<PAGE>   1
                                      1996
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549-1004

                                  FORM 10-K/A
                                (AMENDMENT NO. 1)
(MARK ONE)

[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 [FEE REQUIRED]

        FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                  -----------------
                                       OR

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

        FOR THE TRANSITION PERIOD FROM                 TO
                                       ---------------    ------------------

                          COMMISSION FILE NUMBER 1-977

                       WESTINGHOUSE ELECTRIC CORPORATION
                       ---------------------------------
             (Exact name of registrant as specified in its charter)

                  PENNSYLVANIA                        25-0877540
                  ------------                        ----------
            (State of Incorporation)               (I.R.S. Employer
                                                  Identification No.)

                WESTINGHOUSE BUILDING,
 11 STANWIX STREET, PITTSBURGH, PENNSYLVANIA 15222-1384      (412) 244-2000
 ------------------------------------------------------      --------------
         (Address of principal executive offices)            (Telephone No.)

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

<TABLE>
<CAPTION>
         TITLE OF EACH CLASS                      NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------------------     -------------------------------------------------------
<S>                                        <C>                         <C>
Common Stock, par value $1.00 per Share     New York Stock Exchange     Boston Stock Exchange
                                            Pacific Stock Exchange      Philadelphia Stock Exchange
                                            Chicago Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

    Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X  No 
                                              ---    ---

    Indicate by checkmark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained  herein,  and will not be contained,  to
the best of  registrant's  knowledge,  in definitive  proxy or  information
statements  incorporated  by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  X
                             ---

    Westinghouse Electric Corporation had 608,654,292 shares of common stock
outstanding at February 28, 1997. As of that date, the aggregate market value
of common stock held by non-affiliates was $10.0 billion.

DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED:

1. Portions of Westinghouse Electric Corporation's Notice of 1997 Annual
   Meeting and Proxy Statement filed with the Commission pursuant to 
   Regulation 14A of the Securities and Exchange Act of 1934 (the Proxy 
   Statement). (Parts I and III)


<PAGE>   2
    The Corporation hereby amends the following items of its Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (the Original Filing).
Each of the below referenced Items in Parts I and II and the Exhibits referenced
in Part IV, Item 14 are hereby amended by deleting the Items or Exhibits in 
their entirety and replacing them with the Items or Exhibits set forth herein. 
Any Items or Exhibits in the Original Filing not expressly changed hereby shall 
be as set forth in the Original Filing.

      PART I

Item 1.  Business

      PART II

Item 6.  Selected Financial Data

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

Item 8.  Financial Statements and Supplementary Data

      PART IV

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

<TABLE>
         <S>              <C>
         Exhibit 11        Computation of Per Share Earnings
         Exhibit 12(a)     Computation of Ratio of Earnings to Fixed Charges
         Exhibit 12(b)     Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
         Exhibit 23(a)     Consent of Independent Auditors
         Exhibit 23(b)     Consent of Independent Accountants
         Exhibit 27        Financial Data Schedule
</TABLE>

    The terms "Westinghouse" and "Corporation" as used in this Report on Form
10-K/A refer to Westinghouse Electric Corporation and its consolidated
subsidiaries unless the context indicates otherwise.

                                     PART I

ITEM 1. BUSINESS

General

    Westinghouse Electric Corporation was founded in 1886 and operates under a
corporate charter granted by the Commonwealth of Pennsylvania in 1872. Today,
Westinghouse is a global company which operates its businesses through the
Westinghouse/CBS Group and the Industries & Technology Group. In November 1996,
Westinghouse announced a plan to separate its media and industries and
technology businesses. See "Separation Plan" discussed below. The Corporation's
Westinghouse/CBS Group combines the media operations of CBS Inc.(CBS) and
Infinity Broadcasting Corporation (Infinity), which the Corporation acquired in
1995 and 1996, respectively, and Group W Broadcasting. The Westinghouse/CBS
Group operates in the principal business areas of television and radio
broadcasting and cable programming. The Industries & Technology Group operates
in the principal business areas of power generation systems, transport
temperature control, and chemical and nuclear materials management.

    The Corporation dramatically redefined its business portfolio and future
direction by acquiring CBS in November 1995. This repositioning was furthered
by the acquisition of Infinity in December 1996, and the execution of a
definitive merger agreement in February 1997 whereby the Corporation will
acquire Gaylord Entertainment Company's two major cable networks: The Nashville
Network (TNN) and Country Music Television (CMT). As a result of the
acquisitions of CBS and Infinity, Westinghouse has become the largest
television and radio broadcaster in the United States with 14 owned and
operated television stations and 79 radio stations. As part of this strategic
redirection, the Corporation divested The Knoll Group (Knoll), its office
furniture unit, and the Corporation's defense and electronic systems business
in February and March 1996, respectively. In addition, in December 1996, the
Corporation divested Westinghouse Security Systems (its residential security
business) and portions of its Scientific Ecology Group subsidiary. Financial
results for 1996 and prior years include these and other divested businesses as
Discontinued Operations. For information about principal acquisitions, pending
acquisitions, and divestitures, see notes 1, 2, 3 and 23 to the financial
statements included in Part II, Item 8 of this report.

                                       2

<PAGE>   3
    For financial reporting purposes, the Corporation's Continuing Operations
are aligned into four segments: Media, Power Systems, Thermo King and
Government Operations. Except for Media, all of these reporting segments
operate as part of the Industries & Technology Group. Results of international
activities, including manufacturing, export sales, and foreign licensee income,
are included in the financial information of the segment that has operating
responsibility.  Financial and other information by segment and geographic area
is included in note 21 to the financial statements included in Part II, Item 8
of this report.

OPERATING SEGMENTS

WESTINGHOUSE/CBS GROUP

    The Westinghouse/CBS Group combines the operations of CBS, Group W
Broadcasting and, beginning on December 31, 1996, Infinity. Its principal
businesses include the furnishing of network television services to affiliated
television stations primarily throughout the United States, the production of
news, sports and entertainment programming, and the operation, under licenses
from the Federal Communications Commission (FCC), of 14 television broadcast
stations and 79 radio stations.

    Through the CBS Television Network, the Westinghouse/CBS Group distributes
a comprehensive schedule of news and public affairs broadcasts, entertainment
and sports programming and feature films to more than 200 domestic affiliates
and to certain overseas affiliated stations. The CBS Television Network's
domestic affiliates include independently-owned affiliated stations and the
Westinghouse/CBS Group's 14 owned and operated television stations. These
affiliates serve, in the aggregate, the 50 states and the District of Columbia.
The CBS Television Network is responsible for sales of advertising time for the
CBS Television Network broadcasts and related merchandising and sales promotion
activities. It is also responsible for managing the full range of ongoing
activities and areas of mutual concern between the television network and the
independently-owned affiliated stations.

    CBS Entertainment produces and otherwise acquires entertainment series and
other programs for all time periods and acquires feature films for broadcast by
the CBS Television Network. CBS News operates a worldwide news gathering and
production organization which produces regularly scheduled news and public
affairs broadcasts and special reports for CBS Television Stations and CBS
Radio. This unit also produces, for the CBS Television Network, certain
news-oriented programming for broadcast in the early morning daypart and in
designated hours during primetime. A unit of CBS News produces documentaries
for sale to other media outlets. CBS Sports produces and otherwise acquires
sports programs for broadcast by the CBS Television Network.

    CBS Television Stations operates the 14 television stations owned by
Westinghouse/CBS. The larger markets served by the owned television stations
include New York, Los Angeles, Chicago, Philadelphia, San Francisco and Boston.
CBS Television Stations operates in seven of the nation's ten largest markets
and ten of the nation's top 20 markets, reaching approximately 33 percent of
all U.S. households.

    CBS Radio owns and operates 79 AM and FM radio stations in 16 markets
(including 40 AM and FM radio stations that were acquired as part of the
Infinity acquisition), with 64 stations in the nation's ten largest radio
markets. CBS Radio believes that its presence in large markets makes it
attractive to advertisers and that the overall diversity of its stations
reduces its dependence on any single station, local economy or advertiser. CBS
Radio stations include leading franchises in news, sports and personality
programming.  The CBS Radio Network serves approximately 585 affiliated
stations nationwide.  The Corporation also has an indirect minority equity
investment in Westwood One, which Infinity manages pursuant to a management
agreement. Westwood One is a leader in producing and distributing syndicated
and network radio programming.

    The Corporation also participates in the out-of-home media business through
the Corporation's wholly-owned subsidiary TDI Worldwide, Inc. (TDI), which was
acquired by Infinity in March 1996. TDI is one of the largest out-of-home media
companies in the U.S., operating some 100 franchises, the majority of which are
in large metropolitan areas. TDI sells space on various media including buses,
trains, train platforms and terminals throughout commuter rail systems, painted
billboards, thirty-sheet billboards, and phone booths. TDI also has the
franchise to manage advertising space within the London Underground and on
certain London buses and has the exclusive rights to all transit advertising in
Ireland.

    CBS Cable (formerly known as Group W Satellite Communications) provides
programming and distribution services to the cable television industry,
provides satellite distribution services, operates a 24-hour, Spanish-language
news service (CBS TeleNoticias), 

                                       3


<PAGE>   4
and is developing a new cable information and entertainment channel, Eye on
People. CBS Cable also provides regional sports programming and the marketing
and advertising services for two country music entertainment networks, TNN and
CMT, which are expected to be acquired by Westinghouse in 1997. See note 23 to
the financial statements included in Part II, Item 8 of this report.

    CBS TeleNoticias, which was acquired by Westinghouse in June 1996, is the
world's leading Spanish-language news channel. It provides 24-hour news
services in Latin America and Spain and is distributed to over 200 million
homes in 22 countries.

    Also part of CBS Cable, Group W Network Services is a global provider of
production, post-production and satellite services to broadcast, cable and
corporate networks.

    EYEMARK Entertainment produces, markets and distributes first-run and
off-network syndicated programming for the domestic and international
television marketplace. EYEMARK Entertainment combines the activities of MAXAM
Entertainment, a distribution and production company acquired in February 1996,
and Group W Productions.

    The network broadcast environment is highly competitive. The
Telecommunications Act of 1996 provides both new opportunities and potential
new competition for the Westinghouse/CBS Group. By deregulating station
ownership limits, the Act will allow the Corporation to pursue strategic growth
in its Radio and Television Station groups. The entry of telephone companies
into the video programming and distribution businesses will mean new
competition in program sales, but will also provide new opportunities for the
distribution of CBS programming.

    The CBS Television Network and the CBS Television Stations compete for
audiences with other television networks and television stations, as well as
with other video media, including cable television, satellite television
services and videocassettes. In the sale of advertising time, the CBS
Television Network and the CBS Television Stations compete with other broadcast
networks, other television stations, cable television systems, and other
advertising media. The CBS Television Network and the CBS Television Stations
also compete with other video media for distribution rights to television
programming.

    In addition, the CBS Television Network competes with other television
networks to secure affiliations with independently-owned television stations in
markets across the country, which are necessary to ensure the effective
distribution of network programming to a nationwide audience. In recent years,
competition among the networks for affiliates has intensified. More than 95
percent of CBS affiliates are under long-term agreements with the CBS
Television Network.

    Current and future technological developments may affect competition within
the television marketplace. Developments in advanced digital technology may
enable competitors to provide "high definition" pictures and sound
qualitatively superior to what television stations now provide. Development of
the technology to compress digital signals may also permit the same broadcast
or cable channel or satellite transponder to carry multiple video and data
services, and could result in an expanded field of competing services.

    CBS Radio competes with other radio stations, other radio networks and
suppliers of radio programming, and other advertising media. Developments in
radio technology could affect competition in the radio marketplace. New radio
technology, known as "digital audio broadcasting," can provide sound of the
quality of compact discs, which is significantly higher than that now provided
by radio stations and networks using analog technology.

    All of the Corporation's television and radio stations operate under
licenses from the FCC, which is empowered by the Communications Act of 1934, as
amended, to, among other things, license and regulate television and radio
broadcasting stations. The FCC has authority to grant or renew broadcast
licenses for a maximum statutory term of eight years if it determines that the
"public convenience, interest or necessity" will be served thereby. During a
specified period after an application for renewal of a broadcast station
license has been filed, persons objecting to the license renewal application
may file petitions to deny.

    The approval by the FCC of the Corporation's acquisition of Infinity
contained a number of temporary waivers of the FCC's television and radio
cross-ownership rules. These waivers were granted subject to the outcome of the
pending ownership rulemaking in which certain deregulation of the television
and radio cross-ownership rules has been proposed. In the event that any
station divestitures are required at the conclusion of this rulemaking, the
Corporation would be required to file applications with the FCC for consent to
the necessary divestitures within six months of the rulemaking order. The order
granting approval of the Infinity transaction made permanent the temporary
waivers of the television and radio cross-ownership rules granted in connection
with the 

                                       4


<PAGE>   5
Corporation's acquisition of CBS. The FCC orders approving both the CBS and
Infinity acquisitions are subject to judicial appeals by certain third parties.
The FCC has previously rejected the positions of these third parties, and the
Corporation believes that such appeals are without merit.

INDUSTRIES & TECHNOLOGY GROUP

    The Industries & Technology Group consists of the following businesses:
Power Systems, Thermo King, and Government Operations.

Power Systems

    The Power Systems segment designs, develops, manufactures and services
nuclear and fossil-fueled power generation systems and is a leading supplier of
reload nuclear fuel to the global electric utility market. In addition, Power
Systems provides distributed control, communications, data acquisition, and
information systems to nuclear and fossil-fuel electric utilities and to other
industries.

      The Energy Systems business unit serves the domestic and international
electric power industry by supplying fuel and a wide range of other products
and services to the owners and operators of nuclear power plants. Approximately
40% of the world's operating commercial nuclear power plants incorporate
Westinghouse's technology. The business unit supplies a wide range of operating
plant services, ranging from performance-based maintenance programs, including
operational and safety upgrades, to new products and services that enhance
plant performance. It also has complete capabilities for supplying customers
with nuclear fuel for pressurized water reactors. The annual demand for
operating plant services and fuel is over $10 billion in the United States and
$30 billion globally. Energy Systems products and equipment are highly
engineered and serve critical safety and operational missions in customer
nuclear power plants. The business unit is marketing new nuclear power plants
and components for new plants to the worldwide market. The business unit is
also working with government agencies to develop a simplified nuclear power
plant design that incorporates passive safety systems.

    The Process Control Division (PCD) provides distributed control,
communications, data acquisition, and information systems to domestic and
international nuclear and fossil-fuel electric utilities, and to chemical
processors, water and waste water treatment facilities, and the steel industry.
PCD financial results are included for reporting purposes as part of Energy
Systems.

    The Power Generation business unit designs, manufactures and services steam
turbine-generators for nuclear and fossil-fueled power plants and combustion
turbine-generators for natural gas and oil-fired power plants. Power Generation
also constructs turn-key power plants worldwide. In addition to serving the
electric utility industry, the business unit supplies, services and operates
power plants for independent power producers and supplies power generator
equipment and services to other non-utility customers. Growing demand for
electrical energy has contributed to the business unit's increase in orders. In
1996, the business unit was awarded orders for approximately 4,579 megawatts of
new power generating capacity. The domestic demand for new generating equipment
over the next ten years is expected to be approximately 91 gigawatts; the
international demand is expected to be over nine times the domestic demand.
Power Generation is a participant in the development of emerging technologies
that could impact the future power generation business.

