FORM 10-K
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549
                              (Mark One)
                                   
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1996

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from ___________ to ___________
Commission file number ___________

                             Tracor, Inc.          
         (Exact name of registrant as specified in its charter)

               Delaware                                74-2618088   
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                  Identification No.)

                    6500 Tracor Lane, Austin, Texas 
                              78725-2000 
               (Address of principal executive offices)
  Registrant's telephone number, including area code:   512/926-2800 
                                   
Securities to be registered pursuant to Section 12(b) of the Act:   None 
                                   
   Securities to be registered pursuant to Section 12(g) of the Act:
                                   
                     Common Stock, $.01 par value 
              Series A Warrants to Purchase Common Stock 
                           (title of class)
                                   
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. [X] YES   [ ] NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.     [ ] YES 
  [X] NO

As of December 31, 1996, 24,754,303 common shares were outstanding and
aggregate market value of the common shares held by non-affiliates (based
upon the average of the bid and asked prices of these shares on the Nasdaq
National Market System on December 31, 1996) was approximately
$526,028,938.75.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. __ YES    ___ NO

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into the
indicated part or parts of this report:

None.

PART I

Item 1. Business.

General

Tracor, Inc. provides sophisticated electronic and information technology
products, systems and services for the Department of Defense ("DOD"), other
U.S. government agencies, foreign governments and commercial customers. The
Company's business units operate in the U.S. and foreign defense
electronics, information technology and systems engineering and integration
markets.. The Company's products and services and largely support 
high-priority DOD weapons, platforms and systems enable defense customers
to enhance the operational performance and readiness of existing systems
and platforms, as well as extend their useful lives and survivability. As
a result, the Company believes it is well positioned to benefit from
fundamental changes in national defense strategy precipitated by the end
of the Cold War. Since August 1993, the Company has made three substantial
acquisitions as part of its strategy to take advantage of a consolidating
defense industry. With the Company's recent acquisition of Cordant, Inc.,
Tracor has achieved a major presence, and substantially increased its
revenues, in the information technology market serving a broad range of new
DOD and other government customers. Largely as a result of such
acquisitions, Tracor's revenues and operating income have increased from
$261.8 million and $11.1 million, respectively, in 1992 to $1,082.5 million
and $92.6 million, respectively, in 1996.
Industry Overview

Beginning in the mid-1980s, the U.S. defense industry in general was
negatively impacted by the perceived reduction of threats from the former
Soviet Union and eastern European countries and, more recently, by
competing demands upon the federal budget. This has resulted in a U.S.
defense budget that has declined in real dollars, adjusted for inflation,
since the mid-1980s. For many defense contractors, the defense budget
decrease and the related DOD procurement strategies have resulted in
program cancellations, scope reductions, delays in contract funding or
awards and significant predatory pricing pressures associated with
increased competition and reduced funding. The defense budget has begun to
stabilize and, for the first time in many years, has increased in 1996,
adjusted for inflation.

The U.S. defense budget may generally be divided into four major areas:
military personnel, operations and maintenance, procurement, and research
and development. A major portion of the Company's activities are funded by
the operations and maintenance segment, relating primarily to systems,
products and services which support the readiness, improved performance and
increased life expectancy of existing platforms, weapons systems and
military forces. Despite the sharp overall decline in the defense budget,
the operations and maintenance segment has declined less sharply, as
existing weapons platforms are upgraded and maintained to provide a
cost-effective means of supporting a smaller military force. As a result,
the operations and maintenance segment has become the largest segment of
the DOD budget. Management estimates the current DOD operations and
maintenance market to be approximately $90 billion per year, or more than
one-third of the U.S. defense budget. Defense procurement relates primarily
to the development, production and acquisition of weapons platforms such
as aircraft, land vehicles and naval vessels. Until the last few years, the
procurement budget was the largest segment of the DOD budget. Over the past
decade, the declining U.S. defense budget has resulted in a significant
decrease in the military procurement budget as new generation weapons
platforms have been canceled or delayed. DOD budget priorities over the
next several years are likely to emphasize the readiness (operations and
maintenance) of a smaller force structure and the need to extend the lives
of existing weapons platforms by incrementally upgrading their
capabilities, while the procurement portion is expected to experience a
modest increase. Management believes Tracor is also well positioned to
benefit from this procurement upturn.

Declining defense budgets and increasing pressures for cost reductions have
precipitated a major consolidation in the defense industry. The Company
believes large diversified companies are likely to continue to make the
decision to divest non-strategic defense assets, as noncompetitive cost
structures and lack of critical mass and long-term commitment to the
industry put such diversified companies at a relative competitive
disadvantage. In addition, smaller, independent businesses may find it more
difficult to compete effectively in the changing defense environment and
may become available for acquisition. The Company believes this industry
condition will continue for the next several years and that businesses and
product lines will become available for acquisition on acceptable financial
terms.

Company Strategy

The Company's strategy in the evolving defense market consists of three key
elements: (i) protect and strengthen core businesses; (ii) expand and
diversify into new markets complementary to current operations; and (iii)
make strategic acquisitions of well-positioned companies which complement
the existing business strategy. Key elements in support of this strategy
are continued high-quality performance and continued improvements in
efficiency to remain highly competitive.

Protect and Strengthen Core Businesses. The Company's strategy for
protecting and strengthening its core businesses is comprised of a
number of the following key elements:

Support high-priority programs. The foundations for Tracor's core
businesses are high-priority, long-term, stable programs in which
Tracor has performed for many years. Many of Tracor's systems,
products and services support key weapons platforms and systems which
are expected to continue their important roles in the U.S. defense
strategy. These platforms include the AEGIS cruisers and destroyers,
the Trident submarines, the Tomahawk missile and key aircraft
including the F-16, F/A-18, C-17, C-130, B-1, B-2 and most
helicopters. In addition, Tracor has been a long-term incumbent
contractor in producing a large percentage of the nation's full scale
target drones, in producing a variety of range instrumentation systems
for more than 20 years, in supplying high-quality image exploitation
and mission planning systems and in providing important information
systems expertise to a number of customers including national
intelligence agencies.

Tracor's strategy is to continue its excellent performance record in
its core business areas by supplying high-quality products, systems
and services at competitive prices. Because of the Company's long-term
established presence, experience and knowledge, quality performance
and cost competitiveness, management believes the Company is well
positioned to continue to support these stable, high-priority DOD
programs.

Maintain the readiness of existing forces. The Company will continue
to compete for contracts to provide products, systems and services
which are suited to supporting the readiness of the military force,
a major thrust of the DOD's current defense strategy. A substantial
portion of the Company's operations are focused on extending the
useful lives of existing weapons systems through upgrades and
modifications rather than the procurement of costly new systems and
providing a wide range of capabilities which enhance the combat
effectiveness and readiness of military personnel and equipment.

Enhance survivability of weapons platforms and crews. The Company's
electronic warfare systems enhance the survivability of weapons
platforms and related personnel at a relatively low cost. Management
expects demand for these products to remain strong as customers seek
effective, cost-efficient means for protecting crews and high-value
assets.

Expand and Diversify Into New Markets. The Company is experiencing
success in transferring its core technologies and competencies to new
customers and markets. The expansion of the Company's core businesses
and its diversification to new businesses generally require several
years of planning, development and marketing. The Company's
diversification and expansion efforts have focused on the following
areas:

Nondefense U.S. Government. The Company has established an important
presence in the U.S. government nondefense market, which was further
enhanced with the acquisition of Cordant in September 1996. Its
information systems specialists are providing advanced information
systems capabilities to an expanding set of U.S. intelligence
customers, as well as to the U.S. Postal Service and the Department
of Justice. In 1993 and 1995, the Company was awarded contracts from
the Federal Aviation Administration (the "FAA") to perform system
engineering and integration for its new radar systems. The Company has
also received contracts from NASA.

International. The Company sells a wide range of products and services
to numerous friendly foreign governments. Products sold
internationally include countermeasures systems and expendables, radar
and electronic tracking systems, target drones, imagery systems and
automatic test equipment for F-16 aircraft acquired by foreign
governments. In addition, Tracor's aircraft avionics test equipment
business was expanded in 1995 with the winning of a contract to
provide test equipment for the new Japanese F-2 fighter. International
business accounted for 10% of total 1996 revenues.

New DOD Business. Tracor is constantly evaluating its technology to
identify areas of potential new business within the DOD. Recent
contract awards include a program in support of the U.S. Army's
battlefield digitization initiatives, a new flare development program
and a program to develop a minefield breaching system. Tracor also won
a key contract to upgrade an important National Imagery and Mapping
Agency system and a contract from the Naval Air Warfare Center to
provide design engineering and software services for a variety of
defense systems. The Company expanded its radio communication systems
business by winning the first competition for Nimitz class aircraft
carrier radio communication systems.

Commercial. The Company has developed a number of commercial
applications of its technology in areas as diverse as automotive laser
detectors, artificial heart valve testing, digital photogrammetry,
direct broadcast television antenna materials and test systems for
developing commercial satellite communications systems. In addition,
the Company has several contracts for applying a range of
sophisticated information systems capabilities to commercial and state
government customers, plus new contracts relating to major upgrades,
modifications and manufacture of structures for commercial aircraft,
including electronics installation and systems integration.

Acquire Complementary Businesses. The Company's acquisition strategy is
a key component of its overall business strategy. Tracor management
believes the continuing consolidation within the defense industry will
result in additional opportunities for the Company to make attractive
acquisitions.

Vitro Acquisition. On August 25, 1993, Tracor purchased all of the
outstanding common stock of Vitro Corporation and its subsidiaries
("Vitro"), a provider of high-technology systems engineering and
integration, software engineering, and various other services, from
The Penn Central Corporation for approximately $92 million. Tracor
financed the Vitro Acquisition and refinanced existing indebtedness
through the issuance of $105 million of Senior Subordinated Notes and
a new $78 million credit facility. As a result of the Vitro
Acquisition, the Company is one of the major providers of systems and
software engineering support to the Navy and is one of the few
companies capable of providing the U.S. Navy with the expertise
necessary for its most technologically advanced communications and
guided missile systems, including those for the AEGIS cruisers and
destroyers and the submarine ballistic missile programs. The
acquisition of Vitro also strengthened Tracor's position with key
nondefense U.S. government customers such as national intelligence
organizations and the FAA.

GDE Acquisition. On November 17, 1994, Tracor purchased all of the
outstanding common stock of GDE Holdings, Inc. and its subsidiaries
("GDE"), which has a major presence in the application of advanced
digital imagery technology to key DOD and intelligence systems and
programs, from its shareholders for approximately $102 million,
including the effect of a post-closing amendment to the acquisition
that was finalized in March 1995. Tracor financed the GDE Acquisition
by borrowing $55 million in additional term loans under its amended
credit agreement, issuing approximately $10.9 million of Series A
Notes, issuing 1,928,050 shares of Common Stock and using
approximately $19.9 million of the Company's cash on hand. As a result
of the GDE Acquisition, the Company has strengthened its position as
a provider of products and services to both the DOD and non-DOD
intelligence communities. GDE produces advanced digital technology
products for imagery information systems, mission planning and
automatic ground test equipment.

AEL Acquisition. On February 22, 1996, Tracor purchased all of the
outstanding common stock of AEL Industries, Inc. ("AEL") (now named
"Tracor Aerospace Electronic Systems, Inc."), which designs and
manufactures sophisticated countermeasures, simulation and
radar-warning receiver systems, installs and integrates electronic
avionics equipment in military and commercial aircraft and provides
state-of-the-art antenna, microwave and integrated circuit components.
The consideration paid to AEL shareholders for the common stock was
approximately $103 million in cash. AEL's long-term indebtedness prior
to the acquisition totaled approximately $20 million, of which
approximately $10 million was retired and approximately $10 million
was assumed by Tracor. Since the acquisition, Tracor has sold several
excess AEL facilities and two non-core business lines for $14 million
and another facility is currently for sale. The financing of the
transaction and related expenses was obtained through an increase of
the Company's existing bank term credit facility and from cash on
hand.

Cordant Acquisition. On September 26, 1996, Tracor purchased all of
the outstanding common stock of Cordant Holdings, Inc. and its
subsidiaries ("Cordant"), an employee-owned information systems
company. Cordant focuses on the design, development and integration
of information systems for a variety of applications, including mail
processing, records management and CAD/GIS ("computer aided
design/geographic information systems"). The purchase price of $65.7
million is subject to a contingent payment of up to an additional $10
million based upon the potential award of a large contract. The
acquisition was financed by the use of $34.2 million of cash on hand
and the issuance of two promissory notes totaling $31.5 million
supported by cash collateralized irrevocable standby letters of
credit. The promissory note in the principal amount of $26.5 million
requires a payment of approximately $1.8 million on April 1, 1997, and
an additional payment of $3.5 million on April 1, 1997, if the
contingent payment discussed above does not occur. The balance of this
note is payable upon the resolution of a former Cordant minority
shareholders' lawsuit. The $5 million promissory note for the balance
of the purchase price is subject to adjustments for indemnification
claims and is payable on March 26, 1998.

Cost Reductions. Historically, Tracor has identified substantial cost
savings following the integration of acquired businesses. Since the
acquisitions of Vitro, GDE and AEL, significant cost savings have been
realized resulting from the consolidation of facilities, staff
reductions, process improvements and elimination of other duplicative
costs. Although a substantial portion of these annualized cost
reductions are shared with customers in the form of reduced rates on
cost-reimbursement contracts, management believes the Company's cost
competitiveness has been enhanced. The Company has also identified
additional savings in connection with the Cordant Acquisition.

Core Businesses

The Company's core businesses are primarily in the U.S. and foreign
defense electronics, information technology and systems engineering and
integration markets and largely support high-priority DOD weapons,
platforms and systems. A major portion of Tracor's DOD business is
funded by the operations and maintenance segment of the defense budget
which supports the operational readiness, effectiveness and the
survivability, upgrading and long-term viability of DOD defense systems.
The many agencies of the U.S. Navy are Tracor's primary customers within
the operations and maintenance segment of the budget. The major
electronic products, systems and services comprising the Company's core
businesses are described below and the approximate pro forma revenue and
percentage of total pro forma revenue for 1996 and the approximate
historical revenue and percentage of total revenue for 1996, 1995, 1994
and 1993 represented by each are as follows:

<TABLE>
<CAPTION>
                                     1996
                                   Pro Forma(1)            1996                1995                1994                  1993
                                  -------------      ----------------    ---------------     ----------------     ---------------
                                                           (in thousands)
<S>                            <C>          <C>   <C>            <C>    <C>        <C>     <C>        <C>     <C>           <C>
Weapons and Combat Systems
  Integration and Support       $   294,800   25%   $ 294,800      27%   $ 288,790    33%   $ 313,665    45%   $ 156,547(5)   38%
Electronic Warfare                  205,999   17%     188,823(2)   18%     102,626    12%      98,981    14%      96,968      24%
Information Systems                 195,796   16%     107,556(3)   10%      62,389     7%      54,358     8%      17,360(5)    4%
Weapons Testing Systems 
  and Support                       152,363   13%     150,967      14%     126,572    14%     123,210    18%      68,803(5)   17%
Imagery and Information 
 Systems                             97,564    8%      97,564       9%      66,210     7%       7,667(4)  1%          -        -   
Communication Systems                89,771    8%      89,771       8%      81,934     9%      76,698    11%      67,817      17%
Mission Planning Systems             85,400    7%      85,400       8%      78,265     9%      12,241(4)  2%          -        -    
Automatic Test Systems               67,624    6%      67,624       6%      80,134     9%       7,217(4)  1%          -        -    
                                -----------  ----  ----------     ----   ---------   ----   ---------   ----   ---------     ----
Tracor Net Revenue              $ 1,189,317  100%  $1,082,505     100%   $ 886,920   100%   $ 694,037   100%   $ 407,495     100%
                                ===========  ====  ==========     ====   =========   ====   =========   ====   =========     ====
</TABLE>

(1) Assumes acquisitions of AEL and Cordant as of January 1, 1996.
(2) Reflects approximately 10 months of AEL revenue in 1996.
(3) Reflects approximately 3 months of Cordant revenue in 1996.
(4) Reflects approximately 6 weeks of GDE revenue in 1994.
(5) Reflects approximately 4 months of Vitro revenue in 1993.

Weapons and Combat Systems Integration and Support. The Company provides
systems engineering and integration, software engineering and management
and technical capabilities for the operation, testing, maintenance,
upgrade, protection and extension of the lives of high-priority weapons
and combat systems including:

Submarine Ballistic Missile Weapon Systems. The Company has been the
systems integration contractor for submarine ballistic missile
programs since the mid-1950s. Tracor's role includes systems
engineering, testing, data analysis and logistics for the Polaris,
Poseidon and TRIDENT weapon systems. As the weapon systems integration
contractor for the United States and United Kingdom TRIDENT II system,
Tracor ensures the major subsystems, including missile, launcher,
navigation and fire control, are fully integrated and tested to
perform as specified.

U.S. Navy Surface Combatant and Ship Systems. Tracor is the systems
engineering and integration contractor for shipboard anti-air warfare
guided missile systems such as the Terrier New Threat Upgrade, Tartar,
AEGIS, NATO SeaSparrow and Tomahawk. The Company has performed systems
engineering for every guided missile system installed on U.S. Navy
ships since World War II. The Company develops software for track
control of the Tomahawk missile and performs combat systems
integration for the Tartar system. Tracor also operates a remotely
controlled quarter-scale submarine used to test and evaluate various
submarine component designs. In addition, the Company provides systems
engineering and integration services for ship systems on board AEGIS
destroyers such as propulsion power plants and electrical power
generation plants.

Anti-Submarine Warfare Systems. The Company has provided engineering,
software and testing capabilities for the U.S. Navy's anti-submarine
warfare ("ASW") systems since 1948. Complex systems engineering and
integration are provided for development, operation, quality control
and life cycle maintenance of the newest ASW systems. The Company
performs software engineering and systems integration for surface ship
sonars; tests ASW weapons and combat systems; develops acoustic signal
processing software and test instrumentation and conducts research and
development in ASW sonar systems and related oceanography. The Company
also provides project management, engineering and system assessment
and evaluation for both the U.S. Navy's lightweight and heavyweight
torpedo programs.

U.S. Navy Aircraft. Tracor's systems engineering expertise is being
applied to a program with a new U.S. Navy customer for support of the
U.S. Navy's fighter and attack aircraft, helicopters, maritime
patrol/reconnaissance planes and weapon avionics systems. In this
area, the Company is developing software to support the common
airborne instrumentation system, which is the DOD's standard test and
evaluation data collection system. Tracor won a new design engineering
and software contract in 1995, supporting the entire acquisition life
cycle of various U.S. Navy avionics and electronic systems.

Electronic Warfare. Tracor designed, and is currently the only
manufacturer of, the most advanced and widely used countermeasures
dispenser systems in the United States and is a major supplier of
expendables, which create false targets for hostile radar-guided and
heat-seeking missiles to protect aircraft, land vehicles, naval vessels
and personnel. The acquisition of AEL greatly expanded the Company's
electronic warfare capabilities. Tracor's primary products in this market
include:

Countermeasures Dispensers. The Company has a long history of
developing and producing aircraft countermeasures dispenser systems.
Tracor has developed and manufactured several generations of these
systems during the past 30 years, including the newest system, the
AN/ALE-47, which is an advanced, automatic and integrated dispenser
system for use aboard U.S. Air Force, Navy and Army tactical and
transport aircraft and helicopters, as well as aircraft of other
governments. To date, Tracor has been the sole producer of the
AN/ALE-47 system, and has submitted a bid to produce additional
systems. The winner of this award, which is being openly bid, will be
announced in April 1997. The Company's systems dispense chaff and
flares as decoys against hostile missiles. These systems are also
designed to dispense certain active radio-frequency decoys to counter
advanced anti-aircraft threats.

Countermeasures Expendables. Tracor develops and manufactures chaff
and flare decoys, which are ejected from countermeasures dispenser
systems and provide protection for aircraft, ships and personnel when
operating in a missile threat environment. In 1995, Tracor acquired
the chaff manufacturing business of its only U.S. chaff-producing
competitor, the Lundy Division of TransTechnology Corporation. The
Company is the leading developer of infrared flares in the U.S. and
won a program in 1995 to develop next-generation flare expendables
which decoy infrared-seeking missiles incorporating the latest
counter-countermeasures features.

Communications and Electronic Countermeasures. Through its recent
acquisition of AEL, the Company continues its long and extensive
experience in the development and fielding of electronic
countermeasures systems. The TACJAM-A system provides the DOD with a
common, modular, multiplatform communication electronic attack
capability into the 21st century. AEL's transmitters are key
components of the jamming capability on the U.S. Navy's EA-6B. Their
reliability and effectiveness have been dramatically demonstrated in
operational service. Recently, the Company won the competition to
provide a new low band communications jammer.

Radar Warning Systems. Tracor's systems seek and identify radar
systems across the spectrum of frequency and application. The
Company's integrated front-end technology provides expanded frequency
coverage, improved direction finding accuracy and dual polarization
detection for Radar Warning Receivers and Electronic Warfare Support
Measures systems, which detect, identify and locate hostile radar and
communication transmitters.

Mine Neutralization and Detection Systems. The Company is developing
an Explosive Standoff Minefield Breacher ("ESMB") system prototype for
the U.S. Army and Marine Corps. The prototype features a
Tracor-designed rocket-deployed net which expands to detonate and
neutralize a large area of surface or buried mines, clearing the way
for rapid, safe vehicle and personnel passage. To enhance the
Company's capabilities in this business area, the Company acquired the
shaped-charge munitions business unit of The Titan Corporation in
1995, which provides the explosive shaped-charges used in the ESMB
system and in smaller systems for deactivating mines. Tracor is also
under contract to develop hand-held and vehicular platform mounted
mine detection systems which illuminate the ground with
electromagnetic energy to measure field disturbances, determining mine
presence and location. In addition, Tracor personnel have created
products which work with standard ship navigation devices and use
sonar to identify the presence of mines at sea.

