<PAGE>
 
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                ---------------
                                   FORM 10-K
               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                                ---------------
FOR FISCAL YEAR ENDED OCTOBER 31, 1996             COMMISSION FILE NUMBER 1-5407

                             WHITTAKER CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


               DELAWARE                                 95-4033076
    (STATE OR OTHER JURISDICTION OF                 (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                IDENTIFICATION NO.)

        1955 N. SURVEYOR AVENUE                            93063
        SIMI VALLEY, CALIFORNIA                         (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 526-5700

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



                                                  NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                      ON WHICH REGISTERED
          -------------------                      -------------------  
 Common Stock, par value $.01 per share          New York Stock Exchange
                                                 Pacific Stock Exchange

   Series A Participating Cumulative             New York Stock Exchange
    Preferred Stock Purchase Rights              Pacific Stock Exchange


          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      NONE
                                (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.  YES [X]    NO [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of the Securities Exchange Act of 1934) 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. [_]

     State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant: $131,520,142 as of December 31, 1996.

     Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 11,149,473 shares of
Common Stock as of December 31, 1996.

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<PAGE>
 
DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                                                                       WHERE    
                Document                                            INCORPORATED
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<S>                                                                 <C> 
Definitive Proxy Statement for the Annual Meeting of Stockholders      Part III 
  to be held April 4, 1997 to be filed pursuant to Section 14(a) 
  of the Securities Exchange Act of 1934 (the "Proxy Statement")
</TABLE>
<PAGE>
 
                                     PART I

ITEM 1.  BUSINESS.

GENERAL

   Whittaker Corporation ("Whittaker" or the "Company") was incorporated in
California in 1947 and became a Delaware corporation in 1986.  Whittaker
maintains its principal executive and administrative offices at 1955 N.
Surveyor Avenue, Simi Valley, California 93063 (telephone number 805-526-5700).

   The Company has been active during fiscal 1996 in the aerospace business,
including defense electronics, and in the data networking and communications
business.  The Company's Aerospace Group develops, manufactures and markets
proprietary fluid (pneumatic, hydraulic, and fuel) control valves and control
systems and fire and overheat detection products and systems for aircraft, land-
based gas turbines, and other industrial applications, and defense electronic
products and systems.  The Company's Communications division develops remote
access and other wide-area network ("WAN") and local-area network ("LAN")
products and systems for general business communications applications and
provides professional services for the integration of hospital data networks.
For the fiscal year ended October 31, 1996, the Company's total sales were
$221.9 million, of which 59% were generated by the Aerospace Group and 41% were
generated by the Communications division.  Set forth below is a description of
these two business areas.

AEROSPACE GROUP
---------------

   The business and operations which comprise the Aerospace group are conducted
by the Company's defense electronics and industrial products units.


PRODUCTS

   Principal applications and representative products of the Company's Aerospace
group include:

   Fluid and Pneumatic Controls. The Company designs and manufactures a broad
range of fluid control devices for both commercial and military aircraft.  The
products are designed to control pneumatic, hydraulic and fuel flows in aircraft
systems.  In commercial applications, they are used on virtually all Boeing,
McDonnell Douglas, and AirBus commercial aircraft, and virtually all other
aircraft and jet engines manufactured in the world, with the exception of those
manufactured in the former Communist countries.  In addition, commercial and
industrial applications include ground fueling devices for airports and valving
systems, heat exchangers, and fuel skids for land-based gas turbines, off-shore
oil platforms, and petrochemical complexes.  In military applications, the
products are used on military transports, bombers, helicopters, fighters and
landing craft.  Both commercial and military applications include aircraft
turbine engines built by General Electric, Rolls Royce and Pratt & Whitney.
Sales of fluid control products were $73.9 million in fiscal 1996, $59.5 million
in fiscal 1995 and $52.9 million in fiscal 1994.

   Fire and Overheat Detectors. The Company designs and manufactures continuous
length pneumatic fire and overheat detectors as well as optical flame and smoke
detectors and systems for commercial and military aircraft and gas turbine
engines.  This equipment is widely used on a broad spectrum of aircraft
manufactured by Boeing, AirBus, McDonnell Douglas, Northrop Grumman and many
small manufacturers, as well as on small naval vessels, helicopters, and
railcars.  The aircraft range from large commercial transports to small commuter
aircraft, private twin engine airplanes, helicopters, military fighters and
transport aircraft.  The fire and overheat detectors are used on aircraft
engines manufactured by General Electric, Pratt & Whitney and Rolls Royce.
Industrial applications of such products include complete fire protection
systems for vehicles, gas turbine powered pumping and electric power generation
applications, as well as large scale systems to protect oil platforms and
refineries.  Sales of fire and overheat detectors and systems were $21.8 million
in fiscal 1996, $21.8 million in fiscal 1995, and $10.5 million in fiscal 1994,
the year during which the Company acquired this business.

                                       1
<PAGE>
 
   Command, Control and Communications. The Company designs and manufactures
electronic systems for command, control and communications, including display
and analysis systems, digital data lines, signal data converters, tactical
simulation systems, and wide-band encrypted secure voice and data systems that
permit secure communications.  The Company also has developed modular software
that is designed to be portable to any real-time operating system.  A user-
friendly, window-based display and a unique table-driven architecture provide
easy interface between various equipment and facilitate the addition of new
equipment.  Sales of command, control and communications systems were $7.7
million in fiscal 1996, $18.9 million in fiscal 1995, and $24.5 million in
fiscal 1994.

   Radio Frequency/Survivability Systems. The Company designs radar
countermeasure systems and electronic combat systems that provide radar and
proximity fuse jamming using an internally developed radio frequency memory
unit.  Experience in technique development was used by the Company to invent a
proprietary monopulse radar countermeasures generator that is applicable to most
modern jamming systems.  Based on this technology, the Company is under contract
with the United States Army to develop enhancements to a Company-designed and
produced electronic protection system, the Shortstop Electronic Protection
System ("SEPS"), that prematurely detonates incoming artillery, mortar and other
proximity-fused weapons, significantly enhancing the survivability of personnel
and high value assets.  Other radar surveillance and tracking systems of the
Company, including replicas of enemy radar systems, are used in tactical
training, including the production of airborne pods that provide real time
simulations for air combat crew training.

   Other Electronics Products. The Company designs and manufactures high
reliability silicon dioxide insulated coaxial and multiple conductor cable
systems which permit broad-band data transmission and control function operation
in extreme environments.  Atmospheric monitoring systems are produced for timely
warning of emergency conditions.  Applications for these technologies include
signal transmission and control functions inside nuclear power plants and
reactors, power and control monitoring and electronic valve control at oil
refineries, extreme environmental condition cable applications near jet engines,
and critical connections in airborne electronic countermeasure systems.

PRODUCT DEVELOPMENT

   In 1996, the Company completed development of several products for the
industrial market.  The Company developed and produced its first gas turbine
fuel skid.  This device employs a number of valves, instruments and associated
plumbing which connect a gas turbine to its fuel supply and regulates the fuel
flow in response to an electronic fuel controller to control the speed and
output of the engine.  The Company also completed the development of a liquefied
natural gas fuel nozzle under a contract with DARPA, which will be used to
refuel automobiles and other vehicles which are powered by low polluting
liquefied natural gas.

   The Company also developed new products for the aircraft market.  The Company
completed the qualification and initial deliveries of the fire detection system
for the third generation Boeing 737.  The system utilizes a newly designed,
customer friendly electronic controller, lighter weight product, and uses an
improved detection system.  The Company also completed the development and
initial deliveries of the cargo compartment ventilation and heating valves for
the Boeing 777.  This was a rapid development resulting from a system
requirement change that surfaced during the initial operation of the aircraft in
service.

   The Aerospace group spent $2.5 million, $3.4 million and $2.7 million on
research and development activities in fiscal 1996, 1995 and 1994, respectively.

MARKETS AND CUSTOMERS

   Sales to commercial customers, including foreign customers, were the major
contributor to Aerospace sales and profit in 1996.  In past years, the principal
contributor to sales and profit for the Aerospace group had been the United
States Government and its prime contractors.  Sales directly or indirectly to
the United States Government, primarily under military procurement contracts,
continued to decrease as a percentage of Aerospace sales, dropping to 35% of
sales in 1996 compared to 41% of sales in 1995 and 49% in 1994.  Export sales to
customers outside the United States continued to increase, representing 25% of
Aerospace sales for 1996, compared to 23% in 1995 and 20% in 1994.

                                       2
<PAGE>
 
   The Company has been able to achieve increased sales of its aircraft fluid
and pneumatic control devices over the past three years despite relatively low
new aircraft build rates in 1994 and 1995.  Increased emphasis has been placed
on expanding sales from overhaul repairs, retrofits, upgrades and spare
components to end-users such as airlines, cargo carriers, maintenance stations,
military bases and government agencies.  New aircraft production is now rising,
which may continue to contribute to an improved business climate for these
Company products.  The Company has also positioned itself for continued growth
in the Aerospace segment by expanding its product offerings through acquisitions
and growth in related markets, including fire and overheat detection equipment
and industrial markets.  During fiscal 1996, the Company continued to market its
products to manufacturers of industrial, land-based gas turbines, resulting in
increased sales to industrial customers in 1996 compared to 1995.

   In certain geographic areas and for certain products, sales are often made
indirectly through independent representatives or distributors.

   Companies engaged in supplying military equipment to the United States
Government are subject to competition, changes in the continuing availability of
Congressional appropriations, changes in contract timing and scheduling,
complexity of designs and the potential for obsolescence, and other changes
which may result from world events.  Contracts with the United States Government
are subject to termination for the convenience of the Government if deemed in
its best interests.  Contracts which are terminated for convenience generally
provide for payments to a contractor for its costs and for fees or profits
related to work accomplished through the date of termination.


BACKLOG

   At October 31, 1996, Aerospace Group backlog totaled $60.6 million (compared
to $66.9 million at October 31, 1995), of which $6.3 million is not expected to
be filled within fiscal 1997.  Aerospace backlog includes no unfunded amounts
relating to government contracts.


COMPETITION

   The military and commercial industries in which the Aerospace Group operates
are generally highly competitive, with competition centering on price, technical
innovation, product performance and product support.  Competitors of the Company
in such markets may have substantially greater financial resources, research and
design capabilities, and manufacturing capacity.


COMMUNICATIONS DIVISION
-----------------------

   The business and operations of the Communications division are conducted by
Xyplex Networks, the combined organization of Whittaker Communications, Inc. and
of Xyplex, Inc., which was acquired in April 1996.  Xyplex Networks is a leading
provider of network access solutions for the enterprise edge market.  The
Company designs, develops and markets a comprehensive line of networking
products that allow its customers a migration path from their existing legacy
infrastructures to new and emerging data networking architectures.  In addition,
the Company offers high-performance Ethernet and Asynchronous Transfer Mode
(ATM) Local Area Network switching and hub products and provides a full range of
network design, consulting, integration, and support services for small
businesses and large enterprise-wide solutions.

   The local area network (LAN) market was born in the 1980's as mainframe
dominance was being seriously challenged by departmental minicomputers
supporting multiple users through terminals and personal computers.
Decentralized computing brought many advantages, but limitations on sharing
information and communicating quickly became evident.  LANs provided the
foundation for cooperative computing concepts, better resource sharing, and the
further dissemination of computing power throughout businesses, government
agencies and schools.

                                       3
<PAGE>
 
   In the 1990's, new applications such as digital imaging, client/server, and
multimedia have begun to tax the bandwidth of early LAN technologies such as
Ethernet and Token Ring.  The emergence of new technologies such as 100 megabit
per second (Mbps) Fast Ethernet connectivity from the server to the desktop and
ATM are critical in order to keep up with the demands of emerging applications.
In addition, the recent rapid expansion of the Internet as well as e-mail,
multimedia servers, fax, groupware, and video conferencing have made wide area
networks (WANs) a commonplace phenomenon, with networking and computing brought
to the masses.

   Looking forward, the development of the telecommunications infrastructure,
deregulation under the Telecommunications Act of 1996, and the arrival of new
technologies can enable high speed services to be brought to the home and
business cost effectively.  The xDSL (Digital Subscriber Line), V.34 (analog
modem services), ATM, ISDN, and frame relay markets coupled with remote access
software and switching have the capabilities for high volume deployment by
businesses, carriers, alternative carriers and Internet Service Providers
(ISPs).  There is potential for developments in the areas of wide area
networking, the enterprise edge, and the Internet edge.  The enterprise edge is
the point in the network where the corporate network connects to the Internet
(via an ISP or telecommunications carrier).


              [GRAPHIC DESCRIPTION OF THE ENTERPRISE EDGE MARKET]


PRODUCTS AND SERVICES

   Xyplex Networks is a leading provider of network access solutions for the
enterprise edge market.  Xyplex currently sells products that meet the needs of
both the corporate "edge" and the Internet service provider "edge" and is well
positioned to take a leadership role at this point in the network.  The Company
also offers high-performance Ethernet and ATM switching and hub products.

   Principal network access and internetworking products of the Company's
Communications Division include:

   Network 9000(R) -- a multi-function 3-, 6- and 15-slot hub that enables the
integration of routing, switching, access serving and media concentration
technologies.  Primarily used at the central site of corporate networks and at
the edge of ISP networks, the Network 9000(R) supports any combination of
Ethernet, Fiber Distributed Data Interface (FDDI), Token Ring, Integrated
Service Digital Network (ISDN), ATM, local and remote bridge/router
connectivity.

   Network 3000 -- a family of branch office routers that provides a modular,
scaleable solution geared toward accessing the corporate network and the
Internet from remote offices.  Any combination of Ethernet, ISDN, Frame Relay
and asynchronous connections is available.  RouteRunner(TM) is a low-cost ISDN
router designed to meet the WAN needs of small office home offices and branch
offices such as doctor's offices or sales offices.

                                       4
<PAGE>
 
   MAXserver(R) -- a family of low-cost, scaleable remote access server
solutions that enable terminals, PCs, modems, printers and other asynchronous
devices to connect to the LAN and/or WAN.  Ideal for supporting workgroups, the
stackable MAXserver(R) offers 8-40 ports (and up to 280 ports in the modular
Network 9000(R) solution) to provide network access locally and remotely via
dial-up services.  A variety of protocols are supported including TCP/IP, IPX,
and Appletalk.  Security capabilities such as Kerberos, RADIUS, SecurID,
password and dial-back are also offered.

   ControlPoint(TM) -- Xyplex Networks' SNMP-based network management
application that enables network managers to remotely manage the Company's hubs,
routers and access servers via the industry standard SunNet Manager and HP
OpenView platforms, and FocalPoint -- a graphical users interface (GUI)
configuration tool for Xyplex Networks routers that helps network managers
configure internetworks through point and click operations.

   Principal LAN switching and hub products of the Company's Communications
division include:

   Network 9000(R) -- a hub equipped with a SwitchPlane(TM) fabric that provides
an internal bandwidth of up to 8.4 Gbps to support a large number of non-
blocking LAN switch ports.  Switching functions are provided by the 610 LAN
Switch Processor modules and 600 Series Switching I/O modules.  The product
supports Ethernet (10 or 100 Mbps) as well as wide area connections.

   Model 6701 and 6801 -- low-cost, high-performance standalone Ethernet
workgroup switches, designed for use as workgroup switches or small collapsed
backbones and providing 16-ports of 10 Mbps LAN switching with optional slots
for 100Base-TX, 100Base-FX and FDDI connectivity for server or backbone
connections.  These switches are manufactured by Plaintree Systems under an
Original Equipment Manufacturers' ("OEM") agreement.