    In 1996, in excess of 80% of Power Generation's sales of new power
generating equipment and plants were outside of the United States, and more
than 65% of its dollar sales volume was outside the United States. The Power
Generation business unit conducts business in more than 50 countries.

    The United States electric utility industry is restructuring in response to
a new competitive environment brought on by regulatory changes. Power Systems
has a number of domestic and foreign competitors in the power generation
industry where Westinghouse is recognized as a significant supplier. Positive
factors with respect to competitive position are technology, product
reliability, service capability, and worldwide presence. Potential negative
factors include reduced opportunities for operating fleet products and
services, continued softness in the domestic electric utility sector, and
intense competition for new unit sales worldwide. In addition, the worldwide
nuclear industry is a mature business with intense competition. The principal
methods of competition for Power Systems are technology, product development
and performance, responsiveness, customer service, pricing and financing.

                                       5

<PAGE>   6

Thermo King

    Thermo King is a world leader in the $2.5 billion transport temperature
control market. It designs, manufactures and distributes transport temperature
control equipment, including units and their associated service parts, for
trucks, trailers, seagoing containers, buses and rail cars. The transport
refrigeration units are powered by diesel, gasoline or propane fueled engines,
or electricity. These products provide air conditioning for people and preserve
not only food, but pharmaceuticals, flowers, cosmetics, electronic gear and
many other temperature-sensitive goods and products by heating and cooling as
necessary. Thermo King supplies units for both long distance transportation and
local distribution of all these cargoes.

    As an industry leader in its product technology, Thermo King serves its
customers through a network of 14 manufacturing operations and approximately
400 sales and service dealers as well as a network of authorized service
locations throughout the world. International manufacturing facilities are
located in Ireland, Brazil, Spain, Germany, the Czech Republic, Denmark and the
People's Republic of China. In 1996, more than 50% of Thermo King's sales were
outside of the United States.

    Thermo King is subject to competition worldwide for all its products.
Thermo King's products compete on the basis of service, technology, warranty,
product performance, and cost.

Government Operations

    Westinghouse's Government Operations business unit includes management
services for certain government-owned facilities under contracts with the
Department of Energy (DOE), management of the nuclear reactors program for the
U.S. Navy, and management of a chemical agent and weapons destruction program
for the Department of Defense (DOD).

    Government Operations manages three government-owned facilities under
contracts with the DOE. Westinghouse Savannah River Company manages the
Savannah River site in Aiken, South Carolina; West Valley Nuclear Services
Company manages the West Valley Demonstration Project in New York; and the
Waste Isolation Division manages the Waste Isolation Pilot Project in Carlsbad,
New Mexico. In addition, Safe Sites of Colorado L.L.C., a company 65% owned by
Westinghouse, performs nuclear waste management services and environmental
cleanup under a major subcontract with Kaiser-Hill, L.L.C. at the DOE Rocky
Flats facility. The principal mission at all of these sites is waste
management, environmental cleanup, and the safe management of the nation's
nuclear materials inventory. In March 1996, Westinghouse was awarded a
nine-year DOD contract to destroy chemical weapons at the Anniston Chemical
Agent Disposal Facility in Anniston, Alabama.

    The U.S. Navy work of the Government Operations business unit includes new
ship reactor plants and advanced designs, training and fleet support. The
government-funded U.S. naval nuclear reactors program consists of
Westinghouse's U.S. Navy nuclear and technical support businesses, including
the Bettis Atomic Power Laboratory, the Plant Apparatus Division, and the
Machinery Apparatus Operation Division.

    The federal government reserves the right to terminate these contracts for
convenience.

    Competition for services provided by businesses in the Government
Operations segment is based on safety, price, technology preference,
environmental experience, and performance reputation. Government Operations
competes primarily in the market for DOE operation and maintenance contracts.

DISCONTINUED OPERATIONS

    During 1996, Discontinued Operations consisted of the Communication &
Information Systems Company (CISCO), the environmental services business,
Knoll, the defense and electronic systems business, and Financial Services. The
largest component of the CISCO segment, Westinghouse Security Systems (the
Corporation's residential security business), and portions of Westinghouse's
Scientific Ecology Group subsidiary were sold in December 1996. Knoll and the
defense and electronic systems business were divested in the first quarter of
1996.

    During 1996, the Corporation continued to liquidate Financial Services. The
remaining Financial Services assets consist of the leasing portfolio and are
expected to liquidate in accordance with contractual terms. The remaining
assets of Discontinued Operations generally are expected to be divested within
the next year.

                                       6
<PAGE>   7

SEPARATION PLAN

    In November 1996, Westinghouse announced that its Board of Directors had
approved, subject to certain conditions, a plan to separate the Corporation's
industries and technology businesses from its media businesses. This separation
(the Separation) is expected to be effected by means of a tax-free dividend to
shareholders of Westinghouse, forming a publicly-traded company to be called
Westinghouse Electric Company (WELCO). In addition, the Corporation also
announced that Thermo King, Westinghouse's transport temperature control
company, was planning a public offering of up to 20 percent of its common
stock.  If the Separation is completed, shares of WELCO common stock (WELCO
Common Stock) will be distributed on a pro rata basis to the shareholders of
record of Westinghouse common stock as of a date to be determined.

    As currently contemplated, after the Separation, Westinghouse (the Media
Company) will be renamed "CBS Corporation" and will consist primarily of the
businesses in the Westinghouse/CBS Group and the TNN and CMT networks (assuming
consummation of the merger discussed previously), and WELCO will consist
primarily of Thermo King, Power Systems and Government Operations. Also, as
currently contemplated, the Media Company will retain all debt obligations of
the current Westinghouse as well as the approximately $1.5 billion tax net
operating loss carryforward, and WELCO will assume most of the unfunded pension
obligation and other non-debt obligations generated by Westinghouse's
industrial businesses in earlier years.

    Completion of the Separation is subject to a number of conditions,
including a favorable ruling from the Internal Revenue Service that the
transaction will not be taxable for U.S. federal income tax purposes to
Westinghouse's shareholders or to Westinghouse and the registration of the
WELCO Common Stock under the Securities Exchange Act of 1934. The Corporation
estimates that the separation will be completed later in 1997. For a discussion
of the results of each of the businesses comprising the Westinghouse/CBS Group
and the Industries & Technology Group, see Management's Discussion and Analysis
of Financial Condition and Results of Operations included in Part II, Item 7 of
this report.

    Notwithstanding the foregoing, there can be no assurance that the
Separation will occur or as to the timing thereof. Furthermore, if the
Separation does occur, there can be no assurance that all of the assets,
liabilities and contractual obligations will be transferred as currently
contemplated, or that changes will not be made to the Separation plan. See note
24(a) to the financial statements for a modification of the separation plan.

RAW MATERIALS

    The Corporation has experienced no significant difficulty with respect to
sources and availability of raw materials essential to its businesses.

PATENTS AND TRADEMARKS

    Westinghouse owns or is licensed under a large number of patents and patent
applications in the United States and other countries that, taken together, are
of material importance to its businesses. Such patent rights are, in the
judgment of Westinghouse, adequate for the conduct of its business. No patents
which Westinghouse considers material to its business as a whole will expire
within the next five years.

    Westinghouse has a world-wide trademark portfolio which it considers
important in the marketing of its products and services, including, among
others, the trademarks "WESTINGHOUSE," "CIRCLE W," "CBS," the CBS "Eye" logo,
and "THERMO KING." Westinghouse believes that its rights in these trademarks
are adequately protected and of unlimited duration.

BACKLOG

    The backlog of firm orders of the Corporation's Continuing Operations was
$5,591 million and $6,110 million at December 31, 1996 and 1995, respectively.
Of the 1996 backlog $3,281 million is expected to be liquidated after 1997. In
addition to the reported backlog, the Corporation provides certain
non-Westinghouse products primarily for nuclear steam supply customers.

                                       7
<PAGE>   8

Backlog for the Corporation is as follows:

    Power Systems backlog at year end 1996 and 1995 was $5,414 million and
$5,855 million, respectively. Backlog of $3,214 million is expected to be
liquidated after 1997. Energy Systems backlog at year end 1996 and 1995 was
$2,744 million and $2,675 million, respectively. Power Generation backlog at
year end 1996 and 1995 was $2,670 million and $3,180 million, respectively.

    Thermo King backlog at year end 1996 and 1995 was $130 million and $174
million, respectively. Backlog of $65 million is expected to be liquidated
after 1997.

    Government Operations backlog at year end 1996 and 1995 was $16 million and
$39 million, respectively. Backlog of $2 million is expected to be liquidated
after 1997.

    Also included in backlog at year end 1996 and 1995 was $31 million and $42
million, respectively, attributable to Corporate and Other. This backlog
primarily relates to research activities for outside customers.

ENVIRONMENTAL MATTERS

    Information with respect to Environmental Matters is incorporated herein by
reference to Management's Discussion and Analysis--Environmental Matters
included in Part II, Item 7 and in note 17 to the financial statements included
in Part II, Item 8 of this report.

RESEARCH AND DEVELOPMENT

    Data with respect to research and development is incorporated herein by
reference to note 21 to the financial statements included in Part II, Item 8 of
this report.

EMPLOYEE RELATIONS

    During 1996, Westinghouse employed an average of 59,275 people, of whom
49,430 were located in the United States. Included in the 1996 average
employees were 22,533 employees associated with government-owned facilities and
the U.S.  naval nuclear reactors program and 6,330 employees in Discontinued
Operations.  During the same period, 5,741 domestic employees were represented
in collective bargaining by 36 labor organizations.

FOREIGN AND DOMESTIC OPERATIONS

    Information with respect to foreign and domestic operations and export
sales is incorporated herein by reference to note 21 to the financial
statements included in Part II, Item 8 of this report.


                                       8
<PAGE>   9



                                    PART II


ITEM 6. SELECTED FINANCIAL DATA.

    The information required by this item appears on pages 59 and 60 of this
report and is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

    The information required by this item appears on pages 10 through 26 of
this report and is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The information required by this item, together with the reports of KPMG
Peat Marwick LLP dated January 29, 1997, except as to note 24, which is as of
July 11, 1997, and Price Waterhouse LLP dated February 12, 1996, except for the
restatements discussed in notes 1, 3, and 24, for which the dates are March 31,
1996, November 13, 1996, and July 11, 1997, appears on pages 27 through 60 of
this report and is incorporated herein by reference.


                                                                       PAGE
                                                                       ----
      Report of Management                                              27
      Reports of Independent Auditors and Accountants                   28
      Consolidated Statement of Income for each of the three years      29
        in the  period ended December 31, 1996
      Consolidated Balance Sheet at December 31, 1996 and 1995          30
      Consolidated Statement of Cash Flows for each of the three        31
        years in the period ended December 31, 1996
      Notes to the Financial Statements                                 32
      Quarterly Financial Information (unaudited)                       59
      Five-Year Summary Selected Financial and Statistical Data         60
        (unaudited)


                                       9
<PAGE>   10

MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

For most of 1996, the Corporation operated essentially as two separate
companies--a media company and an industries and technology company--joined
only by a shared capital structure, certain common overhead functions, and
senior management.

Following the acquisition of CBS in late 1995, the media company focused on
integrating its radio and television stations, improving its network
operations, and expanding its radio and cable programming operations. On
December 31, 1996, the Corporation completed an acquisition of Infinity
Broadcasting Corporation (Infinity), thus creating the premier radio group
consisting of 79 radio stations. The total purchase price of $4.7 billion
consisted of $3.8 billion of equity and $.9 billion of debt. In exchange for
Infinity's shares, Westinghouse issued 183 million new common shares which,
when the merger agreement was reached, had a market value of $18.875 each.
These new shares, together with the options outstanding, resulted in an
increase in shareholders' equity of $3.8 billion. In addition, the Corporation
repaid $936 million of Infinity's debt by replacing it with Westinghouse
revolver debt.

The industries and technology company focused on strengthening its operations
through increased market penetration and continued cost improvement efforts.
Thermo King Corporation (Thermo King) built on its strength in domestic markets
and expanded its international presence, particularly in Europe, Latin America
and Asia. It made two strategic acquisitions--a Danish manufacturer of
container refrigeration units and a German manufacturer of air conditioning
units for buses. Power Generation also continued its global expansion. Of its
$2.5 billion of new orders, nearly 65% originated outside the United States.
Its joint venture investments in China are expected to provide unique oppor-
tunities to develop that market. Cost reduction efforts throughout the
industries and technology company continued with improvements in supply
management and production efficiencies as well as through workforce reductions.

In early 1996, the Corporation completed the sales of The Knoll Group (Knoll),
its office furniture business, and its defense and electronic systems business
for cash proceeds totalling $3.6 billion. A combined after-tax gain of $1.2
billion was recorded on the sales of these Discontinued Operations. The
proceeds were used to repay a portion of the debt incurred to finance the
acquisition of CBS. The debt repayment enabled the Corporation to complete a
new $5.5 billion credit facility with more favorable terms to replace its $7.5
billion credit facility. The repayment of the outstanding debt under the
previous facility resulted in a $93 million after-tax extraordinary loss from a
non-cash write-off of deferred financing fees for the early extinguishment of
debt.

In determining the core businesses that would comprise its industries and
technology company, the Corporation decided to exit both its environmental
services and its communication and information systems businesses. Both of
these segments have been accounted for as Discontinued Operations. On December
31, 1996, the Corporation completed the sale of Westinghouse Security Systems,
its residential security business, for approximately $425 million, including
the assumption of certain liabilities by the buyer.

In November 1996, the Board of Directors approved a plan to separate the
industries and technology businesses by way of a tax-free dividend to
shareholders, forming a new publicly traded company to be called Westinghouse
Electric Company (WELCO). The plan also provides that Thermo King will conduct
a public offering of up to 20% of its common stock and will become a
majority-owned subsidiary of WELCO. Completion of the plan is subject to a
number of conditions, including a favorable ruling from the Internal Revenue
Service and the registration of the WELCO common stock under the Securities
Exchange Act of 1934. There can be no assurance that the separation will occur
or as to the related timing. Furthermore, if the separation does occur, there
can be no assurance that all of the assets, liabilities and contractual
obligations will be transferred as currently contemplated or that changes will
not be made to the separation plan. See note 24(a) to the financial statements
for a modification of the separation plan.

                                       10
<PAGE>   11

On February 10, 1997, the Corporation announced that it reached a definitive
merger agreement with Gaylord Entertainment Company (Gaylord) whereby the
Corporation will acquire Gaylord's two major cable networks--The Nashville
Network (TNN) and Country Music Television (CMT). The acquisition includes
domestic and international operations of TNN, the U.S. and Canadian operations
of CMT, and approximately $50 million of working capital. The purchase price of
$1.55 billion will be paid in Westinghouse common stock. The number of shares
to be issued will depend on the average closing price of the Corporation's
stock during a trading period just prior to closing the transaction, subject to
certain limits on the total number of shares to be issued and certain
termination rights under the merger agreement. The transaction is subject to
several conditions, including regulatory approvals, the receipt of a favorable
ruling from the Internal Revenue Service, and the approval of Gaylord's
shareholders.

