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
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 1-977
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WESTINGHOUSE ELECTRIC CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
Westinghouse Building, 11 Stanwix Street, Pittsburgh, Pa. 15222-1384
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(Address of principal executive offices, zip code)
(412) 244-2000
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(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 359,180,913 shares outstanding at June 30, 1995
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WESTINGHOUSE ELECTRIC CORPORATION
INDEX
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PAGE NO.
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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 6-14
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 14-29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 29-30
Item 4. Submission of Matters to a
Vote of Security Holders 31-32
Item 6. Exhibits and Reports on Form 8-K 32-33
SIGNATURE 34
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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 Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
Sales of products and services $ 2,296 $ 2,108 $ 4,320 $ 3,851
Costs of products and services (1,686) (1,568) (3,216) (2,917)
Provision for restructuring (note 2) (5) - (5) -
Marketing, administration and general
expenses (441) (386) (848) (715)
Other income and expenses, net (note 3) (2) 16 (4) 55
Interest expense (61) (45) (119) (92)
------- ------- ------- -------
Income from Continuing Operations before
income taxes and minority interest in
income of consolidated subsidiaries 101 125 128 182
Income taxes (39) (47) (49) (69)
Minority interest in (income) loss of
consolidated subsidiaries (3) (3) (5) (2)
------- ------- ------- -------
Net income $ 59 $ 75 $ 74 $ 111
======= ======= ======= =======
Earnings per common share $ 0.12 $ 0.16 $ 0.12 $ 0.23
======= ======= ======= =======
Cash dividends per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
======= ======= ======= =======
See Notes to the Condensed Consolidated Financial Statements
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WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(in millions)
June 30, 1995 December 31, 1994
ASSETS ------------- -----------------
------ (unaudited)
Cash and cash equivalents $ 466 $ 338
Customer receivables 1,513 1,553
Inventories (note 4) 1,582 1,541
Uncompleted contracts costs over related billings 693 555
Deferred income taxes 494 524
Prepaid and other current assets 288 209
------- -------
Total current assets 5,036 4,720
Plant and equipment, net 1,737 1,898
Intangible and other noncurrent assets (note 5) 3,617 3,572
Net assets of Discontinued Operations (note 7) 434 434
------- -------
Total assets $10,824 $10,624
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Revolving credit borrowings and
other short-term debt $ 773 $ 662
Current maturities of long-term debt 329 17
Accounts payable 732 831
Uncompleted contracts billings over related costs 417 473
Other current liabilities (note 6) 1,557 1,726
------- -------
Total current liabilities 3,808 3,709
Long-term debt 1,566 1,886
Other noncurrent liabilities (note 6) 3,596 3,207
------- -------
Total liabilities 8,970 8,802
------- -------
Contingent liabilities and commitments (note 8)
Minority interest in equity of consolidated
subsidiaries 34 30
Shareholders' equity (note 9):
Preferred stock, $1.00 par value (25 million
shares authorized):
Series A preferred (no shares issued) - -
Series B conversion preferred (8 million
shares issued) 8 8
Series C conversion preferred (4 million
shares issued) 4 4
Common stock, $1.00 par value (630 million
shares authorized, 393 million shares issued) 393 393
Capital in excess of par value 1,911 1,932
Common stock held in treasury (816) (870)
Other (995) (1,000)
Retained earnings 1,315 1,325
------- -------
Total shareholders' equity 1,820 1,792
------- -------
Total liabilities and shareholders' equity $10,824 $10,624
======= =======
See Notes to the Condensed Consolidated Financial Statements
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WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(in millions) (unaudited)
Six Months Ended June 30
------------------------
1995 1994
---- ----
Cash provided (used) by operating activities
of Continuing Operations $ (90) $ 4
Cash used by operating activities
of Discontinued Operations (50) (175)
Cash flows from investing activities:
Business divestitures 65 50
Business acquisitions (37) (73)
Liquidation of assets of Discontinued Operations 159 1,578
Capital expenditures (97) (92)
Liquidation of trust investments 239 0
Other 0 (9)
------- -------
Cash provided by investing activities 329 1,454
------- -------
Cash flows from financing activities:
Bank revolver borrowings 508 150
Bank revolver repayments (460) (2,255)
Net change in other short-term debt (19) (72)
Repayments of long-term debt (44) (403)
Sale of equity securities 0 505
Treasury stock reissued 33 26
Dividends paid (84) (69)
Other 2 19
------- -------
Cash used by financing activities (64) (2,099)
------- -------
Increase (decrease) in cash and cash equivalents 125 (816)
Cash and cash equivalents at beginning of period 344 1,248
------- -------
Cash and cash equivalents at end of period $ 469 $ 432
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid -- Continuing Operations $ 118 $ 92
======= =======
Interest paid -- Discontinued Operations $ 44 $ 127
======= =======
Income taxes paid $ 47 $ 76
======= =======
See Notes to the Condensed Consolidated Financial Statements
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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.
In the opinion of the management of the Corporation, 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.
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, 1994. Certain amounts pertaining to the six months ended June 30,
1994 and the year ended December 31, 1994 have been reclassified for
comparative purposes.
2. RESTRUCTURING
During the second quarter of 1995, management approved additional restructuring
projects with costs totalling $20 million generally for the separation of 338
additional employees. All of these employees have been notified of their
separation, although the effective dates may not occur for several months.
Certain amounts accrued for prior restructuring projects, primarily related to
the 1993 restructuring program, have been applied to these project costs to
reduce the required restructuring charge to $5 million.
The new restructuring initiatives involve 247 employee separations at the
Electronic Systems operation, 14 employee separations at Energy Systems, and 77
employee separations for corporate overhead functions. The costs for new
programs at Electronic Systems and the corporate headquarters essentially have
been offset by adjustments from prior programs. Restructuring costs of $5
million for Energy Systems include unfavorable adjustments from prior programs
as well as costs for the additional separations.
3. OTHER INCOME AND EXPENSES, NET (in millions) (unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
Net gain (loss) on disposition of assets $ (1) $ 11 $ (8) $ 46
Miscellaneous, net (1) 5 4 9
----- ----- ----- -----
Other income (expenses), net $ (2) $ 16 $ (4) $ 55
===== ===== ===== =====
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The net gain on disposition of assets for the six months ended June 30, 1994
includes a first quarter gain of $32 million from the sale of two Sacramento
radio stations and a second quarter gain of $10 million from the sale of a WCI
investment in a shopping center development joint venture.
4. INVENTORIES (in millions)
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
Raw materials $ 188 $ 158
Work in process 1,173 1,065
Finished goods 141 156
------- -------
1,502 1,379
Long-term contracts in process 1,051 877
Progress payments to subcontractors 107 97
Recoverable engineering and development costs 445 437
Less: Inventoried costs related to contracts
with progress billing terms (1,523) (1,249)
------- -------
Inventories $ 1,582 $ 1,541
======= =======
5. INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
Deferred income taxes $ 1,462 $ 1,516
Goodwill and other intangible assets 1,008 1,119
Intangible pension asset 114 114
Undeveloped land 252 244
Joint ventures, affiliates, and other 210 100
Noncurrent receivables 139 147
Other 432 332
--------- ---------
Total intangible and other noncurrent assets $ 3,617 $ 3,572
========= =========
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6. OTHER CURRENT AND NONCURRENT LIABILITIES (in millions)
June 30, 1995 December 31, 1994
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(unaudited)
Other current liabilities:
-------------------------
Accrued employee compensation $ 180 $ 198
Income taxes currently payable 122 241
Accrued product warranty 76 82
Accrued taxes, interest and insurance 301 270
Accrued restructuring costs 127 180
Liability for business dispositions 109 112
Other 642 643
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Total other current liabilities $ 1,557 $ 1,726
========= =========
Other noncurrent liabilities:
----------------------------
Postretirement and postemployment benefits $ 1,270 $ 1,265
Pension liability 1,475 1,174
Accrued restructuring costs 8 8
Liability for business dispositions 75 75
Other 768 685
--------- ---------
Total other noncurrent liabilities $ 3,596 $ 3,207
========= =========
The increase in the pension liability reflects the current year's pension
accrual as well as the reclassification of certain trust assets. In June 1995,
the investments in a trust that was established to fund a nonqualified pension
plan were replaced with the Corporation's common stock. Because of the nature
of the trust, this stock is treated as treasury stock for financial statement
purposes.
7. DISCONTINUED OPERATIONS
In November 1992, the Corporation announced a Plan (the Plan) that included
exiting the financial services business and the sales of the Distribution and
Control Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO).
In the first quarter of 1994, the Corporation completed the sales of DCBU and
WESCO for proceeds in excess of $1.1 billion and approximately $340 million,
respectively.
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(in millions) (unaudited) Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994*
---- ---- ---- ----
Sales of products and services
------------------------------
Financial Services $ 8 $ 11 $ 16 $ 25
DCBU and WESCO - - - 319
------ ------ ------ ------
Sales of products and services $ 8 $ 11 $ 16 $ 344
====== ====== ====== ======
Net earnings (losses)
---------------------
Financial Services $ (16) $ (47) $ (34) $ (116)
DCBU and WESCO - - - 4
------ ------ ------ ------
Net losses $ (16) $ (47) $ (34) $ (112)
====== ====== ====== ======
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*Operating results of Discontinued Operations for DCBU and WESCO for the six
months ended June 30, 1994 included the operating results of DCBU for the one
month ended January 31, 1994 and the operating results of WESCO for the two
months ended February 28, 1994, their respective dates of sale.