Head-up Displays. The ANVIS Head-up Display provides a
high-resolution, programmable display of critical flight data to the
pilot through night vision goggles, allowing the pilot to concentrate
on the outside environment while maintaining cognizance of the flight
instruments. The system is being installed in the U.S. Army UH-60A/L
Blackhawk and the CH-47D Chinook; the U.S. Marine Corps UH-1N Huey,
CH-46E Sea Knight, KC-130T Hercules and the CH-53E Sea King; and the
U.S. Navy HH-60H Seahawk. It is planned for installation in the
UH-1H/V Huey, OH-58A/C Kiowa Warrior and the AH-1F Cobra.

Information Systems. An increasingly important component of the Company's
focus is now on providing a wide range of information technology
products, systems and services to the DOD, nondefense government agencies
and the commercial market. This includes offering information systems
solutions to customers, such as those in intelligence agencies, the U.S.
Postal Service and the U.S. Department of Justice. The acquisition of
Cordant in September 1996 increased Tracor's number of Indefinite
Delivery, Indefinite Quantity ("IDIQ") information technology contracts.
In these contracts, Tracor provides commercial off-the-shelf ("COTS")
products, custom-tailored and designed to meet specific customer needs.
Tracor can serve a number of government customers under each IDIQ
contract for which it is providing services. Following the Cordant
acquisition, Tracor formed Tracor Information Systems Company by grouping
Cordant, Quality Systems, Inc. and the Software Center of Excellence.
Tracor Information Systems Company business includes:

   Intelligence Information Systems. An important component of the
   Company's acquisition strategy has been to build a strong
   presence in the intelligence information systems market. The
   acquisition of Vitro and its subsidiary Quality Systems, Inc.,
   was a major penetration into the intelligence market, and the
   acquisition of GDE substantially expanded the Company's presence
   in a wide range of intelligence areas. Tracor now has a large
   employee base with special high-level security clearances, which
   are crucial for doing business in this sector. Since the early
   1980s, Tracor has provided systems engineering, software
   engineering, systems management and training under numerous
   classified contracts with U.S. intelligence community customers.
   The Company uses state-of-the-art software engineering methods
   and has re-engineered specialized intelligence systems to provide
   customers with the tools required for on-demand, dynamic and
   highly reliable data access and analysis.

   Systems Engineering and Design and Products. Cordant provides
   systems engineering, design and information technology products
   primarily to DOD and other government customers. The primary
   focus is to provide integrated systems solutions utilizing COTS
   products custom-tailored to a customer's needs.

   Software Development. The Software Center of Excellence is a
   corporate resource for software development,
   engineering/re-engineering and production operations. The primary
   goal is to ensure that best practices are developed and uniformly
   applied. The Software Engineering Program ("SEP") provides
   technology to continuously enhance software engineering standards
   and practices, software development facilities, software tools
   and reusable application software, software engineering training
   and software metrics. The tools developed by SEP enable the
   Company to assess diverse user requirements and varied hardware
   platforms and customer software environments to provide modern
   re-engineered software systems capable of handling large volumes
   of dynamic data. Computer-Aided Software Engineering ("CASE")
   tools, which are central to the Company's high-productivity
   environment, are carefully integrated into this environment
   through SEP. This organization is one of only 60 companies which
   has achieved Software Engineering Institute's level 3 designation
   for the advanced level of capability to design software systems.

   Weapons Testing Systems and Support. The DOD is committed to
   sustaining the readiness of weapons and adapting current weapons to
   counter future threats. Tracor manufactures products for testing
   and evaluating weapons systems and supports weapons testing
   operations to achieve these objectives. The Company's work in this
   area includes:

   Drones. The Company has been a major producer of full scale
   target drones for the DOD for more than 25 years and is the sole
   provider of the current drone (the QF-4) for the U.S. Armed
   Forces. The Company designs, manufactures and modifies retired
   military aircraft into full scale drones for use as targets in
   weapons system testing and evaluation and personnel training.
   Tracor is also producing sub-scale target drones for the U.S.
   Army and Navy with options for additional targets through the
   year 2000. In late 1996, these Tracor-built targets were selected
   in an international competition to replace Australia's currently
   fielded aerial target. The Company also performs major upgrades
   and modifications for military and commercial aircraft.

   Range Operations and Instrumentation. For more than 21 years,
   Tracor has been a worldwide supplier of precision tracking
   radars, optical tracking systems, radar-threat simulators and
   range instrumentation control systems. This diverse array of
   capabilities for weapons systems test ranges includes logistics
   support, on-site depot level maintenance, repair of components
   and engineering design and fabrication. For more than 40 years,
   the Company has performed operations and maintenance on
   high-technology equipment and has supplied logistics and
   engineering support for research and development programs for
   more than 146 radar systems at 28 test ranges.

   Flight Testing and Training. Tracor performs a variety of flight
   testing using both military and civilian aircraft. The Company
   uses its tactical aircraft, equipped to launch guided and
   unguided weapons, to test and evaluate weapons systems and tows
   targets for U.S. and foreign tactical air forces to support
   air-to-air combat training. The Company's pilots also fly
   aircraft for training naval aviation navigators.
   Electronic Warfare Simulators. Tracor designs, develops and
   certifies a variety of airborne radar threat emitters, simulators
   and jammers, both pod and internally mounted. The Company also
   develops advanced signal threat generators for laboratory testing
   of the defensive avionics systems aboard a variety of U.S.
   military aircraft.

   Imagery and Information Systems. In another major part of the
   Company's overall information technology business, the Company
   develops and integrates systems which extract and analyze
   information from various types of imagery. Tracor's expertise in
   the automation of information extraction satisfies the
   sophisticated image-processing requirements of both government and
   commercial customers worldwide. Applications for the Company's
   software, systems and products include digital mapping, charting
   and geodesy ("MC&G"), image-processing ground stations,
   interpretation and analysis centers, and other imagery information
   systems in which digital image processing is an essential
   technology. Currently, Tracor has an installed base of more than
   760 MC&G workstations. In 1996, two Tracor subsidiaries became key
   participants on the recently awarded U.S. Air Force Electronic
   Systems Center Reconnaissance/Intelligence Ground Systems Products
   and Services program. This dual-award contract will build imaging
   ground stations to new common standards developed by the Defense
   Airborne Reconnaissance Office. Other new business activities
   include continued development of a front-end processing capability
   to allow efficient use of data from a wide variety of imaging
   sources; a new digital photo interpretation ground station system
   for a foreign customer; and a multi-source intelligence analysis
   software system for use by operational forces.

   Communication Systems. Tracor provides radio communication
   engineering and technical services to the DOD and other government
   customers. The Company performs systems and design engineering,
   subsystem procurement, systems integration, testing and
   installation for these systems. It also provides logistics support,
   maintenance and technology upgrades for these high-priority systems
   to maintain their operational readiness throughout their service
   life. The Company's key systems include:

   AEGIS Communication Systems. Tracor is the primary contractor of
   turnkey radio communication systems for the U.S. Navy's newest
   class of destroyers and cruisers which are equipped with AEGIS
   weapon systems. Tracor's cost-effective performance has
   contributed to its winning every recompetition for its AEGIS work
   over the past 22 years. The most recent award extends Tracor's
   participation in this high-priority program through 2001.

   Aircraft Carrier Communication Systems. In 1996, Tracor's
   shipboard radio communications business was expanded by winning
   the first competitive contract to provide these systems for the
   Nimitz class aircraft carriers.

   Special Forces Communication Systems. The Company has designed,
   produced, installed and maintained, for more than 14 years,
   communication systems used by U.S. Navy Special Warfare and Joint
   Special Operations Forces and various national agencies. Systems
   range in size from hand-held communication devices to full-scale
   communication suites for special-purpose boats, planes and vans.

   Command and Control Systems. For more than 20 years, the Company
   has provided systems engineering and test and evaluation systems
   in connection with the modernization and upgrading of the U.S.
   Navy's command and control systems communication equipment and
   for the U.S. Navy's worldwide center for airborne ASW flight
   planning and post-mission analysis. In addition, Tracor provides
   software and systems engineering, signals intelligence and
   electronic warfare engineering, and technical communication
   support services for U.S. Army military command and control
   systems. In addition, Tracor is providing engineering development
   and technical support services to the U.S. Army Communications
   - Electronics Command Space and Terrestrial Communications
   Directorate.

   U.S. Navy Air Traffic Control and Landing Systems. The Company
   has provided management, engineering and research and development
   for the U.S. Navy's automatic carrier landing systems and U.S.
   Marine air traffic control and landing systems for 24 years.
   These systems assist naval and marine aviators in achieving safe
   landings aboard carriers, shore stations and expeditionary
   fields. Tracor expanded its work in this area with the
   acquisition of Codar Technology's shelter integration business.
   Under contract with the U.S. Air Force, the Company is producing
   vehicle-mounted air traffic control towers, which provide a
   mobile, deployable, quick-response capability to areas that have
   little or no base airport facilities.

   Identification Systems. For more than 23 years, the Company has
   provided hardware and software design engineering and technical
   support for shipboard and shore-based identification systems used
   by the U.S. Navy, Marines and Coast Guard.

   Mission Planning Systems. The Company provides mission planning
   systems for the U.S. Navy, Air Force and Strategic Command as part
   of Tracor's broad range of information technology products and
   services. Products include specialized software used to plan and
   coordinate military aircraft and weapons, imagery systems in
   support of targeting, planning and rehearsing military operations,
   and government information systems. The Company provides
   imagery-based mission planning systems for stealth aircraft and
   cruise missiles, which are expected to continue to represent the
   U.S. Armed Forces' primary strike capability for the foreseeable
   future. Management believes these products and services will
   benefit from the DOD's increasing need for precision weapons and
   tactical intelligence in diverse areas of the world in order to
   efficiently utilize and coordinate its increasingly sophisticated
   and costly weapons systems. Tracor's Digital Imagery Workstation
   Suite ("DIWS"), is a critical part of the U.S. Navy's Tomahawk
   cruise missile planning program. In 1996, Tracor won a program for
   the continued development of the DIWS. This Consolidated
   Configuration program increases the COTS hardware and software
   content of the suite, which reduces the size of the hardware while
   improving the suite's performance. Further, in 1996, the Company
   continued to deploy these precision targeting systems with two
   additional suites going aboard U.S. Navy carriers and two suites
   delivered to support rapid deployment forces. These systems are
   expected to be installed on all Navy aircraft carriers and
   amphibious assault ships by the year 2000. The Company has also
   gained prominence in the emerging field of information warfare by
   developing the mission planning systems for the Global Hawk and
   DarkStar high altitude endurance unmanned aerial vehicles. Under
   development for the Defense Advanced Research Projects Agency and
   the Defense Airborne Reconnaissance Office, the Global Hawk will
   provide a high capacity reconnaissance and surveillance platform
   with an endurance of 42 hours and a total range of 14,000 miles.

   Automatic Test Systems. The Company has designed and built
   automatic test systems ("ATS") for more than 30 years and is a
   major supplier of ATS to the U.S. Air Force. Principal ATS products
   include avionics test equipment for the U.S. and other air forces
   for the F-16 fighter, the C-17 and C-5B transports and the B-1B and
   B-2 bombers. The Company produces a new generation of downsized,
   mobile testers, supporting the F-16 program as well as munitions
   programs. The Company also provides diagnostic systems, test
   program sets and operations and logistics for ATS products.
   Deliveries of the Company's core F-16 test systems have recently
   declined due to reduced production of F-16 aircraft. However, the
   F-16 remains the primary U.S. Air Force tactical fighter, and the
   Company expects to continue to receive significant orders for
   program maintenance and upgrades as well as testers for F-16
   international sales and established Air National Guard
   requirements. Expanding this product line and the Company's
   international presence, Tracor won two contracts in 1995 to supply
   avionics test equipment for the new Japanese F-2 fighter. Tracor's
   success in the development phase of the F-2 program led to
   additional contract awards in 1996 for technical assistance and
   software co-development with the Japanese. Tracor also produces
   avionics subsystems for the Atlas and Titan launch vehicles. In
   1996, Lockheed Martin Astronautics authorized Tracor to proceed
   with the development and production of avionics for the
   next-generation Atlas launch vehicle with an award of more than $26
   million. This long-term contract provides a continuing production
   base for work to be performed to the year 2003.

   Expansion and Diversification

   Tracor has increased its sales to both established and new customers. The
   Company has been successful in translating its technologies and products
   to other military customers, other governmental agencies, the foreign
   marketplace and select commercial customers. See "Core Businesses" and
   "Company Strategy." Tracor's other expansion and diversification
   initiatives are described below.

     U.S. Army Programs. Over the past eight years, Tracor has expanded
     its systems, software and technical capabilities to various U.S.
     Army areas including the Global Command and Control System, signals
     intelligence/electronic warfare, Communications-Electronics Command
     and C4I support.

     Camouflage, Concealment and Deception. In an extension of its
     countermeasures technology, Tracor has developed coatings and
     camouflage materials to conceal aircraft, vehicles, ground-based
     installations and ships from detection by radar, infrared scanners
     and other sensing systems.

     Air Transportation Systems. The Company won a $66 million contract
     with the FAA in 1993 to provide systems, hardware and software
     engineering for the development, testing and operation of new air
     traffic control and surveillance systems across the U.S. This
     seven-year contract emphasizes Tracor's ability to transfer its
     radar engineering expertise to non-DOD governmental agencies. In
     1995, Tracor won another FAA contract to provide test and
     evaluation engineering services for surveillance and weather radar
     systems.

     NASA Programs. Since 1988 the Company has provided engineering for
     safety, reliability, maintainability and quality assurance for
     NASA's manned and unmanned space flights.

     Public Information Systems. The Company has successfully translated
     certain of its defense related capabilities into business
     opportunities with new government and commercial customers. For
     example, signal processing expertise developed under U.S. Navy
     sonar programs and advanced database systems are the foundation for
     a statewide regulatory and compliance system, client/server based
     order fulfillment system for Hewlett-Packard, as well as for
     aircraft noise monitoring systems sold to 18 major U.S. airports.

     Commercial. The Company has successfully applied its technologies
     to a number of commercial products and services and continues to
     seek new opportunities. Current commercial diversifications
     include:

      Aircraft Structures. The Company performs major upgrades and
      modifications and manufactures structures for commercial
      aircraft, including electronics installation and systems
      integration. Under two new programs awarded in 1996 by McDonnell
      Douglas, Tracor will join the wing halves and manufacture the
      y-barrel assembly for the new-generation MD-95 commercial jet.

      Photogrammetry. Through its subsidiary, Helava, the Company
      provides integrated digital stereo software which operates on
      commercial computer hardware, principally in the commercial
      photogrammetry market. Helava provides photogrammetric
      workstations and high-quality scanners for map compilation,
      engineering regional planning, orthophoto production, digital
      terrain collection and environmental management. Through a
      distributorship agreement with Leica, Inc., a world leader in
      surveying and photogrammetric systems, Tracor's systems are now
      operational in 48 countries. In addition, in 1996 the Company
      acquired Aerial Data Reduction Associates ("ADR"). ADR has a
      26-year history of using photogrammetric technology to produce
      mapping and geographic information systems database services
      primarily for federal, county and municipal governments
      throughout the United States. Management believes the acquisition
      provides the Company with the nation's largest photogrammetric
      map production capacity in private industry.

      Remote Sensing. Tracor has entered the growing new market of
      commercial remote sensing systems by joining with Boeing,
      Farmland Industries and Agrium, Ltd., to develop and operate the
      Resource21(TM) imaging satellite system which is planned to
      become operational at the turn of the century. This multispectral
      satellite system is designed to facilitate agriculture, forestry
      and environmental management on a worldwide scale. Employing
      technologies developed for military applications, Tracor is
      responsible for the ground data processing, image assessment,
      archiving and production generation for this commercial system.
      With the Company's proprietary technologies in image processing
      and manipulation, coupled with the leading edge satellite
      technologies provided by its teammates, Tracor management
      believes it is well positioned in this emerging market.

      Chaff. Tracor is working with the leading manufacturer of direct
      broadcast satellite antennae to design a new generation antennae
      which uses Tracor's aluminum-coated glass fibers (chaff) in that
      firm's molded antennae. The proprietary nature of Tracor's
      manufacturing process of chaff, typically used in military
      applications, positions the Company to benefit from the
      increasing popularity of direct broadcast television.

      Telecommunications. The Company is providing automatic test
      systems to support the commercial telecommunications and
      satellite market, including custom systems to test Motorola's
      Iridium R(R) global communications system.

  Major Customers

The net sales of Tracor are predominantly derived from contracts with
agencies of, and prime contractors to, the U.S. government. The various
U.S. government customers exercise independent purchasing decisions, and
sales to the U.S. government are generally not regarded as constituting
sales to one customer, but instead, each contracting entity is considered
to be a separate customer. As of December 31, 1996, Tracor was performing
under more than 700 contracts with approximately 100 customers within
various U.S. government agencies. Sales to all such agencies are subject
to conditions unique to sales to the U.S. government.

Research and Development

Tracor employs scientific, engineering and other personnel to improve
existing product lines and to develop new products in the same or related
fields under programs funded by the respective companies or, in the case
of Tracor, under customer contracts through which Tracor is reimbursed
directly for its efforts. Customer-sponsored programs sometimes lead to the
development of products which Tracor has the opportunity to produce for
others.

During the past three fiscal years, Tracor has expended the following
amounts on Company-sponsored and customer-sponsored research and
development activities:

                         					1996		      1995      		1994
                              ----        ----        ----
						  (in millions)

Customer-sponsored          $ 157.5	    $ 132.3	    $ 104.9
Company-sponsored              11.1         5.4         4.7

A significant portion of the increase in Tracor's customer-sponsored
research and development costs in 1995 and 1996 is attributable to the
inclusion of GDE and AEL expenditures following their acquisition by the
Company in November 1994 and February 1996, respectively, the award of
several new contracts, and increased research and development efforts under
several existing contracts.

Competition

The Company experiences vigorous competition from industrial firms and U.S.
government agencies, some of which have substantially greater resources.
A majority of the sales of the Company is derived from contracts with the
U.S. government and its prime contractors, and such contracts are awarded
on the basis of negotiations or competitive bids. Management does not
believe any one competitor or a small number of competitors is dominant in
any of the business areas of the Company. Management believes the Company
will continue to be able to compete successfully based upon the quality and
cost competitiveness of its products and services.

Government Contracts

Approximately 86% of the Company's revenues result from contracts with the
U.S. government and its prime contractors. System engineering and
integration, software engineering and other engineering and management
support contracts are generally cost-reimbursement fixed-fee type
contracts. Product engineering and development contracts are either
cost-reimbursement fixed-fee type or fixed-price type contracts. Contracts
for the manufacture of products are usually fixed-price type contracts.
Cost-reimbursement type contracts provide for the payment of actual
allowable costs, plus a fee. Under fixed-price type contracts, the
contractor benefits from or shares in cost savings but generally bears or
shares the risk of cost overruns. Cost-reimbursement type contracts are
normally priced to realize lower margins than fixed-price type contracts.
For the year ended December 31, 1996, approximately 55% of the Company's
revenues were derived from cost-reimbursement type contracts, and
approximately 45% of the Company's revenues were derived from fixed-price
contracts.

Contracts with the U.S. government and its prime contractors contain
standard provisions for termination at the convenience of the U.S.
government or such prime contractor, pursuant to which the Company is
generally entitled to recover costs incurred, settlement expenses and
profit on work completed prior to termination. Contracts with the U.S.
government do not provide for renegotiation of profits.

Companies supplying products and services directly or indirectly to the
U.S. government are subject to other risks such as contract suspensions,
changes in policies or regulations and availability of funds. Any of these
factors could adversely affect the Company's business with the U.S.
government in the future.

Sales to Foreign Customers

For 1996, 1995 and 1994, approximately $104.8 million, $87.0 million and
$63.6 million (representing 10%, 10% and 9%, respectively) of the net sales
of the Company were attributable to sales and services provided to foreign
customers. The principal customers are governments of those countries in
Western Europe, the Middle East and the Pacific Rim region which are
generally deemed to be friendly to the government of the United States and
to have relatively stable governments. Each of the contracts with these
customers is subject to the risks inherent in dealing with foreign
governments (e.g., changes of administration or governmental form, economic
problems). Although the loss of all of the Company's foreign business could
have a materially adverse impact on the Company's results of operations and
financial condition, it is management's opinion that this risk is remote
and that the loss of any single contract with a foreign government would
not be material.

Employees

As of December 31, 1996, the Company had approximately 10,450 employees.
Of this number, approximately 3,950 employees held advanced or bachelor's
degrees in a number of scientific disciplines. Approximately 100 of the
Company's employees are located outside of the United States. Less than
three percent of the Company's U.S. employees are covered by collective
bargaining agreements with labor unions. The Company considers relations
with its employees to be excellent.

Backlog

In each of its major lines of business, the Company has significant firm
backlog and unexercised contract options which may be exercised by the
customer. Firm backlog represents the amount of revenue expected to be
recognized for contractually authorized performance of awarded firm
contractual commitments. Firm backlog may include amounts yet to be fully
funded by the customer or amounts for performance yet to be fully
definitized. Unexercised contract options represent the amount of revenue
which would be recognized from the performance of contract options that may
be exercised by customers under existing contracts and from task orders to
be issued under indefinite quantity contracts or basic ordering agreements.
Amounts included in both firm backlog and unexercised contract options are
based on the contract's total awarded value and the Company's estimates
regarding the amount of the award that will ultimately result in the
recognition of revenue. These estimates are based on the Company's
experience with similar awards and similar customers. Estimates are
reviewed periodically and appropriate adjustments are made to the amounts
included in firm backlog and unexercised contract options. Historically,
these adjustments have not been significant.