CONSOLIDATED OPERATING RESULTS

The Corporation reported net income for 1996 of $95 million compared to a loss
of $10 million for 1995 and income of $48 million for 1994. On a per-share
basis, net income was $.22 for 1996, a loss of $.11 for 1995, and a loss of $.01
for 1994. The per-share amounts for 1995 and 1994 reflect a reduction for
dividend requirements on the Series B preferred stock, which converted to common
stock in September 1995. Certain amounts have been restated as discussed in note
24 to the financial statements. Net income includes results from Continuing
Operations, Discontinued Operations, and the extraordinary loss on early
extinguishment of debt, as presented below.

<TABLE>
<CAPTION>
COMPONENTS OF NET INCOME (in millions)
     YEAR ENDED DECEMBER 31        1996     1995     1994
-------------------------------  -------   ------   -----
<S>                              <C>       <C>     <C>
Loss from Continuing
  Operations                     $ (773)   $ (44)   $ (37)
Income from Discontinued
  Operations                        961       34       85
Extraordinary loss                  (93)       -        -
                                 ------    -----    -----
Net income                       $   95    $ (10)   $  48
                                 ======    =====    =====
</TABLE>


The results for Continuing Operations included a number of special items,
summarized in the following table:

<TABLE>
<CAPTION>
IMPACT OF SPECIAL ITEMS (in millions)
     YEAR ENDED DECEMBER 31          1996        1995       1994
-------------------------------    --------    -------    ------
<S>                                <C>         <C>        <C>
Restructuring                      $   (273)   $   (83)   $   (19)
Litigation matters                     (486)      (236)         -
Impairment of assets                    (15)         -          -
Environmental remediation
  activities                           (175)         -          -
Other                                   (30)         -          -
                                   --------    -------    -------
  Total impact on
    operating profit               $   (979)   $  (319)   $   (19)
                                   --------    -------    ------- 
Gain on sale of investment         $      -    $   115    $     -
Pension settlement loss                   -          -       (308)
Loss on assets held for sale           (152)         -          -
                                   --------    -------    -------
   Total impact on other
     income and expenses           $   (152)   $   115    $  (308)
                                   --------    -------    ------- 
Total pre-tax impact on
  Continuing Operations            $ (1,131)   $  (204)   $  (327)
                                   ========    =======    ======= 
After-tax impact on
  Continuing Operations            $   (737)   $  (132)   $  (207)
                                   ========    =======    ======= 
Per-share impact on
  Continuing Operations            $  (1.66)   $ (0.32)   $ (0.54)
                                   ========    =======    ======= 
</TABLE>

Excluding the after-tax impact of the special items included in the table
above, income from Continuing Operations for 1996 was a loss of $36 million, or
$.08 per share, compared to income of $88 million, or $.13 per share, for 1995
and $170 million, or $.31 per share, for 1994. Performance improvements by some
of the businesses were more than offset by higher interest expense in each of
the last two years, arising substantially from CBS acquisition debt and
goodwill amortization resulting from the CBS acquisition.

                                       11
<PAGE>   12



RESULTS OF OPERATIONS--CONTINUING OPERATIONS

<TABLE>
<CAPTION>
RESULTS OF OPERATIONS - CONTINUING OPERATIONS (in millions)
                                                SALES OF                                          OPERATING PROFIT (LOSS)
                                         PRODUCTS AND SERVICES       OPERATING  PROFIT (LOSS)    EXCLUDING SPECIAL CHARGES
                                  -----------------------------     -------------------------    --------------------------
     YEAR ENDED DECEMBER 31          1996      1995      1994      1996      1995      1994       1996       1995    1994
-------------------------------   -----------------------------------------------------------------------------------------
<S>                                 <C>       <C>      <C>        <C>       <C>       <C>        <C>        <C>       <C>
Media:
   Television                      $  809    $  405   $  325      $ 295    $ 149      $ 130      $ 295      $ 149     $  130
   Network                          2,581       230        -         25       12          -         25         12          -
   Radio                              554       216      175        161       55         47        161         55         47
   Other Media Businesses             227       164      150          7       10         21          7         10         21
   Other Media                        (26)        1        -       (178)     (14)        (1)      (137)       (14)        (3)
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------ 
Total Media                         4,145     1,016      650        310      212        197        351        212        195
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------
Industries & Technology:
   Power Systems:
      Energy Systems                1,234     1,369    1,364        (30)     114        114         94        130        140
      Power Generation              2,172     1,718    1,630        (75)     (57)        82         (2)       (29)        77
      Other Power Systems            (172)     (138)    (149)      (362)    (305)       (79)       (73)       (69)       (79)
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------ 
    Total Power Systems             3,234     2,949    2,845       (467)    (248)       117         19         32        138
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------
    Thermo King                     1,013     1,065      877        180      176        135        186        176        135
    Government Operations             121       155      133         63       81         77         71         81         77
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------
Total Industries &
   Technology                       4,368     4,169    3,855       (224)       9        329        276        289        350
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------
Corporate & Other                     133       393      674       (734)    (161)      (165)      (296)      (122)      (165)
Intersegment Sales                    (41)      (30)     (54)         -        -          -          -          -          -
                                    -----     -----    -----      -----     ----      -----      -----      -----     ------
Total                              $8,605    $5,548   $5,125      $(648)    $ 60      $ 361      $ 331      $ 379     $  380
                                   ======    ======   ======      =====     ====      =====      =====      =====     ======
</TABLE>

During 1996, the Corporation made several changes to its reported business
segments. The environmental services line of business and the Communication &
Information Systems (CISCO) segment were reclassified to Discontinued
Operations in March and November 1996, respectively, in accordance with the
Corporation's plan to exit these businesses. Previously, the environmental
services business was reported as part of the Government & Environmental
Services business segment. The remaining line of business comprising that
segment is now reported as Government Operations. The previously reported Other
Businesses segment, which consisted of non-strategic businesses that have been
divested or closed over the last three years, has been combined with Corporate
& Other. Segment information for 1995 and 1994 has been restated to reflect
these changes.

The Corporation's consolidated revenues from sales of products and services
increased $3,057 million in 1996 compared to 1995 and increased $423 million in
1995 compared to 1994, primarily due to the November 1995 acquisition of CBS.

Operating profit for each of the last three years included special charges
related to restructuring activities, which totalled $273 million in 1996, $83
million in 1995, and $19 million in 1994. Operating profit for 1996 also
included special charges of $486 million for litigation matters, $15 million
for asset impairment based on the modification of projected recoverability of
certain long-lived assets, and $175 million for environmental remediation
matters. Also included in 1996 operating profit was a special charge of $30
million for other costs related to previously divested businesses. See notes 1,
17, and 20 to the financial statements. Other special charges of $236 million
for litigation matters were included in operating profit in 1995.

Excluding special charges, the 1996 increases in profits for the media
businesses were more than offset by a 4% decline in profits for the industries
and technology businesses and a significant increase in Corporate & Other
costs.  Subsequent to the sale of the defense and electronic systems business
in February 1996, retiree pension and postretirement benefit costs previously
absorbed by the operations of that business were included in Corporate & Other.

Results for the Corporation continue to be unfavorably affected by pension
costs related to the unfunded pension obligation. Although the Corporation's
objective is to reduce this earnings constraint over the next few years,
management expects that it will continue to negatively affect operating results
in 1997.

                                       12

<PAGE>   13

MEDIA

The results for CBS subsequent to the completion of the acquisition on November
24, 1995 are included in the results for Media. Sales and operating profit for
CBS for the last 37 days of 1995 included in the Corporation's 1995 results
were $305 million and $9 million, respectively.

The television group owned 14 television stations at year-end 1996 compared to
15 television stations and 5 television stations at December 31, 1995 and 1994,
respectively. The radio group owned 79 radio stations at year-end 1996,
including 40 radio stations acquired with Infinity on December 31, 1996,
compared to 37 stations and 16 stations at December 31, 1995 and 1994,
respectively. No results of operations are included in 1996 for Infinity. See
note 2 to the financial statements.

The approval by the Federal Communications Commission (FCC) of the
Corporation's acquisition of Infinity contained a number of temporary waivers
of the FCC's television and radio cross-ownership rules. These waivers were
granted subject to the outcome of the pending ownership rulemaking in which
certain deregulation of the television and radio cross-ownership rules has been
proposed. In the event that any station divestitures are required at the
conclusion of this rulemaking, the Corporation would be required to file
applications with the FCC for consent to the necessary divestitures within six
months of the rulemaking order.

The order granting approval of the Infinity transaction made permanent the
temporary waivers of the television and radio cross-ownership rules granted in
connection with the Corporation's acquisition of CBS. The FCC orders approving
both the CBS and Infinity acquisitions are subject to judicial appeals by
certain third parties. The FCC has previously rejected the positions of these
third parties, and the Corporation believes that such appeals are without
merit.

The reported results for television, radio and the network include depreciation
and amortization of specifically identifiable assets based on their fair values
when acquired. Amortization of goodwill arising from the CBS acquisition, which
approximates $120 million per year, is included in the results of Other Media.
Where appropriate, the separate business discussions that follow provide a
comparison of the actual 1996 results with the pro forma combined Group W and
CBS actual results for 1995 and 1994.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a
widely accepted financial indicator of a company's ability to incur and service
debt. It is commonly used in the media industry as a surrogate for cash flows.
For the entire Media group, EBITDA excluding the restructuring charge totalled
$628 million for 1996. On a pro forma combined basis, EBITDA for 1995 was $536
million and $728 million for 1994. EBITDA differs from operating cash flows for
the group primarily because it does not consider changes in assets and
liabilities from period to period, and it includes the impact of purchase price
accounting adjustments related to program rights of $164 million and $24
million for 1996 and 1995, respectively.

TELEVISION

On a pro forma combined basis, revenues for the television stations fell
slightly for 1996 compared to 1995 due to lower ratings and affiliation changes
at certain stations. Operating profit on a pro forma combined basis also
declined slightly reflecting the lower revenues, although cost improvements at
the stations reduced that impact. Also in 1996, WPRI, the television station in
Providence, Rhode Island, was sold. No gain or loss was reported on this sale.
A decline in pro forma combined performance for 1995 compared to 1994 generally
was attributable to the CBS stations.

NETWORK

The network, on a pro forma basis, experienced a 3% increase in revenues in
1996 compared to 1995. Higher prices, revenues from the addition of college
football, and increased syndication revenues were the primary factors.
Operating profit on a pro forma basis increased to $25 million reflecting the
favorable effects of higher prices and increased syndication revenues as well
as lower demographic ratings and higher costs associated with coverage of the
presidential election, advertising and promotion for the new primetime season,
programming, and affiliate compensation. In addition, operating profit included
the favorable effect of purchase accounting adjustments related to program
rights totalling $131 million in 1996 and $24 million in 1995. Network results
were strong in 1994 due to the broadcast of the Olympic Winter Games.

RADIO

Performance for 1996, which included results for two Chicago radio stations
acquired January 2, 1996, was strong. On a pro forma combined basis, revenues
grew 11% for 1996 compared to 1995. Operating profit on a pro forma combined
basis increased 51% during the same period, reflecting increased revenues and
significant benefits from cost reduction activities. Revenues and profits
increased approximately 5% on a pro forma combined basis for 1995 compared to
1994.

                                       13
<PAGE>   14

OTHER MEDIA BUSINESSES

Other Media Businesses includes operating results for Group W Satellite
Communications (GWSC) and EYEMARK Entertainment (EYEMARK). EYEMARK combines the
activities of Group W Productions and MAXAM, a distribution and production
company acquired in February 1996. Revenues for GWSC increased in 1996 compared
to the prior year as a result of certain cable channel and network services
acquired from CBS, increased advertising revenues, and the acquisition of
TeleNoticias, a 24-hour, Spanish-language news service. Operating profit for
GWSC was flat with 1995 as the increased revenues were offset by startup costs
for TeleNoticias and a new cable channel, Eye on People. GWSC reported strong
results in 1995. While revenues for production operations increased in 1996
compared to 1995, operating losses also increased due to absorbing MAXAM's
operations. Operating results for 1995 and 1994 included significant program
development costs at Group W Productions.

OTHER MEDIA

Costs for the Media group's headquarters and amortization of all goodwill
arising from the CBS acquisition comprised Other Media. For 1996, Other Media
included a $41 million restructuring charge for Group W's actions to obtain
operational synergies between CBS and Group W. The cost of the CBS actions was
recorded in connection with the CBS acquisition. Goodwill amortization related
to the CBS acquisition totalled approximately $120 million for 1996.

INDUSTRIES & TECHNOLOGY

POWER SYSTEMS

Power Systems consists of Energy Systems and Power Generation, the
Corporation's manufacturing and service businesses for the nuclear and
fossil-fueled power generation industry. The results for the Power Systems
segment in total reflect the impact of discounts on goods and services provided
to customers under litigation settlements. However, the results for Energy
Systems and Power Generation are presented as if the sales had been made at
normal commercial rates. The effect of these discounts is presented in Other
Power Systems.

Sales for Power Systems in 1996 increased $285 million, or 10%, over 1995 due
to a strong sales increase of $454 million from Power Generation, partially
offset by a sales decrease of $135 million at Energy Systems. Operating profit
declined significantly over the three years.

In general, Power Systems has been unfavorably affected by the uncertainties
caused by deregulation of the U.S. utility industry and price compression
globally. In the United States, new power generation capacity additions have
been modest. In addition, pressures on utilities to reduce spending for capital
improvements and minimize outages for nuclear and fossil-fueled plants have
adversely impacted the U.S. market. Internationally, new capacity additions are
growing, but price compression continues to impact profitability.

ENERGY SYSTEMS Energy Systems sales were $1,234 million in 1996, a 10% decrease
from 1995. Sales remained constant from 1994 to 1995. The decrease in sales in
1996 was due primarily to lower parts and service volume associated with
utilities' spring power plant outages and a decline in simulator sales.

The operating loss for 1996 included $113 million for restructuring activities,
including the separation of approximately 1,200 employees and $11 million for
environmental remediation activities. Operating profit for 1995 and 1994
included $16 million and $26 million, respectively, for restructuring
activities. Excluding restructuring charges in all years, 1996 operating profit
of $94 million declined 28%, or $36 million, from 1995. This decrease in 1996
operating profit was primarily the result of lower volume from spring outages
and a reduced level of income from project close-outs. Operating profit
decreased 7% to $130 million in 1995 compared to 1994, primarily due to lower
licensee income. Cost savings from restructuring activities have been partially
offset by price compression.

Energy Systems orders were approximately $1.2 billion for both 1996 and 1995
and $1.3 billion in 1994 reflecting continued strong demand despite operating
in a shrinking market. Year-end backlog remained stable at approximately $3.2
billion for all three years.

In the first quarter of 1997, the Corporation recognized a $49 million
adjustment to both sales and operating profit following a comprehensive
reevaluation of the work scope and costs to complete a complex international
nuclear project which originated in 1993. Although this $352 million contract
remains profitable, management determined that the Corporation's profit will be
less than originally estimated.