The assets and liabilities of Discontinued Operations have been separately
classified in the Condensed Consolidated Balance Sheet as net assets of
Discontinued Operations. A summary of these assets and liabilities follows:
NET ASSETS OF DISCONTINUED OPERATIONS
(in millions) June 30, 1995 December 31, 1994*
------------- -----------------
(unaudited)
ASSETS:
Cash and cash equivalents $ 3 $ 6
Portfolio investments 1,043 1,230
Deferred income taxes 402 340
Other assets 168 221
------ ------
Total assets -- Discontinued Operations 1,616 1,797
------ ------
LIABILITIES:
Revolving credit facilities borrowings 295 374
Current maturities of long-term debt 413 230
Liability for estimated loss on disposal 70 145
Long-term debt 346 568
Other liabilities 58 46
------ ------
Total liabilities -- Discontinued Operations 1,182 1,363
------ ------
Net assets of Discontinued Operations $ 434 $ 434
====== ======
*Certain amounts have been reclassified for comparative purposes.
Portfolio investments by category of investment and financing at June 30, 1995
and December 31, 1994 are summarized in the following table.
PORTFOLIO INVESTMENTS
At June 30, 1995 (unaudited)
(in millions) ---------------------------------------
Real
Leasing Estate Corporate Total
------- ------ --------- -----
Receivables $ 868 $ 15 $ 1 $ 884
Other portfolio investments 38 120 1 159
----- ----- ----- ------
Portfolio investments $ 906 $ 135 $ 2 $1,043
===== ===== ===== ======
At December 31, 1994
---------------------------------------
Real
Leasing Estate Corporate Total
------- ------ --------- -----
Receivables $ 886 $ 18 $ 9 $ 913
Other portfolio investments 38 279 - 317
----- ----- ----- ------
Portfolio investments $ 924 $ 297 $ 9 $1,230
===== ===== ===== ======
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Other portfolio investments at June 30, 1995 and December 31, 1994 included the
Corporation's investment in LW Real Estate Investments, L.P. (LW) of $21
million and $133 million respectively, real estate properties of $76 million
and $88 million, respectively, and other investments of $62 million and $96
million, respectively, primarily consisting of investments in real estate and
leasing partnerships. The remaining portfolio investments, other than the
leasing assets, are expected to be substantially liquidated by the end of 1995.
The leasing portfolio is expected to liquidate through 2015 in accordance with
contractual terms.
Non-earning receivables at June 30, 1995 and December 31, 1994 totalled $22
million and $30 million, respectively. There were no reduced earning
receivables at either date.
Leasing receivables consist of direct financing and leveraged leases. At
June 30, 1995 and December 31, 1994, 82% and 81%, respectively, related to air-
craft and 17% and 18%, respectively, related to cogeneration facilities.
Certain leasing receivables classified as performing and totalling $137 million
at June 30, 1995 have been identified by management as potential problem
receivables. This amount consists primarily of leveraged leases related to
aircraft leased by major U.S. airlines. Such leasing receivables were current
as to payments and performing in accordance with contractual terms at June 30,
1995.
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL
The following table is a reconciliation of the liability for the estimated loss
on disposal of Discontinued Operations from December 31, 1994 to June 30, 1995:
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
(in millions)(unaudited)
Financial DCBU & Restruc-
Services WESCO turing Total
--------- ------ -------- --------
December 31, 1994 $ 80 $ 60 $ 5 $ 145
Year-to-date activity (64) (10) (1) (75)
----- ----- ------ ------
June 30, 1995 $ 16 $ 50 $ 4 $ 70
===== ===== ====== ======
The liability for estimated loss on disposal of financial services' assets is
shown net of expected gains on future asset liquidations. Management believes
that the total liability for the estimated loss on disposal of Discontinued
Operations is adequate. Any variances from estimates which may occur for one
Plan component will be considered in conjunction with those for other
components in determining whether an adjustment of the total liability is
necessary. The adequacy of this liability is evaluated each quarter.
8. CONTINGENT LIABILITIES AND COMMITMENTS
Uranium Settlements
-------------------
The Corporation had previously provided for the estimated future costs for the
resolution of all uranium supply contract suits and related litigation. The
remaining uranium reserve balance includes assets required for certain
settlement obligations and reserves for estimated future costs. The reserve
balance at June 30, 1995 is deemed adequate considering all facts and
circumstances known to management. The future obligations require providing
the remainder of the fuel deliveries running through 2013 and the supply of
equipment and services through approximately 1995. Variances from estimates
which may occur are considered in determining if an adjustment of the liability
is necessary.
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Litigation
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Philippines
In December 1988, a 15-count lawsuit was filed against the Corporation alleging
bribery and other fraudulent conduct in connection with the construction of a
nuclear power plant in the Philippines. Of the 15 claims, 14 were stayed
pending arbitration before the International Chamber of Commerce (ICC). With
respect to the remaining count alleging bribery, a jury verdict was rendered in
favor of the Corporation on May 18, 1993 and was appealed by the Republic of
the Philippines on March 24, 1995. A similar finding was made by the ICC in
1991. Arbitration proceedings before the ICC on issues relating to the
construction of the plant were concluded in October 1994, and the parties await
a decision.
Steam Generators
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Corporation as components of
nuclear steam supply systems. Since 1993, settlement agreements have been
entered resolving seven litigation claims, including the recent settlement of a
claim by a co-plaintiff in a pending lawsuit. These agreements generally
involve providing certain products and services at prices discounted at varying
rates. Two cases were resolved in favor of the Corporation after trial or
arbitration, although an appeal has been filed in one of the cases. Four
lawsuits are pending.
The Corporation is also a party to six tolling agreements with utilities or
utility plant owners' groups. The tolling agreements delay initiation of any
litigation for various specified periods of time and permit the parties time to
engage in discussions.
Securities Class Actions - Financial Services
The Corporation is defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of Westinghouse common stock in
1991. The court dismissed both the derivative claim and the class action
claims in their entirety. These dismissals have been appealed.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in each of the foregoing cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation has meritorious defenses to the litigation described above, and
management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
Environmental Matters
---------------------
Compliance with federal, state, and local laws and regulations relating to the
discharge of substances into the environment, the disposal of hazardous wastes
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. While it is difficult to
estimate the timing and ultimate costs to be incurred in the future due to
uncertainties about the status of laws, regulations, technology and information
available for individual sites,
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management has estimated the total probable and reasonably possible remediation
costs that could be incurred by the Corporation based on the facts and
circumstances currently known.
PRP Sites
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation
is either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at 54 sites. With regard to cleanup costs at these sites, in
many cases the Corporation will share these costs with other responsible
parties and the Corporation believes that any liability incurred will be
satisfied over a number of years. Management believes that the Corporation's
total remaining probable costs for remedial actions as of June 30, 1995 are
approximately $77 million, all of which has been accrued.
Bloomington Sites
The Corporation is a party to a 1985 Consent Decree relating to remediation of
six sites in Bloomington, Indiana. In the Consent Decree, the Corporation
agreed to construct and operate an incinerator, which would be permitted under
federal and state law, to burn excavated material. On February 8, 1994, the
Consent Decree parties filed with the court a status report advising of the
parties' intention to investigate alternatives. The Corporation believes it is
probable that the Consent Decree will be modified to an alternative remedial
action, which could include a combination of containment, treatment,
remediation, and monitoring. The parties also recognize that the Consent
Decree shall remain in full force and effect during this process.
In addition to the six sites covered by the Consent Decree, the Corporation has
responsibility for two additional sites in the Bloomington area, where material
had been previously excavated and stored. The Corporation has received
approval from the Environmental Protection Agency (EPA) to permanently move
material from one of the sites to a commercial hazardous waste landfill. The
removal of materials from this site commenced in the second quarter of 1995.
The Corporation has requested approval from the EPA for removal of materials
from the second site. If EPA approval is received, the Corporation anticipates
removal from the second site to commence in the third quarter of 1995.
The Corporation estimates that its total cost to implement the most reasonable
alternative for the eight Bloomington sites is approximately $70 million, all
of which has been accrued. Included in this amount is $52 million for site
construction and other related costs valued as of the year of expenditure. The
remaining $18 million is the present value, assuming a 5% discount rate, of
approximately $46 million of operating and maintenance costs that will be
incurred over a 30 year period. Other remediation alternatives, while
considered less likely, could cause the total costs to be as much as $125
million.
Other
The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters, the Corporation has estimated its remaining reasonably possible costs
and determined them to be insignificant.
The Corporation currently manages under contract several government-owned
facilities, which among other things are engaged in the remediation of
hazardous and nuclear wastes. To date, under the terms of the contracts, the
Corporation is not responsible for costs associated with environmental
liabilities, including environmental cleanup costs, except under certain
circumstances associated with the willful misconduct or lack of good faith of
its managers or their failure to
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exercise prudent business judgement. There are currently no material claims
for which the Corporation believes it is responsible.