The Company's firm backlog at December 31, 1996, was $1.0 billion, compared
with $924 million as of December 31, 1995. The Company's unexercised
contract options as of December 31, 1996, were $1.6 billion, compared with
$949 million at December 31, 1995. This total backlog of $2.6 billion at
December 31, 1996 is the highest in the Company's history and represents
a 40% increase over the total backlog at December 31, 1995. Management does
not believe that the Company's firm backlog is seasonal in any material
respect. Approximately 80% of firm backlog as of December 31, 1996, is
expected to be realized as sales within one year. Approximately 76% of firm
backlog as of December 31, 1996, was comprised of contracts with agencies
of the U.S. government or its prime contractors. See "Major Customers" and
"Government Contracts."

Sources and Availability of Raw Materials

The Company's manufacturing operations require a wide variety of electronic
and mechanical components for which the Company has multiple commercial
sources. The Company's manufacturing operations also require raw materials
which are purchased in the open market and are normally available from a
number of suppliers. The Company has not experienced any significant delays
in obtaining timely deliveries of essential materials.

Compliance with Environmental Controls

There have not been, and the Company does not anticipate, any materially
adverse effects upon the capital expenditures, earnings or competitive
position of the Company resulting from compliance with federal, state and
local provisions regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment.

Patents

There are a total of 110 Company owned patents with 33 patent applications
pending. The Company does not believe that existing patents and licenses
are material in the conduct of its business as a whole and believes that
research, development and engineering skills are more significant. The U.S.
government typically receives royalty-free licenses on inventions arising
from government contracts, with each company retaining all commercial
rights with respect to such inventions. While patents are not material to
the operation of the business, proprietary information of the Company is
adequately protected through the requirement that employees execute
confidentiality agreements as a condition of employment.

Item 2.  Properties.

The Company's facilities are located primarily in the United States. The
Company's corporate offices and certain administrative, manufacturing and
engineering facilities are located in Austin, Texas on a 140 acre campus
owned by the Company and contain approximately 612,000 square feet of
offices and engineering and manufacturing facilities. The Company occupies
approximately 1,132,000 square feet of administrative and engineering
facilities in the Washington, D.C. area consisting of multiple facilities
owned and leased by the Company under leases with differing expiration
dates, the latest of which expires in 2004. The Company also owns and
leases approximately 278,000 square feet of administrative and engineering
facilities located in the California, Maryland area. The Company leases
approximately 73,000 square feet of administrative and engineering
facilities in the Poulsbo and Silverdale, Washington area.

The Company owns and leases approximately 142,000 square feet of
administrative, manufacturing and engineering facilities located in Fort
Walton Beach, Florida. The Company leases (under a lease expiring in 1998)
or owns engineering facilities in Groton, Connecticut, containing
approximately 34,000 square feet of space. The Company leases 48,000 square
feet of administrative and engineering facilities in Bloomington, Indiana.
The Company owns approximately 10,000 square feet of administrative and
manufacturing facilities in Butler, Georgia.

The Company occupies approximately 308,000 square feet of administrative,
manufacturing, engineering and aircraft hangar facilities in Mojave,
California, some of which is owned and some of which is leased under a
lease expiring in 2036. This site also includes ramp space associated with
the aircraft hangars. The Company owns approximately 134,000 square feet
of administrative, manufacturing, engineering and aircraft hangar
facilities in East Alton, Illinois which is currently vacant and for sale.

The Company occupies approximately 123,000 square feet of leased space
located in East Camden, Arkansas utilized for administrative and
manufacturing purposes under a lease expiring in 1999 and approximately
117,000 square feet of owned space located in San Ramon, California and
utilized for administrative, manufacturing and engineering.  The Company
also utilizes leased space for administrative, engineering and
manufacturing in Lillington, North Carolina (75,000 square feet) and
Jerusalem, Israel (23,000 square feet), under leases expiring in 2000 and
2003, respectively.

The Company leases approximately 450,000 square feet of administrative,
manufacturing and engineering facilities in various locations in San Diego,
California.  The Company owns approximately 92,000 square feet of
administrative and engineering space located in Oxnard, California.  The
Company owns approximately 370,000 square feet of administrative,
manufacturing and engineering facilities located in Montgomery Township,
Pennsylvania.

The Company's facilities also include certain other leased and owned
facilities at miscellaneous locations, having no more than 20,000 square
feet at any locations and aggregating approximately 180,000 square feet.

Item 3.  Legal Proceedings.

Tracor is involved in various lawsuits and is subject to certain
contingencies incidental to its business. While the ultimate results of
these matters cannot be predicted with certainty, management does not
expect them to have a material adverse effect on the consolidated financial
position or results of operations of Tracor.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder
Matters.

Trading Market for Tracor Common Stock and Series A Warrants

The Common Stock and Series A Warrants of the Company are listed on the
Nasdaq National Market where they have traded since late 1992 under the
symbols "TTRR" and "TTRRW," respectively.  Prior thereto, the Common Stock
and Series A Warrants had a limited trading market and were not listed on
a national securities exchange.  The following table sets forth the
reported high and low sales prices of the Common Stock and Series A
Warrants on Nasdaq for the applicable periods:

                           Common Stock	      Series A Warrants
                                           1996
                         -----------------------------------------
                       	  High         Low	       High       Low
                         -------     ------      ------     ------ 
Fourth Quarter     	    $24  3/8   	$19 3/4    	$21 3/4    $17 3/8
Third Quarter            20  5/8     16 5/8	     18 1/2	    14 7/8
Second Quarter           21  1/8     17 1/8	     18 1/2	    14 5/8
First Quarter            17  7/16    14      	   15      	  11 1/2

                                           1995
                         -----------------------------------------
                       	  High         Low	       High       Low
                         -------     ------      ------     ------ 
Fourth Quarter	         $16 7/8	    $14 1/2     $14 5/8    $11 7/8
Third Quarter            18 1/8	     13 5/8	     15 5/8     11 1/8
Second Quarter	          14 1/4	     11 3/8	     11 3/4      8 7/8
First Quarter	           14        	 10      	   11 3/8      7 1/2

                                           1994
                         -----------------------------------------
                       	  High         Low	       High       Low
                         -------     ------      ------     ------ 
Fourth Quarter	         $12 5/8     $7  1/2  	  $10        $5 1/2
Third Quarter	            8 3/4      7  1/8  	    7 1/8     5 1/4
Second Quarter	           8 1/2      6 15/16	     6 1/8     5      
First Quarter	           10 1/8      7  7/8  	    7 1/2     5 5/8

As of  February 17, 1997, the Company had approximately 7,000 holders of
the Common Stock, of which 292 were stockholders of record.  The
approximate number of holders, not of record, was determined by a request
of registered clearing agencies.

Dividend and Dividend Policy

The Company has never paid a cash dividend on its Common Stock, although
the Company's predecessor paid dividends in certain years prior to 1989. 
The Company currently intends to retain its earnings to provide funds for
the expansion of its business.  The payment of dividends in the future will
be at the sole discretion of the Board of Directors and will depend upon
the Company's profitability, financial condition, capital needs, future
prospects, contractual restrictions and other factors deemed relevant by
the Board of Directors.  The Company's current credit facilities impose
certain limitations on the payment of dividends.  See Note N to the
Consolidated Financial Statements of Tracor, Inc.

Item 6.  Selected Financial Data.

Years Ended December 31
(in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                    1996(1)     1995     1994(1)   1993(1)   1992  
                                   ---------   -------  -------   -------   -------
<S>                              <C>         <C>      <C>       <C>       <C>                     
Income Statement Data:
Net sales                         $1,082,505  $886,920 $694,037  $407,495  $261,835
Cost of sales                        866,234   713,802  568,020   333,852   214,070
Selling, administrative, and 
  general expenses                   123,681   104,928   78,201    49,889    36,639
                                  ----------  -------- --------  --------  --------
Earnings before interest and 
  income taxes                        92,590    68,190   47,816    23,754    11,126
Interest expense, net                 26,470    19,496   16,771     8,277     3,746
                                  ----------  -------- --------  --------  --------
Income before income taxes            66,120    48,694   31,045    15,477     7,380
Income taxes                          29,506    20,831   12,498     6,200     2,850
                                  ----------  -------- --------  --------  --------
Net income                        $   36,614  $ 27,863 $ 18,547  $  9,277  $  4,530
                                  ==========  ======== ========  ========  ========
Share Data:
Net income per share:
  Primary                              $1.46     $1.23     $.96      $.56      $.32
  Fully diluted                        $1.46     $1.23     $.93      $.54      $.32
Weighted average common and
  common equivalent shares            25,353    24,168   22,113    22,069    21,953

Operating and Other Data:
Capital expenditures              $   19,623  $ 13,676 $ 11,007  $  8,435  $  7,360
Depreciation and amortization         30,361    22,854   14,746     9,614     6,814
Firm backlog                       1,030,472   923,978  806,228   590,366   301,502

Balance Sheet Data
(at end of period):
Working capital                     $140,430  $129,129 $ 95,392  $ 87,140  $ 45,977
Total assets                         744,954   467,456  444,086   305,733   139,771
Long-term debt                       316,884(2)191,175  205,738   144,302    50,194
Shareholders' equity                 222,917   136,965   90,592    63,167    52,345

(1)  Reflects the acquisitions of Cordant Holdings, Inc. and its
     subsidiaries on September 26, 1996, AEL Industries, Inc. and its
     subsidiaries on February 22, 1996, GDE Holdings, Inc. and its
     subsidiaries on November 17, 1994, and Vitro Corporation and its
     subsidiaries on August 25, 1993.

(2)  Includes $31.5 million of fully cash collateralized promissory notes
     payable issued in conjunction with the acquisition of Cordant.

Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operation.

Business Environment

Approximately 86% of the products, systems, and services of Tracor, Inc.
and its subsidiaries (Tracor or the Company) are sold to the U.S.
government through direct contracts, primarily with agencies of the U.S.
Department of Defense (DOD), or through subcontracts with other U.S.
government contractors. Beginning in the mid-1980s, the defense industry
in general was negatively impacted by the perceived reduction of threats
from the former Soviet Union and eastern European countries and, more
recently, by competing demands upon the federal budget. While this has
resulted in a U.S. defense budget that has decreased in real dollars,
adjusted for inflation, over the last decade, it has recently begun to
stabilize. A major portion of the Company's DOD sales are funded by the
operations and maintenance segment of the defense budget in areas which
are among today's top priorities. This segment has declined less than
other segments of the budget as readiness priorities have emerged. It is
now the largest segment of the defense budget and is projected to comprise
more than one-third of the defense budget over the next decade. The
electronic content of the operations and maintenance segment, as well as
the procurement portion of the budget, is expected to experience a modest
increase over this same time frame. Tracor's ability to benefit from this
upturn is enhanced by its substantial position in the electronic warfare,
mission planning, and imagery markets. 

Budget reductions have also driven the DOD and other U.S. government
agencies to pursue products and services which rapidly improve their
operating efficiency. This, in turn, has triggered a substantial increase
in the demand for state-of-the-art computer equipment and software systems
and a major change in the government's method for acquiring information
technology, moving to large government-wide acquisition contract vehicles.
Following the acquisition of Cordant Holdings, Inc. (Cordant), the Company
formed Tracor Information Systems Company, by uniting Cordant, Quality
Systems, Inc., and the Software Center of Excellence. This consolidation
strengthens Tracor's ability to effectively address the rapidly growing
information technology market for both DOD and nondefense customers.
Information systems has been the fastest growing business area within
Tracor. 

The contraction of the defense budget in recent years and the resulting
excess capacity and increase in competition for contracts among defense
companies have resulted in a significant consolidation in the industry.
Through internal growth and several acquisitions, the Company has
substantially increased its revenue base. It has also reduced combined
overhead costs through staff reductions, facilities consolidations,
process improvements, and the elimination of certain other duplicative
costs. These efficiencies and increased revenue base have enhanced
Tracor's cost competitiveness in bidding on new contracts and recompetes
of existing contracts. While acquisition price expectations have
increased, management believes the ongoing consolidation within the
defense industry will continue to present opportunities for additional
selected acquisitions at prices which meet the Company's objectives.

While the long-term impact of changes in the defense budget and the
industry consolidation cannot be predicted with certainty, management
believes the Company is well positioned to continue to leverage its
strengths and successes in electronic and information technology products,
systems, and services for the U.S. defense and intelligence marketplaces
and increase its ongoing diversification efforts into foreign defense
markets, nondefense U.S. government markets, and selected commercial
markets.

Results of Operations

The Company's results of operations were affected by major acquisitions
during 1996 and 1994. Each acquired company's results of operations are
included only from its respective date of acquisition. (See Note A to the
Consolidated Financial Statements.) 

Year Ended December 31, 1996, Versus Year Ended December 31, 1995 

On February 22, 1996, Tracor purchased all of the outstanding common stock
of AEL Industries, Inc. (AEL). AEL designs and manufactures sophisticated
countermeasures, simulation, and radar warning receiver systems; installs
and integrates electronic avionics equipment in military and commercial
aircraft; and provides state-of-the-art antenna, microwave, and integrated
circuit components. The acquisition was accounted for using the purchase
method, and, accordingly, the purchase price ($103.1 million) and the
liabilities assumed ($64 million) were allocated to the assets acquired
($98.1 million) based on their respective fair values on the date of
acquisition. The resulting excess of the purchase price over the fair
value of the net assets acquired ($69 million) is being amortized over 30
years. 

On September 26, 1996, Tracor purchased all of the outstanding shares of
Cordant, an employee-owned information systems company. Cordant focuses
on the design, development, and integration of information systems for a
variety of applications, including mail processing, records management,
and CAD/GIS (computer-aided design/geographic information systems). The
purchase price of $65.7 million is subject to a contingent payment of up
to an additional $10 million based upon the potential award of a large
contract. The acquisition was financed by the use of $34.2 million cash
on hand and the issuance of two promissory notes totaling $31.5 million.
The promissory notes are supported by irrevocable standby letters of
credit, which are fully collateralized by cash escrow deposits. The
acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price, including transaction expenses ($66
million), and the liabilities assumed ($39 million) have been allocated
to the assets acquired ($44.9 million) based on a preliminary estimate of
their respective fair values as of the date of acquisition. This
preliminary estimate is subject to change based on finalization of certain
fair value determinations which are not expected to have a material effect
on the consolidated financial position or results of operations of Tracor.
The resulting excess of the purchase price over the preliminary estimate
of the fair value of the net assets acquired ($60.1 million) is being
amortized over 25 years. 

Tracor experienced a 22% growth in sales compared to the prior year. AEL
and Cordant contributed 14%, while Tracor companies excluding AEL and
Cordant contributed 8%. The sales increases occurred throughout the
Company in the following business areas and product lines: intelligence
information systems, imagery and mapping products, automatic test
equipment, QF-4 drones, engineering services, mine detection and
neutralization systems, digital imagery workstations, and chaff and flare
expendables. 

Selling, general, and administrative (SG&A) expenses decreased as a
percentage of sales from 11.8% in 1995 to 11.4% in 1996. Amortization
expense, included in SG&A expenses, remained constant at approximately 1%
of sales. However, operating expenses, the major component of SG&A
expenses, decreased from 10.8% of sales in 1995 to 10.3% of sales in 1996
due to the increased revenue base and reduced combined overhead costs.

An increase of 36% in earnings before interest and income taxes was
realized in 1996 over 1995. AEL and Cordant contributed 17% with
approximately 5% of the increase resulting from a negotiated increase of
$3.6 million in the price of a U.S. government contract for work performed
prior to 1996. The remaining 19% increase is attributable to the internal
sales growth noted above and improved profits on those sales.
Specifically, intelligence information systems, imagery and mapping
products, and mine detection and neutralization systems realized higher
profits during the year.

Fully diluted earnings per share were $1.46 in 1996, up from $1.23 in
1995. A portion of the increase, $.08, is attributable to a $2.1 million
gain, resulting from a negotiated increase of $3.6 million in the price
of a U.S. government contract for work performed prior to 1996. The
increase in weighted average common and common equivalent shares from 24.2
million in 1995 to 25.4 million in 1996 resulted from the issuance of
shares in a public offering completed in July 1996. 

Interest expense increased $7.7 million due primarily to an additional
$108 million of senior term debt borrowed in conjunction with the AEL
acquisition and increased amortization expense of related loan costs. The
increase in investment interest income of $700,000 occurred due to higher
cash balances during 1996 compared to the prior year. 

Income taxes were incurred at statutory federal, state, and foreign rates. 
The effective tax rate increased to 44.6% in 1996 compared to 42.7% in
1995, due to additional nondeductible amortization expense of goodwill.
The net deferred income tax asset at December 31, 1996, is $17.5 million,
due primarily to acquisitions. Based on the Company's taxable income in
prior carryback years and its forecast of future income, management
believes, it is more likely than not, all net deferred income tax assets
will be realized. The realization of deferred tax assets will be evaluated
periodically. 

Year Ended December 31, 1995, Versus Year Ended December 31, 1994 

On November 17, 1994, Tracor purchased all of the outstanding common stock
of GDE Holdings, Inc., including its wholly owned subsidiaries
(individually and collectively referred to as GDE).  GDE designs,
develops, manufactures, and supports automatic test systems, imagery and
information systems, and mission planning systems. The acquisition was
accounted for using the purchase method, and, accordingly, the purchase
price ($102 million) and the liabilities assumed ($76 million) were
allocated to the assets acquired ($104 million) based on their respective
fair values at the date of the acquisition. The resulting excess of the
purchase price over the fair value of the net assets acquired ($74
million) is being amortized over 30 years.

Sales increased 28% in 1995 due to the acquisition of GDE, while sales
excluding GDE remained relatively constant. Increased revenues from a new
contract for the production of sub-scale drones and the production of
drones under the QF-4 contract were offset by reductions in existing and
newly awarded engineering contracts.

SG&A expenses were 11.8% of sales in 1995, up from 11.3% of sales in 1994.
While total operating expenses included in SG&A expenses remained constant
at 10.8% of sales in 1995 and 1994, operating expenses, excluding the
effect of acquisitions, decreased as a percent of sales from 10.7% in 1994
to 10.0% in 1995. Amortization expense, also included in SG&A expenses,
increased from less than .5% of sales in 1994 to 1% of sales in 1995 due
to additional intangible assets arising from the acquisition of GDE. The
Company's operating profits increased 43% due primarily to the acquisition
of GDE. Excluding GDE's results, earnings increased 2% due to higher
profit margins on engineering contracts and electronic countermeasures
systems. 

Fully diluted earnings per share increased from $.93 in 1994 to $1.23 in
1995. A $1.2 million pretax gain on the sale of real estate contributed
$.03 to earnings per share in the third quarter of 1995. Weighted average
common and common equivalent shares used in the computations increased
from 22.1 million in 1994 to 24.2 million in 1995 due primarily to a
public offering of common stock completed in May 1995. 

Interest expense increased $4.4 million as a result of the issuance of
$10.9 million of 10 7/8% Senior Subordinated Series A Notes and $55
million additional senior term debt borrowed in conjunction with the GDE
acquisition. This increase was offset by a slight reduction in interest
rates on the senior term debt and by increased investment interest income
of $1.7 million. 

Income taxes were incurred at statutory federal, state, and foreign rates,
with an increase in the effective tax rate of 40% in 1994 to 42.7% in
1995. Such increase is primarily the result of increased nondeductible
amortization expense of goodwill. At December 31, 1995, Tracor had a net
deferred income tax asset of $8.6 million, primarily arising from
acquisitions. Based on the Company's taxable income in prior carryback
years and its forecast of future income, management believes, it is more
likely than not, all net deferred income tax assets will be realized. The
realization of deferred tax assets will be evaluated periodically. 

Financial Condition and Liquidity

Working capital was $140.4 million at December 31, 1996, up from $129.1
million at December 31, 1995, and the ratio of current assets to current
liabilities was 1.8 at December 31, 1996, compared to 2.3 at December 31,
1995. The decrease in the current ratio is attributable to the decrease
in the cash balance primarily due to the Cordant acquisition and the
increase in the current portion of long-term debt resulting from the
financing of the AEL acquisition. Cash provided by operating activities,
compared to the prior year, was reduced by costs associated with
consolidating AEL facilities and exiting non-strategic activities and
product lines, including the disposal of excess properties, and relocation
of certain operations to other Tracor facilities. Cash provided by
operating activities in 1995 also included a tax refund of $1.5 million
related to the preacquisition period of an acquired company. Normal
capital expenditures of $19.6 million and scheduled long-term debt
payments of $19 million were incurred during the year. Proceeds of
approximately $14.4 million were received from the sale of two properties
and two product lines obtained in the acquisition of AEL. Long-term debt
of $4 million associated with one of the properties was retired with those
proceeds. Proceeds from the amended credit agreement and cash on hand were
used to finance the acquisition of AEL, to retire approximately $10
million of debt assumed in the acquisition, and to pay approximately $5
million of financing costs. Net proceeds of $48 million from the sale of
Tracor common stock were used to complete the acquisition of Cordant.
Three other business acquisitions with a total purchase price of $15.9
million were also completed during 1996 from cash on hand. 

At December 31, 1996, Tracor had firm backlog of $1.0 billion, which
includes funded and unfunded contractual commitments. Approximately 76%
of firm backlog represents contracts with agencies of the U.S. government
or its prime contractors, and about 80% is expected to be realized as
sales within one year. In addition, the Company's backlog of unexercised
contract options on U.S. government contracts was $1.6 billion at year
end. 

The Company's operations typically do not require large capital
expenditures, and there were no significant capital commitments at
December 31, 1996. 