                                       14
<PAGE>   15

POWER GENERATION Power Generation sales were $2,172 million in 1996, a 26%
increase from 1995. This sales increase resulted primarily from greater volume
for combustion and steam turbines and large projects, particularly in the
international market. In addition, slightly higher service volume contributed
to the sales increase. Sales for 1995 increased 5% due to increased volume for
combustion and steam turbines.

The operating loss for 1996 included $68 million for restructuring costs
related to the separation of approximately 900 employees and the closing of a
manufacturing plant. The operating loss for 1995 included $28 million for
restructuring activities while 1994's results included a favorable adjustment
of $5 million for a modification of previous restructuring plans.

Excluding the impact of these special items, the 1996 operating loss improved
$27 million to a loss of $2 million; the operating loss of $29 million in 1995
represents a profit decline of $106 million compared to 1994. A shift in
product mix from higher margin service and parts sales to lower margin new
apparatus and project sales has depressed profits in recent years. Service and
parts sales were affected by a combination of improved equipment reliability
and deferral of maintenance by utilities. The severe price compression
experienced in 1995 in the new apparatus business appeared to moderate in 1996.
The reduced service and parts volume combined with the price compression on new
apparatus more than offset the cost improvements made as a result of
restructuring activities. Power Generation continues to respond to the
significant market pressures through aggressive cost reduction measures in both
direct product cost and overhead.

Power Generation orders of $2.5 billion for 1996 were slightly higher than
1995.  The focus on international orders has grown dramatically over the last
several years. In 1996, nearly 65% of new orders originated outside the United
States.  Also in 1996, Power Generation adjusted backlog by approximately $650
million for project cancellations, delays, or other uncertainties. Backlog was
$2.8 billion at the end of 1996 compared to $3.2 billion at year-end 1995.

OTHER POWER SYSTEMS Other Power Systems includes eliminations of sales between
Energy Systems and Power Generation, as well as activities related to uranium,
steam generator and Philippines litigation matters, including legal fees
incurred, estimated losses for settlements, and discounts. Other Power Systems
operating losses excluding special charges primarily represent discounts from
commercial prices on goods and services supplied under previous settlement
arrangements when discounted prices exceed costs. Special charges for
litigation matters reflect discounts that exceed profit margins. In 1996 and
1995, special charges of $289 million and $236 million, respectively, were
recognized for estimated costs in excess of discounted prices related to
litigation and other matters. Excluding these special charges, the operating
losses in 1996, 1995 and 1994 were $73 million, $69 million and $79 million,
respectively.

THERMO KING

Orders for 1996 totalling $1 billion were flat with 1995. Strong orders for
service parts offset a downturn in the North American truck and trailer
business and reduced container volume. Orders in 1995 exceeded 1994 by $20
million, or 2%, due to strong international demand, particularly in Europe.
International orders accounted for nearly 52% of Thermo King's total orders for
1996.

Sales in 1996 declined $52 million, or 5%, from 1995, primarily driven by the
slowdown in the North American truck and trailer market. This reduction was
offset in part by strong sales of service parts. Total international sales
remained consistent with the prior year in part because of two fourth-quarter
1996 acquisitions-Sabroe Reefer Cool, a Danish manufacturer of container
refrigeration units, and Thermal, a German manufacturer of air conditioning
units for buses. Sales in 1995 exceeded 1994 by $188 million, or 21%, due to
strong international demand.

Despite downturns in the North American truck and trailer market, Thermo King
reported record profit in 1996. Operating profit reached $180 million, which
was $4 million, or 2%, higher than 1995. The impact of reduced sales levels was
more than offset by a significant reduction in operating costs and higher
margin on service parts. Substantial cost reductions were achieved through
improvements on material procurement and productivity. In addition, operating
profit for 1996 included $6 million of restructuring costs related to

                                       15
<PAGE>   16


a plant closing in the United Kingdom and the exit of the heavy rail
refrigeration business. Operating profit was also strong in 1995, exceeding
1994 by $41 million, or 30%. This was primarily a result of the higher 1995
sales volume.

The Corporation's current plan to separate its industries and technology
businesses and its media businesses includes a public offering by Thermo King
of up to 20% of its common stock. See note 24(a) to the financial statements 
for a modification of the separation plan.

GOVERNMENT OPERATIONS

Government Operations supplies nuclear services to the U.S. Department of
Energy (DOE), U.S.Army, and the U.S. naval nuclear reactors program. Sales in
1996 decreased 22% from 1995 due to losses of a Navy engineering contract and
reduced government spending. The loss of the maintenance and operations
contract for the DOE's Hanford site did not materially impact results in 1996
although future results will be affected. The lost revenue from the Navy
engineering contract was partially replaced by a new five-year contract with
the U.S. Army for a chemical demilitarization project and a one-year contract
for the nuclear maintenance planning and control activities at a DOE
laboratory. Government Operations was also awarded the DOE's Savannah River
contract for an additional five-year period.

Sales for the management of government sites were strong for 1995, with sales
up 17% compared to 1994. Benefits from the DOE's new performance based
contracts were partially offset by the loss of a management contract at a DOE
facility in Idaho.

The Corporation intends to aggressively pursue retention of its current
government contracts and to selectively bid for sites not currently managed by
the Corporation. This has resulted in increased bid and proposal costs,
particularly in 1996.

The 1996 operating profit included $8 million for restructuring activities
related to the separation of approximately 30 employees associated with
terminated contracts. Excluding the restructuring charge, operating profit
decreased 12% to $71 million in 1996 compared to 1995. Operating profit for
1995 increased 5% to $81 million compared to 1994 as a result of the new DOE
performance based contracts, partially offset by the loss of operating profit
from the Idaho DOE facility.

CORPORATE & OTHER

During 1996, the Corporation completed the sale of Wittnauer International,
Inc., a previously identified non-strategic business. In 1995, several other
non-strategic businesses were sold as well as the Corporation's majority
interest in MICROS Systems, Inc. (MICROS). In addition, the Corporation closed
a plant in Abingdon, Virginia. Controlmatic and Gladwin were divested in 1994.
The decline in revenues over the last three years reflects these divestitures.

Included in the operating loss for 1996 is $37 million for restructuring costs,
$164 million for environmental remediation matters related primarily to
businesses previously divested, $192 million for litigation contingencies, $15
million for asset impairment, and $30 million for other matters. Included in
the 1995 operating loss was $39 million for restructuring.

Corporate costs excluding special charges increased dramatically in 1996.
Nearly $150 million of this increase represents pension and other benefits
associated with previously divested businesses. These costs increased in part
because of a reduction in the pension discount rate from 8.5% to 6.75%, all of
which is reflected in corporate costs. Upon the sale of the defense and
electronic systems business in February 1996, Corporate & Other absorbed the
retiree pension and postretirement benefit costs that previously were included
in the results of operations for that business. In addition, corporate
overheads were higher, in part, because of significant systems reengineering
activities. Under the current plan to separate the media businesses from the
industries and technology businesses, approximately 15% of costs for Corporate
& Other would be allocated to the media businesses.

RESTRUCTURING OF OPERATIONS

The Corporation is committed to strengthening its businesses and improving its
profitability through restructuring actions ranging from changes in business
and product-line strategies to downsizing for process reengineering and
productivity improvements. To the extent possible, the Corporation is committed
to reducing its workforce through normal attrition. See note 20 to the
financial statements.

                                       16
<PAGE>   17

During the last three years, the Corporation has undertaken restructuring
programs at its corporate headquarters as well as at several of its major
businesses. In particular, Power Systems has identified initiatives at both its
Power Generation and Energy Systems business units in an effort to remain
competitive in light of a reduction in the demand for services and intense
pricing pressures. Restructuring actions for Continuing Operations, including
corporate headquarters, have resulted in the recognition of restructuring costs
net of adjustments of prior plans totalling $273 million in 1996, $83 million
in 1995, and $19 million in 1994.

The most significant cost component of the Corporation's restructuring plans
generally involves the elimination of positions and the separation of
employees.  Approximately 4,200 positions were eliminated from Continuing
Operations during the last three years resulting in employee separation costs
totalling $319 million, including pension and postretirement curtailment costs.
Other cost elements of these plans consisted of asset writedowns of $40 million
and costs for facility closure or rationalization of $40 million. As of
December 31, 1996, cash expenditures totalled $134 million for these plans.
Cash expenditures of $146 million and $19 million are projected for 1997 and
1998, respectively.  Employee separation costs generally are paid over a period
of up to two years following the separation.

The annual savings expected from these restructuring initiatives approximates
$100 million for the 1996 plan, $40 million for the 1995 plan, and $35 million
for the 1994 plan. Cost savings realized approximated $80 million in 1996 and
$40 million in 1995. Because an announced closing of a major plant is scheduled
to occur later in 1997, the full benefit from these plans will not be realized
until 1998. Also, competitive pressures causing price compression in certain of
the Corporation's markets have absorbed a significant portion of the savings
achieved through restructuring actions.

Results of operations for the Corporation's Discontinued Operations included
restructuring actions, principally for the defense and electronic systems
business and Knoll, which resulted in costs totalling $2 million in 1996, $52
million in 1995, and $52 million in 1994. These actions involved the separation
of approximately 1,400 employees and the exiting of various product lines and
closure of facilities.

In conjunction with the CBS acquisition, a plan was developed to integrate the
CBS headquarters and the radio and television operations with those of the
Corporation. The estimated cost for restructuring the CBS organization,
including separating employees and closing facilities, is $100 million, of
which $24 million had been spent as of year-end 1996. Total expenditures for
1997 and 1998 are anticipated to be $40 million and $25 million, respectively.
Restructuring costs associated with the integration of Group W are included in
the 1996 corporate restructuring plan discussed previously. No significant
restructuring costs are anticipated for the Infinity acquisition.

Cost reduction initiatives are undertaken when the expected benefits are
substantial in relation to the cost of the programs and are realizable in the
near term. The Corporation expects to continue to implement restructuring
initiatives as competitive conditions dictate in an ongoing effort to reduce
its overall cost structure and improve its competitiveness.

1994 PENSION SETTLEMENT LOSS

The Corporation's restructuring activities contributed to a high level of
lump-sum cash distributions from the Corporation's pension fund during 1994.
The magnitude of these cash distributions required that the Corporation apply
the provisions of Statement of Financial Accounting Standards (SFAS) No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and recognize a settlement loss of
$308 million. This noncash charge to income represents the pro rata portion of
unrecognized losses associated with the pension obligation that was settled.
Lump-sum cash distributions during 1996 and 1995 did not reach the threshold
for recognition of a settlement loss.

The settlement loss in 1994 did not affect shareholders' equity because the
decrease resulting from the income statement provision was fully offset by a
reduction in the charge to shareholders' equity related to the minimum pension
liability. See note 4 to the financial statements.

                                       17
<PAGE>   18

OTHER INCOME AND EXPENSES

Year-to-year fluctuations in other income and expenses were dramatic. A net
expense of $86 million was recorded in 1996 compared to income of $137 million
in 1995 and expense of $285 million in 1994.

In 1996, the net expense included an estimated loss of $152 million resulting
from a decision to sell certain miscellaneous non-strategic assets. A $17
million gain from the sale of equity investments partially offset this loss.

Other income for 1995 of $137 million included a pre-tax gain of $115 million
from the sale of the Corporation's 62% interest in MICROS. The Corporation
recorded an additional $7 million provision for the estimated loss on
disposition of non-strategic businesses related to the disposition of Aptus,
Inc. (Aptus).

For 1994, other income and expense, which was a net expense of $285 million,
consisted primarily of the $308 million charge for the settlement of a portion
of the Corporation's pension obligation as discussed previously. The
Corporation recorded a $17 million provision for the estimated loss on
disposition of non-strategic businesses to reflect changes in estimates related
to previous divestiture decisions. These charges were partially offset by a
gain of $32 million from the sale of two radio stations.

INTEREST EXPENSE

Interest expense for Continuing Operations increased $220 million in 1996 due
to higher debt attributable to the CBS acquisition. The entire acquisition
price of $5.4 billion was financed with debt. The Corporation repaid $3.6
billion of this debt in the first quarter of 1996 through proceeds from the
divestitures of Knoll and the defense and electronic systems business. Average
debt increased from $3,506 million in 1995 to $5,841 million in 1996.

On August 29, 1996, the Corporation prepaid $3.2 billion of debt under its
then-existing credit facility and replaced it with borrowings under a new
revolving credit facility with more favorable borrowing rates (see Revolving
Credit Facility). Weighted average interest rates were slightly lower in 1996
compared to 1995.

In conjunction with the presentation of Knoll and the defense and electronic
systems business as Discontinued Operations, interest expense on Continuing
Operations debt totalling $8 million in 1996, $48 million in 1995, and $37
million in 1994 was allocated to Discontinued Operations. See note 3 to the
financial statements.

INCOME TAXES

The Corporation's 1996 provision for income taxes in total was 81% of the
income before taxes and minority interest. The 1996 total provision of $442
million consisted of a $423 million benefit from Continuing Operations, $925
million expense from Discontinued Operations, and a $60 million benefit from an
extraordinary item.

The Corporation's 1995 provision for income taxes in total was 97% of the
income before taxes and minority interest. The 1995 total provision of $28
million consisted of a benefit of $6 million from Continuing Operations and a
provision of $34 million from Discontinued Operations.

The Corporation's 1994 provision for income taxes in total was 48% of the
income before taxes and minority interest. The 1994 net provision totalled $52
million, consisting of a $30 million benefit from Continuing Operations and an
$82 million expense from Discontinued Operations.

The Corporation's tax provision or benefit has fluctuated dramatically from the
statutory tax of 35% of pre-tax income for 1996, 1995 and 1994. The items that
caused the fluctuations for Continuing Operations are set forth in note 6 to
the financial statements. Amortization of intangible assets has a significant
effect on the relationship between income taxes and pre-tax income. No tax
benefit is recognized on the goodwill amortization recorded as a result of the
CBS acquisition. In future years, the effect will be more dramatic because of
increased goodwill amortization that will result from the Infinity acquisition.

The net deferred tax asset at December 31, 1996 totalled $1,411 million. This
amount consisted of a net deferred tax asset of $1,591 million from Continuing
Operations partially offset by a net deferred tax liability of $180 million
from Discontinued Operations. The temporary differences that give rise to
deferred income taxes are shown in the Consolidated Deferred Income Taxes by
Source table in note 6 to the financial statements.

                                       18
<PAGE>   19

The three significant sources of the net deferred tax asset are: (i) the tax
effect of net operating loss carryforwards of $1,502 million, of which $1,401
million will expire by the year 2008 and the balance by 2010; (ii) the tax
effect of cumulative net temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes of $1,583 million representing future net income tax
deductions; and (iii) alternative minimum tax credit carryforwards of $252
million that have no expiration date. Of the net temporary difference of $1,583
million, approximately $1,027 million relates to a net pension obligation,
$1,285 million relates to an obligation for postretirement and postemployment
benefits, and $1,938 million relates to reserves for restructuring, litigation
and other matters. These are partially offset by temporary differences of
approximately $1,569 million and $637 million related primarily to FCC licenses
and to tax depreciation in excess of book depreciation, respectively.

