-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UYgxEgc2QbwqlVO1StfTZHzBnsEQ22PrRtLpdAZM3IMzH3XDKFj4hmt+2pM5YDNe quhnJ/hB+qV8gFJ5dUNPMg== 0000950128-97-000737.txt : 19970512 0000950128-97-000737.hdr.sgml : 19970512 ACCESSION NUMBER: 0000950128-97-000737 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTINGHOUSE ELECTRIC CORP CENTRAL INDEX KEY: 0000106413 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 250877540 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00977 FILM NUMBER: 97599257 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-Q 1 WESTINGHOUSE ELECTRIC CORP. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549-1004 FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES --- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 -------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE --- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO --- --- COMMISSION FILE NUMBER 1-977 ------ 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, PA. 15222-1384 -------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE) (412) 244-2000 -------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- COMMON STOCK 610,373,930 SHARES OUTSTANDING AT APRIL 30, 1997 ------------------------------------------------------------- -1- 2 WESTINGHOUSE ELECTRIC CORPORATION INDEX ---------------------------------
PAGE NO. -------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENT OF INCOME 3 CONDENSED CONSOLIDATED BALANCE SHEET 4 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 5 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6-13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14-24 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 24-26 SIGNATURE 27
-2- 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WESTINGHOUSE ELECTRIC CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME ------------------------------------------ (IN MILLIONS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ------------------ 1997 1996 ---- ---- SALES OF PRODUCTS AND SERVICES $ 2,223 $ 1,883 COSTS OF PRODUCTS AND SERVICES (1,590) (1,459) RESTRUCTURING, LITIGATION AND OTHER MATTERS (NOTES 2 AND 3) - (654) MARKETING, ADMINISTRATION, AND GENERAL EXPENSES (763) (584) ------- ------- OPERATING LOSS (130) (814) OTHER INCOME (EXPENSES), NET (NOTE 4) 34 (146) INTEREST EXPENSE (114) (146) ------- ------- LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES (210) (1,106) INCOME TAX BENEFIT 59 384 MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES - (1) ------- ------- LOSS FROM CONTINUING OPERATIONS (151) (723) ------- ------- DISCONTINUED OPERATIONS, NET OF INCOME TAXES (NOTE 9): LOSS FROM DISCONTINUED OPERATIONS - (51) ESTIMATED NET GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS - 1,018 ------- ------- INCOME FROM DISCONTINUED OPERATIONS - 967 EXTRAORDINARY ITEM: LOSS ON EARLY EXTINGUISHMENT OF DEBT (NOTE 5) - (63) ------- ------- NET INCOME (LOSS) $ (151) $ 181 ======= ======= EARNINGS (LOSS) PER COMMON SHARE: CONTINUING OPERATIONS $ (0.23) $ (1.65) DISCONTINUED OPERATIONS - 2.20 EXTRAORDINARY ITEM - (0.14) ------- ------- EARNINGS (LOSS) PER COMMON SHARE $ (0.23) $ 0.41 ======= ======= CASH DIVIDENDS PER COMMON SHARE $ 0.05 $ 0.05 ======= =======
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -3- 4 WESTINGHOUSE ELECTRIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET ------------------------------------ (IN MILLIONS)
MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- ASSETS (UNAUDITED) - ------ CASH AND CASH EQUIVALENTS $ 89 $ 220 CUSTOMER RECEIVABLES 1,686 1,561 INVENTORIES (NOTE 6) 863 783 UNCOMPLETED CONTRACTS COSTS OVER RELATED BILLINGS 661 686 PROGRAM RIGHTS 460 431 DEFERRED INCOME TAXES 792 817 PREPAID AND OTHER CURRENT ASSETS 172 289 ------- ------- TOTAL CURRENT ASSETS 4,723 4,787 PLANT AND EQUIPMENT, NET 1,841 1,866 FCC LICENSES, NET 2,213 2,199 GOODWILL, NET 8,736 8,776 OTHER INTANGIBLE AND NONCURRENT ASSETS (NOTE 7) 2,318 2,261 NET ASSETS OF DISCONTINUED OPERATIONS (NOTE 9) 53 - ------- ------- TOTAL ASSETS $19,884 $19,889 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ SHORT-TERM DEBT $ 153 $ 497 CURRENT MATURITIES OF LONG-TERM DEBT 34 4 ACCOUNTS PAYABLE 561 887 UNCOMPLETED CONTRACTS BILLINGS OVER RELATED COSTS 410 334 OTHER CURRENT LIABILITIES (NOTE 8) 2,335 2,578 ------- ------- TOTAL CURRENT LIABILITIES 3,493 4,300 LONG-TERM DEBT 6,128 5,149 PENSION LIABILITY 1,159 1,069 OTHER NONCURRENT LIABILITIES (NOTE 8) 3,497 3,619 ------- ------- TOTAL LIABILITIES 14,277 14,137 ------- ------- CONTINGENT LIABILITIES AND COMMITMENTS (NOTE 10) MINORITY INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARIES 12 10 SHAREHOLDERS' EQUITY (NOTE 11): PREFERRED STOCK, $1.00 PAR VALUE (25 MILLION SHARES AUTHORIZED): SERIES C CONVERSION PREFERRED (4 MILLION SHARES ISSUED) 4 4 COMMON STOCK, $1.00 PAR VALUE (1,100 MILLION SHARES AUTHORIZED, 612 MILLION AND 609 MILLION SHARES ISSUED) 612 609 CAPITAL IN EXCESS OF PAR VALUE 5,418 5,376 COMMON STOCK HELD IN TREASURY (533) (546) MINIMUM PENSION LIABILITY ADJUSTMENT (796) (796) CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (4) 11 RETAINED EARNINGS 894 1,084 ------- ------- TOTAL SHAREHOLDERS' EQUITY 5,595 5,742 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,884 $19,889 ======= =======
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -4- 5 WESTINGHOUSE ELECTRIC CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS ---------------------------------------------- (IN MILLIONS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ------------------ 1997 1996 ---- ---- CASH USED FOR OPERATING ACTIVITIES OF CONTINUING OPERATIONS $ (863) $ (502) CASH USED FOR OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS (30) (314) CASH FLOWS FROM INVESTING ACTIVITIES: BUSINESS ACQUISITIONS (46) (85) BUSINESS DIVESTITURES AND OTHER ASSET LIQUIDATIONS 123 3,587 CAPITAL EXPENDITURES (41) (52) ------ ------ CASH PROVIDED BY INVESTING ACTIVITIES 36 3,450 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: BANK REVOLVER BORROWINGS 1,610 988 BANK REVOLVER REPAYMENTS (435) (57) NET CHANGE IN OTHER SHORT-TERM DEBT (302) (92) REPAYMENTS OF LONG-TERM DEBT (149) (3,570) STOCK ISSUED 60 42 DIVIDENDS PAID (41) (32) BANK FEES PAID AND OTHER (5) (8) ------ ------ CASH PROVIDED (USED) BY FINANCING ACTIVITIES 738 (2,729) ------ ------ DECREASE IN CASH AND CASH EQUIVALENTS (119) (95) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 233 226 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 114 $ 131 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: INTEREST PAID: CONTINUING OPERATIONS $ 117 $ 105 DISCONTINUED OPERATIONS 5 17 ------ ------ TOTAL INTEREST PAID $ 122 $ 122 ====== ====== INCOME TAXES PAID $ 16 $ 23 ====== ======
SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -5- 6 WESTINGHOUSE ELECTRIC CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------- 1. GENERAL THE CONDENSED 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. WHEN READING THE FINANCIAL INFORMATION CONTAINED IN THIS QUARTERLY REPORT, REFERENCE SHOULD BE MADE TO THE FINANCIAL STATEMENTS, SCHEDULES, AND NOTES CONTAINED IN THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996. CERTAIN AMOUNTS PERTAINING TO THE THREE MONTHS ENDED MARCH 31, 1996 HAVE BEEN RESTATED OR RECLASSIFIED FOR COMPARATIVE PURPOSES. REFERENCE ALSO SHOULD BE MADE TO THE CORPORATION'S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 11, 1997 CONTAINING CERTAIN RESTATED FINANCIAL INFORMATION. DURING RECENT YEARS, THE CORPORATION HAS MADE SEVERAL CHANGES TO ITS BUSINESS PORTFOLIO. A NUMBER OF BUSINESS SEGMENTS WERE IDENTIFIED AS NON-STRATEGIC AND WERE RECLASSIFIED TO DISCONTINUED OPERATIONS. WHEN APPROPRIATE, FINANCIAL INFORMATION PREVIOUSLY ISSUED WAS RESTATED TO GIVE EFFECT TO THE CLASSIFICATION OF THESE BUSINESSES AS DISCONTINUED OPERATIONS IN ACCORDANCE WITH ACCOUNTING PRINCIPLES BOARD OPINION (APB) NO. 30, "REPORTING THE RESULTS OF OPERATIONS--REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS." SEE NOTE 9 TO THE FINANCIAL STATEMENTS. ON DECEMBER 31, 1996, THE CORPORATION ACQUIRED INFINITY BROADCASTING CORPORATION (INFINITY). THE ACQUISITION, WHICH WAS ACCOUNTED FOR UNDER THE PURCHASE METHOD OF ACCOUNTING, IS REFLECTED IN THE YEAR-END 1996 CONSOLIDATED BALANCE SHEET. EFFECTIVE JANUARY 1, 1997, OPERATING RESULTS FOR INFINITY ARE INCLUDED IN THE CONSOLIDATED STATEMENT OF INCOME. ON FEBRUARY 10, 1997, THE CORPORATION ANNOUNCED THAT IT REACHED A DEFINITIVE MERGER AGREEMENT WITH GAYLORD ENTERTAINMENT COMPANY (GAYLORD) WHEREBY THE CORPORATION WILL ACQUIRE GAYLORD'S TWO MAJOR CABLE NETWORKS - THE NASHVILLE NETWORK (TNN) AND COUNTRY MUSIC TELEVISION (CMT). THE ACQUISITION INCLUDES DOMESTIC AND INTERNATIONAL OPERATIONS OF TNN, THE U.S. AND CANADIAN OPERATIONS OF CMT, AND APPROXIMATELY $50 MILLION OF WORKING CAPITAL. THE PURCHASE PRICE OF $1.55 BILLION WILL BE PAID IN WESTINGHOUSE COMMON STOCK. THE NUMBER OF SHARES TO BE ISSUED WILL DEPEND ON THE AVERAGE OF THE CLOSING PRICES OF THE CORPORATION'S COMMON STOCK DURING A TRADING PERIOD JUST PRIOR TO THE EFFECTIVE TIME OF THE TRANSACTION, SUBJECT TO CERTAIN LIMITS ON THE TOTAL NUMBER OF SHARES TO BE ISSUED AND CERTAIN TERMINATION RIGHTS UNDER THE MERGER AGREEMENT. THE TRANSACTION IS SUBJECT TO SEVERAL CONDITIONS, INCLUDING REGULATORY APPROVALS, THE RECEIPT OF A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE, AND THE APPROVAL OF GAYLORD'S SHAREHOLDERS. IN NOVEMBER 1996, THE BOARD OF DIRECTORS APPROVED A PLAN TO SEPARATE THE CORPORATION'S INDUSTRIES AND TECHNOLOGY BUSINESSES BY WAY OF A TAX-FREE DIVIDEND TO SHAREHOLDERS, FORMING A NEW PUBLICLY TRADED COMPANY TO BE CALLED WESTINGHOUSE ELECTRIC COMPANY (WELCO). THE PLAN ALSO PROVIDES THAT THERMO KING WILL CONDUCT A PUBLIC OFFERING OF UP TO 20% OF ITS COMMON STOCK AND WILL BECOME A MAJORITY-OWNED SUBSIDIARY OF WELCO. COMPLETION OF THE PLAN IS SUBJECT TO A NUMBER OF CONDITIONS, INCLUDING A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE AND THE REGISTRATION OF THE WELCO COMMON STOCK UNDER THE SECURITIES EXCHANGE ACT OF 1934. MANAGEMENT CURRENTLY ANTICIPATES THE SEPARATION WILL OCCUR LATER IN 1997. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE SEPARATION WILL OCCUR OR AS TO THE RELATED TIMING. FURTHERMORE, IF THE SEPARATION DOES OCCUR, THERE CAN BE NO ASSURANCE THAT ALL OF THE ASSETS, LIABILITIES AND CONTRACTUAL OBLIGATIONS WILL BE TRANSFERRED AS CURRENTLY CONTEMPLATED OR THAT CHANGES WILL NOT BE MADE TO THE SEPARATION PLAN. THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS THAT AFFECT THE REPORTED AMOUNTS OF ASSETS AND LIABILITIES, THE DISCLOSURE OF CONTINGENT ASSETS AND LIABILITIES AT THE DATE OF THE FINANCIAL STATEMENTS, AND THE REPORTED AMOUNTS OF REVENUES AND EXPENSES DURING THE REPORTING PERIOD. ACTUAL -6- 7 RESULTS COULD DIFFER FROM THOSE ESTIMATES. ON AN ONGOING BASIS, MANAGEMENT REVIEWS ITS ESTIMATES, INCLUDING THOSE RELATED TO LITIGATION, ENVIRONMENTAL LIABILITIES, CONTRACTS, PENSIONS, AND DISCONTINUED OPERATIONS, BASED ON CURRENTLY AVAILABLE INFORMATION. CHANGES IN FACTS AND CIRCUMSTANCES MAY RESULT IN REVISED ESTIMATES. IN THE OPINION OF MANAGEMENT, THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDE ALL MATERIAL ADJUSTMENTS NECESSARY TO PRESENT FAIRLY THE CORPORATION'S FINANCIAL POSITION, RESULTS OF OPERATIONS, AND CASH FLOWS. SUCH ADJUSTMENTS ARE OF A NORMAL RECURRING NATURE. THE RESULTS FOR THIS INTERIM PERIOD ARE NOT NECESSARILY INDICATIVE OF RESULTS FOR THE ENTIRE YEAR OR ANY OTHER INTERIM PERIOD. IN FEBRUARY 1997, THE FINANCIAL ACCOUNTING STANDARDS BOARD ISSUED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 128, "EARNINGS PER SHARE," WHICH REQUIRES THE DUAL PRESENTATION OF BASIC AND DILUTED EARNINGS PER SHARE. BASIC AND DILUTED EARNINGS PER SHARE CALCULATED IN ACCORDANCE WITH THIS STANDARD WOULD HAVE BEEN A LOSS OF $0.28 FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND INCOME OF $0.43 FOR THE THREE MONTHS ENDED MARCH 31, 1996. THE CORPORATION WILL ADOPT THIS STANDARD AS OF DECEMBER 31, 1997, AS REQUIRED. EARLY ADOPTION IS NOT PERMITTED. 2. RESTRUCTURING, LITIGATION AND OTHER MATTERS DURING THE FIRST THREE MONTHS OF 1996, THE CORPORATION TOOK SEVERAL ACTIONS TO STREAMLINE ITS BUSINESSES AND RECOGNIZE THE FINANCIAL IMPACT OF CERTAIN MATTERS. CERTAIN OF THESE ACTIONS RESULTED IN THE RECOGNITION OF CHARGES TO OPERATING PROFIT. COSTS FOR NEW RESTRUCTURING PROJECTS OF $123 MILLION WERE RECOGNIZED PRIMARILY FOR THE CONSOLIDATION OF FACILITIES AND THE SEPARATION OF EMPLOYEES. A CHARGE OF $486 MILLION WAS RECOGNIZED FOR PENDING LITIGATION MATTERS. OTHER COSTS OF $45 MILLION RECOGNIZED IN THE FIRST QUARTER GENERALLY RELATED TO ASSET IMPAIRMENT, AS DISCUSSED IN NOTE 3 TO THE FINANCIAL STATEMENTS, OR TO COSTS ASSOCIATED WITH PREVIOUSLY DIVESTED BUSINESSES. NO SUCH CHARGES WERE INCURRED IN THE FIRST THREE MONTHS OF 1997. 3. IMPAIRMENT OF LONG-LIVED ASSETS DURING THE FIRST QUARTER OF 1996, THE CORPORATION ADOPTED SFAS 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF." SFAS 121 REQUIRES THAT LONG-LIVED ASSETS, INCLUDING RELATED GOODWILL, BE REVIEWED FOR IMPAIRMENT AND WRITTEN DOWN TO THEIR ESTIMATED FAIR VALUE WHENEVER EVENTS OR CHANGES IN CIRCUMSTANCES INDICATE THAT THE CARRYING VALUE MAY NOT BE RECOVERABLE. UPON THE ADOPTION OF SFAS 121, AN IMPAIRMENT CHARGE OF $15 MILLION WAS RECOGNIZED IN THE 1996 FIRST QUARTER OPERATING PROFIT. 4. OTHER INCOME AND EXPENSES, NET (IN MILLIONS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ------------------ 1997 1996 ---- ---- INTEREST INCOME $ 1 $ 5 GAIN ON SALE OF EQUITY INVESTMENT 24 - LOSS ON DISPOSITION OF OTHER ASSETS - (151) OPERATING RESULTS - NON-CONSOLIDATED AFFILIATES 2 - FOREIGN CURRENCY TRANSACTION AND HIGH-INFLATION TRANSLATION EFFECT 7 (2) OTHER - 2 ----- ----- OTHER INCOME (EXPENSES), NET $ 34 $(146) ===== =====
-7- 8 5. EXTRAORDINARY ITEM ON MARCH 1, 1996, THE CORPORATION EXTINGUISHED PRIOR TO MATURITY $3,565 MILLION OF DEBT UNDER THE THEN-EXISTING $7.5 BILLION CREDIT FACILITY. AS A RESULT OF THE EARLY EXTINGUISHMENT OF DEBT AND THE WRITE-OFF OF RELATED DEBT ISSUE COSTS, THE CORPORATION INCURRED AN EXTRAORDINARY LOSS OF $63 MILLION, NET OF A TAX BENEFIT OF $41 MILLION, FOR THE THREE MONTHS ENDED MARCH 31, 1996. 6. INVENTORIES (IN MILLIONS)
MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- (UNAUDITED) RAW MATERIALS $ 120 $ 127 WORK IN PROCESS 492 493 FINISHED GOODS 133 125 ------- ------- 745 745 LONG-TERM CONTRACTS IN PROCESS 1,080 986 PROGRESS PAYMENTS TO SUBCONTRACTORS 51 45 RECOVERABLE ENGINEERING AND DEVELOPMENT COSTS 102 68 LESS: INVENTORIED COSTS RELATED TO CONTRACTS WITH PROGRESS BILLING TERMS (1,115) (1,061) ------- ------- INVENTORIES, NET $ 863 $ 783 ======= =======
7. OTHER INTANGIBLE AND NONCURRENT ASSETS (IN MILLIONS)
MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- (UNAUDITED) DEFERRED INCOME TAXES $ 906 $ 774 OTHER INTANGIBLE ASSETS 418 425 INTANGIBLE PENSION ASSET 40 40 DEFERRED CHARGES 41 39 JOINT VENTURES AND OTHER AFFILIATES 222 232 NONCURRENT RECEIVABLES 313 384 PROGRAM RIGHTS 141 142 OTHER 237 225 ------- ------- TOTAL OTHER INTANGIBLE AND NONCURRENT ASSETS $ 2,318 $ 2,261 ======= =======
-8- 9 8. OTHER CURRENT AND NONCURRENT LIABILITIES (IN MILLIONS)
MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- (UNAUDITED) OTHER CURRENT LIABILITIES: - ------------------------- ACCRUED EMPLOYEE COMPENSATION $ 176 $ 248 INCOME TAXES CURRENTLY PAYABLE 179 189 LIABILITIES FOR TALENT AND PROGRAM RIGHTS 455 308 ACCRUED PRODUCT WARRANTY 56 59 ACCRUED INTEREST AND INSURANCE 209 210 ACCRUED RESTRUCTURING COSTS 80 184 LIABILITY FOR BUSINESS DISPOSITIONS 94 79 ACCRUED EXPENSES 558 875 ENVIRONMENTAL LIABILITIES 61 62 OTHER 467 364 ------- ------- TOTAL OTHER CURRENT LIABILITIES $ 2,335 $ 2,578 ======= ======= OTHER NONCURRENT LIABILITIES: - ---------------------------- POSTRETIREMENT BENEFITS $ 1,198 $ 1,218 POSTEMPLOYMENT BENEFITS 67 67 ACCRUED RESTRUCTURING COSTS 86 94 LIABILITY FOR BUSINESS DISPOSITIONS 62 87 LIABILITIES FOR TALENT AND PROGRAM RIGHTS 48 51 ACCRUED EXPENSES 1,079 1,112 ENVIRONMENTAL LIABILITIES 398 404 OTHER 559 586 ------- ------- TOTAL OTHER NONCURRENT LIABILITIES $ 3,497 $ 3,619 ======= =======
9. DISCONTINUED OPERATIONS IN RECENT YEARS, THE CORPORATION HAS ADOPTED SEVERAL SEPARATE PLANS TO DISPOSE OF MAJOR SEGMENTS OF ITS BUSINESS. THESE BUSINESSES HAVE BEEN ACCOUNTED FOR AS DISCONTINUED OPERATIONS IN ACCORDANCE WITH APB 30. THE TABLE BELOW SUMMARIZES EACH OF THE CORPORATION'S SEGMENT DISPOSAL PLANS AS WELL AS THE ASSETS REMAINING AS OF MARCH 31, 1997.