No borrowings were made from Tracor's $60 million revolving loans facility
during the year. At December 31, 1996, the Company had outstanding letters
of credit totaling approximately $32.1 million, leaving $17.9 million
available under its $50 million letters of credit facility. If the letters
of credit facility should become fully utilized, $30 million of the
revolving loans facility, to the extent then available, can be used for
issuance of additional letters of credit. Existing letters of credit
secure performance commitments on certain foreign contracts and serve as
collateral on certain insurance policies. 

On February 14, 1997, Tracor commenced a tender offer to purchase for cash
up to the entire outstanding principal amount of its 10 7/8% Senior
Subordinated Notes due 2001 (Old Notes) and a related solicitation of
consent to modify certain other terms of the indentures under which the
Old Notes were issued. On February 17, 1997, the Company also commenced
a private placement offering (Offering) of $250 million aggregate
principal amount of 8 1/2% Senior Subordinated Notes due 2007. The
Offering is conditioned upon receipt of consents and tenders representing
at least a majority in aggregate principal amount of Old Notes
outstanding. Subject to the completion of the Offering, the Company will
also refinance its outstanding indebtedness under its existing bank
agreement and will obtain a new bank credit facility providing for a
five-year revolving credit facility in the initial principal amount of
$200 million. The consummation of these transactions is subject to the
execution and delivery of definitive documentation and the satisfaction
of other customary closing conditions. The financings are expected to
close on or before March 31, 1997, and will result in a one-time
extraordinary charge of approximately $10.4 million, net of an income tax
benefit of $7.3 million, consisting of a $7.5 million premium to retire
the Old Notes and a $10.2 million write-off of unamortized debt issuance
costs.

Management believes existing cash, continuing operations, and the
restructured debt resulting from the transactions described above will
provide sufficient resources to allow the Company to pursue its business
strategy.

Item 8.  Financial Statements and Supplementary Data.

The consolidated financial statements begin on the next page.

Report of Independent Auditors
Shareholders and Board of Directors
Tracor, Inc.

We have audited the consolidated balance sheets of Tracor, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. 
These financial statements are the responsibility of Tracor's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Tracor, Inc. and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.


                                   /s/ Ernst & Young LLP

Austin, Texas
January 27, 1997
   except for Note N, as to which the date is 
   February 17, 1997

TRACOR, INC.
CONSOLIDATED INCOME STATEMENTS
Years Ended December 31, 1996, 1995, and 1994
(in thousands, except per share amounts)

</TABLE>
<TABLE>
<CAPTION>

                                           1996       1995      1994 
                                        ---------    -------   ------- 
<S>                                   <C>          <C>       <C>
Net sales                              $1,082,505   $886,920  $694,037
Cost of sales                             866,234    713,802   568,020
                                       ----------   --------  -------- 
  Gross profit                            216,271    173,118   126,017
Selling, administrative, 
  and general expenses                    123,681    104,928    78,201
                                       ----------   --------  --------
  Earnings before interest and 
   income taxes                            92,590     68,190    47,816
Interest expense                           30,156     22,440    18,033
Interest income                             3,686      2,944     1,262
                                       ----------   --------  --------
  Income before income taxes               66,120     48,694    31,045
Income taxes                               29,506     20,831    12,498
                                       ----------   --------  --------
Net income                             $   36,614   $ 27,863  $ 18,547
                                       ==========   ========  ========

Net income per common and common 
  equivalent share:
  Primary                                   $1.46      $1.23     $.96
                                            =====      =====     ====
  Fully diluted                             $1.46      $1.23     $.93
                                            =====      =====     ====
</TABLE>

See notes to consolidated financial statements.

TRACOR, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995 (in thousands, except share amounts)
<TABLE>
<CAPTION>

                                                                1996         1995 
                                 ASSETS                       --------    --------                  
<S>                                                          <C>         <C>           
Current assets:
   Cash and cash equivalents                                  $ 36,758    $ 59,478
   Accounts receivable                                         222,899     141,657
   Inventories                                                  12,456       4,695
   Prepaid expenses and other                                   17,542       7,988
   Deferred income taxes                                        26,829      15,916
   Net assets held for sale                                      3,530          - 
                                                              --------    --------
          Total current assets                                 320,014     229,734

Property, plant, and equipment                                 165,305     120,333
   Less allowances for depreciation and amortization            47,842      34,573
                                                              --------    --------
          Net property, plant, and equipment                   117,463      85,760

Goodwill, net of accumulated amortization of $11,590
   in 1996 and $5,219 in 1995                                  236,047      99,813
Other intangibles, net of accumulated amortization of
   $13,517 in 1996 and $7,870 in 1995                           12,947      18,385
Restricted cash                                                 30,094          -   
Prepaid pension costs                                           14,980      23,107
Deferred charges and other assets                               13,409      10,657
                                                              --------    --------
Total assets                                                  $744,954    $467,456
                                                              ========    ========

             LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                           $ 47,696   $  22,981
   Accrued liabilities                                         107,176      66,889
   Current portion of long-term debt                            24,712      10,735
                                                              --------    --------
          Total current liabilities                            179,584     100,605

Long-term debt, less current portion                           292,172     180,440

Deferred revenue                                                15,625      23,752
Other long-term liabilities                                     34,656      25,694

Shareholders' equity:
   Preferred stock, par value $.01 per share:
     1,000,000 shares authorized; no shares
     issued or outstanding                                          -           -  
   Common stock, par value $.01 per share: 53,000,000
     shares authorized; shares issued and outstanding:
     24,754,303 net of 3,411 shares in treasury 
     in 1996, 13,172,754 in 1995                                   247         132
   Class A common stock, par value $.01 per share:
     1,000,000 shares authorized; 978,458 shares issued 
     and outstanding in 1995                                        -           10
   Additional capital paid in                                  125,839      76,606
   Retained earnings                                            96,831      60,217
                                                              --------    --------
           Total shareholders' equity                          222,917     136,965
                                                              --------    --------
Total liabilities and shareholders' equity                    $744,954    $467,456
                                                              ========    ========
</TABLE>
See notes to consolidated financial statements.

TRACOR, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1996, 1995, and 1994 
(in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                  Common Stock        
                                                ----------------      Additional
                                                             Par        Capital      Retained          
                                                Shares       Value      Paid In      Earnings     Total
                                              ----------     -----     --------      --------   -------
<S>                                          <C>            <C>        <C>         <C>       <C>
Balance at January 1, 1994                    10,611,965     $106       $49,254     $13,807   $ 63,167  
 Issuance of common stock 
   for GDE acquisition                         1,928,050       19        16,345                 16,364  
 Exercise of stock options 
   and Series A Warrants                          92,169        1           309                    310  
 Purchase of common stock, 
   at cost                                      (975,000)     (10)       (7,786)                (7,796) 
 Net income                                                                          18,547     18,547  
                                              ----------     ----      --------     -------   --------  
Balance at December 31, 1994                  11,657,184      116        58,122      32,354     90,592  
 Issuance of common stock, 
   net of issuance costs                       2,216,875       22        17,857                 17,879  
 Exercise of stock options 
   and Series A Warrants, net
   of stock tendered as payment 
   for options exercised                         277,153        4           627                    631  
 Net income                                                                          27,863     27,863
                                              ----------     ----      --------     -------   --------  
Balance at December 31, 1995                  14,151,212      142        76,606      60,217    136,965  
 Issuance of common stock, net 
   of issuance costs                           3,000,000       30        48,014                 48,044  
 Exercise of stock options and 
   Series A Warrants, net
   of stock tendered as payment 
   for options exercised                         308,114        2           798                    800  
 Income tax effect related to 
   stock options and grants                                                 292                    292  
 Issuance of common stock for 
   Westmark acquisition                        7,288,977       73            24                     97  
 Issuance of common stock 
   pursuant to board of 
   director stock plans                            6,000                    105                    105  
 Net income                                                                          36,614     36,614  
                                              ----------     ----      --------     -------   --------  
Balance at December 31, 1996                  24,754,303     $247      $125,839     $96,831   $222,917  
                                              ==========     ====      ========     =======   ========
</TABLE>
See notes to consolidated financial statements.

TRACOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995, and 1994 (in thousands)
<TABLE>
<CAPTION>
                                                                     1996         1995        1994 
                                                                   --------      -------     -------
<S>                                                               <C>           <C>         <C>
Operating activities:
   Net income                                                      $ 36,614      $27,863     $18,547  
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation of property, plant, and equipment              18,319       13,524      12,236  
         Amortization of goodwill                                     6,371        3,666       1,204  
         Amortization of other intangibles                            5,671        5,664       1,306  
         Decrease in prepaid pension costs                            8,127       11,686       3,489  
         Decrease in debt issuance costs                              3,237        2,054       2,577  
         Provision for deferred income taxes                          7,778        2,796       2,067  
         Decrease in deferred revenue                                (8,127)     (11,686)     (3,489) 
         Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable              (17,346)      (4,085)      9,616  
            (Increase) decrease in inventories and prepaids          (3,390)       3,220        (771) 
            Increase (decrease) in accounts payable                   1,650        6,869      (8,326) 
            Increase (decrease) in advance payments                   6,195       (2,368)     (4,788) 
            Due to Vitro's former parent                                -             -       (7,197) 
            Decrease in accrued expenses                            (21,770)      (4,696)       (639) 
            Increase in other                                        (1,494)        (545)        (43)
                                                                   --------      -------     ------- 

         Net cash provided by operating activities                   41,835       53,962      25,789  
Investing activities:
   Purchases of property, plant, and equipment                      (19,623)     (13,676)    (11,007) 
   Proceeds from sale of property, plant, and equipment              14,610        2,382         897  
   Acquisition of businesses, net of cash acquired                 (176,948)     (15,120)    (61,048) 
                                                                   --------      -------     ------- 

         Net cash used in investing activities                     (181,961)     (26,414)    (71,158) 
Financing activities:
   Payments of long-term debt                                      (105,602)     (10,732)    (38,342) 
   Purchase of treasury stock                                           -            -        (7,796) 
   Proceeds from stock offering, net of stock issuance costs         48,044       17,879          -   
   Proceeds from issuance of long-term debt                         180,000          -        85,000  
   Payment of debt issuance costs                                    (5,836)         -        (3,229) 
   Exercise of stock options and warrants                               800          631         310  
                                                                   --------      -------     ------- 
     Net cash provided by financing activities                      117,406        7,778      35,943  
                                                                   --------      -------     ------- 
     Increase (decrease) in cash and cash equivalents               (22,720)      35,326      (9,426) 

Cash and cash equivalents at beginning of period                     59,478       24,152      33,578  
                                                                   --------      -------     ------- 
Cash and cash equivalents at end of period                         $ 36,758      $59,478     $24,152  
                                                                   ========      =======     =======

See notes to consolidated financial statements.

Tracor, Inc.
Notes to Consolidated Financial Statements
December 31, 1996

Note A -- Business and Acquisitions

Business -- Tracor, Inc. and its subsidiaries (individually and
collectively referred to as Tracor or the Company) operate in one business
segment, providing a broad range of sophisticated electronic and
information technology products, systems, and services to its customers
in the U.S. Department of Defense (DOD) as well as in nondefense U.S.
government agencies, other governments, and the commercial marketplace.
Tracor primarily markets and sells its own products, systems, and
services. When marketing and selling to foreign customers, Tracor
frequently engages the assistance of in-country representatives,
distributors, or trading companies.

Sales to agencies of the U.S. government totaled $926 million in 1996,
$773 million in 1995, and $611 million in 1994. The U.S. government,
through more than 700 contracts with approximately 100 separate government
agencies, was the only customer accounting for more than 10% of
consolidated net sales. Sales to the DOD were $845 million in 1996, $717
million in 1995, and $563 million in 1994.

Export sales, principally to Pacific Rim, European, and Middle Eastern
customers, totaled $95 million in 1996, $81 million in 1995, and $59
million in 1994. Income before income taxes from foreign-based operations
was not significant. 

Cordant Acquisition -- On September 26, 1996, Tracor purchased all of the
outstanding shares of Cordant Holdings, Inc. (Cordant), an employee-owned
information systems company. Cordant focuses on the design, development,
and integration of information systems for a variety of applications,
including mail processing, records management, and CAD/GIS (computer-aided
design/geographic information systems). The purchase price of $65.7
million is subject to a contingent payment up to an additional $10 million
based upon the potential award of a large contract. The acquisition was
financed by the use of $34.2 million of cash on hand and the issuance of
two promissory notes totaling $31.5 million. One promissory note in the
amount of $5 million, subject to adjustments for indemnification claims,
is payable March 26, 1998. The other note in the amount of $26.5 million
requires a payment of approximately $1.8 million on April 1, 1997, and an
additional payment of $3.5 million on April 1, 1997, if the contingent
payment discussed above does not occur. The remaining balance of this note
is payable upon the resolution of a former Cordant minority shareholder's
lawsuit. Both promissory notes are supported by irrevocable standby
letters of credit which are fully collateralized by cash escrow deposits.
Approximately $1.8 million of the restricted cash and promissory notes is
classified as current and presented with other current assets and current
portion of long-term debt, respectively, in the balance sheet. The
remainder of the restricted cash and promissory notes is classified as
long-term.

The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price including transaction expenses ($66
million) and the liabilities assumed ($39 million) have been allocated to
the assets acquired ($44.9 million) based on a preliminary estimate of
their respective fair values at the date of acquisition. This preliminary
estimate is subject to change based on finalization of certain fair value
determinations which are not expected to have a material effect on the
consolidated financial position or results of operations of Tracor. The
resulting excess of the purchase price over the preliminary estimate of
the fair value of the net assets acquired ($60.1 million) is being
amortized over 25 years.

During the fourth quarter of 1996, Tracor obtained the necessary
information to complete its cost estimates related to the planned
elimination of certain duplicative corporate functions and excess leased
facilities. Estimated liabilities of approximately $1.9 million for
employee severance and excess facilities costs have been established and
are included in the liabilities assumed of $39 million. As a result,
goodwill increased $1.1 million, net of deferred taxes of $747,000, over
the $59 million reported at acquisition date.

The pro forma results for the effect of the Cordant acquisition are not
presented, as such effect is not material to the financial condition or
results of operations of the Company.

AEL Acquisition -- On February 22, 1996, Tracor purchased all of the
outstanding common shares of AEL Industries, Inc. (AEL). AEL designs and
manufactures sophisticated countermeasures, simulation, and radar warning
receiver systems; installs and integrates electronic avionics equipment
in military and commercial aircraft; and provides state-of-the-art
antenna, microwave, and integrated circuit components.

The purchase price, including acquisition expenses, was approximately
$103.1 million. AEL's long-term indebtedness prior to the acquisition
totaled approximately $20 million, of which approximately $10 million was
retired and approximately $10 million was assumed by Tracor. The financing
for the transaction and related expenses was obtained through an increase
of the Company's existing bank term credit facility and from cash on hand.

The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price ($103.1 million) and the liabilities
assumed ($64 million) have been allocated to the assets acquired
($98.1 million) based on their respective fair values at the date of
acquisition. Several changes to initial estimates are described below. The
resulting excess of the purchase price over the fair value of the net
assets acquired ($69 million) is being amortized over 30 years.

In conjunction with the acquisition of AEL, Tracor developed and is
executing a plan to exit certain non-strategic activities and product
lines of AEL, dispose of certain AEL properties which are excess to the
combined company, and to relocate certain AEL operations to other Tracor
facilities. Tracor has completed the sale of AEL's Instruments Services
Division and two excess AEL properties resulting in net proceeds of
approximately $13 million. Based on the completion of a market study
initiated in conjunction with the acquisition, Tracor also decided to exit
AEL's Optical Communications Division product line. The sale of this
product line resulted in proceeds of $1 million. One other facility
remains to be sold at December 31, 1996. Finally, Tracor obtained the
necessary information to finalize its review of AEL's cost estimates to
complete certain contracts which were in loss positions at the date of
acquisition.

The above changes to initial fair value estimates of assets and
liabilities of approximately $14.9 million, offset by a deferred tax asset
increase of approximately $6 million, have resulted in an increase to
goodwill related to the AEL acquisition of approximately $8.9 million.
Such revisions are included in the liabilities assumed of $64 million and
assets acquired of $98.1 million.

As of December 31, 1996, the Company had substantially completed the
relocation and consolidation of certain operations previously performed
at AEL facilities into other Tracor facilities and the elimination of
certain corporate functions at AEL's headquarters. Estimated liabilities
of approximately $6 million for employee severance, relocation costs,
facility closing-related costs, and other miscellaneous liabilities were
established at the date of acquisition. Approximately $4.1 million of
these costs have been incurred through December 31, 1996.

The following unaudited net sales, net income, and net income per share
are presented on a pro forma basis, assuming the acquisition of AEL had
occurred on January 1, 1995 (in thousands, except per share data):

                                      Years Ended December 31,
                                             (unaudited)      
                                      ------------------------
                                           1996         1995 
                                        ----------    -------- 
Net sales                               $1,097,456    $996,839
Net income                                  26,801      27,033
Net income per share fully diluted            1.07        1.19

The unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
of AEL occurred on January 1, 1995, nor of future results.

Westmark Acquisition -- On June 13, 1996, Tracor concluded the acquisition
of substantially all the assets of Westmark Systems, Inc. (Westmark),
which primarily consisted of Tracor stock and warrants and certain other
real estate holdings. Westmark held all of Tracor's Class A stock (978,458
shares), a Series B warrant to purchase 5,249,428 shares of Tracor common
stock with an exercise price of $4.42 per share, and a Series C warrant
to purchase 5,455,000 shares of Tracor common stock with an exercise price
of $7.36 per share. Under the agreement, Tracor exchanged 8,267,435 shares
of common stock for the Westmark assets. Westmark liquidated concurrently
with the closing by distributing the Tracor shares to its shareholders.
The agreement provided for a distribution of the Tracor shares through
underwritten secondary offerings of a maximum of one-half of the shares
during the first two years after the closing. Accordingly, 3,567,272
shares were sold in a public offering concluded on July 11, 1996. (See
Note I.)

Other Acquisitions -- During 1996 and 1995, Tracor completed several
business acquisitions, none of which were individually or collectively
material to the financial condition or results of operations of the
Company. These acquisitions included, in 1996, the AEGIS shipbuilding
program support business from Litton Industries, Inc., the Systems
Integration Division of Codar Technology, Inc., and Aerial Data Reduction
Associates, Inc. and, in 1995, the chaff manufacturing business of Lundy
Technical Center (a division of TransTechnology Corporation), the Convair
Twin Engine Program from General Dynamics' Convair Division, and the
shaped-charge munitions business unit of The Titan Corporation. The
aggregate cash purchase price of these acquisitions, including expenses,
was approximately $25.8 million. The acquisitions have been accounted for
using the purchase method, and, accordingly, the purchase price and
liabilities assumed ($5.6 million) have been allocated to the assets
acquired ($11.2 million) based on their respective fair values at the date
of acquisition. The resulting excess of the purchase price over the fair
value of the net assets acquired ($20.2 million) is being amortized over
10 to 20 years.

GDE Acquisition -- On November 17, 1994, Tracor purchased all of the
outstanding common stock of GDE Holdings, Inc. (GDE). GDE designs,
develops, manufactures, and supports automatic test systems, imagery and
information systems, and mission planning systems. The purchase price,
including the effect of a post-closing amendment to the acquisition that
was finalized in March 1995, and related acquisition expenses totaled $102
million. The purchase price was financed by the issuance of approximately
1.9 million shares of Tracor's common stock (recorded at $8.50 per share),
the issuance of approximately $10.9 million of Series A Notes (see Note
G), the borrowing of $55 million under the Company's amended and restated
credit agreement, and approximately $19.9 million of the Company's cash
on hand.

The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price and the liabilities assumed ($76 million)
have been allocated to the assets acquired ($104 million) based on their
respective fair values at the date of acquisition. The resulting excess
of the purchase price over the fair value of the net assets acquired ($74
million) is being amortized over 30 years. 

Note B -- Summary of Significant Accounting Policies

Consolidation -- The consolidated financial statements include the
accounts of Tracor, Inc. and its subsidiaries, all of which are wholly
owned. All significant intercompany accounts have been eliminated.

Cash Equivalents -- All highly liquid investments, with a maturity of
three months or less when purchased, are considered to be cash
equivalents.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles (GAAP) requires management
to make estimates and assumptions, in particular, estimates of anticipated
contract costs and revenues used in the earnings recognition process,
which affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Long-term Contracts -- Long-term contracts are accounted for under the
percentage of completion method, wherein revenue is recognized based on
cumulative costs incurred and the estimated cost to complete as such
relates to total contract price. All costs are expensed as incurred, and
losses on contracts are estimated and recognized when it becomes apparent
a loss is to be incurred. The revenue impact of pension costs is
recognized as the pension costs are recognized for GAAP purposes. This
results in the deferral of revenue where allowable pension costs under
government accounting regulations exceed pension costs as prescribed by
GAAP. The entire amount of deferred revenue in the accompanying
consolidated balance sheets results from this accounting methodology.

The progress payment provisions of certain contracts permit Tracor to bill
for a percentage of costs incurred. The remainder of costs incurred and
profit are included in unbilled costs and fees and are billed at the
completion of the contract or upon delivery of the product. (See Note C.)

Inventories -- Inventories, consisting principally of raw materials and
purchased components, are stated at the lower of cost (generally first-in,
first-out method) or market.

Property, Plant, and Equipment -- Property, plant, and equipment are
recorded at cost, and depreciation is calculated on both the straight-line
and accelerated methods over the useful lives of the related assets.

Goodwill, Other Intangibles, and Deferred Charges and Other Assets --
Goodwill, the excess cost over the fair value of net assets acquired, is
amortized using the straight-line method over 10 to 30 years. Other
intangibles are recorded at cost and amortized using the straight-line
method over their economic lives. Deferred debt issuance costs, included
in deferred charges and other assets, are capitalized and amortized to
interest expense using the interest method.