Management believes that the Corporation will have sufficient future taxable
income to make it more likely than not that the net deferred tax asset will be
realized. In making this assessment, management considered the net losses
generated in recent years as aberrations caused in part by the liquidation of a
substantial portion of Financial Services assets and by other unusual actions.
The reversal of temporary differences may cause tax losses in future years.
Each tax-loss year would receive a new 15-year carryforward period. Under a
conservative assumption that all net cumulative temporary differences other
than net operating loss carryforwards had reversed in 1996, the Corporation
would have through the year 2011 to recover the tax asset. This would require
the Corporation to generate average annual taxable income of at least $230
million.


The following table shows a reconciliation of income or loss from Continuing
Operations before income taxes to taxable income from Continuing Operations:

RECONCILIATION OF PRE-TAX LOSS FROM CONTINUING OPERATIONS TO 
U.S. FEDERAL TAXABLE INCOME (LOSS) 
(in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31          1996       1995      1994
-------------------------------    --------   -------   ------
<S>                                <C>        <C>       <C>
Pre-tax loss from Continuing
        Operations                 $ (1,190)  $  (39)   $  (58)
                                   ---------  -------   ------ 
Permanent differences:
        Foreign and Puerto Rico        (191)    (167)     (136)
        State income tax                106        3         7
        Goodwill                        130       26        16
        Other                           (83)       9       (29)
                                   --------   ------    ------ 
Net permanent differences               (38)    (129)     (142)
                                   --------   ------    ------ 
Temporary differences:
        Pensions                        (49)     (33)      270
        Long-term contracts             (13)       7       (12)
        Depreciation                    (12)      92        14
        Provision for 
           restructuring
           and other actions            932      154       (87)
        Other                          (161)     (59)      155
                                   ---------  ------    ------
Net temporary differences               697      161       340
                                   --------   ------    ------
U.S. federal taxable 
income (loss)                      $   (531)  $   (7)   $  140
                                   ========   ======    ======
</TABLE>

DISCONTINUED OPERATIONS

In recent years, the Corporation has adopted several separate plans to dispose
of major segments of its business. These businesses have been accounted for as
discontinued operations in accordance with Accounting Principles Board (APB)
Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions."

The table on the following page summarizes each of the Corporation's segment
disposal plans as well as the assets remaining as of December 31, 1996:

                                       19
<PAGE>   20
DISCONTINUED OPERATIONS

<TABLE>
<CAPTION>
    PLAN DATE                      LINE OF BUSINESS                                 REMAINING ASSETS
---------------      -------------------------------------------     -------------------------------------------
<S>                  <C>                                             <C>
November 1996        CISCO                                           Several businesses
March 1996           Environmental Services                          Several businesses
December 1995        Knoll                                           -
December 1995        Defense and Electronic Systems                  -
July 1995            Land Development (WCI)                          Mortgage notes receivable and miscellaneous
                                                                     securities
November 1992        Financial Services                              Leasing receivables
November 1992        Distribution and Control (DCBU)                 -
November 1992        Westinghouse Electric Supply Company (WESCO)    Miscellaneous securities
</TABLE>

In December 1996, the Corporation completed the sale of its residential
security business, the largest component of the CISCO segment, for
approximately $425 million, including the assumption of certain liabilities by
the buyer. The gain realized on this sale was offset by estimated losses for
disposal of other businesses comprising this segment as well as additional
estimated losses for other components of Discontinued Operations. The remaining
businesses in this segment generally are expected to be divested during 1997.

In the first quarter of 1996, the Corporation recorded an after-tax charge of
$146 million for the estimated loss on disposal of the environmental services
businesses. In December 1996, an additional after-tax loss of $100 million for
disposal of these businesses was recognized for additional expected divestiture
costs but was offset by gains related to other components of Discontinued
Operations. Also in December 1996, the Corporation sold a portion of its
hazardous waste disposal business for $31 million. The remaining businesses are
generally expected to be divested during 1997.

In the first quarter of 1996, the Corporation completed the sale of Knoll and
its defense and electronic systems business for a combined after-tax gain of
$1.2 billion. The purchase price totalled $3.6 billion of cash plus the
assumption by the buyer of certain pension and postretirement liabilities
associated with the active employees of the defense and electronic systems
business. The net proceeds from these transactions were used to repay debt of
Continuing Operations.

In July 1995, the Corporation sold WCI for $430 million of cash and retained
approximately $125 million of mortgage notes receivable with maturities through
1997 and other securities. In addition, the buyer assumed $19 million of debt.
Concurrently, the Corporation invested $48 million for a 24% equity interest in
the new business. The Corporation is actively pursuing the divestiture of this
investment. The net cash proceeds from the divestiture of WCI were used to
repay debt of Discontinued Operations. A net loss of $76 million was recognized
on the disposal.

The exit from the Financial Services business involved the sale of the real
estate and corporate finance portfolios over a three-year period and the
liquidation of the leasing portfolio through the year 2015 in accordance with
contractual terms. The real estate and corporate finance portfolio investments
essentially have been liquidated.

In the first quarter of 1994, the Corporation completed the sale of DCBU for a
purchase price of $1.1 billion of cash and the assumption by the buyer of
certain liabilities. During the same quarter, the Corporation also sold WESCO
for a purchase price of approximately $340 million. The proceeds from the sale
of WESCO consisted of approximately $275 million of cash, approximately $50
million of first mortgage notes, and the remainder of stock and options of the
new company.

At December 31, 1996, the assets and liabilities of Discontinued Operations
included those related to the remaining operating businesses from the CISCO
segment and the environmental services business, the remaining securities from
WCI, other miscellaneous securities, the leasing portfolio, and deferred income
taxes. Liabilities also included debt and the estimated losses and divestiture
costs associated with all Discontinued Operations, including estimated results
of operations through divestiture.

Other than the leasing portfolio, the Corporation is actively pursuing the sale
of assets, which are generally expected to be divested within the next year.
Deferred income taxes, which result from temporary differences between book and
tax bases of the assets and liabilities of Discontinued Operations, generally
will be transferred to Continuing Operations upon reversal and will not result
in the receipt or payment of cash by Discontinued Operations. Liabilities
associated with divestitures are expected to be satisfied over the next several
years. Debt will be repaid using cash proceeds from the liquidation of assets
of Discontinued Operations. Cash proceeds in excess of those required to repay
the debt and satisfy the divestiture liabilities of Discontinued Operations
will be transferred to Continuing Operations.


                                       20
<PAGE>   21
Management believes that the net proceeds anticipated from the continued
liquidation of assets of Discontinued Operations will be sufficient to fund the
liabilities of Discontinued Operations, including the repayment of its debt.
Management further believes that the liability for the estimated loss on
disposal of Discontinued Operations of $672 million at December 31, 1996 is
adequate to cover future operating costs, estimated losses, and the remaining
divestiture costs associated with all discontinued businesses.

The following table presents sales and operating profit (loss) for Discontinued
Operations for each of the three years in the period ended December 31, 1996:

RESULTS OF OPERATIONS  (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31                  1996     1995       1994
----------------------                -------  --------   ------
<S>                                   <C>     <C>         <C>
Sales of products and services:
       DCBU and WESCO                 $    -   $     -    $   319
       Financial Services                 26        31         41
       WCI                                 -       108        248
       Defense and Electronic            262     2,549      2,189
         Systems
       Knoll                              90       621        562
       Environmental Services            237       299        335
       CISCO                             337       361        314

Operating profit (loss):
       DCBU and WESCO                      -         -          4
       Financial Services                (16)      (52)      (204)
       WCI                                 -        29         69
       Defense and Electronic            (11)      195        207
         Systems
       Knoll                               9        60        (61)
       Environmental Services           (100)      (56)       (17)
       CISCO                             (77)       (1)        12
</TABLE>

DCBU and WESCO

Operating results for 1994 included revenues and the operating profits of DCBU
for the month ended January 31, 1994 and of WESCO for the two months ended
February 28, 1994, their respective dates of sale.

FINANCIAL SERVICES

Operating results of Financial Services reflect the continued liquidation of
the portfolio investments. At December 31, 1996, portfolio investments totalled
$845 million, a decrease of $56 million from $901 million at year-end 1995.
Portfolio investments at December 31, 1996 and 1995, included $800 million and
$822 million, respectively, of receivables, and $45 million and $79 million,
respectively, of other portfolio investments. The receivables at year-end 1996
and 1995 consisted primarily of leasing receivables, while other portfolio
investments included real estate properties and investments in leasing and real
estate partnerships. With the divestiture of real estate and corporate finance
assets essentially completed, future operating results generally will reflect
the performance of the leasing portfolio.

Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1996 and 1995, 84% related to aircraft and 16% related to
cogeneration facilities.

WCI

Operating results for 1995 included revenues and the operating profit of WCI
until its sale in July 1995.

DEFENSE AND ELECTRONIC SYSTEMS

Operating results for 1996 included revenues and the operating loss of the
defense and electronic systems business until its sale on March 1, 1996.
Revenues for 1995 increased 16% to $2,549 million compared to 1994 as a result
of increased volume from the defense electronics operations, including the
Norden Systems acquisition, air traffic control, and mail processing systems.

Operating profit included restructuring charges of $49 million and $11 million
in 1995 and 1994, respectively. Excluding these charges in both years,
operating profit increased 12% in 1995 as a result of the higher revenues.

KNOLL

In 1996, revenues and the operating loss for Knoll represented its operating
results until its sale on February 29, 1996. In 1995, revenues increased 10% to
$621 million compared to 1994, reflecting increases in Knoll North America
orders.

Knoll's operating profit of $60 million for 1995 represented a dramatic
turnaround of this business. A major restructuring program, resulting in
restructuring charges totalling $40 million in 1994, was implemented beginning
in mid-1994 and was substantially completed in 1995. The results of this
program were evident in both the North American and European results for 1995.
Excluding these restructuring charges, Knoll's operating profit increased $81
million in 1995 compared to 1994. New products, strong sales across all product
lines, and quick delivery programs contributed to the improvement.

                                       21
<PAGE>   22
ENVIRONMENTAL SERVICES

In 1996, revenues for the environmental services businesses decreased $62
million, or 21%, primarily due to a downturn in commercial and government
activity. For 1995, sales decreased $36 million, or 11%, primarily as a result
of the sale of Aptus in March 1995.

The operating loss increased $44 million in 1996, primarily due to the decline
in sales and higher than anticipated waste disposal costs. For 1995, the
operating loss increased $39 million due to higher costs for disposal of
secondary waste.

The remaining businesses are expected to be divested in 1997.

CISCO

Sales in 1996 decreased $24 million, or 7%, compared to 1995. In 1995, sales
increased $47 million, or 15%, compared to 1994. The decrease in sales in 1996
was primarily attributable to contracts won in 1995, which did not recur in
1996, partially offset by increased market penetration in the communication and
residential security businesses.

The operating loss for 1996 of $77 million included $41 million for
restructuring activities and impaired asset writedowns, while the operating
loss for 1995 of $1 million included $3 million for restructuring. Excluding
special charges in all years, the operating loss increased $38 million in 1996
and $10 million in 1995. The decrease in operating profit in 1996 is primarily
the result of the decline in sales and higher strategic expenses. The decrease
in operating profit in 1995 is attributable primarily to reduced margins on
wireless communications contracts.

The Corporation is actively pursuing the disposition of the remaining
businesses in this segment and generally expects the disposals to be completed
within the next year.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

The Corporation continues to manage its liquidity as a consolidated enterprise
without regard to whether assets or debt are classified for balance sheet
purposes as part of Continuing Operations or Discontinued Operations. As a
result, the discussion below focuses on the Corporation's consolidated cash
flows and capital structure.

On December 31, 1996, the Corporation completed the acquisition of Infinity for
a purchase price of $4.7 billion consisting of $3.8 billion of equity and $.9
billion of debt. The issuance of 183 million new common shares and the
conversion of Infinity stock options into approximately 22 million Westinghouse
stock options resulted in an increase to shareholders' equity of $3.8 billion.
In addition, the Corporation repaid $936 million of Infinity revolver debt by
replacing it with Westinghouse revolver debt.

On February 10, 1997, the Corporation announced an agreement to acquire two
major cable networks--TNN and CMT. The purchase price of $1.55 billion will be
paid in Westinghouse common stock, which will further increase the
Corporation's equity. No debt will be assumed in conjunction with this
transaction.

As discussed previously, the Corporation intends to separate its media
businesses from its industries and technology businesses through a tax-free
dividend of the industries and technology businesses to shareholders. As
currently contemplated, the media company will retain all debt obligations of
the current Westinghouse as well as the $1.5 billion tax net operating loss
carryforward. The industries and technology company will assume most of the
unfunded pension obligation and other non-debt obligations generated by the
Corporation's industrial businesses in earlier years. There can be no assurance
that all of the assets, liabilities and contractual obligations will be
transferred as currently contemplated or that changes will not be made to the
separation plan. See note 24(a) to the financial statements for a modification 
of the separation plan.

In late 1995, the Corporation acquired CBS for $5.4 billion and financed the
entire purchase price with debt. In early 1996, the Corporation completed the
sales of Knoll and the defense and electronic systems business and repaid
approximately 65% of the acquisition debt.

The Corporation has and will continue to monetize non-strategic assets. In
1996, the Corporation adopted plans to exit its environmental services and
communication and information systems businesses. In addition to the $3.6
billion of cash generated by the sale of Knoll and the defense and electronic
systems business, sales of various non-strategic assets in 1996 generated cash
proceeds of approximately $550 million. During 1997, sales of non-strategic
assets are expected to generate additional cash of $300 million to $400
million.

Total debt for the Corporation was $6.1 billion at December 31, 1996, a
decrease of $2.3 billion from December 31, 1995. Consistent with prior years,
the Corporation's indebtedness during the first half of 1997 is expected to
increase over year-end 1996 debt levels.

                                       22
<PAGE>   23
Management expects that the Corporation will have sufficient liquidity to meet
ordinary future business needs. Sources of liquidity generally available to the
Corporation include cash from operations, proceeds from sales of non-strategic
assets, cash and cash equivalents, availability under its credit facility,
borrowings from other sources, including funds from the capital markets, and
the issuance of additional capital stock.

OPERATING ACTIVITIES

The operating activities of Continuing Operations used $50 million of cash
during 1996, a decrease of $506 million from the amount provided in 1995. Major
factors contributing to the additional use of cash were higher interest
payments and certain contractual prepayments for program rights and program
development.

Interest payments for Continuing Operations during 1996 were $446 million
compared to $214 million during 1995. This increase was primarily attributable
to the higher debt associated with the CBS acquisition.

During 1996, CBS, in its drive to improve programming and ratings, successfully
negotiated several long-term contracts requiring the Corporation to make
prepayments for future program rights and program development.