The Corporation has or will have responsibilities for environmental closure
activities, such as dismantling incinerators or decommissioning nuclear
licensed sites. The Corporation has estimated the total potential cost to be
incurred for these actions to approximate $97 million, of which $29 million had
been accrued at June 30, 1995. The Corporation's policy is to accrue these
costs over the estimated life of the individual facilities, which in most cases
is approximately 20 years. The anticipated annual costs currently being
accrued are $5 million.
As part of the agreement for the sale of certain of its businesses or sites,
the Corporation has agreed to assume obligations for remediation of
contamination existing at these sites. The Corporation has provided for all
known environmental liabilities related to these agreements.
Management believes that the Corporation has adequately provided for its
present environmental obligations and that complying with existing government
regulations will not materially impact the Corporation's financial position,
liquidity or results of operations.
Insurance Recoveries
--------------------
The Corporation has filed actions against over 100 of its insurance carriers
seeking recovery for environmental, product and property damage liabilities,
and certain other matters. The Corporation has settled with several of these
carriers and has received recoveries related to these actions. Amounts
received to date generally have been applied to cover obligations assumed
through the settlements or litigation costs. The Corporation has not accrued
for any future insurance recoveries.
Financing Commitments -- Continuing Operations
----------------------------------------------
WCI Communities, Inc. (WCI) was contingently liable at June 30, 1995 under
guarantees for $56 million of sewer and water district borrowings. The
proceeds of the borrowings were used for sewer and water improvements on
residential and commercial real estate projects of WCI.
In the ordinary course of business, standby letters of credit are issued by
commercial banks on behalf of the Corporation related to performance
obligations primarily under contracts with customers.
Financing Commitments -- Discontinued Operations
------------------------------------------------
Financial Services commitments with off-balance-sheet credit risk represent
financing commitments to provide funds, including loan or investment
commitments, guarantees, standby letters of credit and standby commitments,
generally in exchange for fees. The remaining commitments have fixed
expiration dates from 1995 through 2002.
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At June 30, 1995, Financial Services commitments totalled $77 million compared
to $80 million at year-end 1994. Of this amount, $68 million were guarantees,
credit enhancements and other standby agreements, and $9 million were
commitments to extend credit. Of the $80 million of commitments at year-end
1994, $71 million were guarantees, credit enhancements and other standby
agreements and $9 million were commitments to extend credit. Management
expects the remaining commitments to either expire unfunded, be assumed by the
purchaser in asset dispositions or be funded with the resulting assets being
sold shortly after funding.
9. SHAREHOLDERS' EQUITY
In March 1994, the Corporation sold 36,000,000 depositary shares each
representing ownership of one-tenth of a share of the Corporation's Series C
Conversion Preferred Stock (Series C Preferred). Each depositary share will
automatically convert into one share of common stock on June 1, 1997 unless
called on May 30, 1997 by the Corporation or redeemed at any time prior to June
1 by the holder. In accordance with prevalent practice at the time of sale,
these shares were treated as outstanding common stock for the calculation of
earnings per share. If the Series C Preferred had been treated as common stock
equivalents for the calculation of earnings per share, the Corporation's
earnings per share for the second quarter and first six months of 1995 would
have been $.10 per share and $.07 per share, respectively, compared to $.14 per
share and $.21 per share, respectively, for the same periods last year.
10. SUBSEQUENT EVENTS
On July 24, 1995, the Corporation sold WCI in a transaction valued at $556
million plus the assumption by the buyer of $19 million of debt. The
Corporation received $430 million of cash and approximately $125 million in
mortgage receivables and securities. Concurrently, the Corporation invested
$48 million for a 24 percent equity interest in the new business. This equity
interest may be sold in the near term. The after-tax-loss on the sale of WCI
of approximately $75 million will be recognized in the third quarter.
On August 1, 1995, the Corporation entered into an agreement to acquire CBS,
Inc. (CBS) by means of a merger. Cash consideration would equal $81 per share
plus an amount equal to 6% per annum beginning on August 31, 1995, less any
dividends declared and paid by CBS for the period after August 1, 1995. The
total purchase price of approximately $5.4 billion is expected to be financed
through borrowings under bank credit facilities, the terms of which are
currently under negotiation.
The purchase is contingent on a number of factors including approval by a
majority of the CBS shareholders, approval by the Federal Communications
Commission, and completion of the bank financing. The transaction is expected
to be consummated in approximately four to six months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Orders in the second quarter of 1995 totalled $2.0 billion. Compared to the
same quarter last year, orders decreased 14 percent. The second quarter of
1994 included an exceptionally high volume of international orders for Power
Generation equipment. Orders for the six months of 1995 were $4.4 billion,
essentially flat compared to the same period last year. Backlog, compared to a
year ago, increased $316 million, or 3 percent, to $10.5 billion, led by Thermo
King, Power Generation, and Energy Systems.
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Revenues for the quarter increased $188 million, or 9 percent, to $2.3 billion.
Revenues for the first six months of 1995 rose $469 million, or 12 percent, to
$4.3 billion, led by Broadcasting, Electronic Systems, Thermo King, and Knoll.
Operating profit for the quarter increased $10 million to $164 million compared
to $154 million in the same quarter last year. Operating profit for the first
six months of 1995 was $251 million, up $32 million from the same period in
1994. The increase in operating profit was more than offset by a substantial
decrease in other income and higher interest expense.
Net income for the second quarter of 1995 was $59 million, or 12 cents per
share, compared to net income of $75 million, or 16 cents per share, for the
same period last year. Net income for the first six months of 1995 was $74
million, or 12 cents per share, compared to $111 million, or 23 cents per
share, during the first six months of 1994.
During the remainder of 1995, the Corporation will continue the divestitures of
its non-strategic businesses as well as explore strategic opportunities to
expand and grow its core businesses.
RECENT DEVELOPMENTS
On August 1, 1995, the Corporation entered into an agreement under which the
Corporation would acquire by means of a merger CBS, for cash consideration
totalling approximately $5.4 billion. The purchase price is expected to be
financed through bank credit facilities totalling $7.5 billion which, in
addition to providing funds for the acquisition, will replace the existing
revolving credit facility. To contribute to repayments under the new credit
facility, the Corporation may raise $1.5 billion to $2 billion through the sale
or joint venture of assets. The purchase of CBS, which is contingent on a
number of factors, is expected to be consummated in approximately four to six
months.
On July 24, 1995, the Corporation sold WCI in a transaction valued at $556
million plus the assumption by the buyer of $19 million of debt. The
Corporation received $430 million of cash and approximately $125 million in
mortgage receivables and securities. Concurrently, the Corporation invested
$48 million for a 24 percent equity interest in the new business. This equity
interest may be sold in the near term. The after-tax loss on the sale of WCI
of approximately $75 million will be recognized in the third quarter.
Of the proceeds from the sale of WCI, approximately $400 million of cash will
be used to reduce debt of Discontinued Operations. Mortgage receivables of
approximately $100 million also will be transferred to Discontinued Operations
and will reduce debt when monetized.
RESTRUCTURING ACTIONS
The Corporation is committed to strengthening its businesses and improving its
profitability through certain restructuring actions including changes in
business and product line strategies, as well as downsizing for process
reengineering and productivity improvements.
During the second quarter of 1995, management approved additional restructuring
projects with costs totalling $20 million generally for the separation of 338
additional employees. Although all of these employees have been notified of
their separation, the effective date may not occur for several months. Certain
amounts accrued for prior restructuring projects, primarily related to the 1993
restructuring program, have been applied to these project costs to reduce the
required restructuring charge to $5 million.
The new restructuring initiatives involve 247 employee separations at the
Electronic Systems operation, 14 employee separations at Energy Systems, and 77
employee separations for corporate overhead functions. The costs for new
programs at
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Electronic Systems and the corporate headquarters essentially have been offset
by adjustments from prior programs. Restructuring costs of $5 million for
Energy Systems include unfavorable adjustments from prior programs as well as
costs for the additional separations.
Progress continued on implementation of the Corporation's 1993 and 1994
restructuring programs. These programs included the involuntary separation of
approximately 4,600 employees by the end of 1995. At June 30, 1995,
approximately 90% of these employee separations had been completed. Of the 338
employees notified under the 1995 restructuring program, approximately 30% of
the separations had been completed. The remaining employees under all of these
programs are expected to be separated in the next several months.
Of the $448 million of expected costs for the 1993 and 1994 programs, $114
million remained to be spent as of June 30, 1995. Approximately half of these
remaining expenditures represent employee separation costs, which generally are
paid over a period of up to two years following separation. A significant
portion of the remaining half will be made by Knoll for the closedown of a
major product line discontinued June 30, 1995 and for lease termination costs
for several facilities. Of the $20 million of expected costs for the 1995
programs, less than $1 million had been spent as of June 30, 1995.