   Enterprise Hub(TM) -- an ATM switching device, available in 5 and 14-slot
chassis, providing up to 155 Mbps switching for connections to other Enterprise
Hubs(TM), legacy LANs, server clusters and bandwidth-hungry workstations.  The
Enterprise Hub(TM) offers scaleable bandwidth, high reliability, low cost of
entry and an incremental and modular upgrade to ATM technology.  Any mix of hot-
swappable Ethernet, Token Ring, FDDI and ATM modules is offered.  The ATM
Enterprise Hub(TM) is able to integrate legacy LANs such as Token Ring, Ethernet
and FDDI, and migrate customers to the new high speed services of ATM.  This
product is particularly well-suited to the healthcare sector, a industry that
has experienced significant growth of information technology expenditures.
Sales of Enterprise Hubs(TM) were $30.3 million in fiscal 1996 and $23.4 million
in fiscal 1995, the year in which the Company acquired Whittaker Communications,
Inc.

   Xyplex Networks also offers a wide range of service and support programs to
help customers install and manage their networking equipment and a spectrum of
professional services focused on designing and maximizing the customers'
networking.  These services include installation, network integration,
consulting, project management and training and a full range of integration and
support with full turn-key networking solutions, including the integration of
third-party products and services with the Company's own products and services.

PRODUCT DEVELOPMENT

   The internetworking and remote access engineering development efforts are
focused on network access, network management products and enterprise and ISP
edge products.  Future products will continue to leverage the Company's
switching, routing, access server software and high performance transmission
(i.e. ATM) expertise.  In order to extend the breadth of the network access
product lines, Xyplex Networks will continue to develop partnerships with
leading edge suppliers of complementary technology.

   The next generation of products from Xyplex Networks are being designed to
recognize the requirement to increase speeds over the wide area network.  This
will involve leveraging the Company's strong remote access and routing software
and ATM background and building products which combine the two.  It will also
require the integration of digital modems and xDSL technologies in the future.

   The Communications division spent $17.5 million on research and development
activities in fiscal 1996 and $4.3 million in fiscal 1995, the first year of the
Company's Communications division.

                                       5
<PAGE>
 
MARKETS AND CUSTOMERS

   Xyplex Networks' customers are network managers from Fortune 5000 companies
from virtually all industries, including manufacturing, professional services,
finance, defense, petrochemicals, technology and telecommunications.  The
Company has a strong presence the healthcare sector, with equipment installed
more than 1000 major hospitals and healthcare provider organizations worldwide.
In addition, Xyplex Networks has a substantial installed base in municipal
governments and education (both K-12 and higher education) and has made
significant inroads among mid-size ISPs.

   The Company's customers are migrating from mainframe-centric networks to a
distributed computing network supporting multiple-remote sites via client-server
applications.  The networks they are building support a hybrid of technologies
ranging from Ethernet, FDDI, and ATM.

   Xyplex Networks sells to customers through direct and indirect channels,
including value-added resellers, distributors, systems integrators and OEMs.
The Company operates sales offices in the United Kingdom, South Africa, Germany,
France, Asia, and Latin America.  In fiscal 1996, approximately 34% of Xyplex
Networks' sales were derived from customers outside the United States.

MANUFACTURING AND SUPPLIERS

   Xyplex Networks' primary manufacturing, including purchasing, testing, final
assembly, and quality assurance, has been conducted at its Boxborough,
Massachusetts and Santa Clara, California facilities. Manufacturing is currently
being consolidated in the Boxborough facility. In addition, the Company plans to
close its Santa Clara facility in early 1997 and integrate those operations into
its Littleton facility. Xyplex procures 90% of its product content in the form
of products and subassemblies through subcontractors.

PATENTS, LICENSES AND RELATED MATTERS

   Xyplex Networks relies on U.S. and foreign patents, copyrights, trademarks
and trade secrets to establish and maintain proprietary rights in its technology
and products.  Although Xyplex Networks believes that its patents and
applications have value, it also believes that its competitive position depends
primarily on the innovative skills, technological expertise and management
abilities of its employees.

   Many of Xyplex's products are designed to include software or other
intellectual property licensed from third parties.  Xyplex Networks actively
seeks to license software that promotes the compatibility of its products with
industry standards, including standard protocols and architectures.  The loss of
rights in software or other intellectual property licensed from a third party
and designed into a particular product might disrupt or delay Xyplex's
distribution of that product.  Although it may be necessary in the future to
seek or renew licenses relating to various aspects of its products, Xyplex
Networks believes that based upon past experience and standard industry
practice, such licenses generally could be obtained on commercially reasonable
terms.

BACKLOG

   Xyplex Networks manufactures its products based upon its forecasted demand of
its customers worldwide and maintains some inventories of finished products in
advance of receiving orders from its customers.  Product orders are generally
placed by the customer on an as-needed basis and products are usually shipped
within two days to two weeks after receipt of an order.  Such orders generally
may be rescheduled or canceled by the customer without significant penalty.
Accordingly, Xyplex does not maintain a substantial backlog, and backlog as of
any particular date may not be indicative of actual sales in any succeeding
period.  At October 31, 1996, Xyplex's backlog totaled $9.8 million, all which
is expected to be filled in fiscal 1997.

                                       6
<PAGE>
 
COMPETITION

   Competition in the network systems business, formerly characterized by niche-
based competitors focused on a single industry segment, has shifted toward more
broad-based suppliers offering multiple product lines.  This has been achieved
through mergers and acquisitions, joint marketing agreements and internally
developed products.  This industry consolidation will likely continue,
intensifying competition among a small group of companies with broad product
offerings.

   The network access market has experienced significant growth over the past
year, and hardware-based solutions dominate this market today.  Principal
competitors include Cisco Systems, Novell, Shiva, Ascend, and Bay Networks.
Xyplex Networks is a significant player in this market segment.  The router
market's growth also continues strong despite mounting pressure from LAN
switching and the saturation of customer internetworks.  Customers are adopting
lower-priced routers as organizations expand their enterprise internetwork
beyond larger sites and out on the Internet.  Currently, the router market is
dominated by Cisco Systems, Bay Networks and 3Com with their high-end and mid-
range product segments.  Xyplex is a challenger in the mid-range and low-end
router segment.

   Xyplex Networks participates in the LAN switching market at the high-end
segment with the ATM Enterprise Hub(TM), which solves network bandwidth
limitations for an extended number of LANs located in a building or campus
backbone environment.  The Enterprise Hub(TM) was the first hub designed with
ATM from the ground up.  Xyplex shares the high-end segment with three major
players: Cisco, Fore Systems, and 3Com.  In the intelligent hub market, Xyplex's
Network 9000(R) continues to compete with Cabletron Systems, 3Com and Bay
Networks hubs.  Xyplex was the first vendor to deliver an integrated suite of
functions ranging from LAN concentration to access server through the Network
9000.

   Several of Xyplex Networks' competitors have greater name recognition, more
extensive engineering, manufacturing and marketing capabilities and greater
financial, technological and personnel resources than those available to Xyplex
Networks.  However, Xyplex has a broad product line well integrated and
supported by its ControlPoint(TM) network management platform.  The Company
believes that this product line, coupled with the Company's reputation for
customer-focused service, will allow Xyplex Networks to continue to compete.
There can be no assurance, however, that Xyplex Networks will be able to compete
successfully in the future with existing or new competitors.

   Xyplex(R), Network 9000(R) and MAXserver(R) are registered trademarks of
Xyplex Networks.  ControlPoint, RouteRunner(TM) and Enterprise Hub(TM) are
trademarks of Xyplex Networks.  All other trademarks are the property of their
respective companies.

DISCONTINUED OPERATIONS

   Since the beginning of the Company's divestiture program in 1989, the Company
has sold or spun off its Anjac/Doron, Duall/Wind, Chemical Coatings, Heico
Chemicals, Park Chemical, Ram Chemicals, Special Chemicals, Technibilt, Water
Management, Whittaker Metals, Winters Industries, Yardney Electric Corporation,
and BioWhittaker units.  The divestiture program has been substantially
completed.  Remaining to be divested is a 996-acre parcel of land formerly used,
until 1987, by the Company's former Bermite division, a discontinued technology
unit.  The land is located in the City of Santa Clarita, California,
approximately 35 miles from downtown Los Angeles.  In September 1995, the city
granted the entitlements necessary to develop this property as a mixed-use,
residential, commercial, and light industrial development.  In February 1996 the
city approved a Development Agreement which, among other things, extended the
ten-year life of the entitlements to over 20 years.  See Note 3 to Consolidated
Financial Statements in Part II, Item 8 of the Form 10-K for information about
the parcel remaining to be divested.

                                       7
<PAGE>
 
ACQUISITIONS

   On April 10, 1996, the Company acquired all of the stock of Xyplex, Inc. from
Raytheon Company for a purchase price of $67.5 million in cash, subject to
certain adjustments, and $50.0 million in the form of 1,974,333 newly issued
shares of the Company's common stock. The cash paid to Raytheon was obtained
under an amendment to the Company's credit facility entered into on April 10,
1996.  See Note 2 to the Consolidated Financial Statements in Part II, Item 8,
for additional information regarding acquisition.  The Company intends to
continue its strategy of growth by selective acquisitions that complement the
Company's existing businesses and product lines at such time as the Company's
financial condition makes such acquisitions feasible.

ENVIRONMENTAL

   Compliance with Federal, state and local provisions that have been enacted or
adopted regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment has had no material effect upon
the capital expenditures, earnings or competitive position of the Company, nor
is the Company estimating any material capital expenditures for environmental
control facilities in fiscal 1997 or 1998.

EMPLOYEE RELATIONS

   As of October 31, 1996, the Company employed approximately 1,150 persons in
its businesses, about 5% of whom were represented by labor organizations.  The
Company believes that it has generally good relations with its employees.

ITEM 2.  PROPERTIES.

   The Company's corporate headquarters are located in its facilities in Simi
Valley, California, which consist of approximately 276,000 square feet in three
buildings owned by the Company.  The Company owns a 30,000 square foot
production facility in Colorado.

   The Company also leases three facilities in California which consist of
approximately 305,000 square feet under leases that expire from March 1997 to
January 1999 and two facilities in Massachusetts which consist of approximately
146,000  square feet under leases that expire from 1997  to 1998.  The Company
has options to renew certain of these leases for various terms.  Approximately
72% of the square footage is used for manufacturing, engineering, and product
development, while the remainder is used for sales, marketing, and other general
and administrative support.

   The Company also leases and occupies sales and technical support officers
throughout the United States as well as in Europe, Mexico, Southeast Asia, and
South Africa.

   The Company believes that in general its plants and equipment are adequately
maintained, in good operating condition and adequate for the Company's present
needs.  The Company regularly upgrades and modernizes its facilities and
equipment and expands it facilities as necessary to meet customer requirements.

ITEM 3.  LEGAL PROCEEDINGS.

ENVIRONMENTAL MATTERS

   As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA").  CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with respect
to past treatment and disposal of hazardous substances.  The Company also is a
potentially responsible party in a number of actions brought under state laws
patterned after CERCLA.

   CERCLA and such other state laws provide for the imposition of clean-up
liability on anyone who arranges for the disposal or treatment of hazardous
substances at designated sites.  Accordingly, anyone who generates hazardous
substances may be a potentially responsible party if the treatment, storage, or
disposal facility that 

                                       8
<PAGE>
 
handles the substances becomes the subject of an environmental clean-up under
such laws. This is true even if the treatment, storage, or disposal facility has
the proper licenses and permits issued by appropriate governmental authorities
and treats, stores, or disposes of the hazardous substances in accordance with
the terms of such licenses and permits. The various state environmental agencies
and the U.S. Environmental Protection Agency take the position under these
environmental laws that all responsible parties are jointly and severally liable
for the costs of cleaning up sites subject to their jurisdiction and for any
environmental damages caused by the treatment or disposal of hazardous
substances at such sites.

   In nearly all of the environmental matters in which the Company is involved
as a potentially responsible party, the Company contributed a very small amount
(generally much less than 1%) of the total wastes treated or disposed of at
these various treatment or disposal facilities and participates as a so-called
"de minimis" party.  De minimis parties are generally allowed to settle their
potential liability for clean-up activities by agreeing with the state or
Federal environmental authorities and the other, larger responsible parties to
bear a share of the past and estimated future clean-up costs based on the volume
of the waste each de minimis party contributed, plus a "premium" or
"multiplier." These premiums or multipliers are designed to allow for the
uncertainty of estimates of future costs and the desirability of settling
liability early to avoid so-called transaction costs, i.e., the legal,
consulting, and other expenses, which tend to consume a significant amount of
the funds actually spent on the resolution of environmental matters.

   Where the Company does not qualify for such treatment, the Company's
potential liability on a particular environmental matter could be significant,
or the Company believes that the premium or multiplier for a de minimis
settlement is unreasonable, the Company may elect to participate in the
settlement or remediation activities as, or on the same basis as, a major party,
generally paying its allocated share of remediation expenses and transaction
costs as they are incurred, often over several years.

   In addition to the CERCLA and similar actions described above, the Company
also, from time to time, conducts or participates in remedial investigations and
clean-up activities at facilities currently or formerly occupied by its
operating units.  In the most significant of these sites, the Company has
"clean closed" 13 of 14 facilities regulated under the Resource Conservation
and Recovery Act at its former Bermite division in Santa Clarita, California.
The Company is currently working to close the 14th of such facilities and to
complete an investigation of the entire 996-acre property in anticipation of the
development of the property for a planned mixed-use residential and commercial
development.

   In 1996, the Company made cash expenditures of approximately $1.8 million on
environmental matters, excluding expenditures for clean-up activities at its
former Bermite division. This amount was charged to reserves for environmental
contingencies which were previously established as part of the Company's
divestiture and restructuring program for discontinued operations.


OTHER LEGAL MATTERS

   There are also various other claims and suits pending against the Company.
Based on an evaluation, which included consultation with counsel concerning the
legal and factual issues involved, the Company is of the opinion that such
claims and suits pending against the Company, including the environmental
matters discussed above, will not have a material adverse effect, singly or in
the aggregate, on the financial position of the Company.  See Note 10 of Notes
to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

                                       9
<PAGE>
 
ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT.

   The following table sets forth the names, ages and positions of the current
executive officers of the Registrant.

<TABLE> 
<CAPTION> 
             NAME                  AGE                    POSITIONS
             ----                  ---                    ---------
   <S>                             <C>     <C> 
   Joseph F. Alibrandi..........    68     President and Chief Executive Officer
   Richard B. Levin.............    46     Vice President and Chief Administrative Officer
   Lynne M. O. Brickner.........    44     Vice President and Secretary
   John K. Otto.................    42     Vice President and Treasurer
   Eva Jonutis..................    47     Controller
   Joseph J. Fernandes..........    62     President, Aerospace Group
   Michael C. Thurk.............    43     President, Xyplex, Inc. and Whittaker
                                           Communications, Inc.
</TABLE>

   Mr. Alibrandi joined Whittaker in July 1970 as President and Director and
served as Chief Executive Officer from November 1974 through January 1995. He
became Chairman of the Board in December 1985 and has continuously served in
such capacity since then. He was appointed President and Chief Executive Officer
on September 30, 1996.

   Mr. Levin joined Whittaker in May 1994, at which time he was appointed Vice
President, Chief Financial Officer and Secretary.  Mr. Levin resigned as Chief
Financial Officer in August 1996 and as Secretary in September 1996.  He was
appointed Chief Administrative Officer in October 1996.  From 1978 until joining
Whittaker, Mr. Levin was a practicing attorney with the law firm of Stutman,
Treister & Glatt.