It is Tracor's policy to value goodwill and other intangible assets at the
lower of unamortized cost or fair value. Management reviews the valuation
and amortization of intangible assets on a periodic basis, taking into
consideration any events or circumstances which might result in diminished
fair value. If this review indicates goodwill will not be recoverable, the
carrying value of the goodwill will be reduced in accordance with the
provisions of Financial Accounting Standards Board (FASB) Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.

Research and Development Costs -- Tracor-funded research and development
costs are expensed as incurred. Such costs were $11.1 million in 1996,
$5.4 million in 1995, and $4.7 million in 1994.

Income Taxes -- In accordance with FASB Statement No. 109, Accounting for
Income Taxes, deferred income taxes are provided for temporary differences
between the basis of assets and liabilities for financial reporting
purposes and for income tax return purposes.

Reclassifications -- For comparative purposes, certain reclassifications
have been made to amounts previously reported.

Note C -- Accounts Receivable
The following table shows the components of accounts receivable (in
thousands), which include unbilled costs and fees under fixed-price and
cost-reimbursement type contracts. Billed accounts receivable are shown
net of allowances for doubtful accounts.

                                            1996         1995  
Billed:                                   --------     --------
   U.S. government, including 
     Foreign Military Sales (FMS)         $105,288     $ 72,338
   Foreign                                  27,909        6,591
   Domestic commercial                      22,236       13,238
                                          --------     --------
                                           155,433       92,167
Unbilled costs and fees:
   U.S. government, including FMS           49,892       41,599
   Foreign                                   6,345        5,266
   Domestic commercial                      11,229        2,625
                                          --------     --------
                                            67,466       49,490
                                          --------     --------
                                          $222,899     $141,657
                                          ========     ========

Amounts included in unbilled costs and fees comprise contract amounts for
which billings have not been presented. The requirements for billing are
those commonly found in contracting situations, such as meeting
contractual milestones and fulfilling retainage provisions. Substantially
all amounts not billed at December 31, 1996, will be billed during 1997.
It is also anticipated that substantially all billed accounts receivable
and unbilled costs and fees will be collected within one year.

The following table summarizes the changes in the allowance for doubtful
accounts for 1994, 1995, and 1996 (in thousands):

Balance at January 1, 1994                                 $   78 
   Additions charged to costs and expenses                      2 
   Additions due to GDE acquisition                           804 
   Write-off of uncollectible accounts                        (16)
                                                           ------
Balance at December 31, 1994                                  868 
   Additions charged to costs and expenses                    285 
   Write-off of uncollectible accounts                       (195)
   Reduction in allowance                                    (492)
                                                           ------
Balance at December 31, 1995                                  466 
   Additions charged to costs and expenses                    223 
   Additions due to acquisitions                            1,508 
   Write-off of uncollectible accounts                       (251)
                                                           ------
Balance at December 31, 1996                               $1,946
                                                           ======

Although Tracor has a concentration of credit risk with the U.S.
government, Tracor has not historically experienced significant collection
losses on U.S. government contracts. Also, Tracor's foreign receivables
are not concentrated within any one geographic region, nor are they
subject to economic conditions that would subject Tracor to unusual risk.

Note D -- Inventories

The components of inventories are as follows (in thousands):

                                                1996        1995 
                                              -------      ------
Raw materials and 
   purchased components                       $ 8,996      $2,824
Work in process                                 2,859       1,651
Finished goods                                    601         220
                                              -------      ------
                                              $12,456      $4,695
                                              =======      ======

Note E -- Property, Plant, and Equipment

The components of property, plant, and equipment are as follows (in
thousands):

                                                1996        1995 
                                              -------      ------
Land                                         $ 13,644    $  8,942
Buildings                                      50,635      34,394
Equipment                                      94,658      71,179
Leasehold improvements                          6,368       5,818
                                             --------    --------
                                             $165,305    $120,333
                                             ========    ========

Note F -- Accrued Liabilities
The components of accrued liabilities are as follows (in thousands):

                                                1996        1995 
                                              -------      ------
Payroll and related items                    $ 47,553     $44,493
Advance payments from customers                 9,519       3,324
Other                                          50,104      19,072
                                             --------     -------
                                             $107,176     $66,889
                                             ========     =======

Note G -- Long-term Debt

The components of long-term debt are as follows (in thousands):

                                                1996        1995 
                                              -------      ------
Revolving loan                               $     -     $     -  
Term loans                                    163,205      74,550
Senior Subordinated Notes                     105,000     105,000
Series A Notes                                 10,947      10,947
Promissory notes payable to 
   former Cordant shareholders 
   (see Note A)                                31,500          -  
Other                                           6,232         678
                                             --------    -------- 
                                              316,884     191,175
Less current maturities                        24,712      10,735
                                             --------    --------
                                             $292,172    $180,440
                                             ========    ========

Interest paid totaled $25.9 million in 1996, $20.6 million in 1995, and
$13.8 million in 1994. 

Amended and Restated Credit Agreement -- Tracor's amended and restated
credit agreement (Amended Credit Agreement) consists of a $180 million
term loan facility, a $60 million revolving loan facility, and a $50
million letters of credit facility. Substantially all assets of Tracor and
certain domestic, wholly owned subsidiaries are pledged or mortgaged under
the Amended Credit Agreement, and all borrowings are guaranteed by such
subsidiaries.

The term loans are comprised of a $64 million A Term Loan, a $49.6 million
B Term Loan, and a $49.6 million C Term Loan. The A Term Loan facility is
evidenced by promissory notes maturing October 31, 1999, requiring
quarterly principal payments of approximately $5.3 million. The B Term
Loan facility is evidenced by promissory notes maturing October 31, 2000,
requiring quarterly payments of $133,333 through and including October 31,
1999, and quarterly payments of $12 million from January 31, 2000, through
October 31, 2000. The C Term Loan facility is evidenced by promissory
notes maturing April 30, 2001, requiring quarterly payments of $131,578
through and including October 31, 2000, and two payments of $23.8 million
on January 31 and April 30, 2001. The revolving loans facility is
evidenced by promissory notes maturing December 31, 2000. The letters of
credit facility provides for the issuance of letters of credit with
expiration dates generally 18 months or less from the date of issuance
(automatically renewable unless a default exists at the expiration date)
but in any event not later than December 31, 2000.

Certain mandatory prepayments may also be required from the net proceeds
of asset or equity sales and annual excess cash flow. Such mandatory
repayments are to be applied to equally and ratably prepay the A, B, and
C Term Loans based on the relative principal amounts outstanding.

Term loans under the A Term Loan facility and the revolving loan bear
interest at Tracor's option at either the lender's base rate plus .75% or
the eurodollar rate plus 1.75% less a reduction ranging from .25% to
1.125% per annum based on Tracor's leverage ratio, as defined. Loans under
the B Term Loan facility bear interest at Tracor's option at either the
lender's base rate plus 1% or the eurodollar rate plus 2%. Loans under the
C Term Loan facility bear interest at Tracor's option at either the
lender's base rate plus 1.25% or the eurodollar rate plus 2.25%. Interest
rates on the A, B, and C Term Loans at December 31, 1996, were 7.3%, 7.8%,
and 8.1% per annum, respectively. Interest on base rate loans is payable
quarterly, and interest on eurodollar loans is payable at the end of the
applicable interest period or every three months in the case of interest
periods in excess of three months. A commitment fee of .5% per annum, less
a reduction ranging from .125% to .25% per annum based on Tracor's
leverage ratio as defined, is charged on the unused revolving loans and
letters of credit facility and is payable quarterly in arrears. The
commitment fee at December 31, 1996, was .375% per annum. Each letter of
credit bears an issuance fee of .125% per annum plus a fee equal to .25%
less than the interest margin in effect for revolving loans maintained as
eurodollar loans. The fee at December 31, 1996, was 1.375%. At December
31, 1996, the Company had outstanding letters of credit totaling $32.1
million relating to commitments for performance on certain contracts with
foreign customers and as collateral on certain insurance policies.

The Amended Credit Agreement contains covenants which, among other things,
impose limitations and restrictions on the incurrence of additional
indebtedness, capital expenditures, future mergers and acquisitions, sales
of assets, payment of dividends and changes in control, as defined. In
addition, Tracor is required to satisfy certain financial covenants and
tests relating to, among other matters, interest coverage, working
capital, leverage, and net worth.

Senior Subordinated Notes -- The acquisition of Vitro Corporation (Vitro)
on August 23, 1993, was financed by the issuance of $105 million aggregate
principal amount of Senior Subordinated Notes due August 15, 2001 (the
Notes). The Notes bear interest at an annual rate of 10 7/8%, payable
semiannually on February 15 and August 15. There is no sinking fund
requirement.

The acquisition of GDE was financed in part by the issuance of
approximately $10.9 million (as adjusted by a post-closing amendment to
the acquisition that was finalized in March 1995) aggregate principal
amount of Series A Notes due August 15, 2001 (Series A Notes), in a
private placement in November 1994. The Series A Notes rank on the same
level as, and are a part of the same series of securities as, the
Company's existing Notes discussed above. The Series A Notes bear interest
at an annual rate of 10 7/8%, payable semiannually on February 15 and
August 15. There is no sinking fund requirement. 

The Notes and Series A Notes are redeemable, in whole or in part, at the
option of Tracor, on or after August 15, 1997, at the redemption prices
of 104.661% in 1997, 103.107% in 1998, 101.554% in 1999, and 100%
thereafter. In the event of a change of control, as defined in the
indenture, each holder may require Tracor to repurchase such holder's
Notes or Series A Notes, as applicable, at 101% plus accrued and unpaid
interest. Tracor is also required to offer to repurchase a specified
portion of the Notes and Series A Notes in the event of certain asset
sales.

The Notes and Series A Notes are subordinated to all senior debt,
subordinated on an equal basis with any future senior subordinated
indebtedness, and senior to all other subordinated debt of Tracor.
Substantially all of Tracor's wholly owned subsidiaries have guaranteed
the Notes and Series A Notes on a senior subordinated basis.

The indentures pertaining to the Notes and Series A Notes contain
restrictions on the incurrence of additional indebtedness, dividends on
and redemptions of capital stock, redemptions of certain subordinated
obligations, the making of certain investments, transactions with
affiliates, sales of assets, and mergers or consolidations with or
transfers of assets to other persons.

Aggregate annual long-term debt maturities for each of the next five years
are as follows (in thousands):

               1997                        $ 24,712
               1998                          27,692
               1999                          22,714
               2000                          48,839
               2001                         163,777
               2002 and thereafter           29,150
                                           --------
               Total                       $316,884
                                           ========

Fair Value -- The fair value of Tracor's outstanding debt under the
Amended Credit Agreement approximates its carrying value. This assessment
is based on the fact the debt has a variable interest rate. Based on the
market prices for the Notes, the fair values of Tracor's Notes and Series
A Notes are $111 million and $11.6 million, respectively, at December 31,
1996, and $108.4 million and $11.3 million, respectively, at December 31,
1995.

Subsequent to December 31, 1996, Tracor initiated transactions to
restructure its long-term debt. (See Note N).

Note H -- Retirement Benefit Plans 

Tracor provides retirement benefits through contributory and
noncontributory defined benefit and defined contribution plans.

Defined Benefit Pension Plan -- Tracor's defined benefit pension plan
(Pension Plan) covers most of its employees. Retirement benefits are
generally based on years of service and final average compensation.
Tracor's contributions are made in amounts sufficient to satisfy funding
requirements under the Employee Retirement Income Security Act of 1974
(ERISA). Significant amendments include the merger of GDE's defined
benefit plan with the Pension Plan on December 31, 1994.

Assumptions used in accounting for the Pension Plan were:

                                                  1996    1995   1994
Weighted-average discount rate:                   ----    ----   ----
   January 1                                      7.25%   8.75%  7.50%
   December 31                                    7.75%   7.25%  8.75%
Rate of increase in compensation levels:
   January 1                                      4.00%   5.00%  4.00%
   December 31                                    4.00%   4.00%  5.00%
Expected long-term rate of 
   return on assets                               9.50%   9.50%  9.50%

Substantially all Pension Plan assets are invested in publicly traded
stocks and bonds. The funded status and the amount recognized in the
consolidated balance sheets are as follows (in thousands):

                                                   1996           1995  
Actuarial present value of benefit               --------       --------
   obligations:
     Vested benefit obligation                   $296,648       $304,687
                                                 ========       ========
     Accumulated benefit obligation              $306,739       $315,351 
                                                 ========       ========
Projected benefit obligation                     $353,421       $365,648 
Pension Plan assets at fair value                 370,422        350,570 
                                                 --------       --------
Pension Plan assets in excess of (less
    than) the projected benefit obligation         17,001        (15,078)
Unrecognized prior service cost                     6,668          7,394 
Unrecognized net loss (gain)                       (8,689)        30,791
                                                 --------       --------
Net prepaid pension costs 
   recognized                                    $ 14,980       $ 23,107 
                                                 ========       ========

The components of pension expense are as follows (in thousands):

                                              1996      1995       1994 
                                              ----      ----       ---- 
Service cost, benefits 
   earned during the year                   $14,487   $12,458    $ 7,877 
Interest cost on projected 
   benefit obligation                        25,149    25,891     13,221 
Actual return on Pension 
   Plan assets                              (42,961)  (73,856)     7,200 
Net amortization and 
   deferral                                  11,452    47,193    (24,367)
                                            -------   -------    -------
                                            $ 8,127   $11,686    $ 3,931
                                            =======   =======    ======= 

Defined Contribution Retirement Plans -- Tracor's contributions under its
defined contribution plans, which together cover substantially all
employees, are generally based upon a percentage of an eligible employee's
covered compensation or employee contributions. Expenses recorded under
defined contribution plans were $10 million in 1996, $9.2 million in 1995,
and $7.2 million in 1994.

Effective December 1, 1996, the Company established the Tracor Deferred
Compensation Plan for eligible employees. The plan is a nonqualified
deferred compensation plan pursuant to which certain eligible employees
of the Company may elect to defer compensation. The plan is maintained
primarily for the purpose of providing deferred compensation for highly
compensated employees, within the meaning of Section 201(2), 301(3), and
401(a)(1) of ERISA, as amended. The Company will match contributions up
to the extent of the allowable scheduled match under the Defined
Contribution Retirement Plan. Expenses under this plan were approximately
$88,000 in 1996.

Postretirement Health Care Plans -- Tracor, principally through Vitro and
GDE, provides postretirement health care and life insurance benefits to
certain retired employees who meet minimum age and service requirements.
The health care and life insurance plans are contributory and contain
other cost-sharing features such as deductibles and coinsurance. Tracor's
policy is to fund the cost of medical benefits in amounts determined at
the discretion of management. 

Upon Tracor's acquisition of Vitro, the postretirement health care plans
for Vitro employees were discontinued, leaving only the obligation that
existed at the acquisition date for eligible employees and retirees.
Accordingly, the cost of providing these benefits under the Tracor and
Vitro plans is not significant to the consolidated financial statements,
and information regarding actuarial methods and assumptions, health care
cost assumptions, and components of the obligation and annual expense is
not provided. Other long-term liabilities include $5 million at December
31, 1996, and $5.5 million at December 31, 1995, for such benefits.

The defined benefit health care and life insurance plans sponsored by GDE
currently provide postretirement benefits; however, the salaried retiree
medical plans will terminate effective July 1, 2008. The current GDE
retiree plans will continue until that time with the premium capped at the
rate in effect July 1, 1993, plus an escalation of 5% per year through
1997.

The following table (in thousands) presents the GDE plans' funded status
and the amounts recognized in the consolidated balance sheets:

                                                1996        1995 
                                                ----        ----
Accumulated postretirement benefit 
   obligation:
     Retirees                                  $7,000     $ 8,149
     Fully eligible active plan 
      participants                                840       1,596
     Other active plan participants               466         842
                                               ------     -------
                                                8,306      10,587
Plan assets at fair value                          -           - 
                                               ------     -------
Accrued postretirement obligation, 
   included in other long-term 
   liabilities                                 $8,306     $10,587
                                               ======     =======

Net periodic postretirement benefit cost for the GDE plans was
approximately $610,000 in 1996 and $961,000 in 1995.

For measurement of the GDE plans, 9% to 11% annual rates of increase,
depending on participant criteria, in the per capita cost of covered
benefits (i.e., health care cost trend rate), were assumed for 1996 and
1995. The rates were assumed to decrease gradually to 6% for most
participants by the year 2001 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care trend
rate by one percentage point would increase the accumulated postretirement
benefit obligation at December 31, 1996, by $130,000 and the net periodic
postretirement benefit cost for 1996 by $67,000.

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation for the GDE plans was 7.75% at December
31, 1996, and 7.25% at December 31, 1995.

Note I -- Shareholders' Equity

Common Stock -- Under certain conditions, as set forth in a registration
rights agreement, the initial holders of common stock may request Tracor
to register its securities with the Securities and Exchange Commission
(SEC) for resale. This registration right is generally not transferable
to subsequent shareholders. Tracor must bear the cost of any registration,
except for underwriting commissions, sellers' counsel fees, and other
selling expenses. Tracor may include in any registration shares of common
stock to be sold for its own account, subject to certain limitations.

The acquisition of Westmark (see Note A), completed on June 13, 1996,
resulted in the issuance of 8,267,435 shares of Tracor common stock, the
retirement of the Company's Class A common stock (978,458 shares) and two
series of warrants to purchase a total of 10,704,428 shares of the
Company's common stock. Subsequent to the Westmark acquisition, Tracor
concluded a public offering on July 11, 1996, of 6,567,272 shares of
common stock at a price of $17.50 per share. Of the shares sold, the
Company sold 3,000,000 shares and certain former shareholders of Westmark
sold 3,567,272 shares. The net proceeds to the Company from the primary
shares sold in the offering totaled approximately $48 million.

On May 2, 1995, Tracor concluded a public offering of 4,600,000 shares of
common stock at a price of $11.50 per share. Of the 4,600,000 shares,
Tracor sold 1,600,000 shares and a selling stockholder sold 3,000,000
shares. Included in shares sold by the stockholder were 616,875 shares
obtained upon the exercise of Series A Warrants. The net proceeds to
Tracor from the exercise of Series A Warrants and the primary shares sold
in the offering totaled approximately $18 million.

During 1994, Tracor purchased from a major shareholder 975,000 shares of
its common stock for $7.8 million. These shares were classified as
treasury shares. In November 1995, Tracor's board of directors retired all
982,653 shares of common stock held as treasury stock. The shares returned
to the status of authorized but unissued shares.

Common Stock Purchase Warrants -- At December 31, 1996, there were
outstanding 1,227,788 Series A Warrants, which entitle the holders to
purchase shares of common stock at an exercise price of $2.54. The
warrants are exercisable at the option of the holder at any time prior to
December 27, 2001, and are not callable by Tracor. Under certain
conditions, as defined in the warrant agreement, the number of shares
purchasable and the exercise price may be adjusted. The holders may also
request Tracor to register the underlying securities with the SEC under
substantially the same terms described above for holders of common stock,
except that the registration rights are generally transferable to
subsequent warrant holders. Series A Warrants exercised totaled 122,900
shares in 1996; 829,175 shares in 1995; and 46,472 shares in 1994.

Common Stock Option Plan -- Tracor's stock option plans provide for the
grant of restricted stock, stock appreciation rights, and both incentive
and non-qualified options to employees. The exercise price of each
currently outstanding option is the fair value of a share of Tracor's
common stock on the date of grant. Up to 30% of each option is exercisable
one year after the grant, up to an additional 30% is exercisable two years
after the grant, and the remainder is exercisable three years after the
grant. The term of each option is 10 years from the date of grant.

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, Accounting for Stock-Based Compensation (FAS 123),
requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized. 

Pro forma information regarding net income and earnings per share is
required by FAS 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994, under the fair value method
prescribed by FAS 123. The fair value for these options was estimated at
the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1996 and 1995, respectively:

                                                     1996      1995 
                                                     ----      ----
Risk-free interest rate                               5.8%      6.3%
Dividend yield                                          0%        0%
Volatility factor of the expected market 
   price of Tracor's common stock                     .576      .576
Weighted-average expected life 
   of the options                                  5 years   5 years

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, this option
valuation model requires the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the Black-Scholes model does not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma information follows (in thousands, except for earnings
per share information):

                                                1996       1995 
                                                ----       ----
Pro forma stock-based 
   compensation expense                       $ 2,021     $   773
Pro forma net income                           34,593      27,090
Pro forma earnings per share:
   Primary                                       1.39        1.20
   Fully diluted                                 1.39        1.20

Because FAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
1997.

The effects of applying FAS 123 for pro forma disclosures are not likely
to be representative of the effects on reported net income for future
years.