Cash contributions to all of the Corporation's pension plans totalled $250
million in 1996. Cash contributions during 1995 totalled $315 million, which
was consistent with the 1994 cash contribution level. The 1996 decrease in the
amount of cash contributions is primarily a result of the divestiture of the
defense and electronic systems business and the assumption of certain pension
liabilities by the buyer. The Corporation's contribution level for 1997, which
is expected to be approximately $250 million to $300 million, is consistent
with the Corporation's goal to fully fund its qualified pension plans over the
next several years.

The operating activities of Discontinued Operations used $401 million of cash
during 1996, provided cash of $237 million during 1995, and used $102 million
during 1994. These cash flows consist primarily of cash provided by the
operations of the defense and electronic systems business, Knoll, and WCI,
offset by cash used in the operations of the environmental services businesses,
Financial Services, and the communication and information systems businesses,
and for divestiture costs associated with these transactions. The increase in
the use of cash during 1996 primarily related to the divestiture costs of Knoll
and the defense and electronic systems business as well as the cash used in the
operations of these businesses through the date of their disposal and in the
operations of the environmental services and the communication and information
systems businesses. 

Future cash requirements of Discontinued Operations will consist primarily of
interest costs on debt, remaining costs associated with completed divestitures,
and operating and disposal costs associated with the environmental services and
the communication and information systems businesses. Management believes that
the future cash receipts of Discontinued Operations will be sufficient to
satisfy the divestiture liabilities of Discontinued Operations and the remaining
debt. Any cash in excess of that required to satisfy those liabilities will be
transferred to Continuing Operations.

INVESTING ACTIVITIES

Investing activities provided $2.9 billion of cash during 1996 after using $4.3
billion of cash in 1995 and providing $1.4 billion in 1994. The sale of Knoll
and the defense and electronic systems business during 1996 for $3.6 billion
and the completion of the CBS acquisition in 1995 for $5.4 billion caused this
significant change.

Acquisitions of $1.1 billion completed during 1996 included the cash investment
associated with the repayment of Infinity debt, as well as purchases of two
Chicago radio stations, TeleNoticias, a 24-hour, Spanish-language news service,
several smaller businesses, and investments in several joint ventures primarily
in China. CBS was the only major acquisition in 1995. In 1994, acquisitions
included Norden Systems, which was divested with the defense and electronic
systems business; the KPIX-AM and FM radio stations in San Francisco; and a
minority interest in Group W radio for total cash expenditures of $109 million.

The Corporation completed the sales of Knoll and its defense and electronic
systems business in 1996, generating $3.6 billion of cash. Remaining 1996
divestiture cash proceeds resulted primarily from the sales of certain
non-strategic businesses, including Westinghouse Security Systems, the
residential security business; Wittnauer International, Inc., a marketer of
fine watches; WPRI,

                                       23
<PAGE>   24
a Providence, Rhode Island television station acquired with CBS; and an
environmental services business. During 1995, divestitures generated cash
proceeds of $683 million and included the sale of the Corporation's WCI
segment, an interest in MICROS, Aptus, and several smaller businesses. During
1994, the Corporation sold DCBU and WESCO, two radio stations, and two
non-strategic businesses for total cash proceeds of $1.5 billion.

The Corporation generated $41 million of cash in 1996 through the continued
liquidation of assets of Financial Services representing the majority of the
remaining real estate portfolio investments. Cash proceeds from portfolio
investment liquidations in 1995 and 1994 totalled $362 million and $323
million, respectively. The remaining Financial Services assets, which generally
consist of the leasing portfolio, are expected to liquidate in accordance with
their contractual terms.

The Corporation's total capital expenditures declined in 1996 primarily because
of major divestitures of capital intensive businesses. Capital expenditures for
Continuing Operations remained relatively stable over the three-year period at
approximately $150 million to $200 million per year.

In 1996 and 1995, the Corporation generated $44 million and $305 million of
cash, respectively, through the sales of investments held in two trusts that
were established to fund executive benefit plans. The trust investments were
replaced with the Corporation's common stock.

The Corporation expects to continue to liquidate assets of Discontinued
Operations as well as its non-strategic assets.

FINANCING ACTIVITIES

Cash used by financing activities during 1996 totalled $2.4 billion compared to
cash provided of $3.5 billion in 1995 and cash used of $2.2 billion in 1994.
Financing cash outflows in 1996 included $3.6 billion of debt prepaid upon the
sales of Knoll and the defense and electronic systems business. Also in 1996,
the Corporation prepaid outstanding debt under its $7.5 billion credit facility
and replaced it with borrowings under a new $5.5 billion credit facility with
more favorable terms (see Revolving Credit Facility). Cash provided by
financing activities in 1995 included $5.4 billion of borrowings to finance the
CBS acquisition.

Total borrowings under the Corporation's $5.5 billion revolving credit facility
were $3.3 billion at year-end 1996 (see Revolving Credit Facility). These
borrowings were subject to a floating interest rate of 6.6% at December 31,
1996, which was based on the London Interbank Offer Rate (LIBOR), plus a margin
based on the Corporation's senior unsecured debt rating and leverage.

Dividends paid in 1996 included approximately $47 million for Series C
preferred stock, with the remaining $80 million representing common stock
dividends.  Dividends paid in 1995 included approximately $47 million for
Series C preferred stock, $38 million for Series B preferred stock, which
converted to common stock in the third quarter of 1995, and approximately $74
million representing common stock dividends. Dividends paid during 1994
included those for the Series C preferred stock issued in March 1994, the
Series B preferred stock, and common stock.

In March 1994, the Corporation sold in a private placement depository shares
representing 3,600,000 shares of Series C preferred stock for net proceeds of
$505 million. These shares convert to common shares on or about June 1, 1997.
The Series B preferred stock, sold in June 1992, converted to 32,890,000 shares
of common stock on September 1, 1995.

As a result of the stock issued in conjunction with the Infinity acquisition
and the financing activities described above, the Corporation's net debt
decreased from 84% of consolidated net capitalization at December 31, 1995 to
50% at December 31, 1996.

At year-end 1996, the Corporation had a shelf registration statement for debt
securities with an unused amount of $400 million.

REVOLVING CREDIT FACILITY

On August 29, 1996, the Corporation completed a new bank credit agreement with
a total commitment of $5.5 billion. Of this commitment, $4.0 billion became
available on the closing date of the credit agreement. The balance became
available on December 31, 1996, the closing date of the Infinity acquisition.
The new agreement was structured as a revolving credit facility with a bullet
maturity in five years. It contains more favorable terms than the previous
seven-year $7.5 billion facility, including lower borrowing rates and the
elimination of collateral, subsidiary guarantees, and mandatory prepayment
provisions.

                                       24
<PAGE>   25
The unused capacity under the revolving credit facility equaled $2.2 billion at
December 31, 1996. Borrowing availability under the revolver is subject to
compliance with certain covenants, representations and warranties, including a
no material adverse change provision with respect to the Corporation taken as a
whole, restrictions on liens incurred, a maximum leverage ratio, minimum
interest coverage ratio, and minimum consolidated net worth. Certain of these
covenants become more restrictive over the term of the agreement. At December
31, 1996, the Corporation was in compliance with these covenants.

HEDGING ACTIVITIES

The Corporation enters into interest rate agreements to manage interest rate
risk associated with various debt instruments. No transactions were speculative
or leveraged. Given their nature, these agreements have been accounted for as
hedging transactions. The notional amount of interest rate exchange agreements
outstanding at December 31, 1996 was $130 million, with a weighted average
fixed rate paid of 8.91%, all of which was associated with long-term debt of
Continuing Operations. The average remaining maturity of these agreements was
slightly longer than two years.

The Corporation's credit exposure under these agreements is limited to the cost
of replacing an agreement in the event of non-performance by its counterparty.
To minimize this risk, the Corporation selects high credit quality
counterparties. At December 31, 1996, the Corporation had no net credit
exposure under its interest rate exchange agreements.

For 1996, outstanding interest rate exchange agreements resulted in a net
increase in interest expense of Continuing Operations of approximately $5
million with a de minimis impact on the average borrowing rate. In 1995,
outstanding interest rate agreements resulted in a net increase in the average
borrowing rate for Continuing Operations of 0.2% and a net decrease in the
average borrowing rate of Discontinued Operations of 0.2%. Corresponding
interest expense for 1995 increased approximately $6 million for Continuing
Operations and decreased approximately $1 million for Discontinued Operations.

The Corporation continually monitors its economic exposure to changes in
foreign exchange rates and enters into foreign exchange forward or option
contracts to hedge its transaction exposure when appropriate. As a result, the
Corporation's unhedged foreign exchange exposure is not significant.
Furthermore, changes in foreign exchange rates, whether favorable or
unfavorable, are not expected to have a significant impact on the Corporation's
financial results or operating activities.

With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52,
"Foreign Currency Translation," the combined total sales for those operations
were less than 0.5% of the Corporation's sales for 1996.

ENVIRONMENTAL MATTERS

Compliance with federal, state and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations and technology, the adequacy of
information available for individual sites, the extended time periods over
which site remediation occurs, and the identification of new sites. See note 17
to the financial statements.

In the second quarter of 1996, the Corporation and its external consultants
completed a study to evaluate the Corporation's environmental remediation
strategies. Based on the costs associated with the most probable alternative
remediation strategy for each of its approximately 90 sites, including the
sites located in Bloomington, Indiana, the Corporation has an accrued liability
of $466 million. This amount includes $175 million that was recognized in the
second quarter of 1996. Depending on the remediation alternatives ultimately
selected, the costs related to these sites could differ from the amounts
currently accrued. The accrued liability, measured in current dollars, includes
$345 million for site investigation and remediation and $121 million for
post-closure and monitoring activities. Management anticipates that the
majority of expenditures for site investigation and remediation will occur
during the next five to ten years. Expenditures for post-closure and monitoring
activities will be made over periods up to 30 years. The Corporation recognizes
changes in estimates as new remediation requirements are defined or as more
information becomes available.

                                       25
<PAGE>   26
Annual environmental costs include approximately $6 million for estimated
future environmental closure costs at operating sites and approximately $6
million related to current management of hazardous waste and pollutants.
Capital expenditures for environmental compliance, which totalled $8 million in
1996, may vary from year to year.

Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that
complying with existing government regulations will not materially impact the
Corporation's financial position, liquidity or results of operations.

LEGAL MATTERS

The Corporation is defending a number of lawsuits on various matters. See note
17 to the financial statements. The Corporation recorded special charges for
litigation matters during 1996 and 1995 of $486 million and $236 million,
respectively. These amounts represent management's best estimate of incremental
costs associated with potential settlements.

Since 1993, the Corporation has entered into agreements to resolve ten
litigation claims in connection with alleged tube degradation in steam
generators sold by the Corporation as components for nuclear steam supply
systems. These agreements generally require the Corporation to provide certain
products and services at prices discounted at varying rates. Certain of these
discounts will impact future operating results primarily over the next nine
years.

The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries. The Corporation was neither a manufacturer
nor a producer of asbestos and is oftentimes dismissed from these lawsuits on
this basis. In court actions resolved, the Corporation has prevailed in the
vast majority of these claims and has resolved others through settlement. The
Corporation is reimbursed for a substantial portion of its current costs and
settlements through its insurance carriers. The Corporation has provided for
its share of estimated costs associated with outstanding claims; however, it
cannot reasonably estimate costs for unasserted asbestos claims.

Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the Corporation's pending cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation has meritorious defenses to the litigation referenced in note
17 and that the Corporation has adequately provided for costs arising from
potential settlement of these matters when in the best interest of the
Corporation.  Management believes that the litigation should not have a
material adverse effect on the financial condition of the Corporation.


                                       26
<PAGE>   27
REPORT OF MANAGEMENT

The Corporation has prepared the consolidated financial statements and related
financial information included in this report. Management has the primary
responsibility for the financial statements and other financial information and
for ascertaining that the data fairly reflect the financial position, results
of operations, and cash flows of the Corporation. The financial statements were
prepared in accordance with generally accepted accounting principles
appropriate in the circumstances, and necessarily include amounts that are
based on best estimates and judgments with appropriate consideration given to
materiality. Financial information included elsewhere in this report is
presented on a basis consistent with the financial statements.

The Corporation maintains a system of internal accounting controls, supported
by adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Corporation. Limitations exist in any system of internal accounting
controls based on the recognition that the cost of the system should not exceed
the benefits derived. Westinghouse believes its system of internal accounting
controls, augmented by its corporate auditing function, appropriately balances
the cost/benefit relationship.


The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fair financial reporting. They
regularly evaluate elements of the internal control structure and perform such
tests and procedures as they deem necessary to express an opinion on the
fairness of the financial statements.

The Board of Directors pursues its responsibility for the Corporation's
financial statements through its Audit Review Committee composed of directors
who are not officers or employees of the Corporation. The Audit Review
Committee meets regularly with the independent auditors, management, and the
corporate auditors. The independent auditors and the corporate auditors have
direct access to the Audit Review Committee, with and without the presence of
management representatives, to discuss the scope and results of their audit
work and their comments on the adequacy of internal accounting controls and the
quality of financial reporting.

We believe that the Corporation's policies and procedures, including its system
of internal accounting controls, provide reasonable assurance that the
financial statements are prepared in accordance with the applicable securities
laws and with a corresponding standard of business conduct.

                                       27
<PAGE>   28
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF WESTINGHOUSE ELECTRIC CORPORATION

We have audited the accompanying consolidated balance sheet of Westinghouse
Electric Corporation and subsidiaries as of December 31, 1996, and the related
consolidated statements of income and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Westinghouse
Electric Corporation and subsidiaries as of December 31, 1996, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.

The 1996 consolidated financial statements have been restated as disclosed 
in note 24.

KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
January 29, 1997 except as to note 24, which is as of July 11, 1997.


REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF WESTINGHOUSE ELECTRIC CORPORATION

In our opinion, the accompanying consolidated financial statements appearing on
pages 29 through 58 of this Annual Report on Form 10-K/A Amendment No. 1 present
fairly, in all material respects, the financial position of Westinghouse
Electric Corporation and its subsidiaries at December 31, 1995, and the results
of their operations and their cash flows for each of the two years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Corporation's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of the Corporation and its subsidiaries for
any period subsequent to December 31, 1995.

The 1995 and 1994 consolidated financial statements have been restated as
disclosed in note 24.

Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 12, 1996 except for the restatements discussed in notes 1, 3, and 24, 
for which the dates are March 31, 1996, November 13, 1996, and July 11, 1997.