   Ms. Brickner joined Whittaker in September 1995 as Assistant General Counsel
and Assistant Vice President. She was named Secretary and General Counsel in
September 1996 and as Vice President in October 1996. Prior to joining
Whittaker, Ms. Brickner was a practicing attorney with Kaye, Scholer, Fierman,
Hays & Handler.

   Mr. Otto joined Whittaker in 1983 as Whittaker's Manager of Banking and Cash.
He was named Assistant Treasurer in 1986 and Treasurer in 1988.  He was
appointed Vice President of the Company in December 1996.

   Ms. Jonutis joined Whittaker in 1974 as a cost accountant and served as its
Director of Financial Services from 1987 to 1993.  She rejoined Whittaker in
October 1996 and was appointed Controller in December 1996.

   Mr. Fernandes joined Whittaker in July 1992 as President of Whittaker 
Controls, Inc. He was named President of Whittaker's Aerospace Group on November
1, 1995.

   Mr. Thurk joined Whittaker in June 1996 as President of Xyplex, Inc. and of 
Whittaker Communications, Inc. Prior to joining Whittaker, he was Senior Vice 
President of General DataComm.

   The term of office of each executive officer (except for Mr. Fernandes and
Mr. Thurk, who serve at the discretion of the Board of Directors) will expire at
the next annual meeting of the Board of Directors, which is scheduled to be held
on April 4, 1997.

                                       10
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS.

PRINCIPAL MARKETS

   The Common Stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange (Symbol: WKR).  The Series A Participating Cumulative Preferred
Stock Purchase Rights are listed on the New York Stock Exchange and the Pacific
Stock Exchange, and, at the present time, trade with the Common Stock and are
not separately transferable.  The Series D Participating Convertible Preferred
Stock (the "Series D Preferred Stock") is not listed or traded on any
exchange.  See Note 6 of Notes to Consolidated Financial Statements in Part II,
Item 8 of this Form 10-K.

COMMON STOCKHOLDERS

   As of December 31, 1996 there were 5,240 registered holders of the Common
Stock.

COMMON STOCK PRICES

   The following table sets forth the high and low sales prices of the Common
Stock during Whittaker's two most recent fiscal years.

<TABLE>
<CAPTION>
                                             QUARTER ENDED
                 ---------------------------------------------------------------------
                   JANUARY 31         APRIL 30           JULY 31         OCTOBER 31
                 ---------------   ---------------   ---------------   ---------------
                  HIGH     LOW      HIGH     LOW      HIGH     LOW      HIGH     LOW
                 ------   ------   ------   ------   ------   ------   ------   ------
<S>              <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
1995..........   20 5/8   16 1/8   21 1/8   17 3/8   24 5/8   20       23 1/8   18
1996..........   24 3/4   16 7/8   26 3/8   22 1/4   23 1/8   13 5/8   14 3/4   13 1/8
</TABLE>


DIVIDENDS

   Dividends of $0.25 were declared on each share of Series D Preferred Stock,
for each quarter of fiscal 1995 and for the first two quarters of fiscal 1996.
Dividends of $1.25 were declared on each share of the $5.00 Cumulative
Convertible Preferred Stock ("$5.00 Preferred Stock") for the first two
quarters of fiscal 1995.  On April 28, 1995, all of the outstanding shares of
$5.00 Preferred Stock were redeemed or converted into Common Stock.  No
dividends have been declared on the Common Stock during the two most recent
fiscal years.

   Under the Company's current credit facility with a group of banks, there are
restrictions that materially limit the amount of cash dividends that may be paid
on the Common Stock.  The Company may pay cash dividends on the Common Stock if
the Company satisfies a minimum tangible net worth requirement and meets a cash
flow test measured at the end of the fiscal quarter immediately preceding the
payment of the dividend, and the cumulative amount of all cash dividends paid on
the Common Stock does not exceed $100,000 plus 20% of the net income of the
Company determined on a cumulative basis from May 1, 1996 through the end of the
fiscal quarter immediately preceding the payment of the dividend.  Furthermore,
under the terms of the Company's 7% convertible subordinated note to Hughes
Electronics Corporation, the Company may not pay or declare cash dividends or
redeem shares of the Company if the Company's tangible net worth is less than
$15 million.  As of April 30, 1996, the Company's tangible net worth was less
than $15 million and thus has not paid or declared dividends (including any
quarterly dividend for the Series D Preferred Stock) or redeemed shares since
that date.  Thus, dividends on the Series D Preferred stock have been accrued
since that date.  In the foreseeable future, in light of the Company's current
financial condition and its strategy of using earnings from operations to fund
growth internally, the Company's present intention is to refrain from paying
cash dividends on the Common Stock,  even if the Company is otherwise able to do
so under its current credit facility and its convertible subordinated note.  See
Note 5 and Note 6 of Notes to Consolidated Financial Statements in Part II, Item
8 of this Form 10-K for further description of the Company's credit facility and
of the convertible subordinated note.

                                       11
<PAGE>
 
SALES OF UNREGISTERED SECURITIES

   During the three most recent fiscal years, the Company has issued 1,974,333
unregistered shares of common stock to Raytheon on April 10, 1996.  Such shares
were issued as partial consideration for the Company's acquisition of Xyplex and
the holders of such shares are subject to certain limitations set forth in the
Stockholder's Agreement between Raytheon and the Company.  The shares were
issued in reliance upon Section 3(b) and 4(a) of the 1934 Act and Regulation D
promulgated thereunder.  A registration statement on Form S-3 covering the
shares was filed by the Company on May 15, 1996.

TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK

   CHASE MELLON SHAREHOLDER SERVICES
   85 Challenger Road
   Overpeck Centre
   Ridgefield Park, New Jersey 07660

RIGHTS AGENT FOR SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE
RIGHTS

   MELLON BANK N.A.
   Post Office Box 444
   Pittsburgh, Pennsylvania 15230

                                       12
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA.

                             WHITTAKER CORPORATION
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                               1996          1995          1994           1993          1992
                                            ---------      ---------     ---------     ---------      --------- 
<S>                                         <C>            <C>           <C>           <C>            <C>    
SUMMARY OF OPERATIONS

Sales...................................    $ 221,877      $ 159,479     $ 126,448     $ 115,386      $ 159,915
Income (loss) from continuing                                                                          
 operations, before accounting change...    $ (17,127)     $   7,865     $  10,061     $   7,698      $  13,377
                                                                                                       
Cumulative effect of accounting change..           --             --            --     $   1,512             --
Income (loss) from discontinued                    
 operations.............................           --             --            --     $  (1,954)     $   2,300 
Net income (loss).......................    $ (17,127)     $   7,865     $  10,061     $   7,256      $  15,677
Earnings (loss) per share                                                                              
   Continuing operations, before                                                                       
    accounting change...................    $   (1.70)     $     .82     $    1.06     $     .81      $    1.42
   Accounting change....................                          --            --           .16             --
   Discontinued operations..............                          --            --          (.21)           .24
   Net income (loss)....................    $   (1.70)     $     .82     $    1.06     $     .76      $    1.66
Average common and common equivalent                                                                   
 shares outstanding (in thousands)......       10,065          9,625         9,502         9,491          9,407
Dividends per common share..............           --             --            --            --             --
                                                                                                       
OTHER DATA                                                                                             
Working capital.........................    $ (65,731)     $  72,272     $  79,983     $  73,924      $  85,926
Total assets............................    $ 379,484      $ 250,959     $ 209,307     $ 201,869      $ 218,279
Long-term debt..........................    $     453      $  70,694     $  54,742     $  56,782      $  66,644
Stockholders' equity....................    $ 131,136      $ 102,424     $  93,950     $  83,748      $  75,200
Current ratio...........................       0.69:1         2.44:1        3.18:1        2.77:1         2.74:1
Capital additions.......................    $   4,800      $   6,400     $   2,500     $   1,300      $   2,200
Stockholders of record..................        5,200          5,500         5,700         7,100          8,500
</TABLE>

                                       13
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION. 

RESULTS OF OPERATIONS


 COMPARISON OF 1996 AND 1995

   Acquisition of Xyplex.  On April 10, 1996, the Company acquired all of the
capital stock of Xyplex, Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon
Company ("Raytheon").  Xyplex is a producer of high-speed internetworking
equipment, terminal servers and shared media products for business local area
networks.  Xyplex also provides remote access products that interconnect with
phone companies' wide area networks.  The purchase price was $67.5 million in
cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333
newly issued shares of the Company's common stock.  Other direct costs
associated with the acquisition were approximately $1.4 million.  The cash paid
to Raytheon was obtained from the Company's bank lending group pursuant to an
amendment to the Company's existing credit facility entered into on April 10,
1996.  The acquisition was accounted for as a purchase, and the balance sheet of
Xyplex was combined with the Company's balance sheet as of April 30, 1996.

   The acquisition of Xyplex resulted in the acquisition of intangible assets
valued at $39.2 million, which is being amortized on a straight-line basis over
periods ranging from five to fifteen years, goodwill of $62.8 million which is
being amortized on a straight-line basis over twenty years, and accrued
liabilities assumed of $14.9 million. Acquired in-process research and
development valued at $11.7 million was expensed at the acquisition date.

   Sales of Xyplex products and services contributed substantial revenues to the
Company beginning in the third quarter, as well as resulting in increased
operating expenses.  A significant portion of the increase in operating expenses
for 1996 over 1995 was due to the acquisition of Xyplex.

   Sales.  The Company's sales for fiscal 1996 of $221.9 million increased by
$62.4 million (39.1%) over sales of the prior fiscal year.  The increase was due
primarily to $61.0 million of additional sales generated by the Communications
segment, which did not exist prior to April 30, 1995.  Aerospace segment sales
for fiscal 1996 increased by $1.4 million (1.1%) over sales of the prior fiscal
year, due to increased sales of aircraft fluid and pneumatic controls devices
substantially offset by reduced sales of defense electronics products and
systems.

   The Company has been able to achieve increased sales of its aircraft fluid
and pneumatic control devices over the past three years despite relatively low
new aircraft build rates in 1994 and 1995.  Increased emphasis has been placed
on expanding sales from overhaul repairs, retrofits, upgrades and spare
components to end-users such as airlines, cargo carriers, maintenance stations,
military bases and government agencies.  New aircraft production is on the rise,
which may further contribute to an improved business climate for these Company
products.  The Company has also positioned itself for continued growth in the
Aerospace segment by expanding its product offerings through acquisitions and
growth in related markets, including fire and overheat detection equipment and
industrial markets.  During fiscal 1996, the Company continued its prior
practice of marketing its aircraft fluid control and other aerospace products to
manufacturers of industrial, land-based gas turbines, which are similar to jet
engines.

   A reduced United States defense budget contributed to both the decline in
sales to the U.S. government and delays in the receipt of new contract bookings
in the Aerospace segment.

   Gross margin.  The Company's gross margin for fiscal 1996 as a percentage of
sales was 41.5%, compared to 43.6% for the prior fiscal year.  The gross margin
for fiscal 1996 consists of Communications segment gross margin of $42.6 million
(46.5% of sales), and Aerospace segment gross margin of $48.6 million (37.3% of
sales).  Communications segment margin as a percentage of sales increased from
44.5% in 1995 to 46.5% in 1996 because of sales of higher margin products
related to the 1996 Xyplex acquisition partially offset by an increased
proportion of lower margin service and support revenues.  The decrease in
Aerospace segment gross margin percentage from 1995 (43.4% of sales) to 1996
(37.3% of sales) is due to decreased margins on defense electronics products and
the absence in 1996 of several items which contributed $5.0 million to gross
margin in 1995, offset by increased 

                                       14
<PAGE>
 
margins and improved manufacturing yields on commercial aircraft after market
and industrial product lines. Aerospace segment gross margin for fiscal 1995
included a contract claim settlement of $1.1 million, a credit of approximately
$2.1 million for income from the Company's defined benefit pension plan and a
$1.8 million recovery related to the Company's insurance claim for damage from
the 1994 Northridge, California earthquake. Without these items, Aerospace
segment gross margin would have been 40.4% of sales for 1995. Approximately $0.6
million of pension income was reclassified from SG&A expense to cost of sales in
the third quarter of 1995.

   Engineering and Development.  Engineering and development expenses for fiscal
1996 increased by $12.2 million from the prior fiscal year.  Engineering and
development expenses for 1996 consist of Communications segment expenses of
$17.5 million (19.1% of sales) and Aerospace segment expenses of $2.5 million
(1.9% of sales).  Communications segment engineering and development expenses
increased by $13.2 million from 1995 to 1996 due to the Xyplex acquisition in
April 1996 and a full year of expense for Whittaker Communications, Inc. ("WCI")
in 1996 compared with only six months of WCI expense following its acquisition
in April 1995.  To maintain its competitive market position in the
Communications segment, the Company expects to continue to invest a significant
amount of its resources in the development of new Communications products and
product enhancements.  Aerospace segment engineering and development expenses
decreased by $1.0 million from 1995 to 1996, but are expected to grow somewhat
in 1997.

   Selling, General and Administrative.  SG&A expenses for fiscal 1996 increased
by $39.0 million from the prior fiscal year, from 24.8% of sales in 1995 to
35.4% of sales in 1996, primarily due to the acquisition of Xyplex.
Communications segment SG&A expenses for fiscal 1996 were $45.6 million (49.8%
of sales), which included amortization expense of $6.9 million related to
goodwill and intangible assets.  Communications segment SG&A expenses for 1995
were $10.0 million (32.9% of sales), which included amortization expense of $1.0
million related to goodwill and intangible assets.

   Aerospace segment SG&A expenses were $31.4 million (24.1% of sales) for
fiscal 1996 compared with $30.4 million (23.5% of sales) for 1995.  In 1996,
Aerospace segment SG&A expenses as a percentage of sales increased due to sales
decreases in defense electronics products, credits, as described below, included
in 1995 SG&A expenses partially offset by sales increases in commercial aircraft
and industrial products which were more than proportional to expense increases
and streamlining actions in the defense electronics business unit.  In 1995,
Aerospace segment SG&A expenses reflected a credit of approximately $0.5 million
for income from the Company's defined benefit pension plan and a $1.3 million
recovery related to the Company's insurance claim for damage from the 1994
Northridge, California earthquake.  Without these items, Aerospace segment SG&A
expenses would have been 24.9% of sales for 1995.  Approximately $0.6 million of
pension income was reclassified from SG&A expense to cost of sales in the third
quarter of 1995.

   Restructuring Costs.  During 1996, the Company incurred certain costs for
restructuring, including severance payments of $2.3 million and move related
costs of $0.3 million.  The Communications segment incurred costs of $1.6
million related to streamlining Xyplex and integrating it with WCI.  The
Aerospace segment incurred costs of $1.0 million related to the streamlining of
the Company's defense electronics business unit and the move of its Safety
Systems Division from Concord, California to Simi Valley, California.  The
Aerospace segment is expected to incur additional restructuring expenses in the
first quarter of fiscal 1997 in connection with the move of its Safety Systems
Division.

   Interest Expense.  Interest expense increased to $11.0 million for fiscal
1996 from $5.9 million in 1995 primarily as a result of higher interest rates
and the incremental debt related to the acquisition of WCI and Xyplex.