PLAN DATE LINE OF BUSINESS REMAINING ASSETS - --------- ---------------- ---------------- NOVEMBER 1996 COMMUNICATION & INFORMATION SYSTEMS (CISCO) SEVERAL BUSINESSES MARCH 1996 ENVIRONMENTAL SERVICES SEVERAL BUSINESSES DECEMBER 1995 THE KNOLL GROUP (KNOLL) - DECEMBER 1995 DEFENSE AND ELECTRONIC SYSTEMS - JULY 1995 LAND DEVELOPMENT (WCI) MORTGAGE NOTES RECEIVABLE AND MISCELLANEOUS SECURITIES NOVEMBER 1992 FINANCIAL SERVICES LEASING RECEIVABLES NOVEMBER 1992 DISTRIBUTION & CONTROL (DCBU) - NOVEMBER 1992 WESTINGHOUSE ELECTRIC SUPPLY COMPANY (WESCO) MISCELLANEOUS SECURITIES
-9- 10 SUMMARIZED OPERATING RESULTS OF DISCONTINUED OPERATIONS, GROUPED BY MEASUREMENT DATE, FOLLOWS: OPERATING RESULTS OF DISCONTINUED OPERATIONS (IN MILLIONS) (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1997
MEASUREMENT DATE --------------------------------------- 1996 1995 1992 TOTAL ---- ---- ---- ----- SALES OF PRODUCTS AND SERVICES $ 109 $ - $ 3 $ 112 LOSS BEFORE INCOME TAXES (18) - (6) (24) INCOME TAX BENEFIT 6 - - 6 NET OPERATING LOSSES AFTER MEASUREMENT DATE CHARGED TO LIABILITY FOR ESTIMATED LOSS ON DISPOSAL (12) - (6) (18)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
MEASUREMENT DATE --------------------------------------- 1996 1995 1992 TOTAL ---- ---- ---- ----- SALES OF PRODUCTS AND SERVICES $ 138 $ 352 $ 7 $ 497 LOSS BEFORE INCOME TAXES (57) (78) (6) (141) INCOME TAX BENEFIT (EXPENSE) 6 (4) - 2 NET LOSS PRIOR TO MEASUREMENT DATE (51) - - (51) NET OPERATING LOSSES AFTER MEASUREMENT DATE CHARGED TO LIABILITY FOR ESTIMATED LOSS ON DISPOSAL - (82) (6) (88)
THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS HAVE BEEN SEPARATELY CLASSIFIED ON THE CONSOLIDATED BALANCE SHEET AS NET ASSETS OF DISCONTINUED OPERATIONS. A SUMMARY OF THESE ASSETS AND LIABILITIES FOLLOWS: NET ASSETS OF DISCONTINUED OPERATIONS (IN MILLIONS)
MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- (UNAUDITED) ASSETS: CASH AND CASH EQUIVALENTS $ 25 $ 13 RECEIVABLES 71 90 INVENTORIES 29 32 PORTFOLIO INVESTMENTS 823 845 OTHER ASSETS 509 438 ------ ------ TOTAL ASSETS -- DISCONTINUED OPERATIONS 1,457 1,418 ------ ------ LIABILITIES: SHORT-TERM DEBT 6 5 CURRENT MATURITIES OF LONG-TERM DEBT 13 2 LIABILITY FOR ESTIMATED LOSS ON DISPOSAL 631 672 LONG-TERM DEBT 425 417 OTHER LIABILITIES 129 142 DEFERRED INCOME TAXES 200 180 ------ ------ TOTAL LIABILITIES -- DISCONTINUED OPERATIONS 1,404 1,418 ------ ------ NET ASSETS OF DISCONTINUED OPERATIONS $ 53 $ - ====== ======
-10- 11 AT MARCH 31, 1997, THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS INCLUDED THOSE RELATED TO THE REMAINING OPERATING BUSINESSES FROM BOTH THE CISCO SEGMENT AND THE ENVIRONMENTAL SERVICES BUSINESS, THE REMAINING SECURITIES FROM WCI, OTHER MISCELLANEOUS SECURITIES, THE LEASING PORTFOLIO, AND DEFERRED INCOME TAXES. LIABILITIES ALSO INCLUDED DEBT AND THE ESTIMATED LOSSES AND DIVESTITURE COSTS ASSOCIATED WITH ALL DISCONTINUED OPERATIONS, INCLUDING ESTIMATED RESULTS OF OPERATIONS THROUGH DIVESTITURE. EXCEPT FOR THE LEASING PORTFOLIO, THE ASSETS GENERALLY ARE EXPECTED TO BE DIVESTED DURING 1997. DEFERRED INCOME TAXES, WHICH RESULT FROM TEMPORARY DIFFERENCES BETWEEN BOOK AND TAX BASES OF THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS, GENERALLY WILL BE TRANSFERRED TO CONTINUING OPERATIONS UPON REVERSAL AND WILL NOT RESULT IN THE RECEIPT OR PAYMENT OF CASH BY DISCONTINUED OPERATIONS. LIABILITIES ASSOCIATED WITH DIVESTITURES ARE EXPECTED TO BE SATISFIED OVER THE NEXT SEVERAL YEARS. DEBT WILL BE REPAID USING CASH PROCEEDS FROM THE LIQUIDATION OF ASSETS OF DISCONTINUED OPERATIONS. CASH PROCEEDS IN EXCESS OF THOSE REQUIRED TO REPAY THE DEBT AND SATISFY THE DIVESTITURE LIABILITIES OF DISCONTINUED OPERATIONS, IF ANY, WILL BE TRANSFERRED TO CONTINUING OPERATIONS. PORTFOLIO INVESTMENTS CONSIST PRIMARILY OF RECEIVABLES RELATED TO THE LEASING PORTFOLIO OF FINANCIAL SERVICES. ALSO INCLUDED ARE REAL ESTATE PROPERTIES AND INVESTMENTS IN LEASING PARTNERSHIPS. THE LEASING PORTFOLIO IS EXPECTED TO LIQUIDATE THROUGH 2015 IN ACCORDANCE WITH CONTRACTUAL TERMS AND GENERALLY CONSISTS OF DIRECT FINANCING AND LEVERAGED LEASES. AT MARCH 31, 1997 AND DECEMBER 31, 1996, 83% AND 84%, RESPECTIVELY, RELATED TO AIRCRAFT AND 17% AND 16%, RESPECTIVELY, RELATED TO COGENERATION FACILITIES. 10. CONTINGENT LIABILITIES AND COMMITMENTS LEGAL MATTERS - ------------- STEAM GENERATORS THE CORPORATION HAS BEEN DEFENDING VARIOUS LAWSUITS BROUGHT BY UTILITIES CLAIMING A SUBSTANTIAL AMOUNT OF DAMAGES IN CONNECTION WITH ALLEGED TUBE DEGRADATION IN STEAM GENERATORS SOLD BY THE CORPORATION AS COMPONENTS OF NUCLEAR STEAM SUPPLY SYSTEMS. SINCE 1993, SETTLEMENT AGREEMENTS HAVE BEEN ENTERED RESOLVING TEN LITIGATION CLAIMS. THESE AGREEMENTS GENERALLY REQUIRE THE CORPORATION TO PROVIDE CERTAIN PRODUCTS AND SERVICES AT PRICES DISCOUNTED AT VARYING RATES. TWO CASES WERE RESOLVED IN FAVOR OF THE CORPORATION AFTER TRIAL OR ARBITRATION. ONE ACTIVE STEAM GENERATOR LAWSUIT REMAINS. THE CORPORATION IS ALSO A PARTY TO SIX TOLLING AGREEMENTS WITH UTILITIES OR UTILITY PLANT OWNERS' GROUPS WHICH HAVE ASSERTED STEAM GENERATOR CLAIMS. THE TOLLING AGREEMENTS DELAY INITIATION OF ANY LITIGATION FOR VARIOUS SPECIFIED PERIODS OF TIME AND PERMIT THE PARTIES TIME TO ENGAGE IN DISCUSSION. SECURITIES CLASS ACTIONS - FINANCIAL SERVICES THE CORPORATION HAS BEEN DEFENDING DERIVATIVE AND CLASS ACTION LAWSUITS ALLEGING FEDERAL SECURITIES LAW AND COMMON LAW VIOLATIONS ARISING OUT OF PURPORTED MISSTATEMENTS OR OMISSIONS CONTAINED IN THE CORPORATION'S PUBLIC FILINGS CONCERNING THE FINANCIAL CONDITION OF THE CORPORATION AND CERTAIN OF ITS FORMER SUBSIDIARIES IN CONNECTION WITH CHARGES TO EARNINGS OF $975 MILLION IN 1990 AND $1,680 MILLION IN 1991 AND A PUBLIC OFFERING OF WESTINGHOUSE COMMON STOCK IN 1991. THE COURT DISMISSED BOTH THE DERIVATIVE CLAIM AND THE CLASS ACTION CLAIMS IN THEIR ENTIRETY. THESE DISMISSALS WERE APPEALED. IN JULY 1996, THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT (THE CIRCUIT COURT) AFFIRMED THE COURT'S DISMISSAL OF THE DERIVATIVE CLAIM. THE CIRCUIT COURT ALSO AFFIRMED IN PART AND REVERSED IN PART THE DISMISSAL OF THE CLASS ACTION CLAIMS. THOSE CLASS ACTION CLAIMS THAT WERE NOT DISMISSED BY THE CIRCUIT COURT HAVE BEEN REMANDED TO THE LOWER COURT FOR FURTHER PROCEEDINGS. -11- 12 ASBESTOS THE CORPORATION IS A DEFENDANT IN NUMEROUS LAWSUITS CLAIMING VARIOUS ASBESTOS-RELATED PERSONAL INJURIES, WHICH ALLEGEDLY OCCURRED FROM USE OR INCLUSION OF ASBESTOS IN CERTAIN OF THE CORPORATION'S PRODUCTS, GENERALLY IN THE PRE-1970 TIME PERIOD. TYPICALLY, THESE LAWSUITS ARE BROUGHT AGAINST MULTIPLE DEFENDANTS. THE CORPORATION WAS NEITHER A MANUFACTURER NOR A PRODUCER OF ASBESTOS AND IS OFTENTIMES DISMISSED FROM THESE LAWSUITS ON THE BASIS THAT THE CORPORATION HAS NO RELATIONSHIP TO THE PRODUCTS IN QUESTION OR THE CLAIMANT DID NOT HAVE EXPOSURE TO THE CORPORATION'S PRODUCT. AT MARCH 31, 1997, THE CORPORATION HAD APPROXIMATELY 101,000 CLAIMS OUTSTANDING AGAINST IT. IN COURT ACTIONS WHICH HAVE BEEN RESOLVED, THE CORPORATION HAS PREVAILED IN THE MAJORITY OF THE ASBESTOS CLAIMS AND HAS RESOLVED OTHERS THROUGH SETTLEMENT. FURTHERMORE, THE CORPORATION HAS BROUGHT SUIT AGAINST CERTAIN OF ITS INSURANCE CARRIERS WITH RESPECT TO THESE ASBESTOS CLAIMS. UNDER THE TERMS OF A SETTLEMENT AGREEMENT RESULTING FROM THIS SUIT, CARRIERS THAT HAVE AGREED TO THE SETTLEMENT ARE NOW REIMBURSING THE CORPORATION FOR A SUBSTANTIAL PORTION OF ITS CURRENT COSTS AND SETTLEMENTS ASSOCIATED WITH ASBESTOS CLAIMS. THE CORPORATION HAS RECORDED A LIABILITY FOR ASBESTOS-RELATED MATTERS THAT ARE DEEMED PROBABLE AND CAN BE REASONABLY ESTIMATED, AND HAS SEPARATELY RECORDED AN ASSET EQUAL TO THE AMOUNT OF SUCH ESTIMATED LIABILITIES THAT WILL BE RECOVERED PURSUANT TO AGREEMENTS WITH INSURANCE CARRIERS. THE CORPORATION CANNOT REASONABLY ESTIMATE COSTS FOR UNASSERTED ASBESTOS CLAIMS. GENERAL LITIGATION IS INHERENTLY UNCERTAIN AND ALWAYS DIFFICULT TO PREDICT. SUBSTANTIAL DAMAGES ARE SOUGHT IN THE STEAM GENERATOR CLAIMS, THE SECURITIES CLASS ACTION AND CERTAIN GROUPINGS OF ASBESTOS CLAIMS AND, ALTHOUGH MANAGEMENT BELIEVES A SIGNIFICANT ADVERSE JUDGMENT IS UNLIKELY, ANY SUCH JUDGMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON THE CORPORATION'S RESULTS OF OPERATIONS FOR A QUARTER OR A YEAR. HOWEVER, BASED ON ITS UNDERSTANDING AND EVALUATION OF THE RELEVANT FACTS AND CIRCUMSTANCES, MANAGEMENT BELIEVES THAT THE CORPORATION HAS MERITORIOUS DEFENSES TO THE LITIGATION DESCRIBED ABOVE AND THAT THE CORPORATION HAS ADEQUATELY PROVIDED FOR COSTS ARISING FROM POTENTIAL SETTLEMENT OF THESE MATTERS WHEN IN THE BEST INTEREST OF THE CORPORATION. MANAGEMENT BELIEVES THAT THE LITIGATION SHOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THE FINANCIAL CONDITION OF THE CORPORATION. ENVIRONMENTAL MATTERS - --------------------- COMPLIANCE WITH FEDERAL, STATE, AND LOCAL LAWS AND REGULATIONS RELATING TO THE DISCHARGE OF POLLUTANTS INTO THE ENVIRONMENT, THE DISPOSAL OF HAZARDOUS WASTES, AND OTHER RELATED ACTIVITIES AFFECTING THE ENVIRONMENT HAVE HAD AND WILL CONTINUE TO HAVE AN IMPACT ON THE CORPORATION. IT IS DIFFICULT TO ESTIMATE THE TIMING AND ULTIMATE COSTS TO BE INCURRED IN THE FUTURE DUE TO UNCERTAINTIES ABOUT THE STATUS OF LAWS, REGULATIONS, AND TECHNOLOGY; THE ADEQUACY OF INFORMATION AVAILABLE FOR INDIVIDUAL SITES; THE EXTENDED TIME PERIODS OVER WHICH SITE REMEDIATION OCCURS; AND THE IDENTIFICATION OF NEW SITES. THE CORPORATION HAS, HOWEVER, RECOGNIZED AN ESTIMATED LIABILITY, MEASURED IN CURRENT DOLLARS, FOR THOSE SITES WHERE IT IS PROBABLE THAT A LOSS HAS BEEN INCURRED AND THE AMOUNT OF THE LOSS CAN BE REASONABLY ESTIMATED. THE CORPORATION RECOGNIZES CHANGES IN ESTIMATES AS NEW REMEDIATION REQUIREMENTS ARE DEFINED OR AS MORE INFORMATION BECOMES AVAILABLE. WITH REGARD TO REMEDIAL ACTIONS UNDER FEDERAL AND STATE SUPERFUND LAWS, THE CORPORATION HAS BEEN NAMED A POTENTIALLY RESPONSIBLE PARTY (PRP) AT NUMEROUS SITES LOCATED THROUGHOUT THE COUNTRY. AT MANY OF THESE SITES, THE CORPORATION IS EITHER NOT A RESPONSIBLE PARTY OR ITS SITE INVOLVEMENT IS VERY LIMITED OR DE MINIMIS. HOWEVER, THE CORPORATION MAY HAVE VARYING DEGREES OF CLEANUP RESPONSIBILITIES AT APPROXIMATELY 90 SITES, INCLUDING THE SITES LOCATED IN BLOOMINGTON, INDIANA. THE CORPORATION BELIEVES THAT ANY LIABILITY INCURRED FOR CLEANUP AT THESE SITES WILL BE SATISFIED OVER A NUMBER OF YEARS, AND IN MANY CASES, THE COSTS WILL BE SHARED WITH OTHER RESPONSIBLE PARTIES. THESE SITES INCLUDE CERTAIN SITES FOR WHICH THE CORPORATION, AS PART OF AN AGREEMENT FOR SALE, HAS RETAINED OBLIGATIONS FOR REMEDIATION OF ENVIRONMENTAL CONTAMINATION AND FOR OTHER COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY ACT (CERCLA) ISSUES. -12- 13 BASED ON THE COSTS ASSOCIATED WITH THE MOST PROBABLE ALTERNATIVE REMEDIATION STRATEGY FOR THE ABOVE MENTIONED SITES, INCLUDING BLOOMINGTON, THE CORPORATION HAS AN ACCRUED LIABILITY OF $459 MILLION. DEPENDING ON THE REMEDIATION ALTERNATIVES ULTIMATELY SELECTED, THE COSTS RELATED TO THESE SITES COULD DIFFER FROM THE AMOUNTS CURRENTLY ACCRUED. THE ACCRUED LIABILITY INCLUDES $338 MILLION FOR SITE INVESTIGATION AND REMEDIATION AND $121 MILLION FOR POST CLOSURE AND MONITORING ACTIVITIES. MANAGEMENT ANTICIPATES THAT THE MAJORITY OF EXPENDITURES FOR SITE INVESTIGATION AND REMEDIATION WILL OCCUR DURING THE NEXT FIVE TO TEN YEARS. EXPENDITURES FOR POST-CLOSURE AND MONITORING ACTIVITIES WILL BE MADE OVER PERIODS UP TO 30 YEARS. COMMITMENTS -- CONTINUING OPERATIONS - ------------------------------------ IN THE ORDINARY COURSE OF BUSINESS, STANDBY LETTERS OF CREDIT AND SURETY BONDS ARE ISSUED ON BEHALF OF THE CORPORATION RELATED PRIMARILY TO PERFORMANCE OBLIGATIONS UNDER CONTRACTS WITH CUSTOMERS. THE CORPORATION ROUTINELY ENTERS INTO COMMITMENTS TO PURCHASE THE RIGHTS TO BROADCAST PROGRAMS, INCLUDING FEATURE FILMS AND SPORTING EVENTS. THESE CONTRACTS PERMIT THE BROADCAST OF SUCH PROPERTIES FOR VARIOUS PERIODS ENDING NO LATER THAN APRIL 2002. AS OF MARCH 31, 1997, THE CORPORATION WAS COMMITTED TO MAKE PAYMENTS UNDER SUCH BROADCASTING CONTRACTS, ALONG WITH COMMITMENTS FOR TALENT CONTRACTS, TOTALLING $3,383 MILLION. COMMITMENTS -- DISCONTINUED OPERATIONS - -------------------------------------- FINANCIAL SERVICES COMMITMENTS AT MARCH 31, 1997 CONSISTING PRIMARILY OF GUARANTEES TOTALLED $33 MILLION COMPARED TO $38 MILLION AT YEAR-END 1996. THE REMAINING COMMITMENTS HAVE FIXED EXPIRATION DATES FROM 1997 THROUGH 2002. MANAGEMENT EXPECTS THESE COMMITMENTS TO EXPIRE UNFUNDED. 11. SHAREHOLDERS' EQUITY THE CORPORATION'S SERIES C CONVERSION PREFERRED STOCK (SERIES C PREFERRED) HAS BEEN TREATED AS OUTSTANDING COMMON STOCK FOR THE CALCULATION OF EARNINGS PER SHARE, WHICH WAS IN ACCORDANCE WITH PREVALENT PRACTICE AT THE TIME OF SALE. IF THE SERIES C PREFERRED HAD BEEN TREATED AS COMMON STOCK EQUIVALENTS FOR THE CALCULATION OF EARNINGS PER SHARE, THE CORPORATION'S PER-SHARE RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 WOULD HAVE BEEN A LOSS OF $0.27 AND INCOME OF $0.42, RESPECTIVELY. IN APRIL 1997, THE CORPORATION ANNOUNCED ITS INTENTION TO REDEEM ALL OUTSTANDING SHARES OF THE SERIES C PREFERRED ON MAY 30, 1997. IN ACCORDANCE WITH THE TERMS OF THE OFFERING, EACH SHARE OF THE SERIES C PREFERRED WILL CONVERT INTO WESTINGHOUSE COMMON STOCK AT THE RATE OF 8.85 SHARES OF WESTINGHOUSE COMMON STOCK, EQUIVALENT TO 0.885 OF A SHARE OF WESTINGHOUSE COMMON STOCK FOR EACH $1.30 DEPOSITARY SHARE. EACH DEPOSITARY SHARE REPRESENTS ONE-TENTH OF A SHARE OF SERIES C PREFERRED. IN CONNECTION WITH THIS REDEMPTION OF THE SERIES C PREFERRED, THE CORPORATION WILL ISSUE 31,859,902 SHARES OF COMMON STOCK. ALL ACCRUED AND UNPAID DIVIDENDS ON THE REDEEMED SHARES OF SERIES C PREFERRED WILL BE PAID ON MAY 30, 1997. IN CONJUNCTION WITH THE INFINITY ACQUISITION ON DECEMBER 31, 1996, THE CORPORATION ISSUED 183 MILLION NEW SHARES OF WESTINGHOUSE COMMON STOCK. THESE SHARES, TOGETHER WITH THE RELATED OPTIONS OUTSTANDING, RESULTED IN AN INCREASE OF SHAREHOLDERS' EQUITY OF $3.8 BILLION. -13- 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW THE $4.7 BILLION ACQUISITION OF INFINITY BROADCASTING CORPORATION (INFINITY) RESULTED IN AN INCREASE IN SHAREHOLDERS' EQUITY AT DECEMBER 31, 1996 OF $3.8 BILLION FROM THE ISSUANCE OF 183 MILLION SHARES OF WESTINGHOUSE COMMON STOCK AND THE CONVERSION OF INFINITY OPTIONS INTO OPTIONS TO ACQUIRE APPROXIMATELY 22 MILLION ADDITIONAL SHARES OF WESTINGHOUSE COMMON STOCK. EFFECTIVE JANUARY 1, 1997, OPERATING RESULTS FOR INFINITY ARE INCLUDED IN THE CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AND ARE REPORTED AS PART OF THE RADIO SEGMENT OF THE MEDIA GROUP. SUBSEQUENT TO THE ACQUISITION OF INFINITY AT YEAR-END 1996, THE CORPORATION'S RADIO GROUP CONTINUED TO OUTPACE THE MARKET. THE RADIO GROUP'S PROFITABILITY IN THE FIRST QUARTER OF 1997 WAS FURTHER ENHANCED BY COST REDUCTION MEASURES AT RADIO STATIONS. NET INCOME FOR THE FIRST QUARTER OF 1997 WAS A LOSS OF $151 MILLION, OR $0.23 PER SHARE, COMPARED TO INCOME OF $181 MILLION, OR $0.41 PER SHARE FOR THE 1996 FIRST QUARTER. INCOME FROM CONTINUING OPERATIONS FOR THE QUARTER WAS A LOSS OF $151 MILLION, OR $0.23 PER SHARE, COMPARED TO A LOSS OF $723 MILLION, OR $1.65 PER SHARE FOR THE 1996 FIRST QUARTER. RESULTS FOR THE 1996 QUARTER INCLUDED A NUMBER OF SPECIAL ITEMS WHICH ARE PRESENTED IN THE TABLE BELOW. NO SPECIAL ITEMS WERE RECOGNIZED IN THE FIRST QUARTER OF 1997. EXCLUDING THE 1996 SPECIAL ITEMS, THE FIRST QUARTER 1996 LOSS FROM CONTINUING OPERATIONS WAS $114 MILLION, OR $0.26 PER SHARE. THE $37 MILLION INCREASE IN THE LOSS FROM CONTINUING OPERATIONS FOR THE QUARTER REFLECTED SEVERAL FACTORS. FOR THE MEDIA GROUP, THE FAVORABLE RADIO RESULTS WERE MORE THAN OFFSET BY LOWER PERFORMANCE BY THE TELEVISION NETWORK. RESULTS FOR THE INDUSTRIES AND TECHNOLOGY GROUP ALSO DECLINED PRIMARILY BECAUSE OF A PROFIT ADJUSTMENT FOR A COMPLEX INTERNATIONAL POWER PROJECT. INTEREST EXPENSE FOR THE 1997 QUARTER WAS FAVORABLE, REFLECTING THE MARCH 1996 DEBT REPAYMENTS FROM THE SALE PROCEEDS OF THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS AND THE KNOLL GROUP (KNOLL), THE CORPORATION'S OFFICE FURNITURE BUSINESS. ON FEBRUARY 10, 1997, THE CORPORATION ANNOUNCED THAT IT REACHED A DEFINITIVE MERGER AGREEMENT WITH GAYLORD ENTERTAINMENT COMPANY (GAYLORD) WHEREBY THE CORPORATION WILL ACQUIRE GAYLORD'S TWO MAJOR CABLE NETWORKS - THE NASHVILLE NETWORK (TNN) AND COUNTRY MUSIC TELEVISION (CMT). THE ACQUISITION INCLUDES DOMESTIC AND INTERNATIONAL OPERATIONS OF TNN, THE U.S. AND CANADIAN OPERATIONS OF CMT, AND APPROXIMATELY $50 MILLION OF WORKING CAPITAL. THE PURCHASE PRICE OF $1.55 BILLION WILL BE PAID IN WESTINGHOUSE COMMON STOCK. THE NUMBER OF SHARES TO BE ISSUED WILL DEPEND ON THE AVERAGE OF THE CLOSING PRICES OF THE CORPORATION'S COMMON STOCK DURING A TRADING PERIOD JUST PRIOR TO THE EFFECTIVE TIME OF THE TRANSACTION, SUBJECT TO CERTAIN LIMITS ON THE TOTAL NUMBER OF SHARES TO BE ISSUED AND CERTAIN TERMINATION RIGHTS UNDER THE MERGER AGREEMENT. THE TRANSACTION IS SUBJECT TO SEVERAL CONDITIONS, INCLUDING REGULATORY APPROVALS, THE RECEIPT OF A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE, AND THE APPROVAL OF GAYLORD'S SHAREHOLDERS. MANAGEMENT CURRENTLY ANTICIPATES THIS TRANSACTION TO BE COMPLETED PRIOR TO THE SEPARATION OF THE INDUSTRIES AND TECHNOLOGY BUSINESSES AS DISCUSSED BELOW. IN NOVEMBER 1996, THE BOARD OF DIRECTORS APPROVED A PLAN TO SEPARATE THE CORPORATION'S INDUSTRIES AND TECHNOLOGY BUSINESSES BY WAY OF A TAX-FREE DIVIDEND TO SHAREHOLDERS, FORMING A NEW PUBLICLY TRADED COMPANY TO BE CALLED WESTINGHOUSE ELECTRIC COMPANY (WELCO). THE PLAN ALSO PROVIDES THAT THERMO KING WILL CONDUCT A PUBLIC OFFERING OF UP TO 20% OF ITS COMMON STOCK AND WILL BECOME A MAJORITY-OWNED SUBSIDIARY OF WELCO. COMPLETION OF THE PLAN IS SUBJECT TO A NUMBER OF CONDITIONS, INCLUDING A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE AND THE REGISTRATION OF THE WELCO COMMON STOCK UNDER THE SECURITIES EXCHANGE ACT OF 1934. MANAGEMENT CURRENTLY ANTICIPATES THE SEPARATION WILL OCCUR LATER IN 1997. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE SEPARATION WILL OCCUR OR AS TO THE RELATED TIMING. FURTHERMORE, IF THE SEPARATION DOES OCCUR, THERE CAN BE NO ASSURANCE THAT ALL OF THE ASSETS, LIABILITIES AND CONTRACTUAL OBLIGATIONS WILL BE TRANSFERRED AS CURRENTLY CONTEMPLATED OR THAT CHANGES WILL NOT BE MADE TO THE SEPARATION PLAN. -14- 15 DURING 1996, THE CORPORATION COMPLETED THE SALES OF ITS DEFENSE AND ELECTRONIC SYSTEMS BUSINESS AND KNOLL, AND RECORDED A COMBINED AFTER-TAX GAIN OF $1.2 BILLION. THE CASH PROCEEDS FROM THESE DIVESTITURES, WHICH TOTALLED NEARLY $3.6 BILLION, WERE USED TO REPAY AHEAD OF SCHEDULE A SIGNIFICANT PORTION OF THE DEBT INCURRED TO FINANCE THE 1995 $5.4 BILLION ACQUISITION OF CBS INC. (CBS). THE CORPORATION FURTHER STREAMLINED ITS BUSINESSES IN 1996 AND ADOPTED PLANS TO EXIT ITS COMMUNICATION & INFORMATION SYSTEMS (CISCO) SEGMENT AND ITS ENVIRONMENTAL SERVICES LINE OF BUSINESS, RESULTING IN THE TRANSFER OF THESE BUSINESSES TO DISCONTINUED OPERATIONS. ON DECEMBER 31, 1996, THE CORPORATION COMPLETED THE SALE OF WESTINGHOUSE SECURITY SYSTEMS, PART OF CISCO. IN THE FIRST QUARTER OF 1996, THE CORPORATION RECOGNIZED COSTS ASSOCIATED WITH ADDITIONAL RESTRUCTURING ACTIONS, AS WELL AS OUTSTANDING LITIGATION AND OTHER MATTERS. THE SPECIAL ITEMS INCLUDED IN THE CORPORATION'S RESULTS FOR THE FIRST THREE MONTHS OF 1996 ARE SUMMARIZED BELOW. SPECIAL ITEMS INCLUDED IN RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 (IN MILLIONS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
PRE-TAX AFTER-TAX PER-SHARE AMOUNT AMOUNT IMPACT ------- --------- --------- CONTINUING OPERATIONS: OPERATING PROFIT: RESTRUCTURING $ (123) LITIGATION MATTERS (486) IMPAIRMENT OF ASSETS (15) CONTRACT ACCOUNTING ADJUSTMENTS (128) OTHER (30) ------- TOTAL IMPACT ON OPERATING PROFIT (782) OTHER INCOME AND EXPENSE: LOSS ON ASSETS HELD FOR SALE (152) ------- TOTAL IMPACT ON CONTINUING OPERATIONS $ (934) $ (609) $ (1.39) ======= DISCONTINUED OPERATIONS: NET GAIN ON DISPOSAL OF BUSINESSES 1,018 2.32 EXTRAORDINARY ITEM: LOSS ON EARLY EXTINGUISHMENT OF DEBT (63) (0.14) ------ ------- NET AMOUNT OF SPECIAL ITEMS $ 346 $ 0.79 ====== =======
-15- 16 RESULTS OF OPERATIONS THE FOLLOWING REPRESENTS THE SEGMENT RESULTS FOR THE CORPORATION'S CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996. SEGMENT RESULTS (IN MILLIONS)(UNAUDITED) ----------------------------------------
OPERATING PROFIT (LOSS) SALES OF PRODUCTS OPERATING PROFIT EXCLUDING & SERVICES (LOSS) SPECIAL CHARGES ----------------- ---------------- ---------------- THREE MONTHS ENDED MARCH 31 1997 1996 1997 1996 1997 1996 - ------------------ ---- ---- ---- ---- ---- ---- MEDIA: TELEVISION $ 177 $ 188 $ 56 $ 54 $ 56 $ 54 NETWORK 793 766 (60) - (60) - RADIO 313 121 47 20 47 20 OTHER MEDIA BUSINESSES 60 49 (4) 4 (4) 4 OTHER MEDIA (17) (6) (35) (76) (35) (35) ------ ------ ----- ----- ----- ----- TOTAL MEDIA 1,326 1,118 4 2 4 43 INDUSTRIES & TECHNOLOGY: POWER SYSTEMS: ENERGY SYSTEMS 187 231 (60) (26) (60) (5) POWER GENERATION (a) 474 277 (39) (225) (39) (42) OTHER POWER SYSTEMS (51) (50) (17) (306) (17) (17) ------ ------ ----- ----- ----- ----- TOTAL POWER SYSTEMS 610 458 (116) (557) (116) (64) THERMO KING 251 257 47 45 47 45 GOVERNMENT OPERATIONS 23 25 10 18 10 18 ------ ----- ----- ----- ----- ----- TOTAL INDUSTRIES & TECHNOLOGY (a) 884 740 (59) (494) (59) (1) CORPORATE & OTHER 20 34 (75) (322) (75) (74) INTERSEGMENT SALES (7) (9) - - - - ------ ------ ----- ----- ----- ----- TOTAL (a) $2,223 $1,883 $(130) $(814) $(130) $ (32) ====== ====== ===== ===== ===== =====
(a) FIRST QUARTER 1996 SALES WERE REDUCED BY A $180 MILLION ONE-TIME ADJUSTMENT TO PREVIOUS ACCOUNTING FOR CERTAIN LONG-TERM CONTRACTS. THE CORPORATION'S REPORTED SALES INCREASED $340 MILLION, OR 18%, FOR THE FIRST QUARTER OF 1997 COMPARED TO THE 1996 FIRST QUARTER. ADJUSTING FOR THE IMPACT OF THE INFINITY ACQUISITION AND EXCLUDING THE EFFECTS OF THE SPECIAL ONE-TIME ACCOUNTING ADJUSTMENT AT POWER GENERATION IN 1996, SALES WERE FLAT FOR THE QUARTER. THE IMPROVEMENTS ACHIEVED BY POWER GENERATION AND MEDIA WERE ESSENTIALLY OFFSET BY LOWER SALES FROM ENERGY SYSTEMS, THERMO KING, GOVERNMENT OPERATIONS, AND CERTAIN MISCELLANEOUS NON-STRATEGIC BUSINESSES THAT WERE DIVESTED IN 1996. THE OPERATING LOSS FOR THE CORPORATION FOR THE FIRST QUARTER OF 1997 INCREASED SIGNIFICANTLY FROM THE FIRST QUARTER OF 1996, EXCLUDING SPECIAL ITEMS IN THE 1996 FIRST QUARTER. WHILE THE STRENGTH OF THE MEDIA GROUP'S RADIO BUSINESS CAUSED PROFITS IN RADIO TO INCREASE SIGNIFICANTLY AS A RESULT OF THE ADDITION OF INFINITY AND IMPROVEMENT AT THE EXISTING STATIONS, THE CBS NETWORK PROFITS DECLINED PRIMARILY AS A RESULT OF LOWER RATINGS AND HIGHER PROGRAMMING COSTS. POWER SYSTEMS' OPERATING LOSS INCREASED FOR THE QUARTER PRIMARILY AS A RESULT OF THE COMPLETION OF A REEVALUATION OF A COMPLEX INTERNATIONAL NUCLEAR PROJECT AT ENERGY SYSTEMS WHICH REQUIRED AN ADJUSTMENT TO SALES AND OPERATING PROFIT. GOVERNMENT OPERATIONS' RESULTS DECLINED FOR THE FIRST QUARTER OF 1997 COMPARED -16- 17 TO 1996 DUE TO THE LOSS OF A DEPARTMENT OF ENERGY (DOE) CONTRACT IN 1996. THERMO KING, HOWEVER, INCREASED PROFITS SLIGHTLY FOLLOWING TWO FOURTH QUARTER 1996 ACQUISITIONS. MEDIA DUE TO THE ACQUISITION OF INFINITY AT DECEMBER 31, 1996, THE RESULTS FOR MEDIA FOR THE FIRST QUARTER OF 1997 INCLUDE INFINITY FINANCIAL DATA, WHILE THE FIRST QUARTER OF 1996 RESULTS DO NOT. WHERE APPROPRIATE, THE DISCUSSION BELOW PROVIDES A COMPARISON OF THE ACTUAL RESULTS FOR THE FIRST QUARTER OF 1997 WITH THE PROFORMA COMBINED CBS AND INFINITY RESULTS FOR THE FIRST QUARTER OF 1996. REVENUES FOR THE TELEVISION GROUP DECLINED $11 MILLION OR 6% FOR THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR. LOWER RATINGS IN CERTAIN MAJOR MARKETS AND THE LACK OF POLITICAL ADVERTISING IN THE 1997 FIRST QUARTER CONTRIBUTED TO THE DECLINE. THE 1996 FIRST QUARTER ALSO INCLUDED REVENUES FROM WPRI, THE PROVIDENCE, RHODE ISLAND STATION SOLD IN JULY 1996. DESPITE THE LOWER REVENUES, OPERATING PROFIT INCREASED NEARLY 4% AS COST IMPROVEMENTS AT THE STATIONS MORE THAN OFFSET THE DECREASED REVENUES. THE NETWORK EXPERIENCED A 4% INCREASE IN REVENUES FOR THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR PRIMARILY AS A RESULT OF INCREASED SYNDICATION FEES AND THE TIMING OF THE NCAA FINAL BASKETBALL GAME. THE FINAL GAME WAS PLAYED ON MARCH 31, 1997 COMPARED TO APRIL 1, 1996. OPERATING PROFIT, HOWEVER, DECLINED AS A RESULT OF LOWER AUDIENCE LEVELS IN KEY DEMOGRAPHIC CATEGORIES AND HIGHER PROGRAMMING COSTS PRIMARILY ASSOCIATED WITH SPORTS AND SPECIAL EVENTS. THE FAVORABLE EFFECT FROM PURCHASE PRICE ACCOUNTING ADJUSTMENTS RELATED TO PROGRAM RIGHTS DECLINED $32 MILLION IN THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR. ON A PROFORMA COMBINED BASIS, SALES FOR RADIO FOR THE FIRST QUARTER OF 1997 INCREASED NEARLY 18% COMPARED TO THE FIRST QUARTER OF 1996, OUTPACING THE MARKET. OPERATING PROFIT, ON A PROFORMA COMBINED BASIS, INCREASED 38% FOR THE SAME PERIOD AS A RESULT OF THE INCREASED REVENUES AND BENEFITS FROM COST REDUCTION INITIATIVES. RESULTS FOR THE RADIO GROUP INCLUDE AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS RELATED TO THE INFINITY ACQUISITION. OTHER MEDIA BUSINESSES INCLUDES OPERATING RESULTS FOR CBS CABLE, FORMERLY GROUP W SATELLITE COMMUNICATIONS, AND EYEMARK ENTERTAINMENT (EYEMARK) WHICH PRODUCES AND DISTRIBUTES PROGRAMMING. REVENUES FOR CBS CABLE INCREASED NEARLY 16% IN THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR, PRIMARILY AS A RESULT OF INCREASED SALES FOR SPORTS AND OTHER CABLE SERVICES AND THE JUNE 1996 ACQUISITION OF TELENOTICIAS, A 24-HOUR, SPANISH-LANGUAGE NEWS SERVICE. OPERATING PROFIT, HOWEVER, DECLINED FOR THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR PRIMARILY DUE TO INCREASED EXPENSES RELATED TO TELENOTICIAS AND COSTS TO DEVELOP AND LAUNCH EYE ON PEOPLE, A NEW CABLE CHANNEL WHICH DEBUTED MARCH 31, 1997. THE ACQUISITION OF TNN AND CMT LATER IN 1997 IS EXPECTED TO STRENGTHEN THE GROUP'S CABLE BUSINESS. REVENUES FOR EYEMARK INCREASED IN THE FIRST QUARTER OF 1997 COMPARED TO THE FIRST QUARTER OF 1996. THE OPERATING LOSS ALSO IMPROVED DUE TO THE MIX OF PROGRAMMING. COSTS FOR THE MEDIA GROUP'S HEADQUARTERS AND AMORTIZATION OF ALL GOODWILL ARISING FROM THE CBS ACQUISITION COMPRISE OTHER MEDIA. FOR THE FIRST QUARTER OF 1996, OTHER MEDIA INCLUDED A $41 MILLION RESTRUCTURING CHARGE FOR WESTINGHOUSE'S ACTIONS TO OBTAIN OPERATIONAL SYNERGIES BETWEEN CBS AND WESTINGHOUSE. THE COST OF THE CBS ACTIONS WAS RECORDED IN CONNECTION WITH THE CBS ACQUISITION. GOODWILL AMORTIZATION RELATED TO THE CBS ACQUISITION TOTALS $30 MILLION PER QUARTER. FOR THE ENTIRE MEDIA GROUP, EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA) TOTALLED $110 MILLION FOR THE FIRST QUARTER OF 1997, FLAT WITH THE SAME PERIOD IN 1996, EXCLUDING THE RESTRUCTURING CHARGE IN 1996. ON A PROFORMA COMBINED BASIS, EBITDA FOR THE FIRST QUARTER OF 1996 WAS $146 MILLION. EBITDA DIFFERS FROM OPERATING CASH FLOWS FOR THE GROUP PRIMARILY BECAUSE IT DOES NOT CONSIDER CHANGES IN ASSETS AND LIABILITIES FROM PERIOD TO PERIOD. -17- 18 POWER SYSTEMS POWER SYSTEMS INCLUDES RESULTS FOR THE ENERGY SYSTEMS AND POWER GENERATION BUSINESS UNITS. EXCLUDING SPECIAL ITEMS IN THE 1996 FIRST QUARTER, SALES FOR POWER SYSTEMS DECREASED SLIGHTLY IN THE 1997 FIRST QUARTER, WHILE THE OPERATING LOSS INCREASED SIGNIFICANTLY. ENERGY SYSTEMS' SALES AND OPERATING PROFIT DECREASED FOR THE FIRST QUARTER OF 1997 COMPARED TO THE FIRST QUARTER OF 1996. SALES DECREASED $44 MILLION OR 19% FOR THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR, WHILE THE OPERATING LOSS INCREASED $55 MILLION FOR THE SAME PERIOD, EXCLUDING LAST YEAR'S $21 MILLION RESTRUCTURING CHARGE. THE PRIMARY REASON FOR THE DECREASE IN SALES AND OPERATING PROFIT FOR THE PERIOD WAS A $49 MILLION ADJUSTMENT TO BOTH SALES AND OPERATING PROFIT FOLLOWING A COMPREHENSIVE REEVALUATION OF THE WORK SCOPE AND COSTS TO COMPLETE A COMPLEX INTERNATIONAL NUCLEAR PROJECT WHICH ORIGINATED IN 1993. ALTHOUGH THIS $352 MILLION CONTRACT REMAINS PROFITABLE, MANAGEMENT HAS DETERMINED THAT THE CORPORATION'S PROFIT WILL BE LESS THAN ORIGINALLY ESTIMATED. ORDERS FOR THE QUARTER WERE DOWN 24%, PRIMARILY DUE TO A LARGE FUEL RELOAD ORDER IN THE FIRST QUARTER OF 1996. POWER GENERATION'S ORDERS FOR THE FIRST QUARTER OF 1997 DECREASED $269 MILLION OR 55% COMPARED TO THE FIRST QUARTER OF 1996. DELAYS IN THE CLOSING OF CERTAIN PROJECT ORDERS WAS THE PRIMARY CAUSE OF THE DECREASED ORDER LEVEL. ALSO, THE 1996 FIRST QUARTER CONTAINED A NUMBER OF LARGE INTERNATIONAL AND DOMESTIC ORDERS. IN LIGHT OF CHANGING MARKET CONDITIONS AND PRICING PRESSURES AT POWER GENERATION, EFFECTIVE JANUARY 1, 1996, THE BUSINESS UNIT MODIFIED ITS APPLICATION OF CONTRACT ACCOUNTING PRINCIPLES TO REFLECT A MORE CONSERVATIVE APPROACH. A ONE-TIME ACCOUNTING ADJUSTMENT WAS RECOGNIZED IN THE FIRST QUARTER OF 1996 TO REDUCE SALES BY $180 MILLION AND OPERATING PROFIT BY $128 MILLION. REVENUES IN POWER GENERATION INCREASED $17 MILLION OR 4% FOR THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR, EXCLUDING THE EFFECTS OF THE 1996 ONE-TIME ADJUSTMENT. HIGHER SERVICE SALES WAS THE PRIMARY REASON FOR THIS REVENUE INCREASE. THE OPERATING LOSS DECLINED 7%, EXCLUDING THE CONTRACT ACCOUNTING ADJUSTMENT, A $5 MILLION LITIGATION CHARGE, AND A $50 MILLION RESTRUCTURING CHARGE, ALL OF WHICH WERE RECOGNIZED IN THE FIRST QUARTER OF 1996. HIGHER SERVICE REVENUES AND COST IMPROVEMENTS FROM RESTRUCTURINGS CAUSED THE IMPROVEMENTS IN THE OPERATING LOSS. THE OPERATING LOSS FOR THE FIRST QUARTER OF 1996 FOR OTHER POWER SYSTEMS, WHICH PRIMARILY REFLECTS DISCOUNTS ON PRIOR LITIGATION SETTLEMENTS, INCLUDED A $289 MILLION CHARGE FOR LITIGATION AND OTHER MATTERS. EXCLUDING THIS CHARGE, THE OPERATING LOSS FOR THE FIRST QUARTER OF 1997 WAS FLAT WITH THE SAME PERIOD LAST YEAR. THERMO KING THERMO KING CONTINUES TO POST POSITIVE RESULTS IN THE FACE OF SOFT MARKETS IN NORTH AMERICA AND EUROPE. ORDERS FOR THE FIRST QUARTER OF 1997 WERE UP 5%, PRIMARILY AS A RESULT OF A LARGE CONTAINER ORDER AND INCREASES IN SERVICE PARTS BUSINESS. SALES WERE DOWN SLIGHTLY DUE PRIMARILY TO THE STRONG U.S. DOLLAR AND WEAK NORTH AMERICAN TRUCK AND TRAILER SALES. REVENUES FROM TWO FOURTH QUARTER 1996 ACQUISITIONS, SABROE AND THERMAL, PARTIALLY OFFSET THE LOWER TRUCK AND TRAILER SALES. OPERATING PROFIT INCREASED 4% IN THE FIRST QUARTER OF 1997 COMPARED TO THE SAME PERIOD LAST YEAR AS REVENUES FROM THE TWO ACQUISITIONS AND SUBSTANTIAL FOCUS ON MATERIAL COST AND PRODUCTIVITY IMPROVEMENTS OFFSET THE EFFECT OF LOWER TRUCK AND TRAILER SALES. -18- 19 GOVERNMENT OPERATIONS REVENUES FOR THE FIRST QUARTER OF 1997 WERE DOWN 8% AND OPERATING PROFIT WAS DOWN $8 MILLION, OR 44%, COMPARED TO THE FIRST QUARTER OF 1996. THE DECREASE IN SALES WAS ATTRIBUTABLE TO THE LOSS OF A DOE CONTRACT AT HANFORD, WASHINGTON, IN LATE 1996, PARTIALLY OFFSET BY INCREASED PASS-THROUGH SALES AT THE DOE SAVANNAH RIVER SITE. OPERATING PROFIT DECREASED AS A RESULT OF THE LOSS OF THE HANFORD CONTRACT PERFORMANCE FEE. CORPORATE AND OTHER SALES FOR THE FIRST QUARTER OF 1997 WERE DOWN 41% DUE PRIMARILY TO THE 1996 SALE OF SEVERAL NON-STRATEGIC BUSINESSES. THE OPERATING LOSS, EXCLUDING THE FIRST QUARTER 1996 CHARGE OF $248 MILLION FOR RESTRUCTURING, LITIGATION AND OTHER MATTERS, WAS FLAT. DESPITE COST REDUCTIONS FROM RESTRUCTURING ACTIVITIES, CORPORATE COSTS ARE CONSISTENT WITH THE PRIOR YEAR. COSTS ASSOCIATED WITH THE CORPORATION'S