas, Inc. Delaware 100% Spinneybeck Enterprises, Inc. New York 100% Thermo King Corporation Delaware 100% Westinghouse Broadcasting Company Indiana 100% Westinghouse Canada, Inc. Canada 100% Westinghouse Energy Systems, Inc. Delaware 100% WCI Communities, Inc. Delaware 100% Westinghouse Hanford Company Delaware 100% Westinghouse Holdings Corporation Delaware 100% Westinghouse de Puerto Rico, Inc. Delaware 100% Westinghouse Electric S.A. Switzerland 100% Westinghouse International Technology Corporation Delaware 100% Westinghouse World Investment Corporation Delaware 100% Westinghouse Foreign Sales Corporation Barbados 100% Westinghouse Savannah River Company, Inc. Delaware 100%
158 EX-23 12 WESTINGHOUSE 10-K405 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in each prospectus constituting part of the Registration Statements on Form S-3 (Nos. 33-41417, 33-41475, 33-45586, 33-51298 and 33-59272), and on Form S-8 (Nos. 2-64733, 2-83376, 2-92085, 33-07761, 33-22198, 33-44044, 33-45365, 33-46051, 33-46779, 33-51445, 33-51579, 33-53815 and 33-53819) of Westinghouse Electric Corporation of our report dated January 31, 1995 appearing on page 26 of this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 55 of this Form 10-K. Price Waterhouse LLP 600 Grant Street Pittsburgh, Pennsylvania 15219-9954 February 28, 1995 159 EX-24 13 WESTINGHOUSE 10-K405 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 3rd day of March, 1995. /S/ LOUIS J. VALERIO ----------------------------------- 160 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 3rd day of March, 1995. /S/ FRANK C. CARLUCCI ----------------------------------- 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 1st day of March, 1995. /S/ GARY M. CLARK ----------------------------------- 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 1st day of March, 1995. /S/ GEORGE H. CONRADES ----------------------------------- 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 3rd day of March, 1995. /S/ WILLIAM H. GRAY III ----------------------------------- 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 6th day of March, 1995. /S/ MICHAEL H. JORDAN ----------------------------------- 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 3rd day of March, 1995. /S/ DAVID T. McLAUGHLIN ----------------------------------- 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 3rd day of March, 1995. /S/ RENE C. McPHERSON ----------------------------------- 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 7th day of March, 1995. /S/ RICHARD M. MORROW ----------------------------------- 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 1st day of March, 1995. /S/ RICHARD R. PIVIROTTO ----------------------------------- 11 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 2nd day of March, 1995. /S/ PAULA STERN ----------------------------------- 12 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1994, hereby constitutes and appoints Michael H. Jordan, Fredric G. Reynolds and Louis J. Valerio his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 3rd day of March, 1995. /S/ ROBERT D. WALTER ----------------------------------- EX-27 14 WESTINGHOUSE 10-K
5 1,000,000 12-MOS DEC-31-1994 DEC-31-1994 338 0 1,612 59 1,541 4,720 4,335 2,437 10,624 3,709 1,886 393 12 0 1,387 10,624 8,848 8,848 6,629 6,629 1,600 0 177 157 71 77 0 0 0 77 .07 .07
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