Savings resulting from implementing the 1993 and 1994 restructuring programs
are expected to total $170 million annually, primarily related to reduced
employment costs. During the second quarter of 1995, actual savings
approximated $35 million, bringing the year-to-date savings to approximately
$70 million. Savings resulting from implementing the 1995 restructuring
initiatives are expected to total $11 million annually, with only a small
portion expected to affect 1995 operations. Competitive pressures causing
price compression in certain of the Corporation's markets have absorbed a
significant portion of these savings.
The Corporation expects to continue to identify restructuring initiatives in an
ongoing effort to reduce its overall cost structure and improve its
competitiveness, especially in the near-term. In this regard, in July 1995,
Power Generation announced a restructuring program involving the separation of
over 500 employees. The costs for this program, which are expected to
approximate $25 million, will be recognized in the third quarter.
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RESULTS OF OPERATIONS
The following represents the segment results of the Corporation's Continuing
Operations for the three months and six months ended June 30, 1995 and 1994.
Segment Results ($ in millions)(unaudited)
------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 % Change 1995 1994 % Change
---- ---- -------- ---- ---- --------
Broadcasting:
Orders $ 241.3 $ 228.3 5.7% $ 443.5 $ 418.8 5.9%
Backlog - - - - - -
Sales 241.3 228.3 5.7% 443.5 418.8 5.9%
Operating Profit (Loss) 64.6 57.6 12.2% 99.6 91.3 9.1%
Operating Profit Margin 26.8% 25.2% N/A 22.5% 21.8% N/A
Depreciation &
Amortization (D&A) 9.0 9.4 -4.3% 18.7 18.6 0.5%
Capital Expenditures 6.1 10.3 -40.8% 9.2 15.7 -41.4%
Electronic Systems:
Orders $ 543.9 $ 530.6 2.5% $ 1,096.9 $ 917.5 19.6%
Backlog 3,707.9 3,932.3 -5.7% 3,707.9 3,932.3 -5.7%
Sales 651.2 487.9 33.5% 1,258.6 937.8 34.2%
Operating Profit (Loss) 36.0 21.8 65.1% 72.7 61.2 18.8%
Operating Profit Margin 5.5% 4.5% N/A 5.8% 6.5% N/A
D&A 19.7 18.7 5.3% 41.4 37.3 11.0%
Capital Expenditures 8.6 11.7 -26.5% 14.6 18.9 -22.8%
Government and
Environmental Services:
Orders $ 64.7 $ 76.4 -15.3% $ 126.3 $ 144.0 -12.3%
Backlog 120.7 86.4 39.7% 120.7 86.4 39.7%
Sales 84.6 99.7 -15.1% 170.5 183.5 -7.1%
Operating Profit (Loss) 18.1 18.9 -4.2% 30.3 28.9 4.8%
Operating Profit Margin 21.4% 19.0% N/A 17.8% 15.7% N/A
D&A 2.2 5.4 -59.3% 7.1 11.0 -35.5%
Capital Expenditures 4.7 5.4 -13.0% 10.7 6.8 57.4%
Thermo King:
Orders $ 279.3 $ 241.2 15.8% $ 591.6 $ 489.2 20.9%
Backlog 307.3 237.4 29.4% 307.3 237.4 29.4%
Sales 284.1 225.6 25.9% 557.4 412.4 35.2%
Operating Profit (Loss) 45.4 34.8 30.5% 88.3 61.6 43.3%
Operating Profit Margin 16.0% 15.4% N/A 15.8% 14.9% N/A
D&A 4.2 4.0 5.0% 8.3 7.7 7.8%
Capital Expenditures 6.4 3.4 88.2% 12.0 7.2 66.7%
Energy Systems:
Orders $ 276.5 $ 332.8 -16.9% $ 653.6 $ 701.1 -6.8%
Backlog 2,773.4 2,615.4 6.0% 2,773.4 2,615.4 6.0%
Sales 311.0 323.9 -4.0% 562.5 559.9 0.5%
Operating Profit (Loss) 2.5 16.6 -84.9% (9.9) 8.3 -219.3%
Operating Profit Margin 0.8% 5.1% N/A -1.8% 1.5% N/A
D&A 12.2 12.8 -4.7% 25.4 26.4 -3.8%
Capital Expenditures 8.2 7.7 6.5% 13.2 14.9 -11.4%
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Segment Results ($ in millions)(unaudited)(continued)
-----------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 % Change 1995 1994 % Change
---- ---- -------- ---- ---- --------
Power Generation:
Orders $ 357.5 $ 657.4 -45.6% $ 936.6 $ 1,120.6 -16.4%
Backlog 2,844.2 2,436.4 16.7% 2,844.2 2,436.4 16.7%
Sales 440.0 395.1 11.4% 762.4 686.7 11.0%
Operating Profit (Loss) (18.2) 3.7 -591.9% (51.2) (22.2) -130.6%
Operating Profit Margin -4.1% 0.9% N/A -6.7% -3.2% N/A
D&A 11.4 11.9 -4.2% 22.6 23.8 -5.0%
Capital Expenditures 13.9 7.1 95.8% 18.1 14.9 21.5%
Knoll:
Orders $ 159.9 $ 144.3 10.8% $ 300.5 $ 261.6 14.9%
Backlog 85.7 105.9 -19.1% 85.7 105.9 -19.1%
Sales 158.6 143.7 10.4% 306.1 261.2 17.2%
Operating Profit (Loss) 10.0 (9.7) 203.1% 16.4 (24.7) 166.4%
Operating Profit Margin 6.3% -6.8% N/A 5.4% -9.5% N/A
D&A 6.8 7.1 -4.2% 13.7 14.4 -4.9%
Capital Expenditures 6.9 3.4 102.9% 9.1 4.6 97.8%
WCI:
Orders $ 51.5 $ 74.0 -30.4% $ 108.5 $ 130.2 -16.7%
Backlog - - - - - -
Sales 51.5 74.0 -30.4% 108.5 130.2 -16.7%
Operating Profit (Loss) 16.3 24.3 -32.9% 28.2 37.2 -24.2%
Operating Profit Margin 31.7% 32.8% N/A 26.0% 28.6% N/A
D&A 0.2 0.5 -60.0% 0.6 0.9 -33.3%
Capital Expenditures 0.0 1.3 -100.0% 0.7 1.5 -53.3%
Other Businesses:
Orders $ 67.4 $ 84.2 -20.0% $ 157.1 $ 212.5 -26.1%
Backlog 587.7 691.5 -15.0% 587.7 691.5 -15.0%
Sales 93.7 130.7 -28.3% 194.5 261.2 -25.5%
Operating Profit (Loss) (5.8) (9.2) N/A (10.2) (22.3) N/A
Operating Profit Margin -6.2% -7.0% N/A -5.2% -8.5% N/A
D&A 1.8 3.0 -40.0% 4.6 6.5 -29.2%
Capital Expenditures (0.1) 0.6 -116.7% 1.1 1.3 -15.4%
Corporate and Other:
Orders $ 15.0 $ 15.8 -5.1% $ 40.6 $ 41.2 -1.5%
Backlog 64.5 65.3 -1.2% 64.5 65.3 -1.2%
Sales 26.8 39.0 -31.3% 49.0 73.5 -33.3%
Operating Profit (Loss) (5.4) (5.3) N/A (13.4) (0.4) N/A
Operating Profit Margin -20.1% -13.6% N/A -27.3% -0.5% N/A
D&A 4.5 8.5 -47.1% 9.9 16.2 -38.9%
Capital Expenditures 4.5 5.6 -19.6% 8.4 5.8 44.8%
Intersegment:
Orders $ (42.1) $ (40.8) -3.2% $ (84.1) $ (78.8) -6.7%
Backlog (40.3) (35.7) -12.9% (40.3) (35.7) -12.9%
Sales (46.6) (39.5) -18.0% (93.1) (74.1) -25.6%
Total - Continuing Operations:
Orders $ 2,014.9 $ 2,344.2 -14.0% $ 4,371.1 $ 4,357.9 0.3%
Backlog 10,451.1 10,134.9 3.1% 10,451.1 10,134.9 3.1%
Sales 2,296.2 2,108.4 8.9% 4,319.9 3,851.1 12.2%
Operating Profit (Loss) 163.5 153.5 6.5% 250.8 218.9 14.6%
Operating Profit Margin 7.1% 7.3% N/A 5.8% 5.7% N/A
D&A 72.0 81.3 -11.4% 152.3 162.8 -6.4%
Capital Expenditures 59.2 56.5 4.8% 97.1 91.6 6.0%
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Broadcasting
Broadcasting sales for the second quarter and first six months of 1995 were up
$13 million and $25 million, respectively, compared to the same periods last
year. Operating profit for the second quarter and first six months increased
$7 million and $8 million, respectively, compared to the same periods. Higher
television and radio advertising revenues, coupled with benefits from cost
containment initiatives, generated the increased Broadcasting profits during
these periods. Gains in the radio and television operations were partially
offset by operating losses for the production company. Increased costs for two
new television programs under development by the production company contributed
to these losses. Group W Satellite Communications also showed a slight
increase in revenues and operating profit for the quarter and first six months
despite the negative impact of the national baseball strike earlier in the
year.