   Income Taxes.  The Company's effective tax rate for fiscal 1996 was 34.7%,
compared to an effective tax rate of 39.6% for the prior fiscal year.  The
nondeductibility of goodwill (WCI in 1995) increases the effective tax rate for
periods with taxable income by increasing the tax provision with respect to
income before taxes.  The nondeductibility of goodwill (WCI and Xyplex in 1996)
in a period with taxable losses decreases the effective tax rate by decreasing
the tax benefit with respect to losses.

                                       15
<PAGE>
 
 COMPARISON OF 1995 TO 1994

   Sales for the Company for fiscal 1995 were $159.5 million, an increase of
$33.0 million (26.1%) over fiscal 1994.  Sales increased in 1995 largely as a
result of the Company's acquisitions of a data networking and communications
business in April 1995, which contributed $30.5 million to 1995 sales, and an
aerospace business in March of 1994.  In the aggregate, the acquired businesses
and product lines accounted for $52.3 million of 1995 sales, compared to $10.5
million in 1994, reflecting the implementation of the Company's previously
announced strategy of growth by selective acquisitions to complement the
Company's existing businesses and product lines.

   The acquisitions offset decreases in government sales and termination claims.
In the first quarter of 1994, $4.0 million of sales were recognized related to
the partial settlement of a termination claim against a defense electronics
products customer.  An additional, final settlement of $1.1 million was
recognized in the second quarter of 1995.

   Gross margin for the Company increased in fiscal 1995 to $69.5 million, or
43.6% of sales, from $53.2 million, or 42.0% of sales in fiscal 1994.  Gross
margin for the Communications segment was 44.5% in fiscal 1995.  Gross margin
for the Aerospace segment increased to 43.4% of sales from 42.0% of sales in
fiscal 1994.  Affecting the comparability of the years were three items which
had a net positive impact of $5.0 million on Aerospace gross margin in 1995,
compared to $4.1 million in 1994.  The first item was recognition in 1995 of
$1.8 million of gross margin related to the Company's insurance claim for
earthquake damage brought about by the January 17, 1994 Northridge, California
earthquake.  The second item was recognition in 1995 of $2.1 million of gross
margin related to the Company's defined benefit pension plan, while related
gross margin in 1994 was $0.6 million.  This actuarially determined pension
income is the result of an expected return on plan assets which exceeded the
interest cost on the projected benefit obligation.  The last item was a
termination claim settlement which contributed $1.1 million of gross margin in
1995, compared to $3.5 million in 1994.  When the effects of these items are
removed from both years, Aerospace segment gross margin as a percentage of sales
was 40.4% in 1995 compared to 40.1% in 1994.

   Engineering expenses for the Company as a percentage of sales increased to
4.9% in 1995 from 2.2% in 1994.  This increase was due to the inclusion of six
months of results of the Communications segment in 1995.  Engineering expenses
as a percentage of sales in the Aerospace segment increased to 2.7% in 1995,
from 2.2% in 1994, due to up-front costs related to its industrial business
product lines.

   Selling, general and administrative expenses for the Company as a percentage
of sales increased to 24.8% in 1995 from 24.1% in 1994.  In 1995, the Aerospace
segment received a $1.3 million earthquake recovery which was reflected as a
reduction in selling, general and administrative expenses.  Excluding the
effects of the termination claim included in 1994 and 1995 revenues, as well as
the earthquake recovery in 1995, the Aerospace segment's selling, general and
administrative expenses as a percentage of sales increased to 19.5% in 1995 from
19.3% in 1994.  The Communications segment of the business spends more on
salespeople and marketing programs, as a percentage of sales, than the Aerospace
segment.  Consequently, the inclusion of six months of Communications segment
results has increased the overall percentage for the Company.

   During the second quarter of 1995, concurrent with the acquisition of WCI, a
charge to earnings was recorded related to acquired in-process research and
development.  The effect was to reduce net income for the second quarter and the
year by $1.9 million, or $0.20 per share.  During the third quarter of 1995, a
charge to earnings was recorded to reflect restructuring actions at WCI, along
with expenses associated with combining a substantial portion of the Company's
Beaverton, Oregon operation into the WCI operation in Santa Clara, California.
The effect was to reduce net income for the third quarter and year by $0.2
million, or $0.02 per share.

   Interest expense increased to $5.9 million for fiscal 1995 from $4.0 million
in fiscal 1994 primarily as a result of higher interest rates and incremental
debt from the purchase of WCI.


 GENERAL

   In fiscal 1996, 1995, and 1994, approximately 23%, 34%, and 49%,
respectively, of the Company's sales were directly or indirectly attributable to
the United States Government.  All of these sales, with the exception of a minor
amount in 1995, relate to the Aerospace segment.  Companies engaged in supplying
military equipment to the United States Government are subject to competition,
changes in the continuing availability of Congressional 

                                       16
<PAGE>
 
appropriations, changes in contract timing and scheduling, complexity of designs
and the potential for obsolescence, and other changes which may result from
world events. A loss of Government business, although not anticipated by the
Company, could have a material adverse effect on the Company's operations.

   In August 1994, the Company was awarded a cost-reimbursement contract,
currently valued at $12.9 million, from the United States Army to develop three
new versions of the Company's previously developed battlefield electronic
countermeasures system, capable of detonating incoming artillery and mortar
rounds, designated the Shortstop Electronic Protection System ("SEPS").
During 1996 and 1995, the Company met performance requirements and developed
three full scale SEPS development models.  The contract did not contribute a
material amount of revenue to the Company in 1996 or 1995, but successful
development of the new SEPS versions slated for delivery starting late in fiscal
1997 could, subject to all of the risks and uncertainties that apply to military
procurement generally, as discussed above, result in subsequent SEPS production
contracts, which could then have a material effect on the Company's sales.
There can be no assurance, however, whether or when any such contracts would be
awarded.

FINANCIAL CONDITION

   On April 10, 1996, in conjunction with the purchase of Xyplex, the Company
amended and increased its bank credit facility and borrowed an additional $76.5
million under such facility.  At that time the amended credit agreement
consisted of an $85.0 million revolving credit facility with a five-year term
and an $85.0 million term loan repayable in quarterly installments over five
years.  The cash payment to Raytheon Company for the purchase of Xyplex on April
10, 1996 was $67.3 million.

   At October 31, 1996, the Company's debt totaled $161.9 million, which
consisted of $65.0 million of loans under the revolving credit facility, $81.0
million under the term loan, $15.0 million of convertible subordinated debt, and
$0.9 million of other debt.  In addition, there were $12.2 million of letters of
credit outstanding under the revolving credit facility.  The Company was not in
compliance with one of its financial ratio covenants under the credit agreement
at July 31, 1996 and with several of the financial ratio covenants at October
31, 1996.  The Company has obtained waivers of the defaults up to, but not
including February 28, 1997.  Consequently, bank debt in the amount of $136.0
million, which otherwise would have been classified as noncurrent, has been
classified as current.  The Company and its bank lending group are currently
discussing alternatives for reducing the Company's bank debt.  Some of these
alternative measures may result in financing that is more expensive than the
Company's current bank financing.  If a reduction of the bank debt cannot be
achieved, the bank lending group may elect to pursue its remedies, including
acceleration of  the total bank indebtedness.  There is no assurance that in
future periods, the Company will be in compliance with all of the financial
covenants contained in its amended credit agreement or that additional waivers
of the financial covenants will be obtained.  Furthermore, acceleration of the
debt under the bank credit agreement by the bank lending group upon the
Company's failure to comply with a financial covenant would be an event of
default under the $15 million 7% convertible subordinated note issued by the
Company to Hughes Electronics Corporation as partial consideration for its
purchase of WCI in 1995.  Because of this possible cross default, the entire $15
million principal balance of the 7% convertible subordinated note has also been
classified as current debt.

   The Company believes that its existing cash and available credit will be
adequate to meet future operating cash needs.  It is anticipated that the
Company will generate sufficient cash flow to service debt under its amended
credit facility.  The cash flow required to service the Company's debt will
reduce its liquidity, which may in turn reduce its ability to fund internal
growth, additional acquisitions, and capital improvements.

   Debt as a percent of total capitalization (stockholders' equity plus debt)
was 55.3% at October 31, 1996, compared with 42.8% at October 31, 1995.  The
increase in debt was primarily due to the acquisition of Xyplex.  The current
ratio at October 31, 1996 was 0.69, compared with 2.44 at October 31, 1995,
while working capital was ($65.7) million at October 31, 1996, compared with
$72.3 million at October 31, 1995.  The decreases in the current ratio and
working capital were due to the classification of bank debt and the convertible
subordinated note as current debt because of the Company's noncompliance with
one of the financial ratio covenants in its bank credit agreement at July 31,
1996 and, to a lesser extent, the acquisition of Xyplex.  Excluding the debt
reclassification, the current ratio would have been 2.36 and working capital
would have been $85.3 million at October 31, 1996.

                                       17
<PAGE>
 
   Cash flow provided by operations in 1996 was $0.4 million, compared to $20.8
million in 1995.  The $20.4 million decrease from 1995 to 1996 was due primarily
to a decrease in net income of $25.0 million, increases in deferred income tax
assets and decreases in operating liabilities, offset in part by higher
depreciation, amortization and an in-process research and development charge.

   Capital expenditures during 1996 were $4.8 million, compared to $6.4 million
for 1995.  At October 31, 1996, there were approximately $1.0 million of
approved capital expenditures outstanding for the replacement and upgrade of
existing plant and equipment at the Company's various facilities.  Funds for
these and other capital expenditures are expected to be provided from
operations.  Capital expenditures are subject to limitations by covenants
contained in the Company's credit agreement.  It is anticipated that the amounts
permitted by the covenants will be sufficient to allow the Company to continue
to maintain and upgrade existing facilities.

   In April of 1996, the Company received a federal income tax refund related to
1987 and 1988 tax returns of $5.2 million and related interest income of $5.2
million.  In July of 1996, the Company recognized a federal income tax refund
for research and development tax credits related to its 1988 tax year of $0.5
million and related interest income of $0.3 million.

   The Company's program for divestiture of its discontinued operations was
substantially complete by the end of fiscal 1992.  A 996-acre parcel of land,
which was formerly used by a discontinued technology unit, remains.  The land is
located in the city of Santa Clarita, California, approximately 35 miles from
downtown Los Angeles.  In September 1995, the City granted entitlements
necessary to develop this property as a mixed-use residential, commercial, and
light industrial development.  The initial term of the entitlements was ten
years.  In February 1996, the City approved a development agreement which, among
other things, extended the ten-year term of the entitlements to over 20 years.
The Company is evaluating the most advantageous means to realize the value of
this asset.  Cash expenditures related to the environmental remediation of this
property were $4.0 million during 1996.

   Subsequent Event

   In connection with the integration and streamlining efforts in the Company's 
Communications segment, the Company's Board of Directors on January 24, 1997, 
approved a plan that will result in a pre-tax charge currently estimated at $10 
million during the first quarter of 1997.  The charge will be taken to cover the
one-time costs of closing its Santa Clara, California facility and integrating 
those operations into its Littleton, Massachusetts facilities.  These one-time 
costs include severance payments associated with the consolidation and reduction
of the combined workforces, the writedown of assets to net realizable value and 
other costs related to this consolidation.  The Enterprise Hub product line will
be sold through Xyplex Networks sales channels and will continue to be supported
from the Littleton facilities.

   Statements made herein that are not based on historical fact are "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. The risk factors that could cause actual results to differ
from the forward looking statements include delay in developing new programs and
products, inability to qualify for new programs or to develop new products, loss
of existing business and inability to attract new business and customers,
reduced spending by commercial and defense customers and development of
competing products.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.

                                       18
<PAGE>
 
                         REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of Whittaker Corporation

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

   We conducted our audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Whittaker Corporation at October 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 October 31, 1996, in conformity with generally accepted accounting
principles.


                                     ERNST & YOUNG LLP
Los Angeles, California
December 16, 1996

                                       19
<PAGE>
 
                             WHITTAKER CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                              FOR THE YEARS ENDED OCTOBER 31,       
                                                              -------------------------------       
                                                             1996           1995           1994     
                                                          ---------      ---------      ---------   
                                                                   (DOLLARS IN THOUSANDS            
                                                               EXCEPT FOR PER SHARE AMOUNTS)        
<S>                                                       <C>            <C>            <C>         
Sales.................................................    $ 221,877      $ 159,479      $ 126,448
Costs and expenses
   Cost of sales......................................      129,890         89,974         73,286
   Engineering and development........................       19,964          7,741          2,720
   Selling, general and administrative................       78,562         39,608         30,429
   Acquired in-process research and development.......       11,700          3,250             --
   Restructuring costs................................        2,574            382             --
                                                          ---------      ---------      ---------
Operating income (loss)...............................      (20,813)        18,524         20,013

Interest expense......................................       11,018          5,897          3,967
Interest income.......................................       (6,299)          (568)          (568)
Other expense.........................................          684            169             82
                                                          ---------      ---------      ---------
Income (loss) before provision (benefit) for taxes....      (26,216)        13,026         16,532
Provision (benefit) for taxes.........................       (9,089)         5,161          6,471
Net income (loss).....................................    $ (17,127)     $   7,865      $  10,061
                                                          =========      =========      =========    
                                                                           
Earnings (loss) per share                                 $   (1.70)     $    0.82      $    1.06
                                                          =========      =========      =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       20
<PAGE>
 
                             WHITTAKER CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                                    ASSETS

<TABLE>
<CAPTION>
                                                                   AT OCTOBER 31,       
                                                              ------------------------- 
                                                                1996            1995    
                                                              ---------      ---------  
                                                                (DOLLARS IN THOUSANDS)  
<S>                                                           <C>            <C>        
CURRENT ASSETS                                                                          
Cash...................................................       $   1,566      $     161 
Receivables............................................          74,258         64,708 
Inventories............................................          46,087         38,975 
Prepaids and other current assets......................           2,319          2,053 
Income taxes recoverable...............................           5,443          1,452 
Deferred income taxes..................................          17,928         15,151 
                                                              ---------      --------- 
   Total Current Assets................................         147,601        122,500 
                                                              ---------      --------- 
                                                                                       
PROPERTY, PLANT AND EQUIPMENT                                                          
Land and land improvements.............................           5,770          5,770 
Buildings and improvements.............................          29,010         27,503 
Equipment..............................................          54,004         44,381 
Construction in progress...............................           1,003            405 
                                                              ---------      --------- 
                                                                 89,787         78,059 
Less accumulated depreciation and amortization.........         (46,421)       (36,641)
                                                              ---------      --------- 
                                                                 43,366         41,418 
                                                              ---------      --------- 
OTHER ASSETS                                                                           
Goodwill, net of amortization..........................          95,003         33,414 
Other intangible assets, net of amortization...........          45,422         10,585 
Notes and other noncurrent receivables.................           2,898          4,218 
Other noncurrent assets................................          14,065         11,709 
Assets held for sale or development....................          31,129         27,115 
                                                              ---------      --------- 
                                                                188,517         87,041 
                                                              ---------      --------- 
                                                              $ 379,484      $ 250,959 
                                                              =========      =========  
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       21
<PAGE>
 
                             WHITTAKER CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                       LIABILITIES & STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                   AT OCTOBER 31,
                                                              ------------------------
                                                                1996            1995
                                                              ----------     ---------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>
CURRENT LIABILITIES
Current maturities of long-term debt........................  $ 161,482      $   6,048
Accounts payable............................................     13,830         14,650
Accrued liabilities.........................................     38,020         29,530
                                                              ---------      ---------
   Total Current Liabilities................................    213,332         50,228
                                                              ---------      ---------
OTHER LIABILITIES
Long-term debt..............................................        453         70,694
Other noncurrent liabilities................................     12,019         11,340
Deferred income taxes.......................................     22,544         16,273
                                                              ---------      ---------
   Total Other Liabilities..................................     35,016         98,307
                                                              ---------      ---------
Commitments and contingencies (Notes 3, 9, and 10)

STOCKHOLDERS' EQUITY
Capital Stock:
   Preferred Stock, par value $1 per share, authorized
    5,000,000 shares --
     $5.00 Cumulative Convertible Preferred Stock,
      outstanding 0 shares at October 31, 1996 and
      October 31, 1995......................................         --             --

     Series D Participating Convertible Preferred
      Stock, outstanding 577.18 shares at October 31,
      1996 and 895.18 shares at October 31, 1995............          1              1

   Common Stock, authorized 40,000,000 shares --
   Par value, $.01 per share, outstanding 11,029,155
    shares at October 31, 1996 and 8,588,982 shares
    at October 31, 1995.....................................        110             86

Additional paid-in capital..................................     70,321         19,261
Retained earnings...........................................     60,704         83,076
                                                              ---------      ---------
   Total Stockholders' Equity...............................    131,136        102,424
                                                              ---------      ---------
                                                              $ 379,484      $ 250,959
                                                              =========      =========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       22
<PAGE>
 
                             WHITTAKER CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          FOR THE YEARS ENDED OCTOBER 31,       
                                                                     ---------------------------------------    
                                                                        1996           1995           1994      
                                                                     ---------      ---------      ---------    
                                                                               (DOLLARS IN THOUSANDS)           
<S>                                                                  <C>            <C>            <C>          
OPERATING ACTIVITIES                                                                                            
Net income (loss).............................................    $ (17,127)     $   7,865      $  10,061       
Adjustments to reconcile net income (loss) to net cash                                                          
provided (used) by operating activities:                                                                        
Depreciation and amortization.................................       18,639          8,065          5,658       
Net periodic pension income...................................         (205)        (2,720)          (782)      
Acquired in-process research and development..................       11,700          3,250             --       
Income taxes recoverable......................................       (3,991)        (1,386)         3,416       
Deferred taxes................................................       (7,183)         2,899          2,913       
Changes in operating assets and liabilities:                                                                    
Receivables...................................................       10,017          8,860          5,555       
Inventories and prepaid expenses..............................          582           (427)        (2,372)      
Accounts payable and other liabilities........................      (12,003)        (5,650)        (2,889)      
                                                                  ---------      ---------      ---------       
Net cash provided by operating activities.....................          429         20,756         21,560       
                                                                  ---------      ---------      ---------        

INVESTING ACTIVITIES
Businesses acquired..............................................   (68,740)       (31,013)       (12,992)
Purchase of property, plant and equipment........................    (4,828)        (6,376)        (2,545)
Collections of notes receivable..................................     1,380          1,147          2,553
Increase in assets held for sale or development..................    (4,014)        (1,626)          (851)
Contingent payments on purchased business........................    (1,839)            --             --
Other items, net.................................................     1,663         (1,631)        (1,748)
                                                                  ---------      ---------      ---------

Net cash used by investing activities............................   (76,378)       (39,499)       (15,583)
                                                                  ---------      ---------      ---------

FINANCING ACTIVITIES
Issuance of convertible subordinated debt........................        --         15,000             --
Issuance of other debt...........................................    84,800         56,960             --
Reduction of debt................................................        --        (55,500)        (2,862)
Reduction (increase) in deferred debt costs......................    (3,281)          (808)           119
Dividends paid...................................................        (1)            (4)           (12)
Purchases of common stock........................................    (6,472)        (1,094)            --
Proceeds from shares issued under stock option plans.............     2,308            843            115
                                                                  ---------      ---------      ---------

Net cash provided (used) by financing activities.................    77,354         15,397         (2,640)
                                                                  ---------      ---------      ---------

Net increase (decrease) in cash..................................     1,405         (3,346)         3,337
Cash at beginning of year........................................       161          3,507            170
                                                                  ---------      ---------      ---------

Cash at end of year.............................................. $   1,566      $     161      $   3,507
                                                                  =========      =========      =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
   Interest...................................................... $   9,792      $   5,079      $   3,780
                                                                  =========      =========      =========
   Income taxes.................................................. $     280      $   1,424      $   3,918
                                                                  =========      =========      =========  
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       23
<PAGE>
 
                             WHITTAKER CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                   FOR THE THREE YEARS ENDED OCTOBER 31, 1996
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                               
                                           PREFERRED STOCK      COMMON STOCK      ADDITIONAL              
                                          -----------------   ----------------      PAID-IN      RETAINED 
                                           $5.00    SERIESD   SHARES    AMOUNT      CAPITAL      EARNINGS      TOTAL
                                          -------   -------   ------    ------    ----------     --------     --------
<S>                                        <C>      <C>       <C>       <C>        <C>           <C>          <C>
BALANCE AT NOVEMBER 1, 1993.............   $ 2      $1         8,472      $ 85      $17,634       $66,026     $ 83,748
Net income..............................    --      --            --        --           --        10,061       10,061
Cash dividends--preferred stock.........    --      --            --        --           --           (12)         (12)
Shares issued under stock option plans..    --      --            14        --          115            --          115
Income tax benefits from stock options                                                                       
 exercised..............................    --      --            --        --           38            --           38
                                           ---      --        ------    ------      -------       -------     --------
                                                                                                             
BALANCE AT OCTOBER 31, 1994.............     2       1         8,486        85       17,787        76,075       93,950
Net income..............................    --      --            --        --           --         7,865        7,865
Cash dividends--preferred stock.........    --      --            --        --           --            (4)          (4)
Conversion of preferred stock...........    (2)     --             4        --           (7)           --           (9)
Shares issued under stock option plans..    --      --           154         1          842            --          843
Purchases of common stock...............    --      --           (55)       --         (225)         (860)      (1,085)
Income tax benefits from stock options                                                                       
 exercised..............................    --      --            --        --          864            --          864
                                           ---      --        ------    ------      -------       -------     --------
                                                                                                             
BALANCE AT OCTOBER 31, 1995.............    --       1         8,589        86       19,261        83,076      102,424
Net loss................................    --      --            --        --           --       (17,127)     (17,127)
Cash dividends--preferred stock.........    --      --            --        --           --            (1)          (1)
Conversion of preferred stock...........    --      --           104         1           --            (1)          --
Shares issued under stock option plans..    --      --           660         6        2,213            --        2,219
Shares reacquired.......................    --      --          (298)       (3)      (1,226)       (5,243)      (6,472)
Shares issued on acquisition of business    --      --         1,974        20       49,984           --        50,004
Income tax benefits from stock options                                                                       
 exercised..............................    --      --            --        --           89            --           89
                                           ---      --        ------    ------      -------       -------     --------
 
BALANCE AT OCTOBER 31, 1996.............   $--      $1        11,029      $110      $70,321       $60,704     $131,136
                                           ===      ==        ======    ======      =======       =======     ========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       24
<PAGE>
 
                            WHITTAKER CORPORATION 

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


   (A) Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles may require management to make certain estimates and
assumptions that could effect the amounts reported in the financial statements
and accompanying notes.  These estimates and assumptions include, among other
things, future costs to complete long term contracts, valuation of slow moving
or obsolete inventories, and amounts of estimated liabilities for contingent
losses and future costs of litigation.  Actual costs could differ from these
estimates.

   (B) Risks and Uncertainties: Certain risks and uncertainties related to the
Company's network systems business could have a material adverse effect on the
financial position of the Company.  These risks and uncertainties include the
Company's ability to anticipate future markets, develop products in advance of
its competition and finance the production and delivery of these products in a
timely manner.  In the event that circumstances indicate that the goodwill and
intangible assets related to the Company's network systems business may be
impaired, an evaluation of recoverability would be performed to determine if a
write-down of these assets is required.  

   (C) Inventories: Inventories are stated at the lower of cost or market.  Cost
has been determined principally on the first-in, first-out (FIFO) method.
Certain of the Company's inventories relate to long term programs and may
require more than one year to be realized.  Inventories consisted of the
following:

<TABLE>
<CAPTION>
                                                         OCTOBER 31,
                                                     -------------------
                                                       1996       1995
                                                     --------   --------
                                                       (IN THOUSANDS)
          <S>                                        <C>        <C>
          Parts and materials.....................   $22,482    $23,518
          Work in process.........................    14,162     11,500
          Finished goods..........................     8,349      3,332
          Costs relating to long-term contracts...     1,289      1,744
          Unliquidated progress billings..........      (195)    (1,119)
                                                     -------    -------
                                                     $46,087    $38,975
                                                     =======    =======
</TABLE>

   (D) Intangibles: Goodwill is amortized using the straight-line method over
periods ranging from 20 to 40 years.  Other intangible assets principally relate
to acquired intangibles and include patents, technology, and customer lists.
Amortization is recorded on a straight-line basis, generally over periods
ranging from 5 to 15 years.

   Accumulated amortization of goodwill and of other intangible assets at
October 31, 1996 amounted to $5,758,000 and $11,836,000, respectively, and at
October 31, 1995 amounted to $2,722,000 and $6,906,000, respectively.

   (E) Property and Depreciation: Property, plant and equipment is recorded at
cost.  Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of such assets, ranging from four to
thirty years.  Depreciation of leasehold improvements is computed on a straight-
line basis over the shorter of the estimated useful lives of the improvements or
the terms of the leases.  During 1996, 1995 and 1994 depreciation of $10.7
million, $6.1 million, and $4.7 million, respectively, was charged to expense.

   (F) Revenue Recognition: For the majority of its operations, the Company
recognizes revenues upon shipment of its product or upon completion of the
services it renders.  The Company accrues estimated warranty and installation
costs at the time of shipment.  The Company generally uses the percentage-of-
completion method for recognition of revenues and profits on significant long-
term contracts.

                                       25
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

   (G) Engineering and Development Costs: Company-sponsored engineering and
development costs are expensed as incurred.  Costs related to engineering and
development contracts are included in inventory and charged to cost of goods
sold upon recognition of related revenue.

   (H) Restructuring Costs: During 1996, the Company incurred certain costs for
restructuring, including severance payments of $2.3 million and relocation costs
of $0.3 million.  The Communications segment incurred costs of $1.6 million
related to streamlining Xyplex and integrating it with WCI.  The Aerospace
segment incurred costs of $1.0 million related to the streamlining of the
Company's defense electronics business unit and the move of its Safety Systems
Division from Concord, California to Simi Valley, California.  The Aerospace
segment is expected to incur additional restructuring expenses in the first
quarter of 1997 in connection with the move of its Safety Systems Division.

   (I) Earnings (Loss) Per Share: Earnings (loss) per share have been computed
based on the weighted average number of common and common equivalent shares
outstanding during the periods, after deducting from 1995 net income the
dividend requirements on the $5.00 Cumulative Convertible Preferred Stock.
Common stock equivalents include Series D Participating Convertible Preferred
Stock, on an if converted method and dilutive employee stock options, calculated
using the treasury stock method.  Common equivalent shares have been excluded
from the 1996 calculation as antidilutive.

   Fully diluted earnings (loss) per share include the additional potential
dilutive effect of employee stock options.  The inclusion of additional shares
assuming the conversion of the convertible subordinated debt would have been
antidilutive.  Fully diluted earnings (loss) per share are not presented because
the calculations result in dilution of less than 3%.

   (J) Reclassification: Certain previously reported amounts have been
reclassified to conform to the current period presentation.

   (K) New Accounting Standards: In March of 1995, the Financial Accounting
Standards Board issued a new standard, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," (SFAS 121).  The
Company will not be required to adopt this standard until the first quarter of
fiscal 1997.  The Company does not expect adoption of this standard to have a
material effect on its consolidated financial statements.

   In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the 1996
fiscal year.  Under SFAS No. 123, compensation expense for all stock-based
compensation plans would be recognized based on the fair value of the options at
the date of grant using an option pricing model.  As permitted under SFAS No.
123, the Company may either adopt the new pronouncement or follow the current
accounting methods as prescribed under APB No. 25. The Company plans to
continue to recognize compensation expense in accordance with APB No. 25.

   In October 1996, the Accounting Standards Executive Committee issued SOP 96-1
"Environmental Remediation Liabilities." The Company will not be required to
adopt this standard until fiscal 1998 and has not determined what, if any,
impact the adoption will have on the financial position of the Company.


NOTE 2.  ACQUISITIONS

   On April 10, 1996, the Company acquired all of the capital stock of Xyplex,
Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon").
Xyplex is a producer of high-speed internetworking equipment, terminal servers
and shared media products for business local area networks.  Xyplex also
provides remote access products that interconnect with phone companies' wide
area networks.  The purchase price was $67.5 million in cash, subject to certain
adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of
the Company's common stock.  Other direct costs associated with the acquisition
were approximately $1.4 million.  The cash paid to Raytheon was obtained from
the Company's bank lending group pursuant to an amendment to the Company's
existing credit facility entered into on April 10, 1996.

                                       26
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 2.  ACQUISITIONS--(CONTINUED)

   The Xyplex acquisition was accounted for as a purchase and the balance sheet
of Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The transaction resulted in the acquisition of intangible assets valued at $39.2
million, which is being amortized on a straight-line basis over periods ranging
from 5 to 15 years and goodwill of $62.8 million which is being amortized on a
straight-line basis over 20 years. Acquired in-process research and development
valued at $11.7 million was expensed at the acquisition date. The Company also
assumed accrued liabilities of $16.6 million at the acquisition date.

   On April 24, 1995, the Company acquired all of the stock of Hughes LAN
Systems, Inc., a subsidiary of Hughes Electronics Corporation.  The subsidiary
was renamed Whittaker Communications, Inc. ("WCI") and is a designer and
manufacturer of high speed switching and Asynchronous Transfer Mode ("ATM")
compatible local area network communication hubs and network management software
systems.  WCI was acquired for a purchase price of $16.0 million in cash,
subject to certain adjustments, and a $15.0 million 7% convertible subordinated
note.  The 7% convertible subordinated note is due on May 1, 2005, and is
convertible into the Company's common stock at a price of $24.25 per share.  The
agreement also provides for contingent deferred payments, not to exceed $25
million, over the years 1996 to 1999 based on future sales of WCI's hub products
and derivatives.

   The acquisition was accounted for as a purchase and accordingly, the purchase
price was allocated to the net assets acquired based upon their estimated fair
market values.  Goodwill amounted to $14.2 million, which is being amortized on
a straight-line basis over 20 years.  Other intangible assets which resulted
from the acquisition include developed technology with a value of $3.3 million
and a customer list with a value of $5.6 million which is being amortized on a
straight-line basis over periods ranging from 5 to 15 years.  Acquired in-
process research and development valued at $3.3 million was expensed at the
acquisition date.  The Company also assumed liabilities of $18.1 million at the
acquisition date.

   The accompanying consolidated financial statements of income reflect the
operating results of Xyplex and WCI since the effective dates of the
acquisitions. The pro forma results of operations for 1996 and 1995, assuming
the consummation of the acquisitions and issuance of 7% debt and common stock at
the beginning of each period, are summarized below (in thousands except per
share amounts):

<TABLE>
<CAPTION>
                                                      1996        1995   
                                                    ---------   ---------
             <S>                                    <C>         <C>      
             Net sales...........................   $276,869    $289,072 
             Net loss............................    (15,630)     (6,188)
             Loss per share......................      (1.43)      (0.58) 
</TABLE>

   These pro forma results have been prepared for comparative purposes only and
may not be indicative of the results of operations which actually would have
occurred had the combination been in effect at the beginning of the respective
periods or of future results of operations of the consolidated entities.