A summary of changes in common stock options during 1994, 1995, and 1996
is as follows:

                                                              Weighted
                                                Range of      Average
                                                Exercise      Exercise
                                    Shares       Prices       Price
                                   --------    ----------     --------
Options outstanding, 
   January 1, 1994                 914,200  $ 1.75-$ 8.13      $ 3.09
     Granted                        71,700    7.88- 12.25       11.83
     Exercised                     (48,500)   1.75-  3.63        2.46
     Surrendered                    (4,200)          3.13        3.13
                                 ---------  -------------      ------
Options outstanding, 
   December 31, 1994               933,200    1.75- 12.25        3.60
     Granted                       487,500   13.00- 15.25       13.02
     Exercised                     (69,703)   1.75-  8.13        2.22
     Surrendered                        -              -           - 
                                 ---------  -------------      ------
Options outstanding, 
   December 31, 1995             1,350,997    1.75- 15.25        7.07
     Granted                       374,600   16.13- 21.88       16.96
     Exercised                    (188,625)   2.00- 13.00        2.90
     Surrendered                    (5,399)   8.13- 13.00       10.84
                                 ---------  -------------      ------
Options outstanding, 
   December 31, 1996             1,531,573  $ 1.75-$21.88      $10.00
                                 =========  =============      ======

Options outstanding at December 31, 1996, are comprised of the following:

                                              Range of
                                              Exercise
                              Options          Prices
                              -------         --------
                              548,773      $ 1.75-$ 3.50
                               80,000        7.88-  8.13
                              842,100       12.25- 16.13
                               60,700       19.13- 21.88
                            ---------      -------------
                            1,531,573      $ 1.75-$21.88
                            =========      =============

Options exercisable, December 31, 

                  1996           797,143      $1.75-$15.25
                  1995           653,400       1.75- 12.25
                  1994           376,600       1.75-  8.13

                                                    1996         1995 
                                                    ----         ----
Weighted-average fair value of
   options granted during the year                  $9.39       $7.28
Weighted-average remaining 
   contractual life of options at 
   December 31                                  7.5 years   7.8 years

Common stock reserved at December 31, 1996, consists of the following:

For exercise of outstanding warrants            1,227,788
For exercise of stock options                   1,668,872
                                                ---------
                                                2,896,660
                                                =========

Note J -- Income Taxes

Income before income taxes consists of the following (in thousands):

                              						         1996     1995     1994  
                                             ----     ----     ----
Domestic                                   $64,990   $48,212  $31,111 
Foreign                                      1,130       482      (66)
                                           -------   -------  -------
                                           $66,120   $48,694  $31,045
                                           =======   =======  ======= 

The provision for income taxes consists of the following (in thousands):

                              						         1996     1995     1994  
                                             ----     ----     ----
Current:
   Federal                                 $17,442  $14,887   $ 8,708 
   State                                     4,269    3,308     1,723 
   Foreign                                      17     (160)       -
                                           -------  -------   -------
                                            21,728   18,035    10,431 
Deferred:
   Federal                                   6,995    2,309     1,978 
   State                                       528      487       218 
   Foreign                                     255       -       (129)
                                           -------  -------   -------
                                             7,778    2,796     2,067 
                                           -------  -------   -------
                                           $29,506  $20,831   $12,498 
                                           =======  =======   =======

A reconciliation between income taxes computed on income before taxes at
the statutory federal rate (35% in 1996, 1995, and 1994) and the provision
for income taxes is as follows (in thousands):

                                           1996     1995      1994
                                           ----     ----      ----  
Income taxes at the 
   statutory federal rate                $23,142   $17,043  $10,866 
Goodwill                                   2,115     1,240      553 
State income taxes, net 
   of federal tax benefits                 3,118     2,467    1,262 
Other                                      1,131        81     (183)
                                         -------   -------  -------
                                         $29,506   $20,831  $12,498
                                         =======   =======  ======= 

A summary of the tax effects of temporary differences comprising deferred
income tax assets and liabilities is as follows (in thousands):

                                                     1996      1995 
                                                    ------    ------
Deferred income tax assets:
   Contracts                                       $13,383   $ 6,509
   Postretirement medical obligation                 1,942     1,982
   Accrued vacation/employee benefits                8,834     8,332
   Expense accruals not yet deductible               4,612       820
   Deferred compensation                             6,894     3,426
   Pension                                           6,891     9,243
   Other                                             2,242       783
                                                   -------   -------
     Total deferred tax assets                      44,798    31,095
   Valuation allowance for 
    deferred tax assets                                 -         - 
                                                   -------   -------
     Net deferred tax assets                        44,798    31,095
Deferred income tax liabilities:
   Depreciation/amortization                        11,055    11,083
   Pension                                           6,257     9,501
   Other                                             9,941     1,921
                                                   -------   -------
     Total deferred tax liabilities                 27,253    22,505
                                                   -------   -------
Net deferred income taxes                          $17,545   $ 8,590
                                                   =======   =======

Net deferred income taxes are reflected on the consolidated balance sheet
as follows (in thousands):

                                          1996      1995
                                          ----      ----  
Current deferred income taxes           $26,829   $15,916 
Other long-term liabilities              (9,284)   (7,326)
                                        -------   -------
Net deferred income taxes               $17,545   $ 8,590
                                        =======   ======= 

Based on Tracor's taxable income in prior carryback years and forecast of
future income, management believes, it is more likely than not, all net
deferred tax assets will be realized. The valuation allowance for capital
losses was eliminated in 1995 as a result of realized capital gains, and
the related tax benefit reduced the goodwill of GDE.

For tax purposes, the acquisitions of GDE, AEL, and Cordant were accounted
for using their carryover tax basis, which resulted in the recording of
significant deferred income tax assets.

By a letter dated January 23, 1997, the Internal Revenue Service (IRS)
notified the Company of various proposed adjustments to the federal income
tax returns of GDE for its tax periods beginning November 20, 1992, and
ending November 17, 1994 (the date the Company acquired GDE). The proposed
adjustments relate primarily to GDE's acquisition of its business from
General Dynamics in 1992. The Company plans to contest the proposed
adjustments through the IRS's administrative appeals process. While it is
not possible to determine the final adjustments resulting from this
matter, management believes the ultimate resolution will have no material
adverse effect on the financial position or results of operations of the
Company.

Income taxes paid, net of refunds, totaled $17.4 million in 1996, $20
million in 1995, and $8.6 million in 1994.

Note K -- Lease Commitments

Tracor leases office space under various operating leases, which generally
contain renewal options and are subject to increases based on formulas
such as changes in the Consumer Price Index. Future minimum payments at
December 31, 1996, for all noncancelable operating leases with initial
terms of one year or more are as follows (in thousands):

               1997                        $16,882
               1998                         13,878
               1999                         11,946
               2000                         10,082
               2001                          6,351
               2002 and thereafter          25,074
                                           -------
                                           $84,213
                                           =======

Rental expense for all operating leases was $16.6 million in 1996, $17.4
million in 1995, and $15.8 million in 1994.

Note L -- Contingencies

Tracor is involved in various lawsuits and is subject to certain
contingencies incidental to its business. While the ultimate results of
these matters cannot be predicted with certainty, management does not
expect them to have a material adverse effect on the consolidated
financial position of Tracor.

Note M -- Net Income Per Common and Common Equivalent Share

Beginning in the second quarter of 1996, both primary and fully diluted
net income per share amounts are computed in accordance with the treasury
stock method using the weighted average common shares outstanding and
equivalents assuming the exercise of all outstanding warrants and options
for common shares. 

Prior to the second quarter of 1996, both primary and fully diluted net
income per share amounts were computed in accordance with the modified
treasury stock method using the weighted average common shares outstanding
and equivalents assuming the exercise of all outstanding warrants and
options for common shares. For purposes of net income per share
computations, net income is adjusted for the pro forma reduction of
interest expense, net of investment income (where applicable) and income
taxes, resulting from the assumed use of warrant and option exercise
proceeds to reduce outstanding debt.

The weighted average common and common equivalent shares used in the fully
diluted calculation were 25,353,000 in 1996; 24,168,000 in 1995; and
22,113,000 in 1994.

Note N -- Subsequent Events

On February 14, 1997, Tracor commenced a tender offer to purchase for cash
up to the entire outstanding principal amount of its 10 7/8% Senior
Subordinated Notes due 2001 (Old Notes) and a related solicitation of
consent to modify certain other terms of the indentures under which the
Old Notes were issued. On February 17, 1997, the Company also commenced
a private placement offering (Offering) of $250 million aggregate
principal amount of 8 1/2% Senior Subordinated Notes due 2007 (New Notes).
The Offering is conditioned upon receipt of consents and tenders
representing at least a majority in aggregate principal amount of Old
Notes outstanding. Subject to the completion of the Offering, the Company
will also refinance its outstanding indebtedness under its existing bank
agreement and will obtain a new bank credit facility (New Bank Credit
Facility) providing for a five-year revolving credit facility in the
initial principal amount of $200 million. The consummation of these
transactions is subject to the execution and delivery of definitive
documentation and the satisfaction of other customary closing conditions.
The financings are expected to close on or before March 31, 1997.

Interest on the New Notes will be payable semiannually commencing
September 1997. The New Notes will be redeemable in whole or in part at
the option of the Company in or after March 2002, at specified redemption
prices. In addition, prior to March 2000, the Company, at its option, may
redeem certain percentages of the aggregate principal amount of the New
Notes with the net cash proceeds of one or more public equity offerings
at specified redemption prices. The New Notes will be general unsecured
obligations of the Company and will be subordinated in right of payment
to all existing and future senior indebtedness of the Company. The New
Notes will be subject to a registration rights agreement, pursuant to
which Tracor has agreed to file a registration statement with respect to
an offer to exchange the New Notes for registered identical senior
subordinated notes of the Company.

The New Bank Credit Facility shall be subject to commitment reductions of
$25 million on February 28, 2000, and $50 million on February 28, 2001.
Certain mandatory prepayments will also be required. All of Tracor's stock
in its subsidiaries will be pledged under the New Bank Credit Facility,
and all borrowings will be guaranteed by such subsidiaries.

The New Bank Credit Facility will bear interest at Tracor's option at
either the lender's base rate plus up to .75% or the euro-dollar rate plus
 .625% to 1.75%, in each case based on certain financial ratios, as
defined. Interest on base rate loans will be payable quarterly, and
interest on eurodollar loans will be payable at the end of the applicable
interest period or every three months in the case of interest periods in
excess of three months. A commitment fee ranging from .25% to .375% per
annum will be charged on the unused revolving loans and will be payable
quarterly in arrears. Each letter of credit will bear customary fees and
administrative charges.

The New Bank Credit Facility and New Notes will contain convenants which,
among other things, impose limitations and restrictions on the incurrence
of additional indebtedness, capital expenditures, future mergers and
acquisitions, sales of assets, and payment of dividends. In addition,
Tracor will be required to satisfy certain financial covenants relating
to, among other matters, interest coverage, working capital, leverage, and
net worth.

The above transactions will result in a one-time extraordinary charge of
approximately $10.4 million, net of an income tax benefit of $7.3 million,
consisting of a $7.5 million premium to retire the Old Notes and a $10.2
million write-off of unamortized debt issuance costs.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

Part III

Item 10. Directors and Executive Officers of the Company

Pursuant to the Delaware General Corporation Law, as implemented by
Tracor's Certificate of Incorporation and Bylaws, all corporate powers are
exercised by or under the direction of the Board of Directors. The Board
of Directors has created committees with responsibility for audits,
compensation and ethical issues. Each director who is not an employee of
Tracor serves on one or more committees. Officers of the Company serve at
the discretion of the Board of Directors. The Board of Directors and
executive officers of the Company consist of the persons named in the
table below. Additional information with respect to those persons who
serve as directors and executive officers is set forth below the table.


Name                       Age   Position(s) with the Company
-------------------        ---   -----------------------------------
James B. Skaggs            59    Chairman of the Board and President

Robert K. Floyd            61    Vice President and Chief Financial
                                  Officer

Barry G. Campbell          55    Vice President; President of Vitro
                                  Corporation

K. Bruce Hamilton          55    Vice President; President of Tracor
                                  Applied Sciences, Inc.

David L. Lawrence          54    Vice President; President of Tracor
                                  Flight Systems, Inc.

George R. Melton           50    Vice President; President of Tracor
                                  Aerospace, Inc.

Dr. Terry A. Straeter      54    Vice President; President of GDE
                                  Systems, Inc.

Woody Endsley              44    Vice President and Treasurer

Robert J. Fitch            48    Vice President - Government Relations

Leroy J. Kana              64    Vice President - Quality, Safety and
                                  Environmental Programs

Russell E. Painton         56    Vice President, General Counsel and
                                  Corporate Secretary

John M. Rock, III          57    Vice President - Corporate Technology
                                  and Information Systems

Roger W. Sadler            59    Vice President - Business Development

Thomas V. Talbott          60    Vice President and Controller

Kathy Thompson             49    Vice President - Human Resources

William E. Conway, Jr      47    Director

Dr. Julian Davidson        69    Director

Anthony Grillo             41    Director

Bob Marbut                 61    Director

Elvis L. Mason             63    Director

Lt. Gen. Thomas P. 
 Stafford (Ret.)           66    Director

James B. Skaggs has been a director of the Company since March 1990. He has
also served as the president and CEO of the Company since November 1991.
Mr. Skaggs also served as president, CEO, and a director of Westmark
Systems, Inc. from March 1990 through December 1991, and is currently a
director of Alamo Group, Inc.  Mr. Skaggs' term expires in 1998.

Robert K. Floyd has been Vice President and Chief Financial Officer of the
Company since December 1990.

Barry G. Campbell has been Vice President of the Company and President and
CEO of Vitro Corporation since October 1993. He has held various positions
with Vitro Corporation since 1970.

K. Bruce Hamilton has been Vice President of the Company and President of
Tracor Applied Sciences, Inc. since 1989.

David L. Lawrence has been Vice President of the Company and President of
Tracor Flight Systems, Inc. since November 1996.

George R. Melton has been Vice President of the Company since March 1990
and President of Tracor Aerospace, Inc. since September 1990.

Dr. Terry A. Straeter has been Vice President of the Company since December
1994 and President and Chief Executive Officer of GDE since November 1992.
From February 1991 until November 1992, he served as Corporate Vice
President and General Manager of the Electronics Division of General
Dynamics Corporation.

Woody Endsley has been Vice President and Treasurer of the Company since
April 1991. He served as Corporate Controller of the Company from January
1988 through April 1991.

Robert J. Fitch has been Vice President - Government Relations since August
1995. From April 1993 to July 1995, he served as Vice President, Corporate
Strategic Development for GDE. Between 1984 and 1993, he was the senior
staff member of the Program and Budget Authorization staff of the House
Permanent Select Committee on Intelligence.

Leroy J. Kana has been Vice President - Quality, Safety and Environmental
Programs of the Company since December 1992 and has been associated with
the Company and its subsidiaries in various capacities since 1969.

Russell E. Painton has been Vice President and General Counsel of the
Company since April 1983. He has also been Secretary of the Company since
January 1991.

John M. Rock, III has been Vice President - Technology and Information
Systems of the Company since September 1991. From January 1990 through
September 1991, he was President of Eagle GT, Inc.

Roger W. Sadler has been Vice President - Business Development of the
Company since August 1991. From 1988 through August 1991, he worked as a
private consultant.

Kathy Thompson has been Vice President - Human Resources of the Company
since October 1996.  Prior to that, she was Director of Human Resources for
Tracor Applied Sciences, Inc., and has worked for Tracor since 1971.

Thomas V. Talbott has been Vice President and Controller of the Company
since April 1991.

William E. Conway, Jr. has been a director since April 25, 1995. 
Mr. Conway joined The Carlyle Group in August 1987 and is a managing
director. He serves on the boards of directors of BDM International, Inc.
(October 1990 to present); GTS Duratek, Inc. (January 1995 to present); and
Nextel Communications, Inc. (February 1997 to present).  He also serves on
the boards of several private companies in which Carlyle has invested. 
Prior to the acquisition of GDE Systems, Inc. ("GDE"), he served as
chairman of the board of GDE.  Mr. Conway's term expires in 1997.

Dr. Julian Davidson has been a director of the Company since November 1991.
He is chairman of the Compensation/Stock Option Committee. Dr. Davidson is
president and CEO of Davidson Enterprises, LLC, a commercial and defense
consulting firm since April 1, 1996. Before that, he was a senior vice
president of Booz, Allen and Hamilton from May 1984 to April 1996. He also
serves as a director on the boards of several privately held companies. 
Dr. Davidson's term expires in 1999.

Anthony Grillo has been a director of the Company since December 1991. He
is chairman of the Audit/Ethics Committee. Mr. Grillo is a senior managing
director of The Blackstone Group, L.P., an investment banking firm. Prior
to May 1991, he was a managing director with the corporate finance
division, Restructuring and Reorganization Group of Chemical Bank (November
1989 through May 1991). Mr. Grillo currently serves as a member of the
board of directors of Littelfuse, Inc. (since November 1991), a former
affiliate of Tracor's predecessor, and of Joule, Inc., as well as a member
of the board of directors of several privately held companies. He is also
a Trustee of the Academy of Political Science.  Mr. Grillo's term expires
in 1999.

Bob Marbut has been a director of the Company since November 1991. He is
a member of the Compensation/Stock Option Committee. Mr. Marbut is chairman
and CEO of Argyle Television, Inc., which he helped found in 1994 and which
now owns and operates television stations in the United States.  He is also
chairman and CEO of Argyle Communications, Inc. (founded in January 1992),
which is the managing general partner of Argyle Communications Partners,
L.P., a limited partnership involved in the acquisition and operation of
television stations, and successor to The Argyle Group, of which he has
been chairman and CEO since January 1992.  Mr. Marbut founded Argyle
Television Holdings, Inc., a television station group in 1993, and was its
CEO until it was sold in April 1995.  He serves on the boards of directors
of Tupperware Corporation (1996 to present); Ultramar Diamond Shamrock,
Inc. (December 1996 to present); Argyle Communications, Inc. (January 1992
to present); Argyle Television, Inc. (August 1994 to present); and Katz
Media Group, Inc. (August 1994 to present).  Mr. Marbut's term expires in
1997.

Elvis L. Mason has been a director of the Company since November 1991. He
is a member of the Compensation/Stock Option Committee. Since August 1984,
he has served as managing partner of Mason Best Company, L.P. ("Mason
Best"), a merchant banking firm, and on the boards of several privately
held companies in which Mason Best was a significant shareholder. He also
has served, since December 1991, as a director and, since February 1992,
as chairman of the Board of Safeguard Business Systems, Inc., a
supplier of office management products and services for small businesses,
and its parent, San Jacinto Holdings. Mr. Mason also serves as a director
of United Meridian Corporation and American Eagle Group, Inc.  Mr. Mason's
term expires in 1999.

Lt. Gen. Thomas P. Stafford (Retired) has been a director of the Company
since April 1994. He is a member of the Audit and Ethics Committee. Lt.
Gen. Stafford is a co-founder of the technical consulting firm of Stafford,
Burke, and Hecker, Inc. (1983). He serves on the boards of directors of
AlliedSignal Corporation (March 1981 to present); CMI, Inc. (1983 to
present); Fisher Scientific, Inc. (December 1991 to present); Pacific
Scientific, Inc. (February 1987 to present); Seagate Technologies, Inc.
(March 1988 to present); Tremont, Inc. (October 1990 to present);
Wackenhut, Inc. (October 1991 to present); and Wheelabrator Technologies,
Inc. (September 1987 to present), all of which are listed on the New York
Stock Exchange (NYSE). Lt. Gen. Stafford also served on the board of
directors for Gulf USA, Inc. (NYSE) from 1992 to 1993.  Lt. Gen. Stafford's
term expires in 1998.

Meetings of the Board of Directors

During 1996, the Board of Directors met six times. Each director attended
more than 75% of the aggregate of (a) the total number of meetings held
during 1996 and (b) the total number of meetings held by all committees of
the Board of Directors on which each served.


Item 11.  Executive Compensation 
The following Summary Compensation Table shows the compensation of the
Company's five most highly compensated executive officers, including the
chief executive officer, for the three most recent fiscal years:

                                  Summary Compensation Table

</TABLE>
<TABLE>
<CAPTION>
NAME AND                                                             LONG-TERM                   ALL OTHER 
PRINCIPAL POSITION         ANNUAL COMPENSATION                      COMPENSATION               COMPENSATION(1)
------------------      ---------------------------    --------------------------------------  ---------------
                                                                 AWARDS               PAYOUTS        
                                                       ---------------------------    -------
                                                                        SECURITIES                
                                                        RESTRICTED      UNDERLYING                
                                                          STOCK         OPTIONS/      LTIP          
                        YEAR    SALARY        BONUS       AWARDS        SAR (#)2      PAYOUTS                   
                        ----    ------        -----       ------        --------      -------
<S>                                                                                 
<C>                    <C>   <C>           <C>          <C>             <C>        <C>          <C>                

James B. Skaggs,        1996  $577,533      $490,445      - 0 -          100,000       - 0 -      $39,281
President & CEO         1995   523,921       410,987      - 0 -          200,000       - 0 -       28,687
                        1994   494,884       398,687      - 0 -            9,200       - 0 -       14,916
                                                                                 
Terry A. Straeter(3)    1996  $226,900      $174,177      - 0 -           12,000       - 0 -      $50,605
Vice President          1995   212,019       138,273      - 0 -           15,000    $243,132       24,296
                        1994   205,769       265,000      - 0 -            5,000       - 0 -        8,015
                                                                                 
Barry G. Campbell,      1996  $235,885      $129,938      - 0 -           12,000       - 0 -      $11,865
Vice President          1995   209,244       105,074      - 0 -           20,000       - 0 -        9,699
                        1994   197,627        81,113      - 0 -            - 0 -    $212,400          549

Robert K. Floyd,        1996  $230,568      $149,446      - 0 -           12,000       - 0 -      $22,585
Vice President & CFO    1995   216,448       126,703      - 0 -           20,000       - 0 -       17,592
                        1994   189,017       112,933      - 0 -            7,500       - 0 -        4,939
                                                                              
George R. Melton,       1996  $200,366      $133,502      - 0 -           12,000       - 0 -      $16,803
Vice President          1995   166,675        88,069      - 0 -           18,000       - 0 -       10,973
                        1995   167,638        53,093      - 0 -            - 0 -       - 0 -        9,727
</TABLE>          
----------
1.    Includes term life insurance premiums paid by the Company on 
      behalf of each named individual.
2.    No SARs have been issued as of the dates indicated.
3.    During the majority of 1994, Dr. Straeter was employed by 
      GDE Systems, Inc. when it was a subsidiary of GDE Holdings, Inc.

                              Option Grants in Fiscal Year 1996(1)
<TABLE>
<CAPTION>                                                              Potential Realizable Value
                                                                        at Assumed Annual Rates
                                                                       of Stock Price Appreciation
                                   Individual Grants                      for Full Option Term
                      ----------------------------------------------  ----------------------------                               
                                  % of Total                                                                 
                      Number of   Options                                                                    
                      Securities  Granted to                                                                   
                      Underlying  Employees    Exercise                                                 
                      Options     in Fiscal       or      Expiration                                
Name                  Granted     1996        Base Price  Date             5% ($)        10% ($)
--------------------  ----------  ----------  ----------  ----------  -------------- -------------   
<S>                  <C>           <C>         <C>       <C>          <C>           <C>
James B. Skaggs       100,000       26.27%      16.13     02/27/2006   $1,014,407.03 $2,570,706.59
Barry G. Campbell      12,000        3.15%      16.13     02/27/2006      121,728.84    308,484.79
Robert K. Floyd        12,000        3.15%      16.13     02/27/2006      121,728.84    308,484.79
George R. Melton       12,000        3.15%      16.13     02/27/2006      121,728.84    308,484.79
Terry A. Straeter      12,000        3.15%      16.13     02/27/2006      121,728.84    308,484.79
--------------------------------------------------------------------------------------------------
</TABLE>                                                                    
_____________
1.   The per share option exercise prices are the fair market value of the 
     Company's common stock on the date of the grant, and the term of each 
     option is 10 years.  30% of each option is exercisable one year after 
     the date of grant, an additional 30% is exercisable two years after 
     the grant, and the remainder is exercisable three years after the grant.

                      Aggregate Option Exercises in Last Fiscal Year
                           and Fiscal Year-End Option Values
<TABLE>                                                         
<CAPTION>
                                                                                Value of Unexercised
                                             Number of Unexercised              In-the-Money Options
                                           Options at Fiscal Year End           at Fiscal Year End(1)
                      Number of            ---------------------------      --------------------------        
                       Shares              Exercisable                                  
                      Acquired    Value        at                                 
Name                 on Exercise  Realized  12/31/96     Unexercisable      Exercisable  Unexercisable
------------------   -----------  -------- -----------   -------------      -----------  -------------
<S>
<C>                  <C>         <C>       <C>           <C>                <C>          <C>                                  
James B. Skaggs        15,000     $331,875   250,520       243,680           $3,992,930   $1,700,120
Barry G. Campbell         -0-          -0-    31,000        26,000              377,500      176,940
Robert K. Floyd         1,000       21,630    64,500        29,000            1,101,250      203,940
George R. Melton        3,800       81,592    56,600        24,600            1,001,900      165,390
Terry A. Straeter         -0-          -0-     7,500        24,500               64,125      166,065
------------------------------------------------------------------------------------------------------                       
</TABLE>                      
_____________
1. The last sale price of the Common Stock on December 31, 1996 was 
   $21.25 per share. 

Employment Agreements

Effective as of November 22, 1996, the Company entered into employment
agreements with certain of its officers who had not previously entered into
employment agreements with the Company and, further, entered into amended
and restated employment agreements with certain of its officers who had
previously entered into employment agreements with the Company.  Each of
the above-named officers has executed employment agreements with the
Company, except for Dr. Straeter, whose employment agreement is with GDE
Holdings, Inc., a subsidiary of the Company.  All of the agreements provide
for a termination date of the earlier of December 31, 1999, or the first
day of the year following the year in which the officer reaches his/her
65th birthday. The agreements also provide for automatic renewals unless
terminated earlier by the officer or the Board of Directors.

Among other things, the employment agreements assure the continuation of
each such officer's base salary and his/her continued participation in the
Company incentive and other welfare and benefit plans, as well as
continuation of his/her then current level of job position and
responsibilities, failing which such officer may terminate his/her
employment with the Company and receive, as termination pay, stipulated
amounts equal to up to two times such officer's base salary then in effect
and other benefits. Under each employment agreement, the Company has the
right to terminate an officer for cause, under which circumstances the
officer would not be entitled to termination pay. Each agreement provides
that upon termination the officer will not compete with the Company for a
period of six months after the date of termination nor will the officer
divulge confidential information or trade secrets to third parties.

Retirement Benefits and Related Information

The Company has a Defined Benefit Retirement Plan (the "Retirement Plan")
which provides retirement benefits for its employees and employees of
participating affiliates. The plan has three benefit formulas as described
below for Tracor, Vitro, and GDE employees. Employees covered under the
Tracor formula become vested in the Retirement Plan upon the completion of
five years of vesting service. Monthly benefits, payable at normal
retirement age, are based upon an amount equal to one percent of final
"average monthly compensation" up to "covered compensation" plus one and
one-half percent of final average monthly compensation in excess of covered
compensation, multiplied by the years of credited service with the Company,
less one year. Average monthly compensation is defined as the average
monthly compensation actually paid, including bonuses and overtime pay for
the five highest successive calendar years. Covered compensation is defined
as the average of the maximum wages subject to social security taxes for
the 35 years ending in the calendar year before the employee reached Social
Security retirement age. Credited service is the period of the employee's
total employment with the Company. The monthly benefits are not subject to
deductions for Social Security or other offset amounts.

Employees covered under the Vitro formula are provided monthly benefits,
payable at normal retirement age, which are based on the amount equal to
one and one-tenth percent of average annual compensation up to covered
compensation plus one and three-quarters percent of average annual
compensation in excess of covered compensation, multiplied by the years of
credited service. Average annual compensation means the average of annual
earnings during the employee's five consecutive highest paid years with
Vitro. Credited service generally means all the employee's years of service
with Vitro. The monthly benefits are not subject to deductions for Social
Security or other offset amounts.

Employees covered under the GDE formula are provided monthly benefits,
payable at normal retirement age, which are based on the amount equal to
approximately one and three-tenths percent of average annual compensation,
multiplied by the years of credited service. Average annual compensation
means the average of annual earnings during the employee's five consecutive
highest paid years with GDE. Credited service generally means all the
employee's years of service with GDE. The monthly benefits are not subject
to deductions for Social Security or other amounts.

The following tables show the estimated annual benefits payable upon
retirement to persons in specified remuneration and years of service
classifications who would retire in 1997 at age 65. The amounts shown in
the tables were determined as normal retirement benefits at December 31,
1996, and were based on pay limited by Section 401(a)(17) of the Internal
Revenue Code (the "Code"). Benefits are limited by Section 415 of the Code
without regard to combined plan limitations.

                       Retirement Plan Benefits
                             Tracor, Inc.
<TABLE>     
<CAPTION>
                                           Years of                                  
                                            Service                                   
                          --------------------------------------------------
Final Average                                                   
Annual Compensation            15         20        25         30        35
-------------------       -------    -------   -------    -------   -------          
<S> <C>                  <C>        <C>       <C>        <C>       <C>       
     $125,000              24,320     33,005    41,691     50,376    59,062
     $150,000              29,570     40,130    50,691     61,251    71,812
     $175,000              33,726     46,176    58,626     71,076    83,526
     $200,000              37,852     52,176    66,502     80,826    95,152
     $225,000              41,976     58,176    74,376     90,576   106,776
     $250,000              43,766     60,778    77,792     94,804   111,818
     $300,000              43,766     60,778    77,792     94,804   111,818
     $350,000              43,766     60,778    77,792     94,804   111,818
     $400,000              43,766     60,778    77,792     94,804   111,818
     $450,000              43,766     60,778    77,792     94,804   111,818
     $500,000              43,766     60,778    77,792     94,804   111,818
   $1,281,573(1)           43,766     60,778    77,792     94,804   111,818
</TABLE>                                                                

                              Vitro Corporation(2)
     
<TABLE>     
<CAPTION>
                                           Years of                                  
                                            Service                                   
                          --------------------------------------------------
Final Average                                                   
Annual Compensation            15         20        25         30        35
-------------------       -------    -------   -------    -------   -------          
<S> <C>                  <C>        <C>       <C>        <C>       <C>       
     $125,000              30,124     40,165    50,206     60,248    70,289
     $150,000              36,686     48,915    61,144     73,373    85,602
     $175,000              41,963     56,390    70,817     85,244    99,671
     $200,000              47,213     63,827    80,442     97,057   113,671
     $225,000              52,463     71,265    90,067    108,869   120,000
     $250,000              54,739     74,490    94,240    113,991   120,000
     $300,000              54,739     74,490    94,240    113,991   120,000
     $350,000              54,739     74,490    94,240    113,991   120,000
     $400,000              54,739     74,490    94,240    113,991   120,000
     $438,987(1)           54,739     74,490    94,240    113,991   120,000
</TABLE>                                                              
___________
     
1.  Represents 120% of covered compensation for the most highly compensated 
    individual who would be entitled to benefits under this particular plan.

2.  Employees of Vitro Corporation and Vitro Services Corporation whose 
    credited service begins on or after January 1, 1996, are covered under 
    the Tracor benefit formula.  Benefits based on $150,000 pay are limited 
    with a minimum benefit, as of December 31, 1993, under prior pay plan.
         
                                 GDE Systems, Inc.
<TABLE>     
<CAPTION>
                                           Years of                                  
                                            Service                                   
                          --------------------------------------------------
Final Average                                                   
Annual Compensation            15         20        25         30        35
-------------------       -------    -------   -------    -------   -------         
<S> <C>                  <C>        <C>       <C>        <C>       <C>       
     $125,000              25,000     33,333    41,667     50,000    58,333
     $150,000              30,000     40,000    50,000     60,000    70,000
     $175,000              34,000     45,667    57,333     69,000    80,666
     $200,000              38,000     51,333    64,667     78,000    91,333
     $225,000              42,000     57,000    72,000     87,000   102,000
     $250,000              43,734     59,457    75,180     90,902   106,625
     $300,000              43,734     59,457    75,180     90,902   106,625
     $350,000              43,734     59,457    75,180     90,902   106,625
     $400,000              43,734     59,457    75,180     90,902   106,625
     $450,000              43,734     59,457    75,180     90,902   106,625
     $481,292(1)           43,734     59,457    75,180     90,902   106,625
</TABLE>                                                              
___________
     
1.  Represents 120% of covered compensation for the most highly compensated 
    individual who would be entitled to benefits under this particular plan.

Benefits under the Retirement Plan are computed based on a straight-life
annuity, and monthly benefits are not subject to deductions for social
security or other offset amounts.

As of December 31, 1996, the persons named in the Summary Compensation
Table were credited with the following years of service under the
Retirement Plan: Mr. Floyd, 6.6; Mr. Skaggs, 6.8; Mr. Melton, 6.8; Dr.
Straeter, 16.8; and Mr. Campbell, 26.6.

The remuneration covered by the Retirement Plan for the named executive
officer generally corresponds with the salary amounts set forth in the
Summary Compensation Table.

Non-Qualified Supplemental Retirement Benefit.  During 1993, the Company
established a Non-Qualified Supplemental Retirement Program for certain of
its officers, which was amended and restated effective as of January 30,
1997 (hereafter, the "Program"). The Program provides that upon normal
retirement or termination not for cause, Company officers covered by the
Program will receive a monthly income of up to 50% of the
average compensation for the 36 months immediately prior to the date of
retirement or termination, less the amount of retirement benefits which the
officer would otherwise be entitled to under the Retirement Plan. The
actual amount the participant would be entitled to receive is determined
by the participant's total number of years of service to the Company after
December 21, 1991. The Program further provides that upon the death of the
participant, his or her spouse would also be entitled to receive a monthly
income equal to one-half of the benefit which would otherwise be payable
to the officer. Currently, Messrs. Skaggs, Floyd, and Melton are
participants in the Program. The Program additionally provides that if any
of the participants are terminated without cause, they shall become
immediately 100% vested in the Program, and in the case of Messrs. Skaggs
and Floyd, they may elect to receive the benefits payable to them under the
Program in a lump sum. Assuming the individuals remain in the employ of the
Company until their normal retirement age, each of the following executives
will receive an annuity, as described above, which, on an actuarial basis,
is equal to the following annual payments: Mr. Skaggs, $465,487; Mr.
Floyd, $166,014; and Mr. Melton, $221,943.

Dr. Straeter is eligible to receive benefits from the GDE Systems, Inc.
Supplemental Retirement Plan. This plan is designed to replace any pension
benefit lost to Dr. Straeter if his final average covered compensation is
in excess of the limitations for eligible compensation contained
in Sections 415 or 401(a)17 of the Code. Assuming Dr. Straeter remains
employed by the Company until his normal retirement age, he will receive
an annuity with an estimated annual payment of $141,282.

Mr. Campbell is eligible to receive benefits from the Tracor Benefit
Restoration Plan. This plan, adopted October 1, 1996, is designed to
replace any pension benefit lost to Mr. Campbell if his final average
monthly covered compensation is in excess of the limitations for eligible
compensation contained in Sections 415 or 401(a)17 of the Code. Assuming
Mr. Campbell remains with the Company until his normal retirement age, he
will receive an estimated lump sum payment of $1,635,681

Effective December 1, 1996, Tracor adopted the Tracor Deferred Compensation
Plan designed primarily to replace 401(k) Plan benefits lost due to the
Code limitations on employee deferrals and covered compensation used to
determine benefits from the qualified Tracor, Inc. 401(k) Plan. For 1996
matching contributions were credited in the amount of $6,612 to Mr. Skaggs;
$1,756 to Mr. Campbell; $2,036 to Mr. Floyd; and $1,670 to Mr. Melton.

Outside (non-employee) directors of the Company receive annual Board
retainers of $20,650, plus travel and allowances where appropriate.
Attendance fees of $1,000 per meeting are also paid. Directors who also
serve on a committee of the Board of Directors receive $950 for each
committee meeting attended. Directors who chair committees receive an
additional $950 per meeting attended.  Directors who are currently on the
board at the first of each year receive 1,000 shares of common stock and
are granted 2,000 shares of stock options at the current market price.

                        COMMITTEES OF THE BOARD
                                   
                        Audit/Ethics Committee
                                   
The Committee met three times in 1996.  The duties of the Audit/Ethics
Committee are to:

a.   recommend to the Board of Directors a firm of independent auditors to
     perform the audit of the annual financial statements of the Company;

b.   review with the independent auditors and with financial management the
     proposed scope of the annual audit, past audit experience, the
     Company's internal audit program, recently completed internal audits,
     and other matters bearing upon the scope of the audit;

c.   review with the independent auditors and with financial management
     significant matters revealed in the course of the audit of the annual
     financial statements of the Company;

d.   review on an annual basis whether the Company's ethics policies have
     been communicated by the Company to all key employees of the Company
     and its subsidiaries;

e.   review with financial management any suggestions and recommendations
     of the independent auditors of the Company;

f.   meet on a regular basis with a representative or representatives of
     the Internal Audit Department of the Company and to review the
     Internal Audit Department's Reports of Operations;  and

g.   report its activities and actions to the Board at least once each
     fiscal year.

Members of the Audit/Ethics Committee are Anthony Grillo, chairman; William
E. Conway; and Lt. Gen. Thomas P. Stafford.

The independent auditors and Tracor's internal auditor have direct access
to the Committee and may discuss with it any matters which may arise in
connection with audits, the maintenance of internal accounting controls,
or any other matter relating to Tracor's financial affairs.  Furthermore,
the Committee may authorize the independent auditors to investigate any
matters which the Committee deems appropriate and may present its
recommendations and conclusions to the Board.

                  Compensation/Stock Option Committee
                                   
The Committee met four times in 1996.  The duties of the Compensation/Stock
Option Committee are to:

a.   administer the Tracor stock option plan;  

b.   recommend policies dealing with compensation, position evaluations,
     and personnel engagements, transfers, and terminations, including the
     Company's annual incentive program;

c.   review and recommend major compensation plans;

d.   recommend the Company's management development programs and
     procedures;

e.   approve and recommend to the Board of Directors compensation for
     corporate officers;  and

f.   review the administration of the Company's Retirement Plan.

Members of the Compensation/Stock Option Committee are Julian Davidson,
chairman;  Bob Marbut;  and Elvis L. Mason.

              COMPENSATION/STOCK OPTION COMMITTEE REPORT
                                   
                   Executive Compensation Principles
                                   
The Company's Executive Compensation Program is based on guiding principles
designed to align executive compensation with Company values and
objectives, business strategy, management initiative, and business
financial performance.  In applying these principles, the
Compensation/Stock Option Committee (the "Committee") has established a
program to:

a.   attract and retain key executives critical to the long-term success
     of the Company and each of its business groups;

b.   reward executives for long-term strategic management and enhancement
     of stockholder values;

c.   integrate compensation programs with both the Company's annual and
     long-term strategic planning and measuring processes; and

d.   support a performance-oriented environment that rewards performance
     not only with respect to Company goals but also Company performance
     as compared to that of industry performance levels.

                    Executive Compensation Program
                                   
The total compensation program consists of both cash and equity-based
compensation.  The annual compensation consists of a base salary and an
annual incentive.  The Committee determines the level of salary for key
executive officers and a salary range for other executive officers.  Actual
salary changes are based upon performance and upon national industry salary
surveys in related industries, depending on the areas in which the
particular executive is employed, and supplemented by other surveys which
are used to enhance the analysis.  These surveys covered essentially the
same companies that are included in the table comparing the cumulative
total returns of the Company, set forth below.   The salary levels are
targeted to the median of such surveys, with variations based upon the
experience of each officer and the complexity of his/her particular
responsibilities.  In considering the salary increases from 1996 to 1997, 
the Committee also evaluated each executive's performance in several areas,
including increases in sales and revenue from the preceding year, increases
in profits in the executive's area of responsibility, and the success of
his/her budgetary controls.  No increases were required, or given, pursuant
to the terms of any employment agreements.  

                    Incentive Compensation Program
                                   
Effective in December 1991, the Company adopted a performance incentive
plan under which executive officers and other high-level employees may
receive compensation based on the achievement of individual and Company
objectives.  Eligible participants include officers and other key employees
of the Company who are in a position to make substantial contributions to
the management, growth, and success of the Company. Payment of an award is
contingent upon the achievement of specified levels of earnings, bookings,
revenue, and cash generation of the Company or the employee's unit
("performance goals") each year based upon the annual operating plan of the
Company.  A smaller portion of each person's incentive payment is based on
individual and organizational goals such as increases in efficiency of the
executive's area of responsibility, adherence to budgetary plans, and
implementation of new operating procedures and programs.  At the close of
each fiscal year, the performance of the operating unit in which the
employee participates is reviewed against the performance goals, division
objectives are evaluated, and awards are issued.  In the event the
performance goals are not achieved, the awards are reduced or eliminated
entirely.  If performance goals are exceeded, the amount of an award may
be increased. In reviewing the performance of the named executives for
1996, the Committee determined each individual and Tracor exceeded their
respective goals for the year.   Executive officers as a group were awarded
payments totaling $1,749,151.19, and all employees as a group received
payments totaling $7,360,905.42 under this plan in 1996.

                              Stock Plan
                                   
The Company adopted, in December 1991, the Stock Plan for Employees of
Tracor, Inc. and its Subsidiaries (the "1991 Plan").  In April 1995, the
Company adopted the 1995 Stock Plan for Employees of Tracor, Inc. and its
Subsidiaries (the "1995 Plan" or, collectively, the "Stock Plans") pursuant
to which options to purchase common stock of the Company, stock
appreciation rights ("SARs") (rights, granted in tandem with an option (or
alone), to receive cash payments equal to any appreciation in value of the
shares subject to option from the date of the option grant to the date of
exercise in lieu of the exercise of an option), and/or shares of restricted
stock may be granted to officers and other key employees of the Company and
its subsidiaries.  The plans are administered by the Committee which has
authority to determine the individuals to whom and the terms pursuant to
which grants shall be made.  Per share option prices are not less than the
fair market value of the Company's common stock on the date of the option
grant, and the term of the options cannot exceed 10 years.  The two plans
are identical in all material respects, except that outside directors
participate in the 1995 Plan.

Under the Stock Plans, the Committee grants stock options, restricted
shares, and/or SARs based upon its review of surveys and publicly available
information relating to the amount and type of awards granted to executives
in the aerospace and defense industry, as well as its review of each
executive's performance, evaluated as described above.  Through the award
of options, the objective of aligning executive officers' long-range
interests with those of the shareholders are met by providing the executive
officers with the opportunity to build a meaningful stake in the Company.

                         Officer Compensation
                                   
The Compensation Committee of the Board of Directors met for the purpose
of evaluating the performance of the Company's CEO.  In accordance with the
Company's Executive Compensation Program, the Committee evaluated Mr.
Skaggs' performance for the year based on both objectively evaluated
quantitative criteria and on subjectively evaluated qualitative criteria. 
Mr. Skaggs' base salary and total compensation were also evaluated with
respect to similar positions in the industry using a number of compensation
surveys.  The goal of the Committee was to determine whether an increase
in his base salary was merited, and, if so, how much of an increase should
be recommended to the Board. The Committee additionally determined the
amount of incentive compensation and stock options to recommend that the
Board award to Mr. Skaggs.

At the beginning of each fiscal year, the Board of Directors establishes
quantitative and qualitative goals or "targets" for the CEO of the Company. 
Results are evaluated at the end of the fiscal year.