CONTINUING PENSION OBLIGATION FOR RETIRED INDIVIDUALS WHO WERE PART OF THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS SOLD IN MARCH 1996 CONTINUES TO UNFAVORABLY IMPACT OPERATING PROFIT. THESE COSTS FOR JANUARY AND FEBRUARY OF 1996 WERE INCLUDED IN DISCONTINUED OPERATIONS AS PART OF THE RESULTS FOR THAT BUSINESS PRIOR TO ITS DISPOSAL. RESTRUCTURING AND OTHER ACTIONS IN RECENT YEARS, THE CORPORATION HAS RESTRUCTURED MANY BUSINESSES AND ITS CORPORATE HEADQUARTERS IN AN EFFORT TO REDUCE COSTS AND REMAIN COMPETITIVE IN ITS MARKETS. RESTRUCTURING ACTIVITIES PRIMARILY INVOLVE THE SEPARATION OF EMPLOYEES, THE CLOSING OF FACILITIES, THE TERMINATION OF LEASES, AND THE EXITING OF PRODUCT LINES. COSTS FOR RESTRUCTURING ACTIVITIES ARE LIMITED TO INCREMENTAL COSTS THAT DIRECTLY RESULT FROM THE RESTRUCTURING ACTIVITIES AND THAT PROVIDE NO FUTURE BENEFIT TO THE CORPORATION. DURING 1996, MANAGEMENT APPROVED NEW RESTRUCTURING PROJECTS WITH COSTS TOTALLING $273 MILLION, $123 MILLION IN THE FIRST QUARTER AND $150 MILLION IN THE FOURTH QUARTER, PRIMARILY FOR CONSOLIDATION OF FACILITIES AND THE SEPARATION OF EMPLOYEES. AS OF MARCH 31, 1997, $162 MILLION HAD BEEN EXPENDED ON THE 1996 PROGRAMS, $106 MILLION OF WHICH WAS CASH. FUTURE CASH EXPENDITURES FOR THESE PROGRAMS ARE ESTIMATED TO APPROXIMATE $71 MILLION FOR THE REMAINDER OF 1997, AND $10 MILLION FOR 1998 AND BEYOND. IN ADDITION TO THE RESERVES ESTABLISHED IN 1996, RESTRUCTURING RESERVES WERE ALSO ESTABLISHED IN 1994 AND 1995. THE EMPLOYEE SEPARATIONS INCLUDED IN THE 1994 PLAN ARE COMPLETE. THE EMPLOYEE SEPARATIONS INCLUDED IN THE 1995 PLAN ARE 85% COMPLETE WITH THE REMAINDER OF SEPARATIONS TO OCCUR DURING 1997. REMAINING TOTAL COSTS UNDER THIS PLAN OF APPROXIMATELY $6 MILLION REPRESENT PRIMARILY CASH EXPENDITURES, ALL OF WHICH WILL OCCUR IN 1997. IN ADDITION, A CBS RESTRUCTURING PLAN WAS ADOPTED IN CONJUNCTION WITH THE ACQUISITION IN NOVEMBER 1995. IMPLEMENTATION OF THIS PLAN WILL CONTINUE OVER THE NEXT TWO YEARS. ANNUALIZED SAVINGS FROM THE 1994 AND 1995 RESTRUCTURING PROGRAMS OTHER THAN THE CBS PLAN ARE ESTIMATED TO TOTAL APPROXIMATELY $75 MILLION; HOWEVER, COMPETITIVE PRESSURES CAUSING PRICE COMPRESSION IN CERTAIN OF THE CORPORATION'S MARKETS HAVE ABSORBED A SIGNIFICANT PORTION OF THE SAVINGS ACHIEVED THROUGH RESTRUCTURING ACTIONS. ANNUALIZED SAVINGS FROM THE 1996 PLAN, WHICH WILL BE GRADUALLY ACHIEVED OVER THE NEXT TWO YEARS, ARE ESTIMATED AT $100 MILLION. THE CORPORATION EXPECTS TO CONTINUE TO IDENTIFY RESTRUCTURING INITIATIVES AT ITS BUSINESS UNITS AND ITS CORPORATE HEADQUARTERS IN AN ONGOING EFFORT TO REDUCE ITS OVERALL COST STRUCTURE AND IMPROVE COMPETITIVENESS. DISCONTINUED OPERATIONS AT MARCH 31, 1997, THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS INCLUDED THOSE RELATED TO THE REMAINING OPERATING BUSINESSES FROM THE CISCO SEGMENT AND THE ENVIRONMENTAL SERVICES BUSINESS, THE REMAINING SECURITIES FROM -19- 20 THE LAND DEVELOPMENT SUBSIDIARY, OTHER MISCELLANEOUS SECURITIES, THE LEASING PORTFOLIO, AND DEFERRED INCOME TAXES. LIABILITIES ALSO INCLUDED DEBT AND THE ESTIMATED LOSSES AND DIVESTITURE COSTS ASSOCIATED WITH ALL DISCONTINUED OPERATIONS, INCLUDING ESTIMATED RESULTS OF OPERATIONS THROUGH DIVESTITURE. IN APRIL 1997, THE CORPORATION COMPLETED THE SALE OF TWO OF THE REMAINING ENVIRONMENTAL SERVICES BUSINESSES. OTHER THAN THE LEASING PORTFOLIO, THE CORPORATION IS ACTIVELY PURSUING THE SALE OF ASSETS, WHICH ARE GENERALLY EXPECTED TO BE DIVESTED DURING 1997. DEFERRED INCOME TAXES, WHICH RESULT FROM TEMPORARY DIFFERENCES BETWEEN BOOK AND TAX BASES OF THE ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS, GENERALLY WILL BE TRANSFERRED TO CONTINUING OPERATIONS UPON REVERSAL AND WILL NOT RESULT IN THE RECEIPT OR PAYMENT OF CASH BY DISCONTINUED OPERATIONS. LIABILITIES ASSOCIATED WITH DIVESTITURES ARE EXPECTED TO BE SATISFIED OVER THE NEXT SEVERAL YEARS. DEBT WILL BE REPAID USING CASH PROCEEDS FROM THE LIQUIDATION OF ASSETS OF DISCONTINUED OPERATIONS. CASH PROCEEDS IN EXCESS OF THOSE REQUIRED TO REPAY THE DEBT AND SATISFY THE DIVESTITURE LIABILITIES OF DISCONTINUED OPERATIONS, IF ANY, WILL BE TRANSFERRED TO CONTINUING OPERATIONS. MANAGEMENT BELIEVES THAT THE NET PROCEEDS ANTICIPATED FROM THE CONTINUED LIQUIDATION OF ASSETS OF DISCONTINUED OPERATIONS WILL BE SUFFICIENT TO FUND THE LIABILITIES OF DISCONTINUED OPERATIONS, INCLUDING THE REPAYMENT OF ITS DEBT. MANAGEMENT FURTHER BELIEVES THAT THE LIABILITY FOR THE ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS OF $631 MILLION AT MARCH 31, 1997 IS ADEQUATE TO COVER FUTURE OPERATING COSTS, ESTIMATED LOSSES, AND THE REMAINING DIVESTITURE COSTS ASSOCIATED WITH ALL DISCONTINUED BUSINESSES. OTHER INCOME AND EXPENSES OTHER INCOME AND EXPENSES FOR THE FIRST QUARTER OF 1997 WAS INCOME OF $34 MILLION COMPARED TO A LOSS OF $146 MILLION FOR THE FIRST QUARTER OF 1996. THE 1997 INCOME INCLUDED THE SALE OF AN EQUITY INVESTMENT IN A REGIONAL SPORTS NETWORK. DURING THE FIRST QUARTER OF 1996, A COMPREHENSIVE REVIEW WAS UNDERTAKEN BY THE CORPORATION TO IDENTIFY NON-STRATEGIC ASSETS. A CHARGE OF $152 MILLION WAS RECOGNIZED DURING THE QUARTER FOR LOSSES EXPECTED TO BE REALIZED UPON THE SALE OF THOSE ASSETS. INTEREST EXPENSE INTEREST EXPENSE FOR CONTINUING OPERATIONS FOR THE FIRST QUARTER OF 1997 WAS $114 MILLION COMPARED TO $146 MILLION FOR THE SAME PERIOD IN 1996. THE DECREASE IN INTEREST EXPENSE IS PRIMARILY THE RESULT OF THE REPAYMENT OF $3.6 BILLION OF DEBT IN MARCH 1996 THROUGH PROCEEDS FROM THE DIVESTITURES OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS, AND FAVORABLE INTEREST RATES UNDER THE NEW BANK CREDIT AGREEMENT COMPLETED IN AUGUST 1996 (SEE REVOLVING CREDIT FACILITY). THIS DECREASE IN INTEREST EXPENSE IS OFFSET SOMEWHAT BY THE INCREASE IN DEBT ASSOCIATED WITH THE ACQUISITION OF INFINITY AND INCREASED WORKING CAPITAL REQUIREMENTS. INCOME TAXES THE CORPORATION'S EFFECTIVE INCOME TAX RATE FOR THE FIRST QUARTER OF 1997 AND 1996 WAS A BENEFIT OF 28% AND 35%, RESPECTIVELY. BECAUSE OF THE AMORTIZATION OF NON-DEDUCTIBLE GOODWILL FOR CBS AND INFINITY AND THE IMPACT OF SPECIAL TRANSACTIONS, THESE RATES CAN VARY DRAMATICALLY DEPENDING ON THE CORPORATION'S INCOME OR LOSS LEVELS. AT MARCH 31, 1997, THE CORPORATION HAD RECORDED NET DEFERRED INCOME TAX BENEFITS TOTALLING $1,498 MILLION COMPARED TO $1,411 MILLION AT DECEMBER 31, 1996. AS A RESULT OF THESE NET DEFERRED INCOME TAX BENEFITS, CASH PAYMENTS FOR FEDERAL INCOME TAXES ARE MINIMAL. 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. -20- 21 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. ON FEBRUARY 10, 1997, THE CORPORATION ANNOUNCED AN AGREEMENT TO ACQUIRE TWO CABLE NETWORKS - TNN AND CMT. THE PURCHASE PRICE OF $1.55 BILLION WILL BE PAID IN WESTINGHOUSE COMMON STOCK, WHICH WILL FURTHER INCREASE THE CORPORATION'S EQUITY. NO DEBT WILL BE ASSUMED IN CONJUNCTION WITH THIS TRANSACTION. AS DISCUSSED PREVIOUSLY, THE CORPORATION INTENDS TO SEPARATE ITS MEDIA BUSINESSES FROM ITS INDUSTRIES AND TECHNOLOGY BUSINESSES THROUGH A TAX-FREE DIVIDEND OF THE INDUSTRIES AND TECHNOLOGY BUSINESSES TO SHAREHOLDERS. AS CURRENTLY CONTEMPLATED, THE MEDIA COMPANY WILL RETAIN ALL DEBT OBLIGATIONS OF THE CURRENT WESTINGHOUSE AS WELL AS THE $1.5 BILLION TAX NET OPERATING LOSS CARRYFORWARD. THE INDUSTRIES AND TECHNOLOGY COMPANY WILL ASSUME MOST OF THE UNFUNDED PENSION OBLIGATION AND OTHER NON-DEBT OBLIGATIONS GENERATED BY THE CORPORATION'S INDUSTRIAL BUSINESSES IN EARLIER YEARS. MANAGEMENT CURRENTLY ANTICIPATES THE SEPARATION WILL OCCUR LATER IN 1997. HOWEVER, THERE CAN BE NO ASSURANCE THAT ALL OF THE ASSETS, LIABILITIES AND CONTRACTUAL OBLIGATIONS WILL BE TRANSFERRED AS CURRENTLY CONTEMPLATED OR THAT CHANGES WILL NOT BE MADE TO THE SEPARATION PLAN. THE CORPORATION HAS AND WILL CONTINUE TO MONETIZE NON-STRATEGIC ASSETS. IN 1996, THE CORPORATION ADOPTED PLANS TO EXIT ITS ENVIRONMENTAL SERVICES BUSINESS AND CISCO. IN ADDITION TO THE $3.6 BILLION OF CASH GENERATED BY THE SALE OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS, SALES OF VARIOUS NON-STRATEGIC ASSETS IN 1996 GENERATED CASH PROCEEDS OF APPROXIMATELY $550 MILLION. DURING 1997, SALES OF NON-STRATEGIC ASSETS ARE EXPECTED TO GENERATE ADDITIONAL CASH OF $300 TO $400 MILLION. THE MAJORITY OF THESE PROCEEDS ARE ANTICIPATED TO BE RECEIVED IN THE SECOND HALF OF THE YEAR. TOTAL DEBT FOR THE CORPORATION WAS $6,759 MILLION AT MARCH 31, 1997, OF WHICH $444 MILLION WAS INCLUDED IN DISCONTINUED OPERATIONS AND WILL BE REPAID THROUGH THE LIQUIDATION OF THOSE ASSETS. DEBT OF CONTINUING OPERATIONS OF $6,315 MILLION INCREASED $665 MILLION FROM DECEMBER 31, 1996 REFLECTING HIGHER WORKING CAPITAL REQUIREMENTS. THE CORPORATION'S DEBT OF CONTINUING OPERATIONS IS EXPECTED TO REMAIN AT APPROXIMATELY THIS LEVEL FOR THE REMAINDER OF THE YEAR. MANAGEMENT EXPECTS THAT THE CORPORATION WILL HAVE SUFFICIENT LIQUIDITY TO MEET ORDINARY FUTURE BUSINESS NEEDS. SOURCES OF LIQUIDITY GENERALLY AVAILABLE TO THE CORPORATION INCLUDE CASH FROM OPERATIONS, AVAILABILITY UNDER ITS CREDIT FACILITY, CASH AND CASH EQUIVALENTS, PROCEEDS FROM SALES OF NON-STRATEGIC ASSETS, BORROWINGS FROM OTHER SOURCES, INCLUDING FUNDS FROM THE CAPITAL MARKETS, AND THE ISSUANCE OF ADDITIONAL CAPITAL STOCK. OPERATING ACTIVITIES THE FOLLOWING TABLE PROVIDES A RECONCILIATION OF NET INCOME TO CASH USED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996: -21- 22 CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS (IN MILLIONS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31 --------------------------- 1997 1996 ---- ---- LOSS FROM CONTINUING OPERATIONS $ (151) $ (723) ADJUSTMENTS TO RECONCILE LOSS FROM CONTINUING OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 134 104 LOSSES (GAINS) ON ASSET DISPOSITIONS (24) 151 NONCASH RESTRUCTURING CHARGES - 30 OTHER NONCASH PROVISIONS AND ACCOUNTING ADJUSTMENTS (28) 185 CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS OF ACQUISITIONS AND DIVESTITURES OF BUSINESSES: RECEIVABLES, CURRENT AND NONCURRENT (127) (55) INVENTORIES (80) (10) ACCOUNTS PAYABLE (326) (172) DEFERRED AND CURRENT INCOME TAXES (117) (121) ACCRUED RESTRUCTURING COSTS (112) 93 OTHER ASSETS AND LIABILITIES (32) 16 ------ ------ CASH USED FOR OPERATING ACTIVITIES OF CONTINUING OPERATIONS $ (863) $ (502) ====== ======
THE OPERATING ACTIVITIES OF CONTINUING OPERATIONS USED $863 MILLION OF CASH DURING THE FIRST THREE MONTHS OF 1997 COMPARED TO CASH USED OF $502 MILLION DURING THE FIRST THREE MONTHS OF 1996. THE TWO PRIMARY FACTORS CONTRIBUTING TO THE ADDITIONAL USE OF CASH IN THE 1997 QUARTER WERE A SIGNIFICANT INCREASE IN WORKING CAPITAL REQUIREMENTS AND HIGHER RESTRUCTURING EXPENDITURES. WORKING CAPITAL REQUIREMENTS INCREASED RELATIVE TO THE FIRST QUARTER OF 1996. INCREASES IN BOTH RECEIVABLES AND INVENTORIES TOTALLED $207 MILLION IN THE FIRST THREE MONTHS OF 1997 COMPARED TO AN INCREASE OF $65 MILLION IN THE FIRST THREE MONTHS OF 1996. IN ADDITION, A SIGNIFICANT REDUCTION IN ACCOUNTS PAYABLE CONTRIBUTED SUBSTANTIALLY TO THE HIGHER WORKING CAPITAL AT MARCH 31, 1997. RESTRUCTURING SPENDING INCREASED IN THE FIRST QUARTER OF 1997 RELATIVE TO THE FIRST QUARTER OF 1996. THIS WAS PRIMARILY ATTRIBUTABLE TO EXPENDITURES ASSOCIATED WITH THE RESTRUCTURING PLANS ADOPTED IN LATE 1996. THE CORPORATION'S PENSION CONTRIBUTION LEVEL FOR 1997, WHICH IS EXPECTED TO BE APPROXIMATELY $250 MILLION TO $300 MILLION, IS CONSISTENT WITH THE CORPORATION'S GOAL TO FULLY FUND ITS QUALIFIED PENSION PLANS OVER THE NEXT SEVERAL YEARS. IN JULY 1997, THE CORPORATION WILL BEGIN MAKING ITS PENSION CONTRIBUTIONS QUARTERLY PURSUANT TO CERTAIN MINIMUM FUNDING REQUIREMENTS. THE OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS USED $30 MILLION OF CASH DURING THE FIRST THREE MONTHS OF 1997 COMPARED TO $314 MILLION OF CASH USED DURING THE SAME PERIOD OF 1996. DURING 1996, A SIGNIFICANT AMOUNT OF CASH WAS USED FOR THE DIVESTITURE COSTS OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS AS WELL AS IN THE OPERATIONS OF THOSE BUSINESSES THROUGH THE DATE OF THEIR DISPOSAL. FUTURE CASH REQUIREMENTS OF DISCONTINUED OPERATIONS WILL CONSIST PRIMARILY OF INTEREST COSTS ON DEBT, REMAINING COSTS ASSOCIATED WITH COMPLETED DIVESTITURES, AND OPERATING AND DISPOSAL COSTS ASSOCIATED WITH THE ENVIRONMENTAL SERVICES BUSINESS AND CISCO. MANAGEMENT BELIEVES THAT THE FUTURE CASH RECEIPTS OF DISCONTINUED OPERATIONS WILL BE SUFFICIENT TO SATISFY THE DIVESTITURE LIABILITIES OF DISCONTINUED OPERATIONS AND THE REMAINING DEBT. ANY CASH IN EXCESS OF THAT REQUIRED TO SATISFY THOSE LIABILITIES WILL BE TRANSFERRED TO CONTINUING OPERATIONS. -22- 23 INVESTING ACTIVITIES INVESTING ACTIVITIES PROVIDED $36 MILLION OF CASH DURING THE FIRST THREE MONTHS OF 1997 COMPARED TO $3.5 BILLION OF CASH PROVIDED DURING THE SAME PERIOD OF 1996. IN THE FIRST QUARTER OF 1997, THE CORPORATION HAD INVESTING CASH OUTFLOWS RELATED TO THE ACQUISITION OF BUSPACK, A TRANSIT ADVERTISING COMPANY IN THE UNITED KINGDOM, AND A $20 MILLION PAYMENT IN CONJUNCTION WITH A SWAP OF THREE RADIO STATIONS IN ORLANDO FOR TWO RADIO STATIONS IN CHICAGO. ACQUISITION CASH OUTFLOWS IN THE 1996 QUARTER INCLUDED THE PURCHASE OF TWO CHICAGO RADIO STATIONS. INVESTING CASH INFLOWS FROM BUSINESS DIVESTITURES IN THE FIRST QUARTER OF 1997 INCLUDED PROCEEDS FROM THE SALES OF ONE RADIO STATION IN CHICAGO, TWO RADIO STATIONS IN DALLAS, AND AN EQUITY INVESTMENT. IN THE 1996 QUARTER, THE CORPORATION COMPLETED THE SALES OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS, GENERATING $3.6 BILLION OF CASH. LIQUIDATIONS OF OTHER ASSETS GENERATED APPROXIMATELY $20 MILLION IN THE FIRST QUARTER OF BOTH YEARS. CAPITAL EXPENDITURES WERE $41 MILLION FOR THE FIRST THREE MONTHS OF 1997, A DECREASE OF $11 MILLION FROM THE SAME PERIOD OF 1996. CAPITAL SPENDING DURING 1997 IS EXPECTED TO BE APPROXIMATELY $50 MILLION HIGHER THAN 1996 PRIMARILY DRIVEN BY THE MEDIA GROUP. FINANCING ACTIVITIES CASH PROVIDED BY FINANCING ACTIVITIES DURING THE FIRST THREE MONTHS OF 1997 TOTALLED $738 MILLION COMPARED TO CASH USED OF $2.7 BILLION DURING THE SAME PERIOD OF 1996. THE CASH OUTFLOWS IN THE FIRST QUARTER OF 1997 INCLUDED $149 MILLION TO EXTINGUISH THE LONG-TERM DEBT PREVIOUSLY ISSUED BY INFINITY. THE CASH OUTFLOWS IN THE FIRST QUARTER OF 1996 INCLUDED $3.6 BILLION OF DEBT PREPAID UPON THE SALES OF KNOLL AND THE DEFENSE AND ELECTRONIC SYSTEMS BUSINESS. TOTAL BORROWINGS UNDER THE CORPORATION'S $5.5 BILLION REVOLVING CREDIT FACILITY WERE $4.2 BILLION AT MARCH 31, 1997 (SEE REVOLVING CREDIT FACILITY). THESE BORROWINGS WERE SUBJECT TO A FLOATING INTEREST RATE OF 6.1% AT MARCH 31, 1997, WHICH WAS BASED ON THE LONDON INTERBANK OFFER RATE (LIBOR), PLUS A MARGIN BASED ON THE CORPORATION'S SENIOR UNSECURED DEBT RATING AND LEVERAGE. DIVIDENDS PAID IN THE FIRST THREE MONTHS OF 1997 AND 1996 INCLUDED $12 MILLION FOR THE SERIES C PREFERRED STOCK, WHICH THE CORPORATION EXPECTS TO REPLACE WITH 31,859,902 SHARES OF COMMON STOCK ON MAY 30, 1997. COMMON STOCK DIVIDENDS INCREASED FROM $20 MILLION IN THE FIRST QUARTER OF 1996 TO $29 MILLION IN THE FIRST QUARTER OF 1997 BECAUSE OF ADDITIONAL SHARES OUTSTANDING. AT MARCH 31, 1997, THE CORPORATION HAD A SHELF REGISTRATION STATEMENT FOR DEBT SECURITIES WITH AN UNUSED AMOUNT OF $400 MILLION. REVOLVING CREDIT FACILITY ON AUGUST 29, 1996, THE CORPORATION EXECUTED A NEW FIVE-YEAR REVOLVING CREDIT AGREEMENT WITH TOTAL COMMITMENTS OF $5.5 BILLION. THE UNUSED CAPACITY UNDER THE FACILITY EQUALED $1.3 BILLION AS OF MARCH 31, 1997. BORROWING AVAILABILITY UNDER THE REVOLVER IS SUBJECT TO COMPLIANCE WITH CERTAIN COVENANTS, REPRESENTATIONS AND WARRANTIES, INCLUDING A NO MATERIAL ADVERSE CHANGE PROVISION WITH RESPECT TO THE CORPORATION TAKEN AS A WHOLE, AND RESTRICTIONS ON LIENS INCURRED. DURING THE FIRST QUARTER OF 1997, THIS AGREEMENT WAS AMENDED TWICE. THE CORPORATION IS SUBJECT TO FINANCIAL COVENANTS INCLUDING A MAXIMUM LEVERAGE RATIO, A MINIMUM INTEREST COVERAGE RATIO, AND MINIMUM CONSOLIDATED NET WORTH. THESE COVENANTS BECOME MORE RESTRICTIVE OVER THE REMAINING TERM OF THE AGREEMENT. AT MARCH 31, 1997, THE CORPORATION WAS IN COMPLIANCE WITH THESE COVENANTS. -23- 24 LEGAL, ENVIRONMENTAL, AND OTHER MATTERS OVER THE PAST SEVERAL YEARS, THE CORPORATION HAS ADDRESSED A VARIETY OF LEGAL, ENVIRONMENTAL, AND OTHER MATTERS RELATED TO CURRENT OPERATIONS AS WELL AS TO PREVIOUSLY DIVESTED BUSINESSES. SEE NOTE 10 TO THE FINANCIAL STATEMENTS. THE COSTS ASSOCIATED WITH RESOLVING THESE MATTERS ARE RECOGNIZED IN THE PERIOD IN WHICH THE COSTS ARE DEEMED PROBABLE AND CAN BE REASONABLY ESTIMATED. MANAGEMENT BELIEVES THAT THE CORPORATION HAS ADEQUATELY PROVIDED FOR THE ESTIMATED COSTS OF RESOLVING THESE MATTERS. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS NO REPORTABLE EVENTS. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A) EXHIBITS (3) ARTICLES OF INCORPORATION AND BYLAWS (a) THE RESTATED ARTICLES OF THE CORPORATION, AS AMENDED TO DECEMBER 13, 1996, ARE INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.1 TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON POST- EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997. (b) THE BYLAWS OF THE CORPORATION, AS AMENDED TO SEPTEMBER 25, 1996, ARE INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.2 TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON FORM S-4 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1996. (4) RIGHTS OF SECURITY HOLDERS (a) THERE ARE NO INSTRUMENTS WITH RESPECT TO LONG-TERM DEBT OF THE CORPORATION THAT INVOLVE SECURITIES AUTHORIZED THEREUNDER EXCEEDING 10% OF THE TOTAL ASSETS OF THE CORPORATION AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS. THE CORPORATION AGREES TO PROVIDE TO THE SECURITIES AND EXCHANGE COMMISSION, UPON REQUEST, A COPY OF INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS OF LONG-TERM DEBT OF THE CORPORATION AND ITS SUBSIDIARIES. (b) RIGHTS AGREEMENT IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 1 TO FORM 8-A FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1996. (10) MATERIAL CONTRACTS (a*) THE ANNUAL PERFORMANCE PLAN, AS AMENDED TO NOVEMBER 1, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(a) TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996. (b*) THE 1993 LONG-TERM INCENTIVE PLAN, AS AMENDED TO NOVEMBER 1, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(b) TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996. (c*) THE 1984 LONG-TERM INCENTIVE PLAN, AS TO AMENDED NOVEMBER 1, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(c) TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996. (d*) THE WESTINGHOUSE EXECUTIVE PENSION PLAN, AS AMENDED TO SEPTEMBER 25, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(d) TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996. -24- 25 (e*) THE DEFERRED COMPENSATION AND STOCK PLAN FOR DIRECTORS, AS AMENDED TO NOVEMBER 1, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(e) TO FORM 10-K FOR THE YEAR ENDED 1996. (f*) THE DIRECTOR'S CHARITABLE GIVING PROGRAM, AS AMENDED TO APRIL 30, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(g) TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996. (g*) THE 1991 LONG-TERM INCENTIVE PLAN, AS AMENDED TO JANUARY 29, 1997. (h*) ADVISORY DIRECTOR'S PLAN TERMINATION FEE DEFERRAL TERMS AND CONDITIONS, DATED APRIL 30, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(i) TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996. (i*) EMPLOYMENT AGREEMENT BETWEEN THE CORPORATION AND MICHAEL H. JORDAN IS HEREBY INCORPORATED BY REFERENCE TO EXHIBIT 10 TO THE CORPORATION'S FORM 8-K, DATED SEPTEMBER 1, 1993. (j*) EMPLOYMENT AGREEMENT BETWEEN THE CORPORATION AND FREDRIC G. REYNOLDS IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(j) TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994. (k) $5.5 BILLION CREDIT AGREEMENT AMONG WESTINGHOUSE ELECTRIC CORPORATION, THE LENDERS PARTIES THERETO, NATIONSBANK, N.A. AND THE TORONTO-DOMINION BANK AS SYNDICATION AGENTS, THE CHASE MANHATTAN BANK AS DOCUMENTATION AGENT, AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK AS ADMINISTRATIVE AGENT, DATED AUGUST 29, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(l) TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996. (l*) EMPLOYMENT AGREEMENT BETWEEN CBS INC. AND PETER LUND, DATED AS OF NOVEMBER 28, 1995, IS HEREBY INCORPORATED BY REFERENCE TO EXHIBIT 10(l) TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996. (m*) EMPLOYMENT AGREEMENT BETWEEN THE CORPORATION AND F. J. HARVEY, DATED AS OF APRIL 30, 1996, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(n) TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996. (n*) CBS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, AS AMENDED TO NOVEMBER 15, 1995, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(n) TO FORM 10-K FOR THE YEAR ENDED 1996. (o*) CBS BONUS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, AS AMENDED, TO NOVEMBER 15, 1995, IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 10(o) TO FORM 10-K FOR THE YEAR ENDED 1996. (p) FIRST AMENDMENT, DATED AS OF JANUARY 29, 1997 TO THE CREDIT AGREEMENT, DATED AS OF AUGUST 29, 1996, AMONG WESTINGHOUSE ELECTRIC CORPORATION, THE LENDERS PARTIES THERETO, NATIONSBANK, N.A. AND THE TORONTO-DOMINION BANK AS SYNDICATION AGENTS, THE CHASE MANHATTAN BANK AS DOCUMENTATION AGENT, AND MORGAN GUARANTEE TRUST COMPANY OF NEW YORK AS ADMINISTRATIVE AGENT. (q) SECOND AMENDMENT, DATED AS OF MARCH 21, 1997, TO THE CREDIT AGREEMENT, DATED AS OF AUGUST 29, 1996, AS AMENDED BY THE FIRST AMENDMENT THERETO DATED AS OF JANUARY 29, 1997, AMONG WESTINGHOUSE ELECTRIC CORPORATION, THE SUBSIDIARY BORROWERS PARTIES THERETO, THE LENDERS PARTIES THERETO, NATIONSBANK, N.A. AND THE TORONTO-DOMINION BANK AS SYNDICATION AGENTS, THE CHASE MANHATTAN BANK AS DOCUMENTATION AGENT, AND MORGAN GUARANTEE TRUST COMPANY OF NEW YORK AS ADMINISTRATIVE AGENT. (r) AGREEMENT AND PLAN OF MERGER, DATED AS OF FEBRUARY 9, 1997, AMONG WESTINGHOUSE ELECTRIC CORPORATION, G ACQUISITION CORP., AND GAYLORD ENTERTAINMENT COMPANY IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 99.2 TO FORM 8-K OF WESTINGHOUSE ELECTRIC CORPORATION, DATED AS OF FEBRUARY 11, 1997. -25- 26 (s*) EMPLOYMENT AGREEMENT BETWEEN THE CORPORATION AND MEL KARMAZIN, MADE AS OF JUNE 20, 1996 AND EFFECTIVE AS OF DECEMBER 31, 1996. (t*) AMENDED AND RESTATED INFINITY BROADCASTING CORPORATION STOCK OPTION PLAN IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.4 TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997. (u*) THE WCK ACQUISITION CORP. STOCK OPTION PLAN IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.5 TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997. (v*) INFINITY BROADCASTING CORPORATION WARRANT CERTIFICATE NO. 3 TO MEL KARMAZIN IS INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 4.6 TO THE CORPORATION'S REGISTRATION STATEMENT NO. 333-13219 ON POST-EFFECTIVE AMENDMENT NO. 1 ON FORM S-8 TO FORM S-4 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997. * 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 (27) FINANCIAL DATA SCHEDULE B) REPORTS ON FORM 8-K: A CURRENT REPORT ON FORM 8-K (ITEMS 5 AND 7) DATED JANUARY 10, 1997 FILING A PRESS RELEASE CONCERNING THE CORPORATION'S DIVESTITURE OF ITS RESIDENTIAL SECURITY BUSINESS. A CURRENT REPORT ON FORM 8-K (ITEMS 5 AND 7) DATED FEBRUARY 11, 1997 FILING A PRESS RELEASE ANNOUNCING AN AGREEMENT TO ACQUIRE, THROUGH A PLAN OF MERGER, THE NASHVILLE NETWORK (TNN) AND COUNTRY MUSIC TELEVISION (CMT) FROM GAYLORD ENTERTAINMENT COMPANY. A CURRENT REPORT ON FORM 8-K (ITEMS 5 AND 7) DATED FEBRUARY 11, 1997 FILING A PRESS RELEASE CONCERNING THE CORPORATION'S EARNINGS FOR THE FOURTH QUARTER OF 1996 AND YEAR-END RESULTS FOR 1996. -26- 27 SIGNATURE PURSUANT TO THE REQUIREMENTS 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 9TH DAY OF MAY 1997. WESTINGHOUSE ELECTRIC CORPORATION /s/ CAROL V. SAVAGE --------------------------------------- VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER -27- EX-10.G 2 WESTINGHOUSE ELECTRIC CORP. 1 Exhibit 10(g) 1991 LONG-TERM INCENTIVE PLAN (as amended as of January 29, 1997) ARTICLE I GENERAL 1.1 Purpose The purposes of the 1991 Long-Term Incentive Plan ("Plan") for eligible employees of Westinghouse Electric Corporation ("Corporation") and its Subsidiaries (the Corporation and its Subsidiaries severally and collectively referred to in the Plan as the "Company") are to foster and promote the long-term financial success of the Company and materially increase stockholder value by (i) attracting and retaining employees of outstanding ability, (ii) strengthening the Company's capability to develop, maintain and direct a high performance team, (iii) motivating employees, by means of performance-related incentives, to achieve long-range performance goals, (iv) providing incentive compensation opportunities competitive with those of other major companies and (v) enabling employees to participate in the long-term growth and financial success of the Company. 1.2 Administration (a) The Plan shall be administered by a committee of the Board of Directors of the Corporation ("Committee") which shall consist of two or more members. The members shall be appointed by the Board of Directors, and any vacancy on the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of its meetings and of any action taken by it without a meeting. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present shall be the acts of the Committee. Any action that may be taken at a meeting of the Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee. The Committee shall make appropriate reports to the Board of Directors concerning the operations of the Plan. (b) Subject to the limitations of the Plan, the Committee shall have the sole and complete authority: (i) to select in accordance with Section 1.3 persons who shall participate in the Plan ("Participant" or "Participants") (including the right to delegate authority to select Participants); (ii) to make Awards and payments in such forms and amounts as it shall determine, including the right to delegate authority to make Awards within limits approved by the Committee; (iii) to impose such limitations, restrictions, terms and conditions upon such Awards as the Committee or its authorized delegates shall deem - 1 - 2 appropriate; (iv) to interpret the Plan and the terms of any document relating to the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to the Plan; (v) to amend or cancel an existing Award in whole or in part (including the right to delegate authority to amend or cancel an existing Award in whole or in part within limits approved from time to time by the Committee), except that the Committee and its authorized delegates may not, unless otherwise provided in the Plan, or unless the Participant affected thereby consents, take any action under this clause that would adversely affect the rights of such Participant with respect to the Award, and except that the Committee and its authorized delegates may not take any action to amend any outstanding Option under the Plan in order to decrease the Option Price under such Option or to cancel and replace any such Option with an Option with a lower Option Price; and (vi) to make all other determinations and to take all other actions necessary or advisable for the interpretation, implementation and administration of the Plan. The Committee's determinations on matters within its authority shall be conclusive and binding upon the Company and all other persons. (c) The Committee shall act with respect to the Plan on behalf of the Corporation and on behalf of any Subsidiary issuing stock under the Plan, subject to appropriate action by the board of directors of any such Subsidiary. All expenses associated with the Plan shall be borne by the Corporation subject to such allocation to its Subsidiaries and operating units as it deems appropriate. 1.3 Selection for Participation Participants selected by the Committee or its authorized delegates shall be Eligible Persons as defined below. "Eligible Persons" are persons who are employees of the Company ("Employee" or "Employees") or, in the event of death while an Employee, his or her estate. Eligible Persons shall also include independent contractors of the Company as to an Award if the person is an independent contractor at the time the Award is granted. 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. - 2 - 3 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 and Formula Value Stock severally and collectively referred to in the Plan as "Stock"). The maximum number of shares of Stock which may be issued for all purposes under the Plan shall be 27,500,000. Except as otherwise provided below, any shares of Stock subject to an Option or other Award which is canceled or terminates without having been exercised shall again be available for Awards under the Plan. Shares subject to an option canceled upon the exercise of an SAR shall not again be available for Awards under the Plan except to the extent the SAR is settled in cash. To the extent that an Award is settled in cash, shares of Stock subject to that Award shall again be available for Awards. Shares of Stock tendered by a Participant or withheld by the Company to pay the exercise price of an Option or to satisfy the tax withholding obligations of the exercise or vesting of an Award shall be available again for Awards under the Plan. Shares of Restricted Stock forfeited to the Company in accordance with the Plan and the terms of the particular Award shall be available again for Awards under the Plan. No fractional shares shall be issued, and the Committee shall determine the manner in which fractional share value shall be treated. ARTICLE II STOCK OPTIONS 2.1 Award of Stock Options The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to any Participant Options to purchase Stock. - 3 - 4 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 granted only if the Committee has not canceled such right prior to the exercise of the original option. Such terms may also provide that, upon the exercise by a Participant of a Reload Option while an Eligible Person, an additional Reload Option will be granted with respect to the number of whole shares used to exercise the first Reload Option. 2.2 Stock Option Agreements The award of an option shall be evidenced by a written agreement ("Stock Option Agreement") in such form and containing such terms and conditions as the Committee may from time to time determine. 2.3 Option Price The purchase price of Stock under each Option ("Option Price") shall be not less than the Fair Market Value of such Stock on the date the Option is awarded. 2.4 Exercise and Term of Options (a) Except as otherwise provided in the Plan, Options shall become exercisable at such time or times as the Committee may specify. The Committee may at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. (b) The Committee shall establish procedures governing the exercise of options and shall require that notice of exercise be given. Stock purchased on exercise of an option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so provided by the Committee (i) through the delivery of shares of Stock which are then outstanding and which have a Fair Market Value on the date of exercise equal to the exercise price, (ii) by delivery of an unconditional and irrevocable undertaking - 4 - 5 by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iii) by any combination of the permissible forms of payment. 