Electronic Systems
Orders for the second quarter and first half of 1995 were up $13 million and
$179 million, respectively, over the same periods of 1994. A large marine
propulsion order, a space classified project, and the acquisition of Norden
Systems, the unit acquired from United Technologies in May 1994, were the
primary reasons for the increased order levels in 1995. Backlog at June 30,
1995 was $3.7 billion compared to $3.9 billion at June 30, 1994.
Increased revenues from core defense electronics operations, including Norden,
from air traffic control, and from mail processing systems generated an
increase in revenues of $163 million for the second quarter of 1995 and $321
million for the first six months of 1995 compared to the same periods last
year. Operating profit for the second quarter and first half of 1995 increased
$14 million and $12 million, respectively, compared to the same periods last
year. Increased revenues coupled with savings from restructuring initiatives
resulted in these higher operating profit levels.
Government and Environmental Services
Orders decreased $12 million for the second quarter and $18 million for the
first six months of 1995 compared to the same periods of 1994 primarily due to
the sale of the Aptus environmental services subsidiary in March 1995. Backlog
was up $34 million at June 30, 1995 compared to the same period last year due
to the buildup of container orders in late 1994, several government remediation
contracts, and a large material order for the U.S. Navy, partially offset by
the sale of Aptus.
Revenues for the second quarter and first six months of 1995 declined $15
million and $13 million, respectively, compared to the same periods last year
due to the sale of Aptus and the expiration in late 1994 of a contract to
manage a Department of Energy facility in Idaho. Despite lower revenues,
operating profit was flat in the second quarter and the first six months of
1995 as cost improvements from restructuring initiatives offset the lower
revenues.
Thermo King
Thermo King continued to post strong results. Orders rose $38 million for the
quarter and $102 million for the first half of 1995 compared to the same
periods in 1994. Backlog increased $70 million from June 30, 1994, reflecting
the strong truck and trailer market in Europe and the higher level of orders
for the North American truck and trailer and container markets.
Revenues increased $59 million for the quarter and $145 million for the first
six months with international revenues up over 60 percent for the first six
months of 1995 compared to the same period in 1994.
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20
The volume increases and the product cost improvement programs increased
operating profit $11 million for the quarter and $27 million for the first half
of 1995 compared to the same periods last year.
Energy Systems
Orders for the second quarter and first six months of 1995 declined $56 million
and $48 million, respectively, due to a large fuel order that was booked in the
second quarter of 1994. Backlog at June 30, 1995 was $2.8 billion, up $158
million over June 30, 1994.
Revenues for the second quarter of 1995 declined $13 million and were flat for
the first six months of 1995 compared to the same periods in 1994. The
quarterly fluctuations resulted from the timing of scheduled power plant
outages with utilities for services and fuel which occurred in the first
quarter of 1995 compared to the second quarter of 1994. Operating profit for
the second quarter decreased $14 million compared to the same quarter last year
due to the lower revenues and a $5 million charge for restructuring costs
consisting primarily of employee separation costs. Operating profit for the
first six months of 1995 decreased $18 million compared to 1994 as a result of
reduced licensee income, increased discounts, and the restructuring charge,
partially offset by cost savings from restructuring initiatives.
Power Generation
Orders declined $300 million in the second quarter of 1995 and $184 million in
the first six months of 1995 compared to the same periods in 1994 due to
several significant orders for China and England in the second quarter of 1994.
Power Generation's backlog at June 30, 1995 of $2.8 billion was up $408
million, or 17 percent, compared to the same period last year. International
orders represent more than 40 percent of the total backlog at June 30, 1995.
For the second quarter and first six months of 1995, higher field service and
new apparatus sales, partially offset by lower factory service sales, increased
revenues $45 million and $76 million, respectively, compared to the same
periods last year. Although volume and revenues improved, the operating losses
for the quarter and first half increased $22 million and $29 million,
respectively, compared to the same periods in 1994. Lower price realization on
new apparatus has had a major impact on operating profits in recent periods.
Cost savings from restructuring initiatives partially offset the deteriorations
in price. Further actions to align the cost base through workforce reductions
and other cost reductions were initiated in July 1995 by the announcement of a
restructuring program for the separation of over 500 employees. The costs for
this program, which are expected to approximate $25 million, will be recognized
in the third quarter.
Knoll
Continued strength in the North American market and an improved European market
increased orders for the second quarter and first half of 1995 by $16 million
and $39 million, respectively, compared to the same periods last year. Backlog
decreased $20 million compared to June 30, 1994 due to several large project
orders that were completed during 1994.
Revenues increased $15 million for the second quarter of 1995 and $45 million
for the first half of 1995 compared to the same periods last year. New
products, strong sales across all product lines, and improved quick delivery
programs contributed to this increase.
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21
The increased volume in North America and Europe and aggressive cost reduction
programs begun in 1994 resulted in an operating profit increase of $20 million
for the second quarter and $41 million for the first six months of 1995
compared to the same periods in 1994.
The strong orders, revenues, and improvements in operating profit are
indicative of the dramatic turnaround Knoll began late last year.
WCI
Revenues were down approximately $22 million for the second quarter and first
six months of 1995 compared to the same periods last year. Operating profit
declined $8 million for the second quarter and $9 million for the first half of
1995 compared to the same periods in 1994. Timing of homesite sales between
the second quarter and third quarter of 1994 caused these variances. In July
1995, the Corporation sold WCI and acquired a 24 percent equity interest in the
new business.
Other Businesses
The sale of Controlmatic in May 1994, Gladwin in December 1994, and
Westinghouse Motor Company in April 1995 caused revenues for the second quarter
and first half of 1995 to decline $37 million and $67 million, respectively,
compared to the same periods in 1994.
The operating losses for the same periods decreased $3 million and $12 million,
respectively, primarily due to the Controlmatic divestiture. Progress
continues toward divesting the remainder of these businesses.
DISCONTINUED OPERATIONS
In November 1992, the Corporation announced a Plan (the Plan) that included
exiting the financial services business and selling both DCBU and WESCO. The
portfolio investments of Financial Services have decreased from $8,967 million
at year-end 1992, to $1,043 million at June 30, 1995, a decrease of $7,924
million. The Corporation completed the sales of DCBU and WESCO during the
first quarter of 1994.
The liability for the estimated loss on the disposal of Discontinued Operations
was established in November 1992. In the fourth quarter of 1993, the
Corporation recorded an additional provision for loss based on changes in
various estimates.
A summary of the changes in the liability for the estimated loss on the
disposal of Discontinued Operations during the first six months of 1995 is
presented in the following table:
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
(in millions)(unaudited)
Financial DCBU & Restruc-
Services WESCO turing Total
--------- ------ -------- --------
December 31, 1994 $ 80 $ 60 $ 5 $ 145
Year-to-date activity (64) (10) (1) (75)
--------- ------ -------- --------
June 30, 1995 $ 16 $ 50 $ 4 $ 70
========= ====== ======== ========
The liability for estimated loss on disposal of financial services' assets is
shown net of expected gains on future asset liquidations. Future disposition
costs relating to the sales of DCBU and WESCO include product warranty claims,
medical claims, employee separation costs and potential environmental
remediation costs. Management believes that the total liability for the
estimated loss on disposal of Discontinued Operations is adequate. Any
variances from estimates which may occur
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22
for one Plan component will be considered in conjunction with those for other
components in determining whether an adjustment of the total liability is
necessary. The adequacy of this liability is evaluated each quarter.
A summary of changes in net debt of Discontinued Operations for the first six
months of 1995 is presented in the table below:
CHANGES IN NET DEBT OF DISCONTINUED OPERATIONS
(in millions) (unaudited)
Net Debt at December 31, 1994 $ 1,166
Liquidation of Discontinued Operations assets (159)
Cash used in operating activities of Discontinued Operations 50
Net cash received from Continuing Operations (6)
-------
Net Debt at June 30, 1995 $ 1,051
=======
Of the remaining net debt of Discontinued Operations at June 30, 1995,
approximately $550 million is expected to be repaid during the remainder of
1995. Approximately $150 million is expected to be repaid through the
liquidation of portfolio investments of Financial Services. The remaining 1995
debt repayment of $400 million is expected to occur when cash is received from
Continuing Operations in conjunction with the sale of WCI.
Noncash proceeds from the sale of WCI of approximately $100 million of mortgage
receivables also are expected to be received from Continuing Operations. The
Corporation believes that the debt of Discontinued Operations at year-end 1995
will be supportable by the assets of Discontinued Operations and can be repaid
as the portfolio liquidates over its contractual terms.
DISPOSITION OF NON-STRATEGIC BUSINESSES
During the fourth quarter of 1993, the Corporation identified certain
businesses as non-strategic and provided for the cost of their disposition.
Non-strategic businesses generally included parts of the former Environmental
Services business unit and all of the businesses in the Industrial Products and
Services business unit. During 1994, the Corporation completed the sales of
Controlmatic and Gladwin Corporation. On March 31, 1995, the sale of Aptus,
Inc., an environmental services subsidiary, was completed. On April 12, 1995,
the Corporation completed the transfer of its 75 percent equity interest in the
Westinghouse Motor Company to TECO Electric & Machinery Co., Ltd. Also in the
second quarter, the Corporation signed agreements to sell three plants and
announced its intentions to close another. The Corporation continues to pursue
the disposition of the remaining non-strategic businesses.