   The Company acquired another business for $13.0 million in cash during fiscal
1994.  The acquisition was accounted for under the purchase method, and the
results of operations for 1994 include sales of $10.5 million, related to that
business.  This acquisition resulted in goodwill of $5.6 million in 1994 which
is being amortized on a straight-line basis over 40 years.

                                       27
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

             
NOTE 3.  ASSETS HELD FOR SALE OR DEVELOPMENT
             
   Assets held for sale or development are carried at the lower of cost or net
realizable value.  These assets at October 31, 1996 and October 31, 1995,
include $29.1 million and $25.1 million, respectively, of land formerly used by
a discontinued technology unit.  The land is located in the City Santa Clarita,
California, approximately 35 miles from downtown Los Angeles.  In September
1995, the City granted the entitlements necessary to develop this property as a
mixed-use, residential commercial, and light industrial development.  In
February 1996, the City approved a development agreement which, among other
things, extends the life of the entitlements from 10 years after they were
granted to 20 years after the completion of all environmental remediation of the
property.

   The Company is currently exploring the real estate market and evaluating the
most advantageous means to realize the value of this property.  One of the
conditions to development of any portion of the property, however, is the
completion of all environmental remediation activities for the entire property.
The Company has completed the remedial investigation of the property and
although there can be no assurance, believes that the remediation activities
themselves can be accomplished within a reasonable period of time and at a
reasonable cost, subject, however, to delays that may result from compliance
with governmental review, hearing and approval procedures.  As a result,
realization of value from the property is not likely to occur until such time as
the remediation requirements are completed or are modified or an agreement can
be reached with appropriate governmental authorities on a firm schedule for
completion and approval of the remediation activities.

   The Company believes that current real estate market conditions are less
likely to result in realization of the highest value of the property from a cash
sale than either from an agreement with a developer to participate in the
development of the property's infrastructure for sale of parcels to merchant
builders or from the Company's infrastructure development of the property
itself.  There can be no assurance, however, that such a development agreement
will be reached or that the Company will have the financial and development
capabilities to develop the property itself.  The Company believes that the
undiscounted cash flows from the development of this property will be sufficient
to cover its carrying value as well as the costs to complete remediation
activities.


NOTE 4.  RECEIVABLES

Receivables consisted of the following:
<TABLE> 
<CAPTION> 
                                                      October 31,    
                                                   ------------------
                                                    1996       1995  
                                                   -------    -------
                                                     (IN THOUSANDS)  
        <S>                                        <C>        <C>    
        Trade accounts receivable--billed.......   $50,380    $37,861
        Trade accounts receivable--unbilled.....    21,993     25,213
        Other receivables.......................     4,249      2,810
        Allowance for doubtful accounts.........    (2,364)    (1,176)
                                                   -------    ------- 
        Total receivables.......................   $74,258    $64,708
                                                   =======    ======= 
</TABLE>

   Unbilled receivables represent recoverable costs and accrued profits, not
billable to customers at the balance sheet date, which are generally billable
upon product delivery and acceptance and/or completion of milestones.  All
amounts are reduced by appropriate progress billings.  Amounts representing
retainages under contracts are not material.  Claims subject to further
negotiations and which may not be collected within one year are not significant
at October 31, 1996.

                                       28
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 5.  LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                                  OCTOBER 31,
                                                                ---------------------------------------------
                                                                       1996                     1995
                                                                --------------------     --------------------
                                                                                (IN THOUSANDS)
                                                                            INTEREST                 INTEREST
                                                                 AMOUNT       RATE       AMOUNT        RATE
                                                                -------     --------     -------     --------
<S>                                                             <C>           <C>        <C>           <C>
Borrowings under revolving credit facility....................  $ 65,000      8.6%       $29,500       7.6%
Borrowings under term loan....................................    81,000      8.6%        31,250       7.5%
Other note, payable semiannually to 1999, with
 interest at the lesser of 10% or 65% of prime................       459      5.4%           659       5.7%

7% convertible subordinated note due May 1, 2005
 (Note 2).....................................................    15,000      7.0%        15,000       7.0%

Capitalized lease obligations payable in varying
 monthly or quarterly installments through 1999, with
 interest rates ranging to 9.67%  (Note 9)....................       476                    333        8.8%
                                                                --------                -------
                                                                $161,935                 76,742
Less current maturities.......................................   161,482                  6,048
                                                                --------                -------
                                                                $    453                $70,694
                                                                ========                =======
</TABLE>
 
   Maturities of long-term debt are as follows for the periods stated:

<TABLE> 
<CAPTION> 
               YEAR ENDING
               OCTOBER 31                  (IN THOUSANDS)
               -----------                 --------------
                 <S>                          <C> 
                  1996...................     $161,482
                  1997...................          345
                  1998...................           98
                  1999...................           10
                  2000...................           --
</TABLE>

   On January 24, 1995, the Company and a group of banks entered into a credit
agreement which consisted of a $65.0 million revolving credit facility with a
three-year term expiring in January 1998 and a $35.0 million term loan that was
payable in quarterly installments over five years. On April 10, 1996, the
Company and its existing agent bank entered into an amendment to the credit
agreement pursuant to which the amount of the credit facility was increased to
$170.0 million and all of the credit commitments under the agreement were
assigned to the agent bank.  At October 31, 1996, the credit facility consisted
of an $85.0 million revolving credit facility that expires in April 2001 and an
$81.0 million term loan payable in quarterly installments until 2001.  Interest
on loans outstanding under the credit agreement are based, at the Company's
option, on LIBOR or the agent bank's prime rate and the increment over LIBOR or
the prime rate is based on the levels of cash flow and debt of the Company.  At
October 31, 1996, the annual interest rate based on LIBOR was LIBOR plus 3.0%,
and the annual interest rate based on the prime rate was prime plus 1.0%.  The
Company is obligated to pay letter of credit fees which, at October 31, 1996,
ranged between 2.625% per annum and 3.125% per annum on the aggregate amount of
outstanding letters of credit, and commitment fees which, at October 31, 1996
were .50% per annum on the unused amount of the revolving credit facility.
Additional borrowings under the amended credit facility were used to fund the
acquisition of Xyplex, and will be used going forward to fund working capital
and other corporate requirements.

                                       29
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 5.  LONG-TERM DEBT--(CONTINUED)

   The Company's obligations under the credit agreement are secured by a pledge
of shares of stock of subsidiaries of the Company, accounts receivable,
inventory, equipment, intellectual property and other assets of the Company and
its subsidiaries. The agreement includes financial covenants with respect to
financial leverage, cash flow, and net worth. At July 31, 1996, the Company was
not in compliance with one of the financial ratio covenants, and at October 31,
1996, the Company was not in compliance with several of the financial ratio
covenants. The Company has obtained waivers of the defaults up to, but not
including February 28, 1997. The Company and its bank lending group are
currently discussing alternatives for reducing the Company's bank debt. Some of
these alternative measures may result in financing that is more expensive than
the Company's current bank financing. If a reduction in the bank debt cannot be
achieved, the bank lending group may elect to pursue its remedies, including
accelerating the total bank indebtedness.

   On April 24, 1995, the Company issued a $15 million 7.0% convertible
subordinated note to Hughes Electronics Corporation, with a scheduled maturity
on May 1, 2005.  The note is convertible at the option of the holder into common
stock of the Company at a conversion price of $24.25 per share, interest is
payable semiannually, and the note is redeemable, at the option of the Company,
at any time with no premium.  The note prohibits the Company from paying
dividends or redeeming its capital stock if its tangible net worth is less than
$15 million. Under the Company's 7% convertible subordinated note to Hughes
Electronics Company, the Company may not pay or declare cash dividends or redeem
shares of the Company if the Company's tangible net worth is less than $15
million.  As of April 30, 1996, the Company's tangible net worth was less than
$15 million and the Company has not paid or declared dividends (including the
quarterly dividend for the Series D Preferred Stock) or redeemed shares since
that date.  Thus, dividends on the Series D Preferred Shares have been accrued
since that date.

   There is no assurance that in future periods the Company will be in
compliance with all of the financial covenants contained in its amended credit
agreement, or, that additional waivers of the financial covenants will be
obtained.  Acceleration of the debt under the bank credit agreement by the bank
lending group upon the Company's failure to comply with a financial covenant
would be an event of default under the $15 million 7% convertible subordinated
note.  Because of this possible cross default, the entire $15 million principal
balance of the 7% convertible subordinated note has been classified as current
debt.

   In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in LIBOR, the Company in
June 1996 purchased an interest rate cap with an initial notional amount of
$42.5 million.  Under the terms of the interest rate cap, the Company will
receive a payment at the end of each quarterly period, as defined in the
interest rate cap, if three-month LIBOR at the beginning of the period exceeds
7.5%.  The amount of such payment will be the interest rate cap at the beginning
of such period at an interest rate equal to the difference between 7.5% and
LIBOR at the beginning of such period.  The interest rate cap expires in July
1999.  The cost of this interest rate cap is being amortized over its 37 month 
term.  At October 31, 1996, the unamortized cost was $242 thousand.

   At October 31, 1996, there were $12.2 million of letters of credit
outstanding under the revolving credit facility.

                                       30
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 6.  CAPITAL STOCK

   On April 28, 1995, all the outstanding shares of $5.00 Cumulative Convertible
Preferred Stock were either redeemed or converted into Common Stock.  Each share
of the $5.00 Cumulative Convertible Preferred Stock was voting, cumulative and
convertible into 1.854 shares of Common Stock plus $74.16 in cash, was
redeemable, at the Company's option, at $100 per share and was entitled to
preference of $100 per share upon voluntary liquidation and $50 per share upon
involuntary liquidation.  Each share of Series D Participating Convertible
Preferred Stock is nonvoting, cumulative and, in connection with a qualifying
transfer, convertible into 326.531 shares of Common Stock.  Holders of the
Series D Participating Convertible Preferred Stock, of which there is presently
only one, are entitled to a $1.00 per share liquidation preference and to the
greater of $.25 per share per quarter or any dividends paid in respect of the
number of shares of Common Stock underlying each share of Series D Participating
Convertible Preferred Stock.  The Board of Directors is authorized to issue
preferred stock in series, to fix dividend rates, conversion rights, voting
rights, rights and terms of redemption and liquidation preferences, and to
increase or decrease the number of shares of any series.

   Common Stock reserved for issuance at October 31, 1996 was as follows:

<TABLE>
<CAPTION>
                                                                                              SHARES IN
                                                                                              THOUSANDS
                                                                                              ---------
        <S>                                                                                   <C>     
        For conversion of Series D Participating Convertible Preferred Stock................      188
        For stock options...................................................................    1,797
        For conversion of 7% convertible subordinated note..................................      619
                                                                                                -----
                                                                                                2,604
                                                                                                =====
</TABLE>

   On December 16, 1994, the Board of Directors adopted, and on March 24, 1995,
the shareholders approved, an amendment to the Whittaker Corporation Long-Term
Stock Incentive Plan (1989) (the "1989 Plan"), that increased from 1,000,000
to 2,000,000 the number of shares of Common Stock of the Company which may be
made subject to stock options and other awards authorized by the 1989 Plan.

   The Company had reserved 1,796,683 shares of Common Stock at October 31, 1996
for future issuances under the 1989 Plan, as well as a prior stock option plan
for employees, and a non-employee director stock option plan.  Options to
purchase Common Stock generally are conditioned upon continued employment,
expire from five to ten years after the grant date, and become exercisable in
whole or in part either commencing with the second year or upon the attainment
of certain predetermined goals, or both.  The following information for the
three years ended October 31, 1996 relates to options granted from 1981 through
1996 under the plans.

                                       31
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 6.  CAPITAL STOCK--(CONTINUED)

<TABLE> 
<CAPTION> 
                                                   OPTIONS
                                                 OUTSTANDING     PRICE RANGE
                                                 -----------    --------------
                                                IN THOUSANDS
        <S>                                         <C>         <C>
        Balance, October 31, 1993.............       1,251       2.41 to 15.06
           Options granted....................         191      14.19 to 16.37
           Options canceled or expired........         (61)      6.32 to 16.37
           Options exercised..................         (14)      4.10 to 15.06
                                                    ------    
                                      
        Balance, October 31, 1994.............       1,367       2.41 to 16.37
           Options granted....................         544      18.00 to 22.50
           Options canceled or expired........         (35)     15.06 to 22.25
           Options exercised..................        (154)      3.82 to 18.63
                                                    ------    
                                      
        Balance, October 31, 1995.............       1,722       2.41 to 22.50
           Options granted....................       1,201      13.44 to 26.25
           Options canceled or expired........      (1,150)     13.44 to 26.25
           Options exercised..................        (660)      2.41 to 22.50
                                                    ------    
                                      
        Balance, October 31, 1996.............       1,113       4.10 to 26.25
                                                    ======    
</TABLE>

   At October 31, 1996, options for 380,040 shares were exercisable.

   The Company also had reserved 618,557 shares of Common Stock at October 31,
1996 for possible conversion of the 7% convertible subordinated note at the
option of the holders.

   The Company's Stockholder Rights Plan gives each holder of the Company's
Common Stock one right for each share of Common Stock held.  Each right entitles
the holder to purchase from the Company 1/100 of a share of a new series of the
Company's preferred stock (Series A Participating Cumulative Preferred Stock) at
an exercise price of $125 per 1/100 of a share.  The rights will become
exercisable and will detach from the Common Stock 10 days after any person or
group acquires 25% or more of the Company's Common Stock, or 10 business days
after any person or group commences a tender or exchange offer which, if
consummated, would result in that person or group owning at least 25% of the
Company's Common Stock.

   If any person acquires 25% or more of the Company's Common Stock, each right
will entitle the holder, other than the acquiring person, to purchase for the
exercise price Common Stock of the Company with a value of twice the exercise
price.  In addition, if following an acquisition by any person or group of 25%
or more of the Company's Common Stock, the Company is involved in a merger or
other business combination transaction, or sells more than 50% of its assets or
earning power to any person, each right will entitle the holder, other than the
acquiring person, to purchase for the exercise price Common Stock of the
acquiring person with a value of twice the exercise price.

   The Company may redeem the rights at $.01 per right at any time until the
tenth day after any person or group has acquired 25% or more of its Common
Stock.  The rights will expire November 29, 1998, unless earlier redeemed.  The
Stockholder Rights Plan may be supplemented or amended at the direction of the
Company without the approval of the holders of rights, except as otherwise set
forth in the Stockholder Rights Plan.  At October 31, 1996, 150,000 preferred
shares were reserved for these rights.

                                       32
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 7.  INCOME TAXES

   Income tax expense (benefit) relating to continuing operations consists of
the following:

<TABLE>
<CAPTION>
                                                    YEARS ENDED OCTOBER 31,    
                                                   1996        1995       1994  
                                                 --------    --------    ------
                                                        (IN THOUSANDS)         
     <S>                                         <C>         <C>         <C>   
     Current provision -                                                       
        U.S. Federal...........................  $(5,314)    $(1,154)    $1,247
        State..................................      266         527      1,100
                                                 -------     -------     ------
                                                  (5,048)       (627)     2,347
                                                                               
     Deferred provision -                                                      
        U.S. Federal...........................   (2,835)      5,634      4,124
        State..................................   (1,206)        154         --
                                                 -------     -------     ------
                                                  (4,041)      5,788      4,124
                                                 -------     -------     ------
     Provision (benefit) for taxes.............  $(9,089)    $ 5,161     $6,471
                                                 =======     =======     ====== 
</TABLE>

   Foreign income taxes were not material.

   The tax expense (benefit) is different than the amount computed by applying
the U.S. federal income tax rate to income (loss) before income taxes.  The
reasons for the differences are as follows:

<TABLE>
<CAPTION>
                                                      YEARS ENDED OCTOBER 31,
                                                   1996        1995        1994
                                                  ------      ------      ------
                                                  
     <S>                                           <C>         <C>         <C>
     U.S. federal statutory rate................  (34.0%)      34.2%       34.4%
     State taxes, net of U.S. federal income    
      tax benefit...............................   (2.4%)       3.4%        4.3%
     Goodwill amortization......................    3.5%        1.8%         --
     Other items................................   (1.8%)       0.2%        0.4%
                                                   ----        ----        ----
     Effective tax rate.........................  (34.7%)      39.6%       39.1%
                                                   ====        ====        ====
</TABLE> 

                                       33
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 7.  INCOME TAXES--(CONTINUED)

   Deferred income taxes reflect the net tax effects of temporary differences
between the reported amounts of assets and liabilities in the financial
statements and the amounts used for income tax purposes.  Significant components
of the Company's deferred tax assets and liabilities at October 31 are as
follows:

<TABLE>
<CAPTION>
                                             1996       1995       1994
                                           -------    --------   -------
                                                   (IN THOUSANDS)
<S>                                        <C>        <C>        <C>
Deferred tax assets:
   Receivables valuation................   $   858    $ 1,416    $ 1,395
   Inventory valuation..................     8,397      4,033      4,030
   Self-insurance reserves..............     1,384      1,737      2,142
   Pending refund from federal tax audit        --      5,160      4,031
   Reserves for discontinued operations.     1,163        848      1,348
   Other................................    12,553      7,160      7,028
                                           -------    -------    -------
Total before valuation allowance........    24,355     20,354     19,974

Valuation allowance.....................      (390)      (490)      (757)
                                           -------    -------    -------
Net deferred tax assets.................   $23,965    $19,864    $19,217
                                           =======    =======    =======
 
Deferred tax liabilities:
   Excess of tax over book depreciation.   $ 1,487    $ 3,450    $ 3,070
   Assets held for sale or development..     7,919      6,148      5,937
   Intangible assets....................    15,667      1,977         --
   Pension costs........................     1,904      1,822        780
   Other................................     2,745      7,589      8,005
                                           -------    -------    -------
                                           $29,722    $20,986    $17,792
                                           =======    =======    =======
</TABLE>

   In March 1996 the Company received a net tax refund of $5.2 million under an
agreement reached with the Internal Revenue Service closing the audit of the
1987 and 1988 income tax returns.

   The changes in the valuation allowance are the result of changes in temporary
differences which impact the deferred state income tax provision.


NOTE 8.  EMPLOYEE BENEFIT PLANS

   Prior to October 31, 1994, most of the Company's domestic employees were
covered by the Whittaker Corporation Employees' Pension Plan (the "Pension
Plan"), its noncontributory defined benefit pension plan.  The benefits are
based on years of service and the employee's highest compensation for five
consecutive years during the last ten years of credited service.

   Effective October 31, 1994, the Company amended the Pension Plan to
"freeze" benefits for all participants: adjustments for changes in credited
years of service ceased on October 31, 1994 and adjustments for changes in
remuneration ceased on December 31, 1994.  The effect of the amendment was to
reduce the Pension Plan's projected benefit obligation at October 31, 1994 by
$3,877,000.  The amount was fully absorbed by unrecognized net losses at October
31, 1994 related to the Pension Plan and accordingly, no curtailment gain was
recognized.  Vested service continues to accrue in accordance with applicable
Pension Plan provisions, and Pension Plan funding will continue until such time
that the Pension Plan is terminated and all benefit obligations are satisfied.
The Company funds the Pension Plan in accordance with the Employee Retirement
Income Security Act of 1974, as amended (ERISA).

                                       34
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 8.  EMPLOYEE BENEFIT PLANS--(CONTINUED)

   The following table sets forth the Pension Plan's funded status and amounts
recognized in the Company's consolidated balance sheet:

<TABLE>
<CAPTION>
                                                                             OCTOBER 31
                                                                       ----------------------
                                                                          1996        1995
                                                                       ----------   ---------
                                                                           (IN THOUSANDS)
<S>                                                                    <C>          <C>
Actuarial present value of benefit obligations:
   Accumulated benefit obligation, including vested benefits of
    $118,782 in 1996 and $123,543 in 1995............................. $(119,525)   $(124,457)
                                                                       =========    =========
   Projected benefit obligation for service rendered through          
    October 31, 1994..................................................  (119,525)    (124,457)
Plan assets at fair value, government, government agency and
 fixed income securities..............................................   119,892      126,278
                                                                       ---------    ---------
Plan assets in excess of projected benefit obligation.................       367        1,821
Items not yet recognized in earnings:
   Unrecognized net loss..............................................     4,446        2,999
   Unrecognized net transition asset at November 1, 1985 net of
   amortization.......................................................        --         (212)
                                                                       ---------    ---------
Net prepaid pension cost recorded in  the consolidated balance sheet.. $   4,813    $   4,608
                                                                       =========    =========
</TABLE>
                                          
   The weighted average discount rates used in determining the actuarial present
value of the projected benefit obligation were 7.5% and 7.0%, respectively, at
October 31, 1996 and 1995.  The expected long-term rate of return on plan assets
was 7.5% for the year ended October 31, 1996, and 8.75% for the years ended
October 31, 1995 and 1994.  As a result of the amendment described above, there
are no projected increases in future compensation levels.
                                            
   The Company also sponsors unfunded supplemental nonqualified executive and
director plans.  At October 31, 1996, the projected benefit obligation for those
plans totaled $5,516,000, of which $1,048,000 is subject to later amortization.
The remaining $4,468,000 is accrued as a liability in the consolidated balance
sheet.                                      
                                            
   Effective November 1, 1994, the Company amended its defined contribution
401(k) plan and renamed it the Whittaker Corporation Partnership Plan
("Partnership Plan").  The amendment provided for new investment alternatives,
added a profit sharing component to Company contributions to the Partnership
Plan, and allowed certain rollover contributions from other qualified plans.
The Partnership Plan contains a matched savings provision that permits pretax
employee contributions.  Participants can contribute from 1% to 12% of
compensation and receive a maximum matching employer contribution of 50% on up
to 6% of their annual compensation.         
                                             
   In addition to matching of employee contributions, beginning with fiscal
1995, the Company has recorded as expense amounts which may range from 0% to
7.5% of eligible employee compensation, based on the attainment of specified
financial goals by participating divisions of the Company.  The Partnership Plan
covers most of the Company's employees, excluding those employed by Xyplex and
WCI.  Xyplex and WCI sponsor defined contribution 401(k) plans covering a
majority of their domestic employees under which participants can make pretax
contributions of up to 15% of eligible compensation and receive a matching
contribution of 75% on up to 6% of their eligible compensation.

                                       35
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 8.  EMPLOYEE BENEFIT PLANS--(CONTINUED)

   Total pension and retirement expense was as follows:

<TABLE>
<CAPTION>
                                                YEARS ENDED OCTOBER 31,
                                           --------------------------------
                                             1996        1995        1994
                                           --------    --------    --------
                                                    (IN THOUSANDS)
<S>                                        <C>         <C>         <C>
Cost components of funded defined
 benefit plan:
   Service cost--benefits earned during                                     
    the period..........................   $    540    $    490    $  2,253 
   Interest cost on projected benefit                                       
    obligation..........................      8,500       8,658       8,723 
   Actual return on plan assets.........    (15,892)    (20,204)      5,086
   Net amortization and deferral........      6,647       8,336     (16,844)
                                           --------    --------    --------
Net periodic pension (income) for
 funded defined benefit plan............       (205)     (2,720)       (782)
Cost for unfunded defined benefit plans.        703         549         644
Cost for defined contribution plans.....      1,589       2,983         708
                                           --------    --------    --------
Total pension and retirement plan                                           
 expense................................   $  2,087    $    812    $    570 
                                           ========    ========    ========
</TABLE>


NOTE 9.  LEASED ASSETS AND LEASE COMMITMENTS

   Whittaker has various leases covering real property and equipment.

   Property, Plant and Equipment includes $500,000 at October 31, 1996 and
$183,000 at October 31, 1995 for leases that have been capitalized.  The
amortization of these assets is included in depreciation expense.

   Future minimum payments under capital leases and under noncancellable
operating leases, net of rentals to be received from existing noncancellable
operating subleases, as of October 31, 1996, were as follows:

<TABLE>
<CAPTION>
                                                        CAPITAL      OPERATING
        YEARS ENDED OCTOBER 31,                          LEASES       LEASES
        -----------------------                         -------      ---------
                                                           (IN THOUSANDS)
                 <S>                                    <C>           <C>
                 1997.................................   $  308       $2,792
                 1998.................................      154        2,285
                 1999.................................       41          743
                 2000.................................       10          175
                 2001.................................       --           77
                 2002 and subsequent..................       --           --
                                                         ------       ------
        Total commitments.............................      513       $6,072
                                                                      ======
        Amounts representing interest.................       37
                                                         ------
        Present value of net minimum lease payments...   $  476
                                                         ======
</TABLE> 

   Rental expense for operating leases, net of rental income from subleases, was
as follows:

<TABLE> 
<CAPTION> 
                  YEARS ENDED OCTOBER 31,                      (IN THOUSANDS)
                  -----------------------                      --------------
                  <S>                                              <C> 
                  1996...................................          $3,282
                  1995...................................           2,292
                  1994...................................           1,710
</TABLE> 

                                       36
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 10.  COMMITMENTS AND CONTINGENCIES

   In certain years, after evaluating the availability and cost of insurance,
the Company did not purchase insurance for certain risks, including workers'
compensation and product liability.  Consequently, the Company is without
insurance for various risks, including product liability for certain products it
manufactured.  The Company currently has workers' compensation insurance and
product liability insurance for products it currently manufactures.  The
Company's insurance carriers have taken the position that in certain cases the
Company is uninsured for environmental matters, a position that the Company
disputes in certain instances.

   As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA").  CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with respect
to the past treatment and disposal of hazardous substances.  The Company is also
a potentially responsible party in a number of other actions brought under state
laws patterned after CERCLA.  In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste.  In addition to the CERCLA and similar actions described
above, the Company also, from time to time, conducts or participates in remedial
investigations and cleanup activities at facilities currently or formerly
occupied by its operating units.  There are also various other claims and suits
pending against the Company.

   At October 31, 1996, the Company had provided for its aggregate liability
related to various claims, including uninsured risks and potential claims in
connection with the environmental matters noted above, excluding the
environmental remediation activities related to the property located in the City
of Santa Clarita, California. The amounts provided on the Company's books for
contingencies, including environmental matters, are recorded at gross amounts.
Because of the uncertainty with respect to the amount of probable insurance
recoveries, these potential insurance recoveries are not taken into account as a
reduction of those amounts provided unless an insurance carrier has agreed to
such coverage. The Company does not anticipate that these matters will have a
material adverse effect on the Company's financial position or on its ability to
meet its working capital and capital expenditure needs. Although the Company has
recorded estimated liabilities for contingent losses, including uninsured risks
and claims in connection with environmental matters, in accordance with
generally accepted accounting principles, the absence of or denial of various
insurance coverages and the filing of future environmental claims which are
unknown to the Company at this time represent a potential exposure for the
Company, and the net income of the Company in future periods could be adversely
affected if uninsured losses in excess of amounts recorded were to be incurred.

   In connection with the discontinuance of various businesses, the Company
remains liable for certain retained obligations and for certain future claims,
principally environmental and product liability.  The noncurrent portion of such
items is included in "Other Noncurrent Liabilities" in the consolidated balance
sheet.

   The Company periodically assesses the adequacy of its accruals for these and
other liabilities, as well as the carrying value of assets, related to former
operations and programs and makes adjustments as required.  During 1996, certain
of these adjustments were offset, in part, by the reversal of tax related
reserves arising from operations prior to 1990 which were determined to be
excess.

                                       37
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 11.  QUARTERLY FINANCIAL DATA (UNAUDITED)

   Summarized quarterly financial data for 1996 and 1995 follow (in millions of
dollars except for per share amounts):

<TABLE>
<CAPTION>
                                          FIRST       SECOND      THIRD       FOURTH   
                                         QUARTER     QUARTER     QUARTER     QUARTER       YEAR
                                         -------     -------     -------     -------     --------
        <S>                              <C>         <C>         <C>         <C>          <C>
        1996                                                                             
        Sales........................     $44.4       $ 47.6      $ 62.2      $ 67.7      $221.9
        Cost of sales................      24.9         27.5        36.8        40.7       129.9
        Net income (loss)............       1.9         (4.9)       (5.9)       (8.2)      (17.1)
        Earnings (loss) per share*...     $0.20       $(0.52)     $(0.54)     $(0.74)     $(1.70)
                                                                                         
        1995                                                                             
        Sales........................     $26.7       $ 31.7      $ 44.3      $ 56.8      $159.5
        Cost of sales................      16.0         19.1        23.1        31.8        90.0
        Net income...................       1.7          0.2         1.8         4.2         7.9
        Earnings per share...........     $0.18       $ 0.02      $ 0.18      $ 0.44      $ 0.82
</TABLE> 

        *  The sums of quarterly per share amounts do not equal the annual
           amounts reported since per share calculations are made independently
           for each quarter and the full year based upon respective average
           shares outstanding.


NOTE 12.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

   The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

   Long-term debt: The carrying amounts of the Company's borrowings approximate
their fair value.  The Company's bank credit facility is a variable rate
facility that reprices frequently.

   Notes receivable: The carrying amounts of the Company's notes receivable
approximate their fair value.


NOTE 13.  BUSINESS SEGMENTS

   The Company develops specialized aerospace and electronic technologies to
create products and customer solutions for aircraft, defense, communications and
industrial markets.  The Company operates in two business segments: Aerospace,
which designs, manufactures, and distributes a wide variety of fluid control
devices and fire detection systems, as well as defense electronics products and
systems, and Communications, which designs, develops, and markets a
comprehensive line of data networking products and services.  Prior to fiscal
year 1995, the Company's communications operations were not material enough to
comprise a separate business segment.

   Operating profit is total revenue less operating expenses.  General corporate
expenses have not been allocated to the business segments and are shown as a
separate expense element of operating profit to reconcile to consolidated
operating income or loss.  Identifiable assets are those assets used in the
Company's operations in each industry.  Corporate assets are principally cash,
notes receivable, deferred income taxes, and assets held for sale.

                                       38
<PAGE>
 
                            WHITTAKER CORPORATION 

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


NOTE 13.  BUSINESS SEGMENTS--(CONTINUED)

   Information about Whittaker's operations by business segment at October 31,
1996, 1995, and 1994 and for the years then ended follows (dollars in millions):

<TABLE>
<CAPTION>
                                                                    DEPRECIATION AND                     
                                     OPERATING       IDENTIFIABLE     AMORTIZATION       CAPITAL         
                          SALES     PROFIT (LOSS)      ASSETS           EXPENSE        EXPENDIRES       
                          ------    ------------     ------------   ----------------   ----------       
<S>                       <C>          <C>          <C>              <C>               <C>            
1996                                                                                                     
Aerospace..............   $130.4       $ 20.3          $133.9           $ 6.7             $2.0           
Communications.........     91.5        (30.7)          171.0            11.7              2.7           
Corporate..............       --        (10.4)           74.6             0.3              0.1           
                          ------       ------          ------           -----             ----           
Consolidated...........   $221.9       $(20.8)         $379.5           $18.7             $4.8           
                          ======       ======          ======           =====             ====           
                                                                                                         
1995                                                                                                     
Aerospace..............   $129.0       $ 29.2          $143.8           $ 5.8             $4.8           
Communications.........     30.5         (3.4)           46.9             2.1              0.7           
Corporate..............       --         (7.3)           60.3             0.2              0.9           
                          ------       ------          ------           -----             ----           
Consolidated...........   $159.5       $ 18.5          $251.0           $ 8.1             $6.4           
                          ======       ======          ======           =====             ====           
                                                                                                         
1994                                                                                                     
Aerospace..............   $126.4       $ 26.8          $153.5           $ 5.4             $2.5           
Corporate..............       --         (6.8)           55.8             0.3               --           
                          ------       ------          ------           -----             ----           
Consolidated...........   $126.4       $ 20.0          $209.3           $ 5.7             $2.5           
                          ======       ======          ======           =====             ====            
</TABLE>

   Communications operating profit for fiscal 1996 and 1995 reflects the
writeoff of $11.7 million and $3.3 million, respectively, of in-process research
and development cost, which was recorded as an expense at the acquisition date.

   In fiscal 1996, 1995, and 1994 approximately 23%, 34%, and 49%, respectively,
of Whittaker's sales were directly or indirectly to the United States
Government.  All of those sales, with the exception of a minor amount in 1995,
were attributable to the Aerospace segment.  In fiscal 1996, 1995, and 1994
approximately 29%, 27%, and 20%, respectively, of Whittaker's sales arose from
exports to customers outside the United States, primarily in Europe and the
Middle East.  Approximately 14% of the Company's accounts receivable are from
the U.S. Government, and the balance is primarily from commercial customers,
prime defense contractors with the U.S. Government, and foreign customers.

NOTE 14.  EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITOR (UNAUDITED)

      In connection with the integration and streamlining efforts in the
Company's Communications segment, the Company's Board of Directors on January
24, 1997, approved a plan that will result in a pre-tax charge currently
estimated at $10 million during the first quarter of 1997. The charge will be
taken to cover the one-time costs of closing its Santa Clara, California
facility and integrating those operations into its Littleton, Massachusetts
facilities. These one-time costs include severance payments associated with the
consolidation and reduction of the combined workforces, the writedown of assets
to net realizable value and other costs related to this consolidation. The
Enterprise Hub product line will be sold through Xyplex Networks sales channels
and will continue to be supported from the Littleton facilities.

ITEM 9.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

   Not applicable.

                                       39
<PAGE>
 
                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

   The information called for by Item 10 is incorporated by reference to the
information under the following captions in the Proxy Statement:

      CAPTION

      Election of Directors--Directors
      Compliance with Section 16(a) of the Securities Exchange Act

   Certain of the information called for by Item 10 with respect to executive
officers of the Registrant appears as Item 4A in Part I of this Report.


ITEM 11.  EXECUTIVE COMPENSATION.

   The information called for by Item 11 is incorporated by reference to the
information under the following caption in the Proxy Statement:

      CAPTION

      Election of Directors--Executive Compensation and Other Information


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

   The information called for by Item 12 is incorporated by reference to the
information under the following caption in the Proxy Statement:

      CAPTION

      Equity Securities and Principal Holders Thereof


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   The information called for by Item 13 is incorporated by reference to the
information under the following caption in the Proxy Statement:

      CAPTION

      Election of Directors--Directors

                                       40
<PAGE>
 
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

   The following documents are filed as part of this report:

<TABLE>
<CAPTION>
                                                                                                      PAGE
                                                                                                    REFERENCE
                                                                                                    ---------
                                                                                                    FORM 10-K
<S>                                                                                                    <C>
(A-1) FINANCIAL STATEMENTS:
Report of Independent Auditors....................................................................     19
Consolidated Statements of Income for the three years ended October 31, 1996......................     20
Consolidated Balance Sheets as of October 31, 1996 and 1995.......................................     21
Consolidated Statements of Cash Flows for the three years ended October 31, 1996..................     23
Consolidated Statements of Stockholders' Equity for the three years ended October 31, 1996........     24
Notes to Consolidated Financial Statements........................................................     25
</TABLE>


(A-2) FINANCIAL STATEMENT SCHEDULES:

   All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or the
Notes to Consolidated Financial Statements.

<TABLE> 
<CAPTION> 
(A-3) EXHIBITS:*
        <C>    <S> 
         3.1   Restated Certificate of Incorporation (Exhibit 3.1 to Form 10-K
               for fiscal year ended October 31, 1989), as amended on March 16,
               1990 (Exhibit 3.1 to Form 10-K for fiscal year ended October 31,
               1995).

         3.2   Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended
               October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2
               to Form 10-K for fiscal year ended October 31, 1994). and on
               December 16, 1996.

         4.1   Reference is made to Exhibit 3.1.

         4.2   Reference is made to Exhibit 3.2.

         4.3   Rights Agreement dated as of November 18, 1988 between Registrant
               and Manufacturers Hanover Trust Company (currently being
               performed by Mellon Bank N.A. as rights agent) concerning Series
               A Participating Cumulative Preferred Stock Purchase Rights
               (Exhibits 1 and 2 to Form 8-A filed on November 23, 1988), as
               amended as of June 28, 1989 (Exhibit 4.4 to Form 10-K for fiscal
               year ended October 31, 1989).

         4.4   Certificate of Designation of Series D Participating Convertible
               Preferred Stock (Exhibit 4.2 to Form S-4, Registration No. 33-
               29028), as amended on March 16, 1990 (Exhibit 4.4 to Form 10-K
               for fiscal year ended October 31, 1995).

         4.5   7% Convertible Subordinated Note dated April 24, 1995 (Exhibit
               10.1 to Form 8-K dated May 8, 1995).

         4.6   Registration Rights Agreement dated April 24, 1995 between
               Registrant and Hughes Electronics Corporation (Exhibit 10.1 to
               Form 8-K dated May 8, 1995). 

         4.7   Stockholder's Agreement dated April 10, 1996 between Registrant
               and Raytheon Company (Exhibit 4.1 to Form 8-K dated April 24,
               1996).

         4.8   Term Note dated April 10, 1996 by the Registrant in favor of
               NationsBank of Texas, N.A. (Exhibit 4.2 to Form 8-K dated April
               24, 1996).
</TABLE> 

                                       41
<PAGE>
 
<TABLE> 
        <C>    <S> 
         4.9   Revolving Note dated April 10, 1996 by the Registrant in favor of
               NationsBank of Texas, N.A. (Exhibit 4.3 to Form 8-K dated April
               24, 1996).

               (Other instruments defining the rights of holders of long-term
               debt are not filed because the total amount of securities
               authorized under any such instrument does not exceed 10% of the
               consolidated total assets of Registrant. Registrant hereby agrees
               to furnish a copy of any such instrument to the Commission upon
               request.)

        10.1   Amended and Restated 1977 Nonqualified Stock Option Plan (Exhibit
               10.5 to Form 10-K for fiscal year ended October 31, 1982).**

        10.2   Restated 1980 Nonqualified Stock Option Plan (Exhibit 10.7 to
               Form 10-K for fiscal year ended October 31, 1982).**

        10.3   Amended and Restated Whittaker Corporation 1992 Stock Option Plan
               for Non-Employee Directors.**

        10.4   1981 Incentive and Nonqualified Stock Option Plan, as amended
               January 22, 1982 (Exhibit 10.7 to Form 10-K for fiscal year ended
               October 31, 1981), and as amended June 26, 1987 (Exhibit 10.6 to
               Form 10-K for fiscal year ended October 31, 1987).**

        10.5   Directors' Deferred Compensation Plan dated February 1983 (Exhibit
               10.9 to Form 10-K for fiscal year ended October 31, 1984), as
               amended on May 18, 1990 (Exhibit 10.7 to Form 10-K for fiscal
               year ended October 31, 1990).**

        10.6   Restated Directors' Retirement Plan effective as of August 2,
               1985 as amended on January 24, 1991 (Exhibit 10.10 to Form 10-K
               for fiscal year ended October 31, 1990), as amended on December
               16, 1996.**

        10.7   Amended and Restated Whittaker Corporation Long-Term Stock
               Incentive Plan (1989).**

        10.8   Whittaker Corporation Supplemental Benefit Plan dated November
               23, 1988, as amended June 12, 1990 and as amended July 12,
               1991.**

        10.9   Whittaker Corporation Excess Benefit Plan dated November 23,
               1988, as amended June 21, 1990.**

        10.10  Whittaker Corporation Supplemental Disability Benefit Plan dated
               November 23, 1988.**

        10.11  Whittaker Corporation Supplemental Retirement and Disability
               Trust Agreement dated November 23, 1988 (Exhibit 10.13 to Form 10-
               K for fiscal year ended October 31, 1988).**

        10.12  Amended and Restated Whittaker Corporation Supplemental Executive
               Retirement Plan, dated as of January 1, 1996, as amended January
               24, 1997.**

        10.13  Amendment and Restatement of Whittaker Corporation Employees'
               Pension Plan dated December 22, 1994, as amended December 15,
               1995 (Exhibit 10.10 to Form 10-K for fiscal year ended October
               31, 1995), and as amended effective October 1, 1996.**

        10.14  Whittaker Corporation Partnership Plan (formerly the Whittaker
               Corporation Savings and Stock Investment Plan), as amended and
               restated effective November 1, 1994 (Exhibit 10.11 to Form 10-K
               for fiscal year ended October 31, 1995) and as amended June 21,
               1996 (Exhibit 10.2 to Form 10-Q dated September 13, 1996).**

        10.15  Amended and Restated Credit Agreement dated as of April 10, 1996
               among Registrant, NationsBank of Texas, N.A., as Agent, and
               certain other financial institutions as signatories thereto
               (Exhibit 10.2 to Form 8-K dated April 24, 1996).

        10.16  First Amendment and Waiver dated as of September 9, 1996 among
               Registrant, NationsBank of Texas, N.A., as Agent, and certain
               other financial institutions as signatories thereto (Exhibit 10.1
               to Form 10-Q dated September 13, 1996).
</TABLE> 

                                       42
<PAGE>
 
<TABLE> 
        <C>    <S> 
        10.17  Second Amendment and Waiver dated as of October 30, 1996 among
               Registrant, NationsBank of Texas, N.A., as Agent, and certain
               other financial institutions as signatories thereto.

        10.18  Third Amendment and Waiver dated as of December 17, 1996 among
               Registrant, NationsBank of Texas, N.A., as Agent, and certain
               other financial institutions as signatories thereto.

        10.19  Stock Purchase Agreement dated as of March 23, 1995 between
               Registrant and Hughes Aircraft Company, as amended on April 24,
               1995 (Exhibit 10.1 to Form 8-K dated May 8, 1995).

        10.20  Stock Purchase Agreement dated as of March 2, 1996, between
               Registrant and Raytheon Company (Exhibit 10.1 to Form 8-K dated
               April 24, 1996)

        11.    Calculation of earnings per share for the three years ended
               October 31, 1996.

        21.    Subsidiaries of the Registrant.

        23.    Consent of Independent Auditors.

        27.    Financial Data Schedule.
</TABLE>

*   Exhibits followed by a parenthetical reference are incorporated by reference
    to the document described therein. Upon written request to the Secretary of
    the Company, a copy of any exhibit referred to above will be furnished
    without charge.

**  Management contract or compensatory plan or arrangement required to be filed
    as an exhibit to this Form 10-K.

(B) REPORTS ON FORM 8-K:

   During the quarter ended October 31, 1996, the Company did not file any
reports on Form 8-K.

                                       43
<PAGE>
 
                                  SIGNATURES

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

                                        WHITTAKER CORPORATION



                                        By:   /s/  Lynne M. O. Brickner
                                              ----------------------------
                                              Lynne M. O. Brickner
                                              Vice President

                                        Date: January 24, 1997

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

<TABLE>
<CAPTION>
          SIGNATURE                     TITLE                  DATE
  ---------------------------   ----------------------   ----------------
<S>                             <C>                      <C> 
   /s/ Joseph F. Alibrandi      Director and Principal   January 24, 1997 
-----------------------------     Executive Officer
    (Joseph F. Alibrandi)                          
 
      /s/ Eva Jonutis                Principal           January 24, 1997 
-----------------------------     Accounting Officer 
        (Eva Jonutis)             
 
 /s/ George H. Benter, Jr.            Director           January 24, 1997  
-----------------------------
   (George H. Benter, Jr.)
 
   /s/ George Deukmejian              Director           January 24, 1997 
-----------------------------
    (George Deukmejian)
                                               
    /s/ Jack L. Hancock               Director           January 24, 1997 
-----------------------------
      (Jack L. Hancock)
 
    /s/ Edward R. Muller              Director           January 24, 1997  
-----------------------------
     (Edward R. Muller)
 
   /s/ Gregory T. Parkos              Director           January 24, 1997 
-----------------------------
    (Gregory T. Parkos)
 
   /s/ Malcolm T. Stamper             Director           January 24, 1997 
-----------------------------
    (Malcolm T. Stamper)
</TABLE>

                                      S-1
<PAGE>
 
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                     SEQUENTIALLY
EXHIBIT NO.  *               DESCRIPTION                                             NUMBERED PAGE
--------------   -----------------------------------                                 -------------
<C>              <S>                                                                 <C>          
3.2              Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended
                 October 31, 1989), as amended on September 30, 1994 (Exhibit
                 3.2 to Form 10-K for fiscal year ended October 31, 1994). and
                 on December 16, 1996.

10.3             Amended and Restated Whittaker Corporation 1992 Stock Option
                 Plan for Non-Employee Directors.

10.6             Restated Directors' Retirement Plan effective as of August 2,
                 1985 as amended on January 24, 1991 (Exhibit 10.10 to Form 10-K
                 for fiscal year ended October 31, 1990), as amended on December
                 16, 1996.

10.7             Amended and Restated Whittaker Corporation Long-Term Stock
                 Incentive Plan (1989).

10.8             Whittaker Corporation Supplemental Benefit Plan dated November
                 23, 1988, as amended June 12, 1990 and as amended July 12,
                 1991.

10.9             Whittaker Corporation Excess Benefit Plan dated November 23,
                 1988, as amended June 21, 1990.
                 
10.10            Whittaker Corporation Supplemental Disability Benefit Plan
                 dated November 23, 1988.

10.12            Amended and Restated Whittaker Corporation Supplemental
                 Executive Retirement Plan, dated as of January 1, 1996, as
                 amended January 24, 1997.

10.13            Amendment and Restatement of Whittaker Corporation Employees'
                 Pension Plan dated December 22, 1994, as amended December 15,
                 1995 (Exhibit 10.10 to Form 10-K for fiscal year ended October
                 31, 1995), and as amended effective October 1, 1996.

10.17            Second Amendment and Waiver dated as of October 30, 1996 among
                 Registrant, NationsBank of Texas, N.A., as Agent, and certain
                 other financial institutions as signatories thereto.

10.18            Third Amendment and Waiver dated as of December 17, 1996 among
                 Registrant, NationsBank of Texas, N.A., as Agent, and certain
                 other financial institutions as signatories thereto.

11.              Calculation of earnings per share for the three years ended
                 October 31, 1996.

21.              Subsidiaries of the Registrant.

23.              Consent of Independent Auditors.

27.              Financial Data Schedule.
</TABLE>

* Exhibits followed by a parenthetical reference are incorporated by reference
  to the documents described therein.