2.5 Termination of Eligibility In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, each of his or her outstanding Options shall be exercisable by the Participant (or his or her legal representative or designated beneficiary), to the extent that such Option was then exercisable, at any time prior to an expiration date established by the Committee at the time of award, but in no event after such expiration date. In the event an Award is made to the estate of a person who died while an Employee, each outstanding Option held by such estate shall be exercisable by the estate (or the distributee of said estate) at any time prior to an expiration date established by the Committee at the time of award. If the Participant ceases to be an Eligible Person for any other reason, all of the Participant's then outstanding Options shall terminate immediately. ARTICLE III STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS 3.1 Award of Stock Appreciation Right (a) An SAR is an Award entitling the recipient on exercise to receive an amount, in cash or Stock or a combination thereof (such form to be determined by the Committee), determined in whole or in part by reference to appreciation in Stock value. (b) In general, an SAR entitles the Participant to receive, with respect to each share of Stock as to which the SAR is exercised, the excess of the share's Fair Market Value on the date of exercise over its Fair Market Value on the date the SAR was granted. (c) SARs may be granted in tandem with options granted under the Plan ("Tandem SARS") or independently of Options ("Independent SARs"). An SAR granted in tandem with an NSO may be granted either at or after the time the option is granted. (d) SARs awarded under the Plan shall be evidenced by either a Stock Option Agreement (when SARs are granted in tandem with an Option) or a separate agreement between the Company and the Participant. (e) Except as otherwise provided herein, a Tandem SAR shall be exercisable only at the same time and to the same extent and subject to the same conditions as the option related thereto is exercisable, and the Committee may prescribe additional - 5 - 6 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. (g) Except as otherwise provided herein, all SARs shall automatically be exercised on the last trading day prior to the expiration date established by the Committee at the time of the award for the SAR, or, in the case of a Tandem SAR, for the related Option, so long as exercise on such date will result in a payment to the Participant. (h) Unless otherwise provided by the Committee, no SAR shall become exercisable or shall be automatically exercised for six months following the date on which it was granted. (i) At the time of award of an SAR, the Committee may limit the amount of the payment that may be made to a Participant upon the exercise of the SAR. The Committee may further determine that, if the amount to be received by a Participant in any year is limited pursuant to this provision, payment of all or a portion of the amount that is unpaid as a result of the limitation may be made to the Participant at a subsequent time. No such limitation shall require a Participant to return to the Company any amount theretofore received by him or her upon the exercise of an SAR. (j) Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Stock, or partly in cash and partly in Stock, as the Committee shall determine. To the extent that payment is made in Stock, the shares shall be valued at their Fair Market Value on the date of exercise of the SAR. (k) Each SAR shall expire on a date determined by the Committee or earlier upon the occurrence of the first of the following: (i) in the case of a Tandem SAR, termination of the related option, (ii) expiration of a period of six months after the - 6 - 7 Participant's ceasing to be an Eligible Person as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, or (iii) the Participant ceasing to be an Eligible Person for any other reason. 3.2 Limited Rights (a) The Committee may award Limited Rights pursuant to the provisions of this Section 3.2 to the holder of an Option to purchase Common Stock granted under the Plan (a "Related Option") with respect to all or a portion of the shares subject to the Related Option. A Limited Right may be exercised only during the period beginning on the first day following a Change in Control, as defined in Section 7.2 of the Plan, and ending on the thirtieth day following such date. Each Limited Right shall be exercisable only to the same extent that the Related Option is exercisable, and in no event after the termination of the Related Option. In no event shall a Limited Right be exercised during the first six months after the date of grant of the Limited Right. Limited Rights shall be exercisable only when the Fair Market Value (determined as of the date of exercise of the Limited Rights) of each share of Common Stock with respect to which the Limited Rights are to be exercised shall exceed the Option Price per share of Common Stock subject to the Related option. (b) Upon the exercise of Limited Rights, the Related Option shall be considered to have been exercised to the extent of the number of shares of Common Stock with respect to which such Limited Rights are exercised. Upon the exercise or termination of the Related Option, the Limited Rights with respect to such Related Option shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the Related Option was so exercised or terminated. (c) The effective date of the grant of a Limited Right shall be the date on which the Committee approves the grant of such Limited Right. Each grantee of a Limited Right shall be notified promptly of the grant of the Limited Right in such manner as the Committee shall prescribe. (d) Upon the exercise of Limited Rights, the holder thereof shall receive in cash an amount equal to the product computed by multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter defined), or (y) the highest reported closing sales price of a share of Common Stock on the New York Stock Exchange at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised, over (b) the Option Price per share of Common Stock subject to the Related Option, by (ii) the number of - 7 - 8 shares of Common Stock with respect to which such Limited Rights are being exercised. (e) For purposes of this Section 3.2, the term "Minimum Price Per Share" shall mean the highest gross price (before brokerage commissions and soliciting dealers' fees) paid or to be paid for a share of Common Stock (whether by way of exchange, conversion, distribution upon liquidation or otherwise) in any Change in Control which is in effect at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised. For purposes of this definition, if the consideration paid or to be paid in any such Change in Control shall consist, in whole or in part, of consideration other than cash, the Board shall take such action, as in its judgment it deems appropriate, to establish the cash value of such consideration. ARTICLE IV PERFORMANCE AWARDS 4.1 Nature of Performance Awards A Performance Award provides for the recipient to receive an amount in cash or Stock or a combination thereof (such form to be determined by the Committee) following the attainment of Performance Goals. Performance Goals may be related to personal performance, corporate performance (including corporate stock performance), departmental performance or any other category of performance deemed by the Committee to be important to the success of the Company. The Committee shall determine the Performance Goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. Regardless of the degree to which Performance Goals are attained, a Performance Award shall be paid only when, if and to the extent that the Committee determines to make such payment. 4.2 Other Awards Subject to Performance Condition The Committee may, at the time any Award described in this Plan is granted, impose the condition (in addition to any conditions specified or authorized in the Plan) that Performance Goals be met prior to the Participant's realization of any payment or benefit under the Award. ARTICLE V RESTRICTED STOCK 5.1 Award of Restricted Stock The Committee may award to any Participant shares of Stock subject to this Article V and such other terms and conditions as the Committee may prescribe, such Stock referred to herein as "Restricted Stock." - 8 - 9 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 of such shares of Restricted Stock shall have the rights of the holder of such Restricted Stock, except that the Committee may provide at the time of the Award that any dividends or other distributions paid on such Stock during the Restriction Period shall be accumulated and held by the Company and shall be subject to forfeiture under Section 5.4. Upon the expiration or waiver by the Committee of the Restriction Period, the Corporation shall redeliver to the Participant (or his or her legal representative or designated beneficiary) the shares deposited pursuant to Section 5.1. 5.4 Termination of Eligibility In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee, or as a result of his or her death, retirement or disability, the restrictions imposed under this Article V shall lapse with respect to such number of shares theretofore awarded to him or her as shall be determined by the Committee. All other shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividends or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. In the event the Participant ceases to be an Eligible Person for any other reason, all shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividend or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. - 9 - 10 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. 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. - 10 - 11 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 had been made and will continue to be subject to the limitations set forth in Section 6.2, and Deferred Amounts and the yield thereon will be paid as otherwise provided in this Article. ARTICLE VII CHANGES IN CONTROL 7.1 Effect of Change in Control Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, as defined in Section 7.2: (i) all Options and, subject to the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but not SARS, outstanding and unexercised on the date of the Change in Control shall become immediately exercisable; (ii) all Performance Awards shall be deemed to have been earned on such basis as the Committee may prescribe and then paid on such basis, at such time and in such form as the Committee may prescribe, or deferred in accordance with the elections of Participants; (iii) all Restricted Stock shall be deemed to be earned and the Restriction Period shall be deemed expired on such terms and conditions as the Committee may determine; and (iv) all amounts deferred under this Plan shall be paid to a trustee or otherwise on such terms as the Committee may prescribe or permit. 7.2 Definition of Change in Control The term "Change in Control" means the occurrence of one or - 11 - 12 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 subsidiaries) shall be the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty percent or more of the combined voting power of the Corporation's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the election or nomination for election of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. ARTICLE VIII GENERAL PROVISIONS 8.1 Non-Transferability No Option, SAR, Performance Award or share of Restricted Stock or Deferred Amount under the Plan shall be transferable by the Participant other than by will, by the applicable laws of - 12 - 13 descent and distribution, or by transfer to a properly designated beneficiary in the event of death. All Awards and Deferred Amounts shall be exercisable or received during the Participant's lifetime only by such Participant or his or her legal representative. Any transfer contrary to this Section 8.1 will nullify the option, SAR, Performance Award or share of Restricted Stock, and any attempted transfer of a Deferred Amount contrary to this Section 8.1 will be void and of no effect. 8.2 Beneficiaries The Committee may establish or authorize the establishment of procedures not inconsistent with Section 8.1 under which a Participant may designate a beneficiary or beneficiaries to hold, exercise and/or receive amounts due under an Award or with respect to Deferred Amounts in the event of the Participant's death. 8.3 Adjustments Upon Changes in Stock If there shall be any change in the Stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split up, dividend in kind or other change in the corporate structure or distribution to the stockholders, appropriate adjustments may be made by the Board of Directors of the Company (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and the price per share subject to outstanding Options or which may be issued under outstanding Performance Awards or Awards of Restricted Stock. Appropriate adjustments may also be made by the Board of Directors or the Committee in the terms of any Awards under the Plan to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance targets and changes in the length of Performance Periods. 8.4 Conditions of Awards (a) The rights of a Participant with respect to any Award received under this Plan shall be subject to the conditions that, until the Participant has fully received all payments, transfers and other benefits under the Award, he or she shall (i) not engage, either directly or indirectly, in any manner or capacity as advisor, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any business or activity which is at the time competitive with any business or activity conducted by the Company and (ii) be available, unless he or she shall have died, at reasonable times for consultations at the request of the Company's management with respect to phases of the business with which he or she is or was actively connected during his or her employment, but such consultations shall not (except in the case of a Participant whose active service was outside the United States) be required to be performed at any - 13 - 14 place or places outside of the United States of America or during usual vacation periods or periods of illness or other incapacity. In the event that either of the above conditions is not fulfilled, the Participant shall forfeit all rights to any unexercised option or SAR, or any Performance Award or Stock held which has not yet been determined by the Committee to be payable or unrestricted (and any unpaid amounts equivalent to dividends or other distributions or amounts equivalent to interest relating thereto) as of the date of the breach of condition. Any determination by the Board of Directors of the Corporation, which shall act upon the recommendation of the Chief Executive Officer, that the Participant is, or has, engaged in a competitive business or activity as aforesaid or has not been available for consultations as aforesaid shall be conclusive. (b) This Section 8.4 shall not apply to Limited Rights. 8.5 Use of Proceeds All cash proceeds from the exercise of options shall constitute general funds of the Company. 8.6 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Stock may be delivered, the Committee will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Stock. If and to the extent that such withholding is required, the Committee may permit the Participant or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. In the alternative, the Committee may, at the time of grant of any such Award, require that the Company withhold from any shares to be delivered Stock with a value calculated to satisfy applicable tax withholding requirements. 8.7 Non-Uniform Determinations The Committee's determinations under the Plan, including without limitation, (i) the determination of the Participants to receive Awards, (ii) the form, amount, timing and payment of such Awards, (iii) the terms and provisions of such Awards and (iv) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, Awards under the Plan, whether or not such Participants are similarly situated. - 14 - 15 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. (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 and/or independent contractors. - 15 - 16 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) 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. - 16 - EX-10.P 3 WESTINGHOUSE ELECTRIC CORP. 1 Exhibit 10(p) FIRST AMENDMENT, dated as of January 29, 1997 (this "First Amendment"), to the Credit Agreement, dated as of August 29, 1996 (the "Credit Agreement"), among WESTINGHOUSE ELECTRIC CORPORATION ("Westinghouse"), the Lenders parties thereto, NATIONSBANK, N.A. and THE TORONTO-DOMINION BANK, as Syndication Agents, THE CHASE MANHATTAN BANK, as Documentation Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. Unless otherwise specified herein, all capitalized terms defined in the Credit Agreement and used herein are so used as so defined. WITNESSETH: WHEREAS, Westinghouse wishes to amend the Credit Agreement in the manner set forth herein; and WHEREAS, each of the parties hereto is willing to enter into this First Amendment on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I-AMENDMENTS TO THE CREDIT AGREEMENT The parties hereto hereby agree that the Credit Agreement shall be amended by (a) adding the shaded underlined text set forth in the Composite Copy of the Credit Agreement (the "Composite Credit Agreement") attached hereto as Appendix 1, (b) deleting the shaded stricken text set forth in the Composite Credit Agreement and (c) adding Annex I and Annex II to this First Amendment as Exhibit B-7 and Exhibit B-8, respectively, to the Credit Agreement. ARTICLE II--MISCELLANEOUS 1. Representations and Warranties. Westinghouse hereby represents and warrants, on and as of the First Amendment Effective Date (as defined below), that (a) the execution and delivery of this First Amendment and the performance of this First Amendment and the Credit Agreement as amended by this First Amendment (the "Amended Credit Agreement") will not conflict with or result in a breach of, or require any consent under, the charter or By-laws (or other equivalent organizational documents) of Westinghouse, or any applicable law or regulation, or any order, writ, injunction or decree of any Governmental Authority, or any material agreement or instrument to which Westinghouse or any of its Material Subsidiaries is a party or by which any of them is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of Westinghouse or any of its Material Subsidiaries pursuant to the terms of any such agreement or - 1 - 2 instrument; (b) Westinghouse has all necessary corporate power and authority to execute and deliver this First Amendment and to perform its obligations under this First Amendment and the Amended Credit Agreement; (c) the execution and delivery of this First Amendment and the performance of this First Amendment and the Amended Credit Agreement have been duly authorized by all necessary corporate action on the part of Westinghouse; (d) this First Amendment has been duly and validly executed and delivered by Westinghouse and each of this First Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Westinghouse, enforceable in accordance with its terms except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general applicability affecting the enforcement of creditors' rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (e) no authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority are necessary for the execution and delivery by Westinghouse of this First Amendment, for the performance by Westinghouse of this First Amendment and the Amended Credit Agreement or for the validity or enforceability hereof or thereof, and (f) each of the representations of Westinghouse set forth in Article III of the Amended Credit Agreement is true and correct in all material respects on and as of the First Amendment Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties were true and correct in all material respects as of such earlier date. 2. No Other Modifications. Except as expressly modified hereby, all the provisions of the Credit Agreement are and shall continue to be in full force and effect. Each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" and words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended hereby. 3. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS AND PRINCIPLES OF SUCH STATE. 4. Counterparts. This First Amendment may be executed by one or more of the parties to this First Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 5. Effectiveness. This First Amendment shall become effective on and as of the date (the "First Amendment Effective Date") upon which the following conditions shall have been satisfied: - 2 - 3 (a) the Administrative Agent shall have received executed counterparts of this First Amendment from Westinghouse and the Required Lenders; and (b) the Administrative Agent shall have received (i) the executed legal opinion of Louis J. Briskman, Senior Vice President and General Counsel of Westinghouse, dated the First Amendment Effective Date, covering, with respect to this First Amendment and the Amended Credit Agreement, substantially the same matters covered in Exhibit E-1 to the Credit Agreement; and (ii) the executed legal opinion of an Assistant General Counsel or Associate General Counsel of Westinghouse licensed to practice law in the State of New York, dated the First Amendment Effective Date, covering, with respect to this First Amendment and the Amended Credit Agreement, substantially the same matters covered in Exhibit E-2 to the Credit Agreement. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed by their respective authorized officers as of the day and year first above written. WESTINGHOUSE ELECTRIC CORPORATION By ------------------------------------ Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Lender and as Administrative Agent By ------------------------------------ Title: THE CHASE MANHATTAN BANK By ------------------------------------ Title: NATIONSBANK, N.A. By ------------------------------------ Title: - 3 - 4 THE TORONTO-DOMINION BANK By ------------------------------------ Title: BANKERS TRUST COMPANY By ------------------------------------ Title: THE BANK OF NEW YORK By ------------------------------------ Title: THE BANK OF TOKYO-MITSUBISHI, LTD. By ------------------------------------ Title: CITIBANK, N.A. By ------------------------------------ Title: THE DAI-ICHI KANGYO BANK, LTD. By ------------------------------------ Title: DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By ------------------------------------- Title: - 4 - 5 THE FUJI BANK, LIMITED, NEW YORK BRANCH By ------------------------------------ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH By ------------------------------------ Title: MELLON BANK, N.A. By ------------------------------------ Title: PNC BANK, NATIONAL ASSOCIATION By ------------------------------------ Title: ROYAL BANK OF CANADA By ------------------------------------ Title: THE SANWA BANK, LIMITED, NEW YORK BRANCH By ------------------------------------ Title: SOCIETE GENERALE, NEW YORK BRANCH By ------------------------------------ Title: - 5 - 6 THE SUMITOMO BANK, LIMITED By ----------------------------------- Title: ABN AMRO BANK N.V. By --------------------------------------- Title: THE ASAHI BANK, LTD. By ----------------------------------- Title: BANK OF MONTREAL By ----------------------------------- Title: BARCLAYS BANK PLC By ----------------------------------- Title: THE FIRST NATIONAL BANK OF CHICAGO By ----------------------------------- Title: LTCB TRUST COMPANY By ----------------------------------- Title: - 6 - 7 THE MITSUBISHI TRUST AND BANKING CORPORATION By ----------------------------------------- Title: THE MITSUI TRUST & BANKING CO., LTD. By ----------------------------------------- Title: THE SAKURA BANK, LTD. By ----------------------------------------- Title: THE TOKAI BANK, LIMITED By ----------------------------------------- Title: WESTDEUTSCHE LANDESBANK GIROZENTRALE By ----------------------------------------- Title: By ------------------------------------------ Title: THE YASUDA TRUST AND BANKING CO., LTD. By ----------------------------------------- Title: ARAB BANK PLC By ----------------------------------------- Title: - 7 - 8 THE BANK OF NOVA SCOTIA By ----------------------------------------- Title: BANQUE PARIBAS By ----------------------------------------- Title: By ----------------------------------------- Title: BAYERISCHE VEREINSBANK AG CHICAGO BRANCH By ----------------------------------------- Title: CAISSE NATIONALE DE CREDIT AGRICOLE By ----------------------------------------- Title: CIBC INC. By ----------------------------------------- Title: CP, AGMOE FOMAMCOERE DE COC ET DE L'UNION EUROPEENNE By ----------------------------------------- Title: By ----------------------------------------- Title: - 8 - 9 CREDIT LYONNAIS NEW YORK BRANCH By ----------------------------------------- Title: KEYBANK NATIONAL ASSOCIATION By ----------------------------------------- Title: NIPPON CREDIT BANK, LTD. By ----------------------------------------- Title: THE NORINCHUKIN BANK By ----------------------------------------- Title: THE ROYAL BANK OF SCOTLAND plc By ----------------------------------------- Title: THE SUMITOMO TRUST & BANKING CO., LTD., NEW YORK BRANCH By ----------------------------------------- Title: THE TOYO TRUST & BANKING CO., LTD. By ----------------------------------------- Title: - 9 - 10 BANCA COMMERCIALE ITALIANA By --------------------------------------- Title: By --------------------------------------- Title: BANQUE NATIONALE DE PARIS By --------------------------------------- Title: CORESTATES BANK, N.A. By --------------------------------------- Title: FIRST COMMERCIAL BANK, NEW YORK AGENCY By --------------------------------------- Title: GULF INTERNATIONAL BANK BSC By -------------------------------------------- Title: - 10 - EX-10.Q 4 WESTINGHOUSE ELECTRIC CORP. 1 Exhibit 10(q) SECOND AMENDMENT, dated as of March 21, 1997 (this "Second Amendment"), to the Credit Agreement, dated as of August 29, 1996, as amended by the First Amendment thereto dated as of January 29, 1997 (the "Credit Agreement"), among WESTINGHOUSE ELECTRIC CORPORATION ("Westinghouse"), the Subsidiary Borrowers parties thereto, the Lenders parties thereto, NATIONSBANK, N.A. and THE TORONTO-DOMINION BANK, as Syndication Agents, THE CHASE MANHATTAN BANK, as Documentation Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. Unless otherwise specified herein, all capitalized terms defined in the Credit Agreement and used herein are so used as so defined. W I T N E S S E T H: WHEREAS, Westinghouse wishes to amend the Credit Agreement in the manner set forth herein; and WHEREAS, each of the parties hereto is willing to enter into this Second Amendment on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT 1. Section 5.7. Section 5.7 of the Credit Agreement is hereby amended and restated in its entirety as follows: "SECTION 5.7. Consolidated Leverage Ratio. Westinghouse will not permit the Consolidated Leverage Ratio at the end of any period of four consecutive fiscal quarters ending on any date set forth below to be greater than the ratio set forth below opposite such date:
Date Ratio ---- ----- 12/31/96 6.00 to 1 3/31/97 and 6/30/97 7.25 to 1 9/30/97 7.00 to 1 12/31/97 6.00 to 1 3/31/98 5.25 to 1 6/30/98 4.75 to 1 9/30/98 4.25 to 1 12/31/98, 3/31/99, 6/30/99 and 9/30/99 3.50 to 1 12/31/99 and thereafter 3.00 to 1
- 1 - 2 2. Section 5.8. Section 5.8 of the Credit Agreement is hereby amended and restated in its entirety as follows: "SECTION 5.8. Consolidated Coverage Ratio. Westinghouse will not permit the Consolidated Coverage Ratio for any period of four consecutive fiscal quarters ending on any date set forth below to be less than the ratio set forth below opposite such date:
Date Ratio ---- ----- 9/30/96 1.75 to 1 12/31/96 2.00 to 1 3/31/97 and 6/30/97 1.75 to 1 9/30/97 2.00 to 1 12/31/97 2.25 to 1 3/31/98, 6/30/98 and 9/30/98 2.50 to 1 12/31/98 and thereafter 3.00 to 1
3. Annex 1. Annex 1 to the Credit Agreement is hereby amended by adding the following sentence to the end thereof: "Notwithstanding anything above to the contrary, commencing on April 1, 1997, the Leverage Margin shall be deemed to be applicable until the Leverage Margin shall be eliminated as otherwise provided above." ARTICLE II - MISCELLANEOUS 1. Representations and Warranties. Westinghouse and each Subsidiary Borrower (to the extent specifically applicable to such Subsidiary Borrower) hereby represents and warrants, on and as of the Second Amendment Effective Date (as defined below), that (a) the execution and delivery of this Second Amendment and the performance of this Second Amendment and the Credit Agreement as amended by this Second Amendment (the "Amended Credit Agreement") will not conflict with or result in a breach of, or require any consent under, the charter or By-laws (or other equivalent organizational documents) of Westinghouse or any Subsidiary Borrower, or any applicable law or regulation, or any order, writ, injunction or decree of any Governmental Authority, or any material agreement or instrument to which Westinghouse or any of its Material Subsidiaries is a party or by which any of them is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of - 2 - 3 Westinghouse or any of its Material Subsidiaries pursuant to the terms of any such agreement or instrument; (b) Westinghouse and each Subsidiary Borrower has all necessary corporate power and authority to execute and deliver this Second Amendment and to perform its obligations under this Second Amendment and the Amended Credit Agreement; (c) the execution and delivery of this Second Amendment and the performance of this Second Amendment and the Amended Credit Agreement have been duly authorized by all necessary corporate action on the part of Westinghouse and each Subsidiary Borrower; (d) this Second Amendment has been duly and validly executed and delivered by Westinghouse and each Subsidiary Borrower and each of this Second Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Westinghouse and each Subsidiary Borrower, enforceable in accordance with its terms except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general applicability affecting the enforcement of creditors' rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (e) no authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority are necessary for the execution and delivery by Westinghouse and each Subsidiary Borrower of this Second Amendment, for the performance by Westinghouse and each Subsidiary Borrower of this Second Amendment and the Amended Credit Agreement or for the validity or enforceability hereof or thereof, and (f) each of the representations of Westinghouse and each Subsidiary Borrower set forth in Article III of the Amended Credit Agreement is true and correct in all material respects on and as of the Second Amendment Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties were true and correct in all material respects as of such earlier date. 2. No Other Modifications. Except as expressly modified hereby, all the provisions of the Credit Agreement are and shall continue to be in full force and effect. Each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" and words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended hereby. 3. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS AND PRINCIPLES OF SUCH STATE. 4. Counterparts. This Second Amendment may be executed by one or more of the parties to this Second Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. - 3 - 4 5. Effectiveness. This Second Amendment shall become effective on and as of the date (the "Second Amendment Effective Date") upon which (a) the Administrative Agent shall have received (i) an executed counterpart of this Second Amendment from Westinghouse and each Subsidiary Borrower, (ii) executed Lender Consent Letters (or facsimile transmissions thereof) from the Required Lenders consenting to the execution of this Second Amendment by the Administrative Agent and (b) Westinghouse shall have paid to the Administrative Agent, for the benefit of each relevant Lender, an amendment fee equal to (x) 0.075% of such Lender's Commitment if such Lender shall have delivered its Lender Consent Letter, in accordance with the terms thereof, no later than 5:00 P.M., New York City time, on March 17, 1997, or (y) if clause (x) above is not applicable, 0.050% of such Lender's Commitment if such Lender shall have delivered its Lender Consent Letter, in accordance with the terms thereof, no later than 5:00 P.M., New York City time, on March 21. 1997. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed by their respective authorized officers as of the day and year first above written. WESTINGHOUSE ELECTRIC CORPORATION By ------------------------------------------ Title: --------------------------------------- HEMISPHERE BROADCASTING CORPORATION By ------------------------------------------ Title: --------------------------------------- INFINITY BROADCASTING CORPORATION OF BOSTON By ------------------------------------------ Title: --------------------------------------- - 4 - 5 INFINITY BROADCASTING CORPORATION OF NEW YORK By ------------------------------------------ Title: --------------------------------------- TRANSPORTATION DISPLAYS, INCORPORATED By ------------------------------------------ Title: --------------------------------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By ------------------------------------------ Title: --------------------------------------- - 5 - EX-10.S 5 WESTINGHOUSE ELECTRIC CORP. 1 Exhibit 10(s) AGREEMENT made as of the 20th day of June, 1996 by and between Westinghouse Electric Corporation ("Westinghouse") and Mel Karmazin ("Executive"). WITNESSETH: Upon the consummation of the Agreement and Plan of Merger dated as of the date hereof among Westinghouse, R Acquisition Corp. and Infinity Broadcasting Corporation ("Infinity") (the "Merger"), and pursuant to the terms thereof, Executive shall be employed as Chairman and Chief Executive Officer, Westinghouse/CBS Radio Group. Executive will report only to the highest executive officer of Westinghouse (currently Michael H. Jordan) and the Board of Directors of Westinghouse ("the Board"). Subject to the supervision of the Board, Executive will be responsible for and have full authority to manage all owned and operated radio stations and other radio-related activities of the Westinghouse/CBS Radio Group, such as the CBS Radio Networks, radio sales representatives, and administrative functions. All entities which conduct activities or operations described below and which are owned, operated or controlled in whole or part by Westinghouse or in which Westinghouse has a direct or indirect interest will be treated as if they were part of the Westinghouse/CBS Radio Group and the presidents or other 2 2 chief executive officers, as applicable, of such entities will report solely to Executive. Without limitation, the foregoing shall apply to any such domestic United States entity, regardless of where it conducts business and any foreign entity which conducts business in the United States, which Westinghouse owns, operates, controls or in which it acquires a direct or indirect interest following the date hereof, and which is engaged, directly or indirectly, in any activity or operation which Infinity operated or controlled or in which it or any entity related to it had an interest on the date of consummation of the Merger. Such activities and operations include, or are deemed to include, without limitation, the following, anywhere throughout the world: (A) radio broadcast operations and activities; (B) ownership, management and/or operation of radio stations; (C) development, production, co-production, financing, distribution and exploitation of audio works and any elements thereof and derivatives therefrom; (D) the ownership, management and/or operation of radio stations and/or radio networks; and (E) commercial tie-ups and merchandising. Executive's authority shall include the right to hire and fire all persons employed by the Westinghouse/CBS Radio Group and to approve any and all employment and similar agreements relating to such persons 3 3 in accordance with CBS and Westinghouse personnel policies and practices, including the Westinghouse Compensation Committee Charter. All officers, employees and other personnel of the Westinghouse/CBS Radio Group shall report only to Executive either directly or through such channels as Executive in his discretion shall specify. Executive shall have full authority to manage the Westinghouse/CBS Radio Group, including its personnel, business and operations in accordance with applicable policies and procedures, including those of the Board. Executive will be employed for a four-year term commencing on the effective time of the Merger (the "Effective Time"), at a starting annual salary of $925,000. Thereafter, Executive's salary shall be subject to merit review and annual increase (but not decrease) at the sole discretion of the Compensation Committee of the Board ("Compensation Committee"). Executive shall have the opportunity to receive an annual incentive bonus payment for each year of the term of this Agreement based on performance of the Westinghouse/CBS Radio Group. The target amount of the annual incentive bonus for each full calendar year during the employment term will be $1,500,000, with a range of $900,000 to $2,625,000. No amount shall be payable under this paragraph for any such 4 4 year unless the minimum performance standards determined by the Compensation Committee for any such year have been met. The full amount of the annual incentive bonus payments provided in this paragraph may be deferred in accordance with the terms of the Westinghouse Deferred Incentive Compensation Program as in effect from time to time. Promptly following the Effective Time, Executive shall be granted 500,000 options to acquire Westinghouse common stock, with an exercise price equal to the fair market value of a share on the date of grant, and otherwise containing customary terms, representing a one-time only grant of options for the four-year term of this Agreement. 250,000 of the options shall vest one year from the date of grant, and the remaining 250,000 options shall vest two years from the date of grant. All previously granted unvested options shall vest effective (i) on the date of Executive's death, (ii) upon the occurrence of a change in control of Westinghouse/CBS Radio Group, or upon the date that Executive's employment is terminated without cause or for disability. Westinghouse has expressed its intention to effect certain internal reorganizations and restructurings. For purposes of determining whether a change in control has occurred under clause (ii) of the second preceding sentence, as long as Westinghouse Electric Corporation or an affiliate 5 5 owns or controls at least 50% of the radio assets of the Westinghouse/CBS Radio Group, as such entity is constituted from time to time, no change of control shall be deemed to have occurred under this Agreement. Benefits and perquisites shall be consistent with those of Westinghouse executives at Executive's level of authority and responsibility. Executive may be terminated for cause on the same terms and conditions as set forth in Executive's most recent employment agreement with Infinity. In the event of any termination by Westinghouse of Executive's employment without cause, or any other breach of this Agreement by Westinghouse, Westinghouse shall pay Executive immediately a lump sum cash payment equal to the compensation (including annual incentive compensation) that would otherwise have been paid to Executive, for the remainder of the term and such payment shall be Executive's exclusive remedy. Westinghouse shall own all right, title and interest in perpetuity to the result of Executive's services and all artistic materials and intellectual properties which are, in whole or in part, created, developed or produced by Executive during the term of this Agreement and which are suggested by or related to Executive's employment hereunder or any activities to which Executive is assigned, and 6 6 Executive shall not have or claim to have any right, title or interest therein of any kind or nature. Nothing in the preceding sentence is intended to constitute a waiver of Westinghouse's or CBS' conflict of interest policies. Executive agrees to devote all customary business time and attention to the affairs of Westinghouse/CBS Radio Group except during vacation periods and reasonable periods of illness or other incapacity consistent with the practices of Westinghouse for executives in comparable positions, and agrees that his services shall be completely exclusive to Westinghouse/CBS Radio Group during the term hereof. Executive acknowledges that he has been furnished a copy of the Westinghouse policy concerning conflicts of interest ("Conflicts Policy"). Executive further acknowledges that he has read and fully understands all the requirements thereof, and acknowledges that at all times during the Employment Period he shall perform his services hereunder in full compliance with the Conflicts Policy and with any revisions thereof or additions thereto. To the fullest extent permitted by the laws of the State of New York, Westinghouse/CBS Radio Group shall protect, indemnify and hold harmless Executive and any entity claiming under or through him from and against any claim, loss, liability, judgment and expense (including 7 7 reasonable attorneys' fees) arising from or relating to Executive's employment by Westinghouse/CBS Radio Group. This Agreement contains the entire understanding of the parties with respect to the subject matter thereof, supersedes any and all prior agreements of the parties with respect to the subject matter thereof, and cannot be changed or extended except by a writing signed by both parties hereto. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, executors, heirs, administrators, successors and assigns. This Agreement and all matters and issues collateral thereto (other than benefits under a plan or option agreement, which shall be subject to the laws specified therein) shall be governed by the laws of the State of New York applicable to contracts performed entirely therein. If any provision of this Agreement, as applied to either party or to any circumstance, shall be adjudged by a court to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability thereof. It is understood that at the Effective Time the existing employment agreements and all ancillary agreements related thereto between Executive and Infinity are terminated. 8 8 IN WITNESS WHEREOF, the parties have executed this Agreement as of June 20, 1996. Westinghouse Electric Corporation By /s/ FREDRIC G. REYNOLDS ----------------------- /s/ MEL KARMAZIN ----------------------- Mel Karmazin EX-11 6 WESTINGHOUSE ELECTRIC CORP. 1 EXHIBIT (11) COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ------------------ 1997 1996 ---- ---- EQUIVALENT SHARES: AVERAGE SHARES OUTSTANDING 588,523,744 397,459,976 ADDITIONAL SHARES DUE TO: STOCK OPTIONS (a) 17,037,916 5,949,398 SERIES C PREFERRED SHARES 36,000,000 36,000,000 ----------- ----------- TOTAL EQUIVALENT SHARES 641,561,660 439,409,374 =========== =========== ADJUSTED EARNINGS (IN MILLIONS): LOSS FROM CONTINUING OPERATIONS $ (151) $ (723) INCOME FROM DISCONTINUED OPERATIONS - 967 EXTRAORDINARY ITEM - (63) -------- -------- ADJUSTED NET INCOME (LOSS) $ (151) $ 181 ======== ======== EARNINGS (LOSS) PER SHARE: FROM CONTINUING OPERATIONS $ (0.23) $ (1.65) FROM DISCONTINUED OPERATIONS - 2.20 FROM EXTRAORDINARY ITEM - (0.14) -------- -------- EARNINGS (LOSS) PER SHARE (b) $ (0.23) $ 0.41 ======== ========
(a) THE 1997 STOCK OPTIONS AMOUNT INCLUDES APPROXIMATELY 10,368,000 OPTIONS WHICH WERE ASSUMED AS A RESULT OF THE INFINITY ACQUISITION. (b) FOR EARNINGS PER SHARE USING AN ALTERNATIVE TREATMENT FOR THE SERIES C PREFERRED SHARES, SEE NOTE 11 TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN PART I OF THIS REPORT. -28- EX-12.A 7 WESTINGHOUSE ELECTRIC CORP. 1 EXHIBIT (12)(a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN MILLIONS) (UNAUDITED)
THREE MONTHS ENDED YEAR ENDED MARCH 31 DECEMBER 31 ------------------ ----------- 1997 1996 1996 ---- ---- ---- LOSS BEFORE INCOME TAXES AND MINORITY INTEREST $ (210) $(1,106) $(1,298) LESS: EQUITY IN INCOME OF 50 PERCENT OR LESS OWNED AFFILIATES 1 - 9 ADD: FIXED CHARGES 124 152 484 ------- ------- ------- EARNINGS AS ADJUSTED $ (87) $ (954) $ (823) ======= ======= ======= FIXED CHARGES: INTEREST EXPENSE $ 114 $ 146 $ 456 RENTAL EXPENSE 10 6 28 ------- ------- ------- TOTAL FIXED CHARGES $ 124 $ 152 $ 484 ======= ======= ======= RATIO OF EARNINGS TO FIXED CHARGES (a) (a) (a) ======= ======= =======
(a) ADDITIONAL INCOME BEFORE INCOME TAXES AND MINORITY INTEREST NECESSARY TO ATTAIN A RATIO OF 1.00X FOR THE THREE MONTHS ENDED MARCH 31, 1997, MARCH 31, 1996, AND THE YEAR ENDED DECEMBER 31, 1996 WOULD BE $211 MILLION, $1,106 MILLION, AND $1,307 MILLION, RESPECTIVELY. -29- EX-12.B 8 WESTINGHOUSE ELECTRIC CORP. 1 EXHIBIT (12)(b) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (IN MILLIONS) (UNAUDITED)
THREE MONTHS ENDED YEAR ENDED MARCH 31 DECEMBER 31 ------------------ ----------- 1997 1996 1996 ---- ---- ---- LOSS BEFORE INCOME TAXES AND MINORITY INTEREST $ (210) $(1,106) $(1,298) LESS: EQUITY IN INCOME OF 50 PERCENT OR LESS OWNED AFFILIATES 1 - 9 ADD: COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS 140 170 557 ------- ------- ------- EARNINGS AS ADJUSTED $ (71) $ (936) $ (750) ======= ======= ======= COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS: INTEREST EXPENSE $ 114 $ 146 $ 456 RENTAL EXPENSE 10 6 28 PRE-TAX EARNINGS REQUIRED TO COVER PREFERRED DIVIDEND REQUIREMENTS (b) 16 18 73 ------- ------- ------- TOTAL COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS $ 140 $ 170 $ 557 ======= ======= ======= RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS (a) (a) (a) ======= ======= =======
(a) ADDITIONAL INCOME BEFORE INCOME TAXES AND MINORITY INTEREST NECESSARY TO ATTAIN A RATIO OF 1.00X FOR THE THREE MONTHS ENDED MARCH 31, 1997, MARCH 31, 1996, AND THE YEAR ENDED DECEMBER 31, 1996 WOULD BE $211 MILLION, $1,106 MILLION, AND $1,307 MILLION, RESPECTIVELY. (b) DIVIDEND REQUIREMENT DIVIDED BY 100% MINUS THE EFFECTIVE INCOME TAX RATE OR THE STATUTORY RATE, WHICHEVER IS MORE APPROPRIATE -30- EX-27 9 WESTINGHOUSE ELECTRIC CORP.
5 1,000,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 89 0 1,719 33 863 4,723 3,585 1,744 19,884 3,493 6,128 4 0 612 4,979 19,884 2,223 2,223 1,590 1,590 763 0 114 (210) (59) (151) 0 0 0 (151) (.23) (.23)
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