                                       28
<PAGE>   29
CONSOLIDATED STATEMENT OF INCOME (in millions except per-share amounts)
<TABLE>
<CAPTION>
            YEAR ENDED DECEMBER 31                                            1996       1995        1994
            ----------------------                                          --------   --------    --------
            <S>                                                             <C>        <C>         <C>
            Service sales                                                   $  5,204   $  2,398    $  2,084
            Product sales                                                      3,401      3,150       3,041
                                                                            --------   --------    --------
                  Sales of services and products                               8,605      5,548       5,125
                                                                            --------   --------    --------
            Cost of services sold                                             (3,015)    (1,412)     (1,193)
            Cost of products sold                                             (2,853)    (2,434)     (2,279)
                                                                            --------   --------    -------- 
                   Costs of services and products sold                        (5,868)    (3,846)     (3,472)
                                                                            --------   --------    -------- 
            Restructuring, litigation and other matters 
               (notes 1, 17 and 20)                                             (979)      (319)        (19)
            Marketing, administration and general expenses                    (2,406)    (1,323)     (1,273)
                                                                            --------   --------    -------- 
            Operating profit (loss)                                             (648)        60         361
                                                                            --------   --------    --------
            Other income and expenses, net (note 19)                             (86)       137        (285)
            Interest expense                                                    (456)      (236)       (134)
                                                                            --------   --------    -------- 
            Loss from Continuing Operations before income taxes
               and minority interest in income of consolidated                (1,190)       (39)        (58)
               subsidiaries
            Income tax benefit  (note 6)                                         423          6          30
            Minority interest in income of consolidated subsidiaries              (6)       (11)         (9)
                                                                            --------   --------    -------- 
            Loss from Continuing Operations                                     (773)       (44)        (37)
                                                                            --------   --------    -------- 
            Discontinued Operations, net of income taxes (notes 1 and 3):
              Income (loss) from operations                                      (57)       110          85
              Estimated gain (loss) on disposal of Discontinued Operations     1,018        (76)          -
                                                                            --------   --------    --------
            Income from Discontinued Operations                                  961         34          85
                                                                            --------   --------    --------
            Extraordinary item:
              Loss on early extinguishment of debt                               (93)         -           -
                                                                            --------   --------    --------
            Net income (loss)                                               $     95   $    (10)   $     48
                                                                            ========   =========   ========
            Earnings (loss) per common share (note 15):
              Continuing Operations                                         $  (1.74)  $   (.19)   $   (.23)
              Discontinued Operations                                           2.17        .08         .22
              Extraordinary item                                                (.21)         -           -
                                                                            --------   --------    --------
            Earnings (loss) per common share                                $    .22   $   (.11)   $   (.01)
                                                                            ========   ========    ======== 

            Cash dividends per common share                                 $    .20   $    .20    $    .20
                                                                            ========   ========    ========
</TABLE>

The Notes to the Financial Statements are an integral part of these financial
statements. Certain amounts have been restated as discussed in note 24.

                                       29
<PAGE>   30
CONSOLIDATED BALANCE SHEET (in millions)
<TABLE>
<CAPTION>
            AT DECEMBER 31                                                           1996        1995
            --------------                                                         ---------   --------
            <S>                                                                    <C>         <C>
            ASSETS:

              Cash and cash equivalents (note 1)                                   $    220    $    196
              Customer receivables (note 7)                                           1,561       1,431
              Inventories (note 8)                                                      783         730
              Uncompleted contracts costs over related billings (note 8)                686         542
              Program rights                                                            431         301
              Deferred income taxes (note 6)                                            817         587
              Prepaid and other current assets                                          289         257
                                                                                   --------    --------
              Total current assets                                                    4,787       4,044
              Plant and equipment, net (note 9)                                       1,866       1,908
              FCC licenses, net (note 10)                                             2,199       1,242
              Goodwill, net (note 10)                                                 8,776       5,244
              Other intangible and noncurrent assets (note 10)                        2,261       2,152
              Net assets of Discontinued Operations (note 3)                              -       1,950
                                                                                   --------    --------
            Total assets                                                           $ 19,889    $ 16,540
                                                                                   ========    ========

            LIABILITIES AND SHAREHOLDERS' EQUITY:

              Short-term debt (note 11)                                            $    497    $    306
              Current maturities of long-term debt (note 13)                              4         330
              Accounts payable                                                          887         796
              Uncompleted contracts billings over related costs (note 8)                334         318
              Other current liabilities (note 12)                                     2,578       2,112
                                                                                   --------    --------
              Total current liabilities                                               4,300       3,862
              Long-term debt (note 13)                                                5,149       7,226
              Pension liability (note 4)                                              1,069       1,426
              Other noncurrent liabilities (note 14)                                  3,619       2,573
                                                                                   --------    --------
            Total liabilities                                                        14,137      15,087
                                                                                   --------    --------
            Contingent liabilities and commitments (note 17)
            Minority interest in equity of consolidated subsidiaries                     10          11
            Shareholders' equity (note 15):
              Preferred stock, $1.00 par value (25 million shares authorized):
                Series C conversion preferred (4 million shares issued)                   4           4
              Common stock, $1.00 par value (1,100 million shares authorized,
                609 million and 426 million shares issued)                              609         426
              Capital in excess of par value                                          5,376       1,847
              Common stock held in treasury                                            (546)       (720)
              Minimum pension liability adjustment (note 4)                            (796)     (1,220)
              Cumulative foreign currency translation adjustments                        11         (11)
              Retained earnings                                                       1,084       1,116
                                                                                   --------    --------
            Total shareholders' equity                                                5,742       1,442
                                                                                   --------    --------
            Total liabilities and shareholders' equity                             $ 19,889    $ 16,540
                                                                                   ========    ========
</TABLE>

The Notes to the Financial Statements are an integral part of these financial
statements. Certain amounts have been restated as discussed in note 24.

                                       30
<PAGE>   31
CONSOLIDATED STATEMENT OF CASH FLOWS (in millions)
<TABLE>
<CAPTION>
                    YEAR ENDED DECEMBER 31                                          1996       1995      1994
                    ----------------------                                        ---------  --------  ---------
                    <S>                                                           <C>        <C>       <C>
                    Cash flows from operating activities of Continuing
                    Operations:
                     Loss from Continuing Operations                              $    (773) $    (44) $     (37)
                     Adjustments to reconcile loss from Continuing Operations
                         to net cash provided (used) by operating activities:
                       Depreciation and amortization                                    405       193        180
                       Pension settlement loss                                            -         -        308
                       Noncash restructuring charges                                     65         6          -
                       Losses (gains) on asset dispositions                             135      (114)       (11)
                       Other noncash provisions                                        (149)      212          -
                       Changes in assets and liabilities, net of effects of
                          acquisitions and divestitures of businesses:
                        Receivables, current and noncurrent                              38       215       (173)
                        Inventories                                                     (62)       46        (31)
                        Progress payments net of costs on uncompleted contracts        (128)     (282)      (218)
                        Accounts payable                                                 61       109        132
                        Deferred and current income taxes                               168       (35)      (263)
                        Program rights                                                 (148)        -          -
                        Other assets and liabilities                                    338       150        161
                                                                                  ---------  --------  ---------
                    Cash provided (used) by operating activities of Continuing
                         Operations                                                     (50)      456         48
                                                                                  ---------  --------  ---------
                    Cash provided (used) by operating activities of Discontinued
                         Operations (note 3)                                           (401)      237       (102)
                                                                                  ---------  --------  --------- 
                    Cash flows from investing activities:
                     Business acquisitions                                           (1,110)   (5,411)      (109)
                     Business divestitures                                            4,124       683      1,462
                     Liquidation of assets of Financial Services                         41       362        323
                     Asset fundings of Financial Services                                 -         -        (86)
                     Capital expenditures (note 21)                                    (206)     (290)      (259)
                     Asset liquidations of trust investments                             44       305          -
                     Other                                                                -        15         22
                                                                                  ---------  --------  ---------
                    Cash provided (used) by investing activities                      2,893    (4,336)     1,353
                                                                                  ---------  --------  ---------
                    Cash flows from financing activities:
                     Bank revolver borrowings                                        21,067     7,480      9,143
                     Bank revolver repayments                                       (18,122)   (8,294)   (11,079)
                     Net reduction in other short-term debt                            (403)     (416)      (599)
                     Repayments of long-term debt                                    (5,012)       (9)       (81)
                     Long-term borrowings                                                 -     5,009         16
                     Sale of equity securities                                            -         -        505
                     Treasury stock reissued                                            174        89         58
                     Debt issue costs                                                   (12)     (176)       (15)
                     Dividends paid                                                    (127)     (159)      (153)
                     Other                                                                -         1          2
                                                                                  ---------  --------  ---------
                    Cash provided (used) by financing activities                     (2,435)    3,525     (2,203)
                                                                                  ---------  --------  --------- 
                    Increase (decrease) in cash and cash equivalents                      7      (118)      (904)
                    Cash and cash equivalents at beginning of period         
                       (notes 1 and 3)                                                  226       344      1,248
                                                                                  ---------  --------  ---------
                    Cash and cash equivalents at end of period (notes 1 and 3)    $     233  $    226  $     344
                                                                                  =========  ========  =========
                    Supplemental disclosure of cash flow information:
                     Interest paid--Continuing Operations                         $     446  $    214  $     134
                     Interest paid--Discontinued Operations                              52       139        259
                                                                                  ----------  --------  ---------
                     Total interest paid                                          $     498  $    353  $     393
                                                                                  =========  ========  =========
                     Income taxes (refunded) paid                                 $     (34) $     61  $     123
                                                                                  =========  ========  =========
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements and include descriptions of noncash transactions. Certain amounts
have been restated as discussed in note 24.

                                       31
<PAGE>   32
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements include the accounts of Westinghouse
Electric Corporation (Westinghouse) and its subsidiary companies (together, the
Corporation) after elimination of intercompany accounts and transactions.
Investments in joint ventures and other companies in which the Corporation does
not control but has the ability to exercise significant management influence
over operating and financial policies are accounted for by the equity method.

Certain previously reported amounts have been reclassified to conform to the
1996 presentation.

SEPARATION PLAN

On November 13, 1996, the Corporation announced that the Board of Directors had
approved, subject to certain conditions, a plan to separate the Corporation's
industries and technology businesses from its media businesses. This separation
is expected to be effected by way of a tax-free dividend to shareholders,
forming a publicly-traded company to be called Westinghouse Electric Company
(WELCO). The plan also provides that Thermo King Corporation, Westinghouse's
transport temperature control company, will conduct a public offering of up to
20% of its common stock and will become a majority-owned subsidiary of WELCO.
If the separation is completed, shares of WELCO common stock will be
distributed on a pro rata basis to the shareholders of record of Westinghouse
common stock as of a date to be determined.

As currently contemplated, after the separation, Westinghouse (Media Company)
will consist primarily of CBS Inc., Group W Satellite Communications Company
and Infinity Broadcasting Corporation (Infinity), and WELCO will consist
primarily of Power Systems, Thermo King, and Government Operations. Also, as
currently contemplated, the Media Company will retain all debt obligations of
the current Westinghouse as well as the $1.5 billion tax net operating loss
carryforward, and WELCO will assume most of the unfunded pension obligation and
other non-debt obligations generated by the Corporation's industrial businesses
in earlier years. For segment financial information, see note 21 to the
financial statements.

Completion of the separation is subject to a number of conditions, including a
favorable ruling from the Internal Revenue Service that the transaction will
not be taxable for U.S. federal income tax purposes to Westinghouse or its
shareholders and the registration of the WELCO common stock under the
Securities Exchange Act of 1934.

There can be no assurance that the separation will occur or as to the related
timing. Furthermore, if the separation does occur, there can be no assurance
that all of the assets, liabilities and contractual obligations will be
transferred as currently contemplated or that changes will not be made to the
separation plan. See note 24(a) to the financial statements for a modification 
of the separation plan.

DISCONTINUED OPERATIONS

In November 1996, the Corporation adopted a plan to exit its Communication &
Information Systems (CISCO) segment, and in March 1996, adopted a plan to exit
its environmental services line of business included in its former Government &
Environmental Services segment. These businesses were reclassified as
Discontinued Operations in 1996.

In December 1995, the Corporation announced a plan to divest its defense and
electronic systems business and The Knoll Group (Knoll), its office furniture
unit. In July 1995, the Corporation sold WCI Communities, Inc. (WCI), its land
development subsidiary. The Corporation's defense and electronic systems
business represented a separate major line of business that comprised
approximately 90% of the former Electronic Systems segment. These businesses
were reclassified as Discontinued Operations in 1995.

The Corporation previously classified as Discontinued Operations its
Distribution and Control Business Unit (DCBU), Westinghouse Electric Supply
Company (WESCO) and its Financial Services business in conjunction with a 1992
plan to exit these businesses.

As a result, certain financial information previously issued has been restated
to give effect to the classification of these businesses as discontinued
operations in accordance with Accounting Principles Board (APB) Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." See note 3 to the financial statements.

REVENUE RECOGNITION

Sales are recorded primarily as products are shipped, services are rendered, or
advertisements are broadcast. The percentage-of-completion method of accounting
is used for major power generation projects with a cycle time in excess of one
year and major nuclear fuel and related equipment orders.

Costs to obtain contracts are expensed as incurred. Estimates of costs to
complete projects are reviewed periodically throughout the lives of the
contracts as events occur and as uncertainties are resolved. When current
contract estimates indicate a loss, provision is made for the entire loss,
which is charged against operations in the period in which such loss is
determined.

                                       32
<PAGE>   33
AMORTIZATION OF INTANGIBLE ASSETS

Identifiable intangible assets related to the Corporation's media businesses
primarily include Federal Communications Commission (FCC) licenses, which are
limited as to availability and have historically appreciated in value with the
passage of time. Identifiable intangible assets and goodwill are amortized
using the straight-line method over their estimated lives but not in excess of
40 years.

For the Corporation's industries and technology businesses, goodwill and other
acquired intangible assets are amortized using the straight-line method over
their estimated lives but not in excess of 40 years for assets acquired prior
to January 1, 1994 and not in excess of 15 years for assets acquired after
December 31, 1993.

CASH AND CASH EQUIVALENTS

The Corporation considers all investment securities with a maturity of three
months or less when acquired to be cash equivalents. All cash and temporary
investments are placed with high credit quality financial institutions, and the
amount of credit exposure to any one financial institution is limited. At
December 31, 1996 and 1995, cash and cash equivalents included restricted funds
of $11 million and $20 million, respectively.

INVENTORIES

Inventories are stated at the lower of standard cost, which approximates actual
cost on a first-in, first-out (FIFO) basis or market. The elements of cost
included in inventories are direct labor, direct material, and certain
overheads including factory depreciation. Long-term contracts in process
include costs incurred plus estimated profits on contracts accounted for using
the percentage-of-completion method.

PLANT AND EQUIPMENT

Plant and equipment assets are recorded at cost and depreciated over their
estimated useful lives. Depreciation is generally computed on the straight-line
method based on useful lives of 27.5 to 60 years for buildings, 20 years for
land improvements, 3 to 10 years for office equipment, and 3 to 12 years for
machinery and transportation equipment. Leasehold improvements are amortized
over the terms of the respective leases. Expenditures for additions and
improvements are capitalized, and costs for repairs and maintenance are charged
to operations as incurred. The Corporation limits capitalization of newly
acquired assets to those assets with cost in excess of $1,500.


PROGRAM RIGHTS

Costs incurred in connection with the production of, or the purchase of rights
to, programs to be broadcast within one year are classified as current assets
while costs of those programs to be broadcast subsequently are considered
noncurrent. Program costs are amortized as the respective programs are
broadcast. Program rights are carried at the lower of cost less accumulated
amortization or estimated net realizable value.

LEGAL COSTS

When estimating the amount of probable loss to be recognized in connection with
litigation matters, the Corporation includes estimated external legal costs
through the date of settlement. All other legal costs are recognized in the
period in which they are incurred.