Quantitative Goals

For 1996, the Committee evaluated the results of three quantitative
criteria.  They were: 

	                      Target          Actual
                    (In Millions)	  (In Millions)  % of Target	
                    -------------   -------------  -----------
Earnings(1)            $ 88.8	  	    $  104.6           118%	
Net Cash Activity	       52.5            60.9           116%	
Bookings                940.2         1,112.5           118%	
________________

1.   Before interest, taxes, depreciation, and other deductions.

Qualitative Goals

In addition, the Committee subjectively evaluated the results of
qualitative criteria.  The qualitative criteria include:

    a.  Return on shareholders' equity;

    b.  Share price increase;

    c.  Shareholders' equity increase;

    d.  Achievement of strategic business goals;

    e.  The conduct of business operations;

    f.  Board communications; 

    g.  Equity restructuring to reduce warrants; and

    h.  Maintain outstanding corporate team

Base Salary and Annual Incentive Compensation

Based upon its review of Mr. Skaggs' overall 1996 performance for base
salary and annual incentive purposes, the Committee determined Mr. Skaggs
significantly exceeded both quantitative and qualitative target measures. 
The Committee also considered the Company's 1996 performance improvements
over 1995 in determining the base salary increase.  These improvements
included a 22% increase in sales, a 36% increase in earnings before
interest and taxes, a 31% increase in net income, a 12% increase in firm
backlog, and a 41% increase in total backlog.  As a result, the Committee
recommended that Mr. Skaggs should receive a base salary increase of 
approximately ten percent (10%) effective for the 1997 year.  

Mr. Skaggs' annual incentive compensation for 1996 was calculated using a
mathematical equation which took into account quantitative performance
results related to earnings, net cash, and bookings plus the achievement
of qualitative goals as evaluated by the Committee.  Using the mathematical
equation and the evaluated incentive results described above, Mr. Skaggs'
recommended annual incentive bonus is 83.13% of his 1996 base salary.

Stock Option Grants

The stock option grants made to Mr. Skaggs under the Company's Stock Plan
were determined using the criteria described under the Stock Plan
referenced previously.  Option grants received by Mr. Skaggs in fiscal year
1996 are noted under the Executive Compensation section showing the five
most highly compensated officers.

Compensation/Stock Option Committee
Dr. Julian Davidson, chairman
Bob Marbut
Elvis L. Mason

               Comparison of Cumulative Total Return1
                   Among the Nasdaq Market Index,
                Dow Jones Defense & Aerospace Index,
                           and Tracor, Inc.
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's common stock, based on the market price of the
common stock and assuming reinvestment of dividends, with the cumulative
total return of companies on the Nasdaq Market Index and the Dow Jones
Defense & Aerospace Index. 

<TABLE>

                             [GRAPH APPEARS HERE]
                 COMPARISON OF FIVE YEAR CUMULATIVE RETURN
Among Dow Jones Aerospace and Defense, Nasdaq Market Index, and Tracor, Inc.

<CAPTION>
                          DJ Aerospace &   Nasdaq Market        Tracor,
  Measurement Period          Defense          Index              Inc.
  ------------------      --------------   ---------------      -------                                                  
<S>                          <C>               <C>            <C>
    1st Quarter '92           100.00            100.00           100.00
    2nd Quarter '92            95.30             92.57           103.23
    3rd Quarter '92            90.83             92.15            83.76
    4th Quarter '92            94.94            101.03           125.33
    1st Quarter '93           103.61            110.72           166.36
    2nd Quarter '93           113.23            110.03           177.98
    3rd Quarter '93           121.61            116.88           287.22
    4th Quarter '93           127.97            123.14           378.23
    1st Quarter '94           140.81            126.40           419.29
    2nd Quarter '94           141.60            117.15           352.43
    3rd Quarter '94           146.19            119.20           349.76
    4th Quarter '94           148.84            121.86           479.42
    1st Quarter '95           160.25            128.00           526.66
    2nd Quarter '95           194.82            141.28           591.26
    3rd Quarter '95           222.32            166.23           729.96
    4th Quarter '95           243.11            170.81           699.72
    1st Quarter '96           275.53            176.17           706.47
    2nd Quarter '96           288.63            196.24           858.46
    3rd Quarter '96           306.39            189.15           849.45
    4th Quarter '96           329.92            208.51         1,005.75
</TABLE>
---------------                                                       
1.   Assumes $100.00 invested on January 1, 1992, in the Nasdaq
     Market Index, Dow Jones Defense & Aerospace Index, and Tracor, Inc.


Item 12.  Ownership of Management and Principal Stockholders

The following tables set forth as of March 17, 1997, certain information
known to the Company with respect to the beneficial ownership (as defined
in the rules of the Commission) of Tracor Common Stock by all directors,
the chief executive officer and the other executive officers named on the
summary compensation table, all directors and executive officers as a group
and any person who is known by the Company to be the beneficial owner of
more than five percent of the Tracor Common Stock.  The percentages are
calculated including shares which are subject to outstanding warrants and
options held by directors and officers.


<TABLE>
<CAPTION>
      Name and Address of           Number of      Percent(1)
      Beneficial Owner              Shares
      -------------------           ---------      ----------                    
<S>  <C>                          <C>             <C>                                
      Dr. Julian Davidson              6,000(2)          *
      1240 Deborah Drive, S.E.                                   
      Huntsville, AL   35801                                  
                                             
      Anthony Grillo                  16,000(3)          *
      358 Oxford Drive
      Short Hills, NJ   07078                                     

      Bob Marbut                      30,500(4)          *
      511 Argyle                                   
      San Antonio, TX   78209                                     

      Elvis L. Mason               1,416,871(5)         5.7%
      3716 Maplewood                                  
      Dallas, TX  75205                                  

      Lt. Gen. Thomas P. 
       Stafford (Retired)             10,000(6)          *
      Coral Harbor Club                                   
      Unit C-44                                   
      88181 Old Highway-MM88                           
      Islamorada, FL 33036                                    

      James B. Skaggs                287,849(7)         1.2%
      Tracor, Inc.                               
      6500 Tracor Lane                                  
      Austin, TX   78725-2000                                             

      Barry G. Campbell               32,583(8)          *
      16327 Bawtry Court                                 
      Bowie, MD   20715                                

      Robert K. Floyd                 68,911(9)          *
      Tracor, Inc.                               
      6500 Tracor Lane                                  
      Austin, TX   78725-2000                                             

      George R. Melton                63,400(10)         *
      Tracor, Inc.                               
      6500 Tracor Lane                                  
      Austin, TX   78725-2000                                             

      Dr. Terry A. Straeter          190,833(11)         *
      GDE Systems, Inc.                                   
      16550 West Bernardo Drive                                 
      San Diego, CA   92127                                   

      William E. Conway               18,046(12)         *
      The Carlyle Group                                   
      1001 Pennsylvania Avenue, NW
      Suite 220 South                                  
      Washington, DC  20004

      Gerald B. Unterman           2,038,474(13)        8.0%
      70 E. 55th Street
      New York, NY   10022                                   

      Edward C. Johnson            1,481,700(14)        6.0%
      82 Devonshire Street                                    
      Boston, MA   02109                                

      Warburg, Pincus              1,464,200            5.9%
       Counsellors, Inc.                           
      446 Lexington Avenue    
      New York, NY   10017                                   

      All directors and            2,454,616(15)        9.7%
       executive officers as a
       group, including those
       names above.                             
</TABLE>
                                             
1    	* = less than 1%.

2	    2,000 shares are held directly by Dr. Davidson;  
      4,000 shares are held pursuant to stock options, 
      none of which are currently exercisable.

3	    12,000 shares are held directly by Mr. Grillo;  
      4,000 shares are held pursuant to stock options, 
      none of which are currently exercisable.

4    	26,500 shares are held directly by Mr. Marbut;  
      4,000 shares are held pursuant to stock options, 
      none of which are currently exercisable.

5    	6,000 shares of common stock are held directly by Mr. Mason.  
      Mr. Mason is the president of E. L. Mason Corporation, 
      which is the general partner of MB Partners, Ltd. ("MB Partners"), 
      which is the general partner of the Mason Best Company, L.P. 
      ("Mason Best").  Mason Best directly owns 1,398,067 shares of 
      common stock.  Mr. Mason owns 50% of the general partner of Mason 
      Best, MB Partners; however, Mr. Mason holds 100% of the voting 
      rights in the general partner of Mason Best.  In addition, 
      Mr. Mason is the managing partner of Mason Best.  As a result, 
      Mr. Mason may be deemed to beneficially own 100% of the shares 
      held by Mason Best.  MB Partners directly owns 8,804 shares of 
      common stock, and Mr. Mason owns 100% of E.L. Mason 
      Corporation, which is the general partner of MB Partners, and 
      may be deemed to beneficially own 100% of the shares held by 
      MB Partners.  4,000 shares are held pursuant to stock options, 
      none of which are currently exercisable.

6    	6,000 shares are held directly by Lt. Gen. Stafford;  
      4,000 shares are held pursuant to stock options, 
      none of which are currently exercisable.

7	    250,520 shares are held pursuant to currently exercisable stock 
      options. In addition, 5,000 shares are held pursuant to Series 
      A Warrants which are convertible into common stock, and 32,329 
      shares are held directly.

8	    1,583 shares are held directly, and 31,000 shares are held 
      pursuant to currently exercisable stock options.

9    	3,411 shares are held directly, and 64,500 shares are held 
      pursuant to currently exercisable stock options. In addition, 
      1,000 shares are held pursuant to Series A Warrants which are
      convertible into common stock.

10   	9,800 shares are held directly, and 53,600 shares are pursuant
      to currently exercisable stock options.

11   	18,000 shares are owned directly by Dr. Straeter, and 160,333 
      shares are held by a family trust over which Dr. Straeter has 
      control.  In addition, 7,500 shares are held pursuant to 
      currently exercisable stock options, and 5,000 shares are 
      issuable upon exercise of Series A Warrants.

12   	14,046 shares are held directly, and 4,000 shares are held 
      pursuant to stock options, none of which are currently exercisable.

13   	GBU, Inc. is the sole general partner of Oak Tree Partners, L.P. 
      and GEM Convertible Securities Partners, L.P.  GBU beneficially 
      owns 1,177,599 shares of Tracor common stock (which are directly 
      owned by Oak Tree Partners, L.P.) and 152,500 Series A 
      Warrants (which are directly owned by GEM Convertible Securities 
      Partners, L.P.) to purchase Tracor common stock.  Mr. Unterman 
      is the president, majority shareholder, and a director of 
      GBU, Inc.  He is also the president, sole shareholder, and a 
      director of GEM Capital Management, Inc.  GEM Capital Management, 
      Inc. is a registered investment advisor whose accounts own 60,001 
      shares of Tracor common stock which Mr. Unterman may be deemed to 
      beneficially own.  Mr. Unterman is the trustee of a profit sharing 
      plan which owns 34,000 shares of Tracor common stock.  
      In addition, Mr. Unterman owns directly 100,000 shares of Tracor 
      common stock and 514,375 Series A Warrants.

     	With respect to the 1,177,599 shares owned by Oak Tree Partners, 
      L.P., GBU owns a 9.9% interest in that partnership and Gerald B. 
      Unterman owns 83% of GBU, Inc. Therefore, Mr. Unterman claims 
      beneficial ownership of only 97,740 of those shares.

     	With respect to the 152,500 shares which may be acquired upon 
      the exercise of the 152,500 Series A Warrants owned by GEM 
      Convertible Securities Partners, L.P., GBU, Inc. owns a 1% 
      interest in that partnership, and Mr. Unterman owns 83% of 
      GBU, Inc.  Therefore, Mr. Unterman claims beneficial ownership 
      of only 1,266 of those shares.

14   	Mr. Johnson is the chairman of FMR Corp. which beneficially 
      owns 1,481,700 shares of Tracor common stock.  Fidelity 
      Management and Research Company, a wholly owned subsidiary of 
      FMR Corp.,  is the beneficial owner of 1,396,700 shares of Tracor 
      common stock.  Mr. Johnson through his control of Fidelity 
      Management and Research Company has sole dispositive power over 
      1,396,700 shares.  Mr. Johnson and FMR Corp., through its control 
      of Fidelity Management Trust Company, each have sole dispositive 
      power over 85,000 and sole power to vote or to direct the voting 
      of 82,300 shares, and no power to vote or to direct the voting 
      of 2,700 shares of Tracor common stock.

15   	Includes shares subject to outstanding warrants and options held 
      by directors and officers.


Item 13.  Certain Relationships and Related Transactions.

On June 13, 1996, the Company consummated the acquisition (the "Westmark
Acquisition") of substantially all of the assets of Westmark Systems, Inc.
("Westmark"), which had the effect of simplifying the Company's capital
structure. The purchase consideration paid by Tracor to Westmark in the
Westmark Acquisition included 8,267,435 shares of Tracor common stock.
Shortly after its acquisition of the shares of Tracor common stock,
Westmark dissolved and distributed all of such shares to its shareholders
in a complete liquidation. The principal assets of Westmark acquired by
Tracor in the Westmark Acquisition were 978,458 shares of Class A Common
Stock of Tracor (the "Class A Common Stock"), a Series B Warrant to
purchase 5,249,428 shares of Tracor common stock (the "Series B Warrant"),
and a Series C Warrant to purchase 5,455,000 shares of Tracor common stock
(the "Series C Warrant" and, together with the Series B Warrant, the
"Tracor Warrants"). The shares of the Class A Common Stock and the Tracor
Warrants were cancelled and will not be reissued.

Elvis Mason, a director of the Company, through his ownership in Mason Best
Company, received an indirect benefit from this transaction.  See footnote
12 to Item 12. "Ownership of Management and Principal Shareholders."

Recent Developments.

On February 12, 1997, the Board of Directors of the Company adopted a
preferred share purchase rights plan (the "Rights Plan"), exercisable only
if a person or group acquires 20% or more of Tracor's common stock or
announces a tender offer which would result in ownership by a person or
group of 20% or more of Tracor's common stock. The Rights Plan is designed
to deter coercive or abusive takeovers, and ensure fair and equal treatment
of all shareholders in the event of any proposed takeover of the Company.
The Rights Plan may have an effect on the Change of Control provisions in
the Indenture, to the extent that the Rights Plan could make a Change of
Control less likely to occur.

PART IV

Item 14.       Exhibits, Financial Statement Schedules and Reports on Form
8-K.

(a)(1)   Financial Statements.  The following financial statements and
         supplementary data of Tracor are presented in a separate section of
         this Form 10-K.
 
         	Report of Independent Auditors.
	         Consolidated Income Statements.
	         Consolidated Balance Sheets.
	         Consolidated Statements of Shareholders' Equity.
	         Consolidated Statements of Cash Flows.
	         Notes to Consolidated Financial Statements.

(a)(2)   Financial Statement Schedules.  All schedules are omitted because
         the required information is included elsewhere in the financial
         statements or is otherwise inapplicable.

(a)(3)  Exhibits.

2.1     Agreement and Plan of GDE Acquisition, dated October 10,
1994, among the Company, Tracor Newco, Inc. ("GDE Acquisition
Sub"), The Carlyle Group, L.P. ("Carlyle") and GDE relating to
the merger of Tracor Newco, Inc. with and into GDE. Exhibit A to
8-K, File Number 0-20227, filed December 1, 1994, is incorporated
herein by reference. 

2.2     Amendment No. 1 to Agreement and Plan of GDE Acquisition,
dated as of October 31, 1994, among the Company, the GDE
Acquisition Sub, Carlyle and GDE. Exhibit 2.2 to Form S-1, File
Number 33-67562, filed February 17, 1995, is incorporated herein
by reference.

2.3     Amendment No. 2 to Agreement and Plan of GDE Acquisition,
dated as of November 17, 1994, among the Company, the GDE
Acquisition Sub, Carlyle and GDE. Exhibit 2.3 to Form S-1, File
Number 33-67562, filed February 17, 1995, is incorporated herein
by reference.

2.4     Agreement and Plan of Merger between Tracor, Inc. and
Cordant Holdings, Inc., dated as of September 26, 1996.  Exhibit
2.1 to Form 8-K, File Number 0-20227, filed September 26, 1996,
is incorporated herein by reference.

2.5     Agreement and Plan of Reorganization among Tracor, Inc.,
AEL Industries, Inc., and Tracor AEL, Inc., dated as of October
2, 1995, and amended as of January 10, 1996, is incorporated by
reference to Exhibit 2..1 in AEL Industries, Inc.'s Form 8-K
reports dated October 2, 1995 and January 10, 1996.

2.6     Acquisition Agreement dated March 9, 1996, by and among
Tracor, Inc. and Westmark Systems, Inc.  Exhibit 2.1 to Form 8-K,
File number 0-20227, filed March 22, 1996, is incorporated herein
by reference.

3.1     Restated Certificate of Incorporation, as amended
(incorporated by reference to the Company's Registration
Statement Number 333-03330 filed with the Securities and Exchange
Commission on April 10, 1996).

3.2     Bylaws of the Company, as amended and restated
(incorporated by reference to the Company's Registration
Statement Number 333-03330 filed with the Securities and Exchange
Commission on April 10, 1996).

4.1     Registration Rights Agreement, dated as of March 14, 1997,
among the Company, the Subsidiary Guarantors named therein and BT
Securities Corporation.  Filed herewith.

4.2     Indenture, dated as of March 14, 1997, among the Company
and U.S. Trust Company of Texas, N.A. relating to the 8 1/2%
Senior Subordinated Notes Due 2007.  Filed herewith.

4.3     Form of Exchange Notes (included in Exhibit 4.2).

4.4     Series A Indenture, dated as of November 17, 1994, among
the Company, each Subsidiary Guarantor, and U.S. Trust Company of
Texas, N.A., as Trustee, relating to the Series A Notes (the
"Series A Indenture").  Previously filed with the Commission as
an exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-89578) on February 17, 1995 and incorporated herein by
reference.

4.5     First Supplemental Indenture, dated as of April 11, 1995,
to the Series A Indenture. Previously filed with the Commission
as an exhibit to the Registrant's Registration Statement on Form
S-4/S-3 (No. 333-03330) on April 10, 1996 and incorporated herein
by reference.

4.6     Second Supplemental Indenture, dated as of February 2,
1996, to the Series A Indenture.  Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-4/S-3 (No. 333-03330) on April 10, 1996 and
incorporated herein by reference.

4.7     Third Supplemental Indenture, dated September 26, 1996, to
the Series A Indenture.  Filed herewith.

4.8     Fourth Supplemental Indenture, dated March 14, 1997, to
the Series A Indenture.  Filed herewith.

4.9     Specimen Series A Note.  Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-89578) on February 17, 1995 and
incorporated herein.

4.10    Indenture, dated as of August 15, 1993, among the Company,
each Subsidiary Guarantor, and U.S. Trust Company of Texas, N.A.,
as Trustee, relating to the Existing Notes (the "Existing Note
Indenture").  Previously filed with the Commission as an exhibit
to the Registrant's Registration Statement on Form S-1 (No. 33-
67562) on August 18, 1993 and incorporated herein by reference.

4.11    First Supplemental Indenture, dated as of November 17,
1994, to the Existing Note Indenture.  Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-89578) on February 17, 1995 and
incorporated herein by reference.

4.12    Second Supplemental Indenture, dated as of February 22,
1996, to the Existing Note Indenture.  Previously filed with the
Commission as an exhibit to the Registrant's Registration
Statement on Form S-4/S-3 (No. 333-03330) on April 10, 1996 and
incorporated herein by reference.

4.13    Third Supplemental Indenture, dated September 26, 1996, to
the Existing Note Indenture.  Filed herewith.

4.14    Fourth Supplemental Indenture, dated March 14, 1997, to
the Existing Note Indenture.  Filed herewith.

4.15    Credit Agreement among Tracor, the lending institutions
party to the Credit Agreement, Credit Lyonais, The First National
Bank of Chicago and Wells Fargo (Texas), National Association, as
Co-Agents and Bankers Trust Company, as Agent, dated as of March
14, 1997.  Filed herewith.

4.16    1995 Stock Plan for Employees of Tracor, Inc. and
Subsidiaries.  Previously filed with the Commission as an exhibit
to the Registrant's Registration Statement on Form S-8 (No.
33-93186) on June 2, 1995 and incorporated herein by reference.

4.17    Specimen Certificate representing Common Stock of Tracor,
Inc. Previously filed with the Commission as an exhibit to the
Registrant's Registration Statement on Form S-10 (No. 0-20227) on
July 17, 1992 and incorporated herein by reference.

10.1    Form of Employment Agreement.  Filed herewith.

10.2    Form of Employment Agreement and Executive Stock
Agreement, dated November 20, 1995 between GDE Systems and Dr.
Terry A. Straeter.  Filed herewith.

11.1    Statement regarding computation of income per share.

21.0    Subsidiaries of the Registrant.

23.0    Consent of Independent Auditors.

                          SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the registrant has duly 
caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

                               Tracor, Inc.
Date:	March 28, 1997

                          					By:	/s/ James B. Skaggs        
                                   ---------------------
                             						James B. Skaggs,
                             						President and
                             						Chief Executive Officer

                   			       		Tracor, Inc.
Date:	March 28, 1997


                          					By:	/s/ Robert K. Floyd         
                                   ---------------------
                             						Robert K. Floyd,
                             						Vice President,
                             						Chief Financial Officer,
                             						and Chief Accounting Officer


Pursuant to the requirements of the Securities Exchange Act 
of 1934, this report has been signed below by the following 
persons on behalf of the registrant and in the capacities and 
on the dates indicated.


Date: March 28, 1997
                           				By:	/s/ William E. Conway, Jr.          
                                   --------------------------
                              					William E. Conway, Jr., Director

Date: March 28, 1997
                           				By:	/s/ Julian Davidson     
                                   --------------------------
                              					Julian Davidson, Director

Date: March 28, 1997
                           				By:	/s/ Anthony Grillo                       
                                   --------------------------
                              					Anthony Grillo, Director

Date: March 28, 1997
                           				By:	/s/ Bob Marbut                           
                                   -------------------------
                              					Bob Marbut, Director

Date: March 28, 1997
                           				By:	/s/ Elvis L. Mason                      
                                   ------------------------
                              					Elvis L. Mason, Director

Date: March 28, 1997
                           				By:	/s/ James B. Skaggs             
                                   ------------------------
                              					James B. Skaggs, Director

Date: March 28, 1997
                           				By:	/s/ Thomas P. Stafford           
                                   ------------------------
                              					Lt. Gen. Thomas P. Stafford, Director