Activity relating to the liability for disposition of non-strategic businesses
for the first six months of 1995 is summarized below:
LIABILITY FOR DISPOSITION OF NON-STRATEGIC BUSINESSES
(in millions)(unaudited)
Balance at December 31, 1994 $187
Additional provision 7
Disposal of businesses (10)
------
Balance at June 30, 1995 $184
======
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23
OTHER INCOME AND EXPENSES
Other income and expenses represents a net expense of $2 million for the second
quarter of 1995 compared to income of $16 million for the second quarter of
1994. For the first six months of 1995, other income and expenses represents a
net expense of $4 million compared to a $55 million income for the first six
months of 1994. The 1994 periods include gains on dispositions of assets,
principally two Sacramento radio stations in the first quarter and a WCI
investment in a shopping center development joint venture in the second
quarter.
INTEREST EXPENSE
Interest expense for Continuing Operations for the second quarter of 1995 was
$16 million higher than the same period of 1994. For the first six months of
1995, interest expense was $27 million higher than the same period of 1994.
These increases reflected the fourth quarter 1994 transfer of debt to
Continuing Operations from Discontinued Operations. Although combined average
debt outstanding under the revolving credit facilities decreased, Continuing
Operations' average debt outstanding increased over $450 million for the first
six months of 1995 compared to the same period of 1994. Average interest rates
for short-term debt outstanding also increased significantly over the prior
year's six-month period.
By December 31, 1995, the Corporation expects to reduce the existing debt of
Continuing Operations by up to $300 million compared to year-end 1994 debt
levels.
INCOME TAXES
The Corporation's effective income tax rate for the first six months of both
1995 and 1994 was 38%. This rate is consistent with management's expectations
for the year.
At June 30, 1995, the Corporation had recorded net deferred income tax benefits
totalling $2,358 million compared to $2,380 million at December 31, 1994.
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.
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.
In recent years, the Corporation has taken several actions to reduce its
leverage and rebuild its capital structure. As a result, in 1994, net debt
(total debt less cash and cash equivalents) was reduced by $1.7 billion. The
Corporation intends to continue to reduce its existing consolidated net debt by
up to $1 billion in 1995. Of this reduction, $700 million is expected to be
debt of Discontinued Operations and will result from the continued liquidation
of portfolio investments and from the sale of WCI. The debt of Continuing
Operations is expected to be reduced up to $300 million primarily through the
sale of non-strategic businesses.
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24
Management expects that cash from Continuing Operations and availability under
its revolving credit facility will continue to be sufficient to meet ordinary
future business needs. Other sources of liquidity generally available to the
Corporation include cash and cash equivalents, proceeds from sales of
non-strategic assets and borrowings from other sources, including funds from
the capital markets. Management continually reviews the Corporation's capital
structure and associated interest costs.
The acquisition of CBS will have a significant near-term impact on the
Corporation's leverage, given that the total purchase price of $5.4 billion is
expected to be financed by bank borrowings. However, management believes that
this higher financial leverage is supportable by the significant level of cash
flows generated by CBS in addition to the operating cash flows provided by the
Corporation. Additionally, the Corporation may sell or joint venture assets to
repay $1.5 billion to $2 billion of debt.
Operating Activities
The following table provides a reconciliation of net income to cash provided by
operating activities of Continuing Operations for the six months ended June 30,
1995 and 1994:
RECONCILIATION OF NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES
Six Months Ended June 30
--------------------------
(in millions) (unaudited) 1995 1994
---- ----
Net income from Continuing Operations $ 74 $ 111
Noncash items included in income:
Depreciation and amortization 152 163
Losses (gains) on asset dispositions 8 (46)
Change in assets and liabilities, net of effects
of acquisitions and divestitures of businesses:
Receivables, current and noncurrent 27 187
Inventories (50) (68)
Progress payments net of costs on uncompleted
contracts (194) (208)
Accounts payable (92) (65)
Deferred and current income taxes 18 (3)
Accrued restructuring costs (34) (96)
Other assets and liabilities 1 29
------ ------
Cash provided (used) by operating activities
of Continuing Operations $ (90) $ 4
====== ======
The operating activities of Continuing Operations used $90 million of cash
during the first six months of 1995 compared to $4 million of cash provided for
the same period of 1994. The increase in operating cash requirements during
the first six months of 1995 was primarily attributable to increased levels of
receivables compared to the same period of 1994 offset somewhat by lower
restructuring expenditures. Customers continue to demand more favorable
payment terms under major contracts, increasing the Corporation's investment in
uncompleted contracts. Management continues to focus significant effort in
this area and expects to substantially reduce working capital requirements by
year-end 1995.
Savings from the Corporation's restructuring activities are expected to
essentially offset related cash expenditures in 1995.
Management expects to contribute approximately $300 million in cash to the
Corporation's pension plans in 1995 which is consistent with the 1994 cash
contribution level. No contributions were made in the first six months of
either period.
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The operating activities of Discontinued Operations used $50 million of cash
during the first six months of 1995 compared to cash used of $175 million for
the same period of 1994. The decrease in operating cash requirements during
the first six months of 1995 was primarily attributable to lower interest
expense resulting from lower levels of outstanding debt, as well as lower
expenditures for the divestitures of DCBU and WESCO. The future operating cash
requirements of Discontinued Operations will be attributable primarily to
interest costs on debt, operating costs, and disposition costs related to DCBU
and WESCO.
Investing Activities
Investing activities provided $329 million of cash during the first six months
of 1995 compared to $1,454 million of cash provided during the same period of
1994. In the first six months of 1995, the Corporation completed the sale of
Aptus, Inc., an environmental services subsidiary, and the transfer of its 75
percent interest in the Westinghouse Motor Company. The majority of the
proceeds for these transactions consisted of cash and notes. In addition, the
Corporation purchased the Plant Services Division of Vectra Technologies, Inc.,
a provider of chemical decontamination and cleaning services for approximately
$15 million and paid an additional $22 million in connection with the 1994
acquisition of Norden Systems. During the second quarter of 1995, the
Corporation also received cash proceeds of $239 million from the sale of
investments held in two trusts established to fund employee benefit plans and
replaced the trust investments with Westinghouse common stock.
In the first six months of 1994, the Corporation sold its DCBU and WESCO
businesses as well as two Sacramento radio stations generating cash proceeds of
$1.4 billion and $50 million, respectively. In addition, the Corporation
purchased Norden for cash of approximately $73 million. Liquidations of
Financial Services portfolio investments generated $159 million in the first
six months of 1995 compared to cash generated of $220 million for the same
period of 1994.
Capital expenditures were $97 million for the first six months of 1995, an
increase of $5 million over the same period of 1994. Capital spending in 1995
is expected to approximate the 1994 level.
During the remainder of 1995, the Corporation expects to generate substantial
cash proceeds through the continued liquidation of portfolio investments of
Discontinued Operations, sales of non-strategic businesses, and the sale of
WCI.
Financing Activities
Cash used by financing activities during the first six months of 1995 totalled
$64 million compared to cash used of $2,099 million during the same period of
1994. The decrease in the financing cash outflows was primarily attributable
to significantly lower repayments under the revolving credit facilities.
Net debt of the Corporation decreased $140 million at June 30, 1995 to $3,253
million from $3,393 million at December 31, 1994, primarily reflecting debt
repaid from the liquidation of assets and sale of non-strategic businesses
during the first six months of 1995. Total debt of the Corporation was $3,722
million at June 30, 1995, a decrease of $15 million from $3,737 million at
December 31, 1994. Repayment of $750 million to $1 billion of debt, in total,
is expected in 1995.
Two new revolving credit agreements with more favorable terms and conditions
than the previous facility were executed in August 1994 (see Revolving Credit
Facilities). Total borrowings under the revolvers were $967 million at June
30, 1995. These borrowings carried a composite interest rate of 6.5% at June
30, 1995 and were based on the London Interbank Offer Rate (LIBOR). The
Corporation allowed one facility with a commitment level of $500 million to
expire on August 4, 1995.
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In March 1994, the Corporation sold in a private placement depositary shares
representing 3,600,000 shares of Series C preferred stock for net proceeds of
$505 million. These shares will convert to 36,000,000 common shares in June
1997. The Series B preferred stock, sold in June 1992, will convert to
32,890,000 shares of common stock on September 1, 1995.
Dividends paid in the 1995 first six months included approximately $23 million
for dividends for the Series C preferred stock issued in March 1994 and $25
million for the Series B preferred shares. The remainder represented common
stock dividends of 5 cents per share for both quarters.
On August 26, 1992, the Corporation filed a registration statement on Form S-3
for the issuance of up to $1 billion of debt securities. At June 30, 1995,
$400 million of this shelf registration remained unused.
Securities Ratings
On July 18, 1995, Standard and Poor's placed the Corporation's senior debt on
CreditWatch for possible downgrade and attributed the action to wide-spread
press reports of a possible acquisition of CBS. On August 1, 1995, Moody's
Investors Service placed the Corporation's credit ratings under review for
possible downgrade following the Corporation's announcement regarding the
acquisition of CBS in a cash transaction for $5.4 billion. Also, in light of
the announcement, on August 2, 1995, Fitch Investors Service, Inc. placed the
Corporation's senior debt on FitchAlert with negative implications.
Revolving Credit Facilities
On August 5, 1994, the Corporation replaced its December 1991 revolver with two
revolving credit agreements (revolvers). These facilities had a combined
commitment level of $2.5 billion, with $2.0 billion maturing on August 4, 1997
(three-year revolver) and $500 million maturing on August 4, 1995. The $500
million facility was allowed to expire on August 4, 1995 as the Corporation's
liquidity position had improved, making this facility unnecessary. Borrowings
under the revolver are used for general corporate purposes, including the
repayment of maturing long-term debt. The interest rates for borrowings under
the revolver are determined at the time of each borrowing and are based on one
of a variety of floating rate indices plus a margin based on the Corporation's
long-term debt ratings.
Unused capacity under the revolvers equalled $1,533 million at June 30, 1995.
Borrowing availability is subject to compliance with certain covenants,
representations and warranties. At June 30, 1995, the Corporation was in
compliance with these covenants.
The Corporation is currently negotiating three new bank credit facilities, the
commitments under which are expected to total $7.5 billion. Borrowings under
the facilities will be used to finance the purchase of CBS and replace the
existing revolver. Borrowings under the new facilities will not occur until
the consummation of the merger.
Hedging Activities
Prior to the adoption of the Plan, Financial Services entered into interest
rate and currency exchange agreements to manage the interest rate and currency
risk associated with various debt instruments. No transactions were
speculative or leveraged. Given their nature, these agreements have been
accounted for as hedging transactions. A summary of notional amounts
outstanding at June 30, 1995 is presented in the table below:
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INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS-NOTIONAL AMOUNTS OUTSTANDING
(in millions)(unaudited)
Short-Term Long-Term
At June 30, 1995 Debt Debt Total
---------- --------- -----
Continuing Operations $ 209 $ - $ 209
Discontinued Operations - 374 374
----- ----- -----
Notional amounts $ 209 $ 374 $ 583
===== ===== =====
The average remaining maturity of interest rate and currency exchange
agreements was 13 months at June 30, 1995.
Of the total notional amount outstanding at June 30, 1995, $359 million relates
to interest rate swaps with rate and maturity characteristics set forth in the
table below:
CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS (in millions)(unaudited)
Twelve months ended June 30, Total 1996 1997 1998 1999 2000
----- ---- ---- ---- ---- ----
Fixed rate swaps (pay fixed):
Notional amount $209 $ 75 $ 4 $ 50 $ 30 $ 50
Wtd. avg. fixed rate paid 8.83% 8.45% 13.02% 8.73% 8.92% 9.08%
Floating rate swaps (pay floating):
Notional amount $150 $150 - - - -
Wtd. avg. fixed rate received 8.74% 8.74% - - - -
Under the majority of the swap agreements, the floating rate received or paid
is based on the average 30-day commercial paper rate for the relevant period.
This rate was 6.1% on June 30, 1995. The floating rate received or paid on the
remaining agreements is based on six month LIBOR and is set on dates specified
in the agreements. This rate was 6.0% on June 30, 1995.
The remaining $224 million notional amount outstanding at June 30, 1995
consists of a $150 million interest rate floor agreement and a $74 million
interest rate and currency swap.
The Corporation's credit exposure under interest rate and currency exchange
agreements is limited to the cost of replacing an agreement in the event of
non-performance by its counterparty. To minimize this risk, Financial Services
selected high credit quality counterparties. At June 30, 1995, the aggregate
credit exposure to counterparties totalled approximately $94 million. This
exposure resulted primarily from an interest rate and currency swap with a
counterparty rated A+. The contract matures in February 1996.
In the first six months of 1995, outstanding interest rate exchange agreements
resulted in a net increase in the average borrowing rate for Continuing
Operations of approximately 0.2% and a net decrease for Discontinued Operations
of 0.2%. These agreements resulted in a net increase in interest expense of
Continuing Operations of approximately $3 million and a net decrease in
interest expense of Discontinued Operations of approximately $1 million.
The Corporation continually monitors its economic exposure to changes in
foreign exchange rates and enters into foreign exchange forward or option
contracts to hedge its transaction exposure when appropriate. As a result, the
Corporation's unhedged foreign exchange exposure is not significant.
Furthermore, changes in foreign exchange rates whether favorable or unfavorable
are not expected to have a significant impact on the Corporation's financial
results or operating activities.
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With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52,
"Foreign Currency Translation," the combined total sales for those operations
were less than 0.5% of the Corporation's sales for the first six months of
1995. Any translation adjustments resulting from converting the local currency
balance sheets and income statements of designated hyperinflationary
subsidiaries into U.S. dollars are recorded as period costs in accordance with
SFAS No. 52.
OTHER MATTERS
Environmental Matters
Compliance with federal, state, and local laws and regulations relating to the
discharge of substances into the environment, the disposal of hazardous wastes
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. While it is difficult to
estimate the timing and ultimate costs to be incurred in the future due to
uncertainties about the status of laws, regulations, technology and information
available for individual sites, management has estimated the total probable and
reasonably possible remediation costs that could be incurred by the Corporation
based on the facts and circumstances currently known. See note 8 to the
financial statements.
At June 30, 1995, the Corporation had accrued liabilities totalling $77 million
for sites where it has been either named a potentially responsible party (PRP)
or has other remedial responsibilities, $70 million for the Bloomington sites
and $29 million for decommissioning costs at facilities where the Corporation
has ongoing operations. In conjunction with the sales of certain of its
businesses, the Corporation has also provided for remediation costs related to
past operations of such sites.
Management believes that the Corporation has adequately provided for its
present environmental obligations and that complying with existing government
regulations will not materially impact the Corporation's financial position,
liquidity or results of operations.
Legal Matters
The Corporation is defending a number of lawsuits on various matters. See note
8 to the financial statements. Costs to defend these lawsuits are charged to
operations in the period in which the services are rendered.
Since 1993, the Corporation has entered into agreements to resolve seven
litigation claims, including the recent settlement of a claim by a co-plaintiff
in a pending lawsuit. These litigation claims are in connection with alleged
tube degradation in steam generators sold by the Corporation as components for
nuclear steam supply systems. These agreements generally involve providing
certain products and services at prices discounted at varying rates. The
future impact of these discounts on operating results will be incurred over the
next 15 years with the greatest impact occurring during the next nine years.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in certain of these cases and although
management believes a significant adverse judgment is unlikely, any such
judgments could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation has meritorious defenses to the litigation referenced in
note 8, and management believes that the litigation should not have a
material adverse effect on the financial condition of the Corporation.
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Insurance Recoveries
The Corporation has filed actions against more than 100 of its insurance
carriers seeking recovery for environmental, product and property damage
liabilities, and certain other matters. The Corporation has settled with
several of these carriers and has received recoveries related to these actions.
Amounts received to date generally have been applied to cover obligations
assumed through the settlements or litigation costs. The Corporation has not
accrued for any future insurance recoveries.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a) As previously reported, the Corporation is defending an action in
Matagorda County, Texas initiated by Houston Lighting and Power Company and
its co-owners seeking damages of approximately $780 million for alleged breach
of contract, misrepresentation, state law violations and violations of the
Texas Deceptive Trade Practices Act arising out of the Corporation's supply of
nuclear steam supply systems for the South Texas Project. Trial commenced in
this action on July 5, 1995.
b) As previously reported, the Corporation is defending an action in the
Western District of Pennsylvania involving claims by Portland General Electric
Company and the Eugene Water & Electric Board ("Eugene Board") for breach of
contract, negligence, fraud, negligent misrepresentation and violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO") arising out of the
Corporation's design, manufacture and installation of steam generators at the
Trojan Nuclear Plant in Ranier, Oregon. The Eugene Board owns 30% of the
Trojan plant. The Eugene Board's claims were dismissed on May 17, 1995 pursuant
to a settlement with the Corporation. After reflecting this settlement, the
remaining damages for this case approximate $270 million.
c) As previously reported, the Corporation is defending consolidated suits in
federal court in Maryland by the Equal Employment Opportunity Commission
("EEOC") and former employees of the Corporation's Electronic Systems Group
with respect to alleged age discrimination and discriminatory employment
practices in connection with reductions in force necessitated by the federal
government's cancellation of all contracts pertaining to the carrier-based A-12
aircraft program. The suits seek back pay, interest, liquidated damages,
reinstatement of employment, court costs, and any other relief that may be
deemed appropriate. At the start of the case, there were 388 employees in the
EEOC action, but during the past several months, 125 of the employees have
consented to the dismissal of their claims, and two of these employees have
also consented to the dismissal of their individual suits. The court adopted a
case management plan for the remaining claimants involving a series of trials
centered on separate divisions within Electronic Systems. The first trial has
been postponed until January 1996, and no other trials have been scheduled.
d) The Corporation also has been named as one of the multiple defendants in
about 50 asbestos cases, and as a third-party defendant in about 2,100 more
such suits that have been consolidated in the Baltimore City Circuit Court. In
the course of a 1994 trial focusing on five representative plaintiffs whose
claims involved defendants other than the Corporation, the jury determined that
two Westinghouse products were defective due to their asbestos content, and due
to the Corporation's alleged failure to provide adequate warnings of the health
hazards associated with those products. These findings may be binding on the
Corporation in future proceedings in the consolidated litigation with
plaintiffs who have asserted claims against the Corporation; however, each
claimant would have to prove that he developed an asbestos-related disease,
that he was exposed to a Westinghouse product, and that this exposure was a
substantial factor in the development of the
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disease. Any award of compensatory damages would be apportioned among the
defendants found liable, and would be subject in large part to the
Corporation's insurance coverage. The court exonerated the Corporation in June
1995 from liability for punitive damages on the grounds that there was
insufficient evidence that the Corporation knew its products posed a risk of
harm. The plaintiffs are expected to appeal the ruling on punitive damages.
In addition to the Baltimore litigation described herein, the
Corporation is a defendant in other asbestos lawsuits which have been brought
in this and other jurisdictions.
e) As previously reported, the Corporation is one of several defendants in a
fraudulent conveyance action by the Official Committee of Unsecured Creditors
of Phar-Mor, Inc. arising out of an August, 1991 Phar-Mor tender offer in which
the Corporation received about $30 million, and an additional $20 million from
the tender of Phar-Mor stock by the DeBartolo Family Limited Partnership
("DeBartolo") pursuant to a prior Westinghouse loan to DeBartolo that was
collateralized by DeBartolo's Phar-Mor holdings. The fraudulent conveyance
action was transferred from bankruptcy court in Cleveland to the Western
District of Pennsylvania and consolidated with about 50 other cases involving
Phar-Mor. Trial is scheduled to begin in September 1995.
Included in the consolidated cases is an action by the Corporation
seeking damages in connection with loans to, and equity investments in,
Phar-Mor. On May 2, 1995 the Corporation concluded a settlement in this
litigation with Phar-Mor's chief executive officer and controlling shareholder
and certain other parties, which has resulted in the dismissal of all
cross-claims and third-party complaints as between the Corporation and these
parties. The action is now limited to the Corporation's claims against Coopers
& Lybrand ("Coopers"), Phar-Mor's former accountants, for securities
violations, fraud, negligent misrepresentation, and breach of contracts to
which the Corporation was a third-party beneficiary. Coopers obtained a
summary judgment on the negligent misrepresentation claim, and on some of the
breach of contract claims. The Corporation has moved for reconsideration of
the summary judgment order. Trial is scheduled to begin in the action against
Coopers immediately following the conclusion of the fraudulent conveyance
action.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in the above matters, and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described above, and management believes
that the litigation should not have a material adverse effect on the financial
condition of the Corporation.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Corporation was held on
April 26, 1995.
(b) The following matters were submitted to a vote of the shareholders
at the annual meeting:
(i) In connection with the election of eleven directors, the
following votes were cast for or withheld from the following
candidates:
FOR WITHHELD
Frank C. Carlucci 278,363,192 6,291,114
Robert E. Cawthorn 278,486,578 6,167,728
Gary M. Clark 278,784,776 5,869,530
George H. Conrades 278,796,589 5,857,717
William H. Gray III 278,349,862 6,304,444
Michael H. Jordan 278,805,447 5,848,859
David T. McLaughlin 278,469,987 6,184,319
Richard M. Morrow 278,417,579 6,236,727
Richard R. Pivirotto 278,364,346 6,289,960
Paula Stern 278,540,840 6,113,466
Robert D. Walter 278,881,662 5,772,644
(ii) A management proposal regarding the election of Price Waterhouse
as independent accountants was presented at the meeting and
279,336,340 shares of common stock were voted for, 3,329,954
shares were voted against, and 1,988,012 shares abstained in
connection with the adoption of this resolution, the text of
which is set forth on pages 29 and 30 of the Corporation's Proxy
Statement dated March 10, 1995, and incorporated herein by
reference.
(iii) A management proposal concerning approval of an amendment to the
Corporation's Deferred Stock and Compensation Plan for Directors
was presented at the meeting, and 254,703,438 shares of common
stock were voted for, 25,386,873 shares were voted against, and
4,563,995 shares abstained, in connection with the adoption of
this proposal, the text of which is set forth on pages 30 through
34 of the Corporation's Proxy Statement dated March 10, 1995 and
incorporated herein by reference.
(iv) A management proposal concerning approval of an amendment to the
Corporation's 1993 Long-Term Incentive Plan was presented at the
meeting, and 259,996,046 shares of common stock were voted for,
19,928,770 shares were voted against, and 4,729,490 shares
abstained, in connection with the adoption of amendments to the
1993 Long-Term Incentive Plan, the text of which is set forth on
pages 34 and 35 of the Corporation's Proxy Statement dated March
10, 1995, and incorporated herein by reference.
(v) A shareholder's resolution concerning tying compensation to the
dividend was presented at the meeting and 27,976,232 shares of
common stock were voted for, 165,196,178 shares were voted
against, 8,246,852 shares abstained, and there were 83,235,044
broker non-votes in connection with this resolution, the text of
which is set forth on pages 35 through 37 of the Corporation's
Proxy Statement dated March 10, 1995, and incorporated herein by
reference.
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(vi) A shareholder's resolution linking compensation to the dividend,
terminating all bonuses, and capping executive compensation at
one million five hundred thousand dollars was presented at the
meeting and 32,645,719 shares of common stock were voted for,
160,794,017 were voted against, 7,979,526 shares abstained, and
there were 83,235,044 broker non-votes in connection with this
resolution, the text of which is set forth on pages 37 and 38 of
the Corporation's Proxy Statement dated March 10, 1995, and
incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) The Restated Articles of the Corporation are incorporated
herein by reference to Exhibit 3(b) to Form 10-Q for the
quarter ended March 31, 1994.
(b) The Bylaws of the Corporation, as amended January 25, 1995,
are incorporated herein by reference to Exhibit 3(c) to Form
10-K for the year ended December 31, 1994.
(4) RIGHTS OF SECURITY HOLDERS
Except as set forth below, there are no instruments with
respect to long-term debt of the Corporation that involve
securities authorized thereunder exceeding 10% of the total
assets of the Corporation and its subsidiaries on a
consolidated basis. The Corporation agrees to provide to the
Securities and Exchange Commission, upon request, a copy of
instruments defining the rights of holders of long-term debt
of the Corporation and its subsidiaries.
(a) Form of Senior Indenture, dated as of November 1, 1990,
between the Corporation and Citibank, N.A. is incorporated
herein by reference to Exhibit 4.1 to the Corporation's
Registration Statement No. 33-41417.
(10) MATERIAL CONTRACTS
(a*) The Annual Performance Plan is incorporated herein by
reference to Exhibit 10(a) to Form 10-K/A for the year
ended December 31, 1992.
(b*) The 1993 Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(b) to
Form 10-Q for the quarter ended March 31, 1995.
(c*) The 1984 Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(b) to
Form 10-Q for the quarter ended June 30, 1993.
(d*) The Westinghouse Executive Pension Plan, as amended, is
incorporated herein by reference to Exhibit 10(d) to
Form 10-K for the year ended December 31, 1994.
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(e*) The Deferred Compensation and Stock Plan for Directors,
as amended, is incorporated herein by reference to
Exhibit 10(e) to Form 10-Q for the quarter ended March 31,
1995.
(f*) The Advisory Director's Plan is incorporated herein by
reference to Exhibit 10(k) to Form 10-K for the year
ended December 31, 1989.
(g) The Director's Charitable Giving Program is incorporated
herein by reference to Exhibit 10(g) to Form 10-K for the
year ended December 31, 1994.
(h*) The 1991 Long-Term Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(h) to
Form 10-K for the year ended December 31, 1994.
(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) 364-Day Competitive Advance and Revolving Credit Facility
Agreement dated as of August 5, 1994, among the Corporation
as borrower, the Co-Agents and Lenders named therein, and
Chemical Bank, as Administrative Agent is incorporated herein
by reference to Exhibit 10(r) to Form 10-Q for the quarter
ended June 30, 1994.
(l) Three-Year Competitive Advance and Revolving Credit Facility
Agreement dated as of August 5, 1994, among the Corporation
as Borrower, the Co-Agents and Lenders named therein, and
Chemical Bank, as Administrative Agent is incorporated herein
by reference to Exhibit 10(s) to Form 10-Q for the quarter
ended June 30, 1994.
(m) Agreement and Plan of Merger among Westinghouse Electric
Corporation, Group (W) Acquisition Corporation and CBS, Inc.,
dated August 1, 1995.
* 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:
None.
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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 8th day of August, 1995.
WESTINGHOUSE ELECTRIC CORPORATION
Fredric G. Reynolds
-----------------------------
Executive Vice President and
Chief Financial Officer
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