ENVIRONMENTAL COSTS

The Corporation expenses or capitalizes, if appropriate under the Corporation's
capitalization policy, environmental expenditures that relate to current
operations. Expenditures that do not extend the service lives of assets or
otherwise benefit future years are expensed. The Corporation records
liabilities when environmental assessments or remedial efforts are probable,
and the costs can be reasonably estimated. Such estimates are adjusted if
necessary as new remediation requirements are defined or as more information
becomes available.

The Corporation accrues over their estimated remaining useful lives the
anticipated future costs of environmental closure activities and
decommissioning of nuclear licensed sites.

OFF-BALANCE SHEET HEDGING

DEBT INSTRUMENTS

The Corporation has entered into interest rate and currency exchange agreements
to manage exposure to fluctuations in interest and foreign exchange rates.
Interest rate exchange agreements generally involve the exchange of interest
payments without exchange of the underlying principal amounts. The Corporation
does not enter into speculative or leveraged derivative transactions.

The differentials paid or received on interest rate swap agreements are accrued
and recognized as adjustments to interest expense. Gains and losses realized
upon early settlement of these agreements are deferred and amortized to
interest expense over the term of the original agreement if the underlying
hedged debt instrument remains outstanding or expensed immediately if the
underlying hedged instrument is settled. At December 31, 1996 and 1995, the
Corporation had no deferred gains or losses from terminated interest rate swaps
recorded on its balance sheet.

                                       33
<PAGE>   34
FOREIGN EXCHANGE

The Corporation's foreign exchange policy includes matching purchases and sales
in national currencies when possible and hedging unmatched transactions when
appropriate. In accordance with this policy, the Corporation enters into
various foreign exchange agreements to hedge receivables or payables. These
agreements may be either foreign exchange forward or option contracts.

Gains and losses on foreign currency contracts offset gains and losses
resulting from currency fluctuations inherent in the underlying transactions.
Gains and losses on contracts that hedge specific foreign currency commitments
are deferred and recognized in net income in the period in which the
transaction is consummated. The notional value of these contracts at December
31, 1996 was $149 million.

In limited cases, foreign exchange contracts may be used to hedge anticipated
cash flows. Realized and unrealized gains and losses on these contracts are
included in the determination of net income. The notional value of these
contracts at December 31, 1996 was $22 million.

EXTRAORDINARY ITEM

In 1996, the Corporation extinguished prior to maturity $6.8 billion of debt
under the then-existing $7.5 billion credit facility. These prepayments
represented all outstanding borrowings under this facility. As a result of the
early extinguishment of debt and the write-off of related debt issue costs, the
Corporation recognized an extraordinary loss of $93 million, net of a tax
benefit of $60 million, in 1996. See notes 11 and 13 to the financial
statements.

ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. On an ongoing basis,
management reviews its estimates, including those related to litigation,
environmental liabilities, contracts, pensions, and Discontinued Operations,
based on currently available information. Changes in facts and circumstances
may result in revised estimates.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

During the first quarter of 1996, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS 121 did not have a material effect on the results of Continuing
Operations.

Subsequent to the acquisition of an intangible or other long-lived asset, the
Corporation continually evaluates whether later events and circumstances
indicate the remaining estimated useful life of that asset may warrant revision
or that the remaining carrying value of such an asset may not be recoverable.
If definitive cash flows are not available for a specific intangible or other
long-lived asset, the Corporation evaluates recoverability of the specific
business to which the asset relates. When factors indicate that an intangible
or other long-lived asset should be evaluated for possible impairment, the
Corporation uses an estimate of the related asset's undiscounted future cash
flows over the remaining life of that asset in measuring recoverability. If
such an analysis indicates that impairment has in fact occurred, the
Corporation writes down the book value of the intangible or other long-lived
asset to its fair value.

STOCK-BASED COMPENSATION

On January 1, 1996, the Corporation adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS 123 allows entities to continue to measure
compensation cost for stock-based awards using the intrinsic value based method
of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and to provide pro forma net income and pro forma earnings per
share disclosures as if the fair value based method defined in SFAS 123 had
been applied. The Corporation has elected to continue to apply the provisions
of APB 25 and provide the pro forma disclosure provisions of SFAS 123. See note
16 to the financial statements.

NOTE 2: ACQUISITIONS

On June 20, 1996, the Corporation executed a merger agreement with Infinity,
whereby each issued and outstanding share of Infinity common stock was to be
converted into 1.71 shares of Westinghouse common stock.

The acquisition was consummated on December 31, 1996, and was accounted for
under the purchase method. Accordingly, the purchase price was allocated to
assets

                                       34
<PAGE>   35
acquired and liabilities assumed based on their estimated fair values as of the
date of acquisition. The purchase price of $4.7 billion includes $3.8 billion
of equity and $.9 billion of debt. The equity includes the issuance of 183
million shares of Westinghouse common stock at a value of $18.875 per share,
based on the closing price of the stock on June 19, 1996 (the last trading day
prior to the execution of the merger agreement), the conversion of Infinity
options into options to acquire approximately 22 million Westinghouse common
shares based on the fair value of the options, and transaction costs. The debt
represents $936 million of Infinity debt that Westinghouse repaid immediately
prior to closing.

The excess of the consideration paid over the estimated fair value of the net
assets acquired, totalling $3.6 billion, was recorded as goodwill and is being
amortized on a straight-line basis over 40 years.

On November 24, 1995, pursuant to the terms of a merger agreement, the
Corporation acquired CBS Inc. (CBS) for a purchase price of approximately $5.4
billion. The acquisition was financed by borrowings under a $7.5 billion credit
agreement executed in September 1995.

This acquisition was accounted for under the purchase method. The excess of the
consideration paid over the estimated fair value of net assets acquired,
totalling $4.8 billion, was recorded as goodwill and is being amortized on a
straight-line basis over 40 years.

The estimated fair values of assets acquired and liabilities assumed are
summarized in the table below:

FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
 (in millions)
<TABLE>
<CAPTION>
                                      INFINITY              CBS
                                  AT DEC. 31, 1996    AT NOV. 24, 1995
                                  ----------------    ----------------
<S>                                    <C>               <C>
Receivables                            $   180           $   643
Program rights                               -               301
Investments                                107               233
Assets held for sale                        70                 -
Plant and equipment                         39               777
Identifiable intangible assets:
         FCC licenses                      996               994
         Film library and other            277               162
Goodwill                                 3,630             4,794
Other assets                                31                25
Liabilities for talent,
program rights and similar contracts         -              (716)
Debt                                      (149)             (850)
Deferred income taxes                     (328)             (270)
Pension, postretirement and
    postemployment benefits                  -              (244)
Accrued restructuring costs                  -              (100)
Other liabilities                         (146)             (398)
                                       -------           ------- 
Total purchase price                   $ 4,707           $ 5,351
                                       =======           =======
</TABLE>


The Corporation's Consolidated Statement of Income for the years ended December
31, 1996 and 1995 include the operating results of CBS from November 24, 1995.
The operating results of Infinity will be included beginning January 1, 1997.
The following unaudited pro forma information combines the consolidated results
of operations of the Corporation with those of CBS and Infinity as if these
acquisitions had occurred at the beginning of 1995. The pro forma results give
effect to certain purchase accounting adjustments, including additional
depreciation expense resulting from a step-up in the basis of fixed assets,
additional amortization expense from goodwill and other identified intangible
assets, increased interest expense from acquisition debt, related income tax
effects, and the issuance of additional shares in connection with the Infinity
acquisition.

PRO FORMA RESULTS (Unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31                  1996          1995
----------------------                  ----          ----
<S>                                   <C>           <C>
Sales                                 $ 9,356       $ 9,235
Interest expense                         (537)         (814)
Loss from Continuing Operations          (791)         (573)
Loss per common share--
     Continuing Operations              (1.24)        (1.01)
</TABLE>

This pro forma financial information is presented for comparative purposes only
and is not necessarily indicative of the operating results that actually would
have occurred had the CBS and Infinity acquisitions been consummated on January
1, 1995. In addition, these results are not intended to be a projection of
future results and do not reflect any synergies that might be achieved from
combined operations.

NOTE 3: DISCONTINUED OPERATIONS

In November 1996, the Corporation adopted a plan to exit its CISCO segment. The
sale of the residential security business, the largest component of this
segment, was completed in December 1996 for approximately $425 million,
including the assumption of certain liabilities by the buyer. The gain realized
on this sale was offset by estimated losses for disposal of other businesses
comprising this segment as well as additional estimated losses for other
components of Discontinued Operations.

In March 1996, the Corporation adopted a plan to exit its environmental
services line of business. During the first quarter of 1996, the Corporation
recorded an after-tax charge of $146 million for the estimated loss on
disposal. In December 1996, an additional after-tax loss of approximately $100
million for disposal of these businesses was recognized for additional expected
divestiture costs but was offset by gains related to other components of
Discontinued Operations.

                                       35
<PAGE>   36
In December 1995, the Corporation announced its intention to sell Knoll and its
defense and electronic systems business and use the proceeds to reduce the debt
incurred for the acquisition of CBS. During 1996, the Corporation completed the
sales of these businesses and recognized a combined after-tax gain of $1.2
billion. The cash proceeds from these transactions, which totalled $3.6
billion, were used to repay debt of Continuing Operations. In addition, the
buyer of the Corporation's defense and electronic systems business assumed
certain pension and postretirement benefit liabilities associated with the
active employees of the business.

In July 1995, the Corporation sold WCI, its land development business, for $430
million of cash and retained approximately $125 million of mortgage notes
receivable with maturities through 1997 and other securities. In addition, the
buyer assumed $19 million of debt. Concurrently, the Corporation invested $48
million for a 24% equity interest in the new business. The Corporation is
actively pursuing the divestiture of this investment. The net cash proceeds
from the divestiture of WCI were used to repay debt of Discontinued Operations.
A net loss of $76 million was recognized on the disposal.

In November 1992, the Corporation announced a plan that included exiting
Financial Services through the disposition of its $9 billion asset portfolios
and the sales of DCBU, its distribution and control business, and WESCO, its
electric supply business. The disposition of Financial Services assets involved
the sale of the real estate and corporate finance portfolios over a three-year
period and the liquidation of the leasing portfolio in accordance with
contractual terms, which extend through 2015. The sales of DCBU and WESCO for
proceeds in excess of $1.1 billion and approximately $340 million,
respectively, were completed in 1994. Liquidation of the real estate and
corporate finance portfolios of Financial Services has been essentially
completed.

The assets and liabilities of Discontinued Operations have been separately
classified on the balance sheet as net assets of Discontinued Operations. A
summary of these assets and liabilities follows:

NET ASSETS OF DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                               1996       1995
--------------------                       -------    ------
<S>                                        <C>        <C>
Assets:
Cash and cash equivalents                  $    13    $    30
Customer receivables                            90        512
Inventories                                     32        268
Uncompleted contracts costs
    over related billings                        -        192
Plant and equipment, net                        96        677
Portfolio investments                          845        901
Deferred income taxes (note 6)                   -        423
Other assets                                   342        955
                                           -------    -------
Total assets--Discontinued Operations        1,418      3,958
                                           -------    -------

Liabilities:
Accounts payable                                79        206
Uncompleted contracts billings
     over related costs                         10        125
Other current liabilities                       49        440
Short-term debt (note 11)                        5         84
Current maturities of long-term debt             2        265
(note 13)
Liability for estimated loss on disposal       672        212
Deferred income taxes (note 6)                 180          -
Postretirement benefits liability              
(note 5)                                         -        108
Pension liability (note 4)                       -        398
Other noncurrent liabilities                     4         13
Long-term debt (note 13)                       417        157
                                           -------    -------
Total liabilities--Discontinued              1,418      2,008
                                           -------    -------
Operations
Net assets of Discontinued Operations      $     -    $ 1,950
                                           =======    =======
</TABLE>

At December 31, 1996, the assets and liabilities of Discontinued Operations
included those related to the remaining operating businesses from the CISCO
segment and the environmental services business, the remaining securities from
WCI, other miscellaneous securities, the leasing portfolio, and deferred income
taxes. Liabilities also include debt and the estimated losses and divestiture
costs associated with all Discontinued Operations, including estimated results
of operations through divestiture.

Except for the leasing portfolio, the assets generally are expected to be
divested within the next year. Deferred income taxes, which result from
temporary differences between book and tax bases of the assets and liabilities
of Discontinued Operations, generally will be transferred to Continuing
Operations upon reversal and will not result in the receipt or payment of cash
by Discontinued Operations. Liabilities associated with divestitures are

                                       36
<PAGE>   37
expected to be satisfied over the next several years. Debt will be repaid using
cash proceeds from the liquidation of assets of Discontinued Operations. Cash
proceeds in excess of those required to repay the debt and satisfy the
divestiture liabilities of Discontinued Operations will be transferred to
Continuing Operations.

Management believes that the net proceeds anticipated from the continued
liquidation of assets of Discontinued Operations will be sufficient to fund the
liabilities of Discontinued Operations, including the repayment of its debt.
Management further believes that the liability for the estimated loss on
disposal of Discontinued Operations is adequate to cover future operating
costs, estimated losses, and the remaining divestiture costs associated with
all discontinued businesses. The adequacy of this liability is evaluated each
quarter.

INVENTORIES

Inventories of Discontinued Operations consisted of the following:

INVENTORIES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                      1996       1995
--------------                      ----       ----
<S>                                <C>       <C>
Raw materials                      $   6     $   47
Work in process                        4        283
Finished goods                        16         38
                                   -----     ------
                                      26        368
Long-term contracts in process         2        269
Progress payments to                   3         53
subcontractors
Recoverable engineering and
     development costs                 5        214
                                   -----     ------
                                      36        904
Inventoried costs related to
contracts
     with progress billing terms      (4)      (636)
                                   -----     ------ 
Inventories                        $  32     $  268
                                   =====     ======
</TABLE>

COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
 (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                      1996       1995
--------------                      ----       ----
<S>                                  <C>       <C>
Costs included in inventories        $  -      $ 571
Progress billings on contracts          -       (379)
                                     ----      ----- 
Uncompleted contracts costs
     over related billings           $  -      $ 192
                                     ----      -----

Progress billings on contracts       $ 14      $ 190
Costs included in inventories          (4)       (65)
                                     ----      ----- 
Uncompleted contracts billings
     over related costs              $ 10      $ 125
                                     ====      =====
</TABLE>

Substantially all inventories at December 31, 1995 related to long-term
contracts. Inventoried costs do not exceed realizable values.

PORTFOLIO INVESTMENTS

Portfolio investments of $845 million at December 31, 1996 included $800
million of leasing receivables and $43 million of investments in leasing
partnerships.  At December 31, 1995, portfolio investments of $901 million
included $820 million of leasing receivables, $45 million of investments in
leasing partnerships, and $34 million of real estate properties. Other
portfolio investments totalled $2 million at December 31, 1996 and 1995.

Leasing receivables consist of direct financing and leveraged leases. At
December 31, 1996 and 1995, 84% related to aircraft and 16% related to
co-generation facilities. The components of the Corporation's net investment in
leases at December 31, 1996 and 1995 are as follows:

NET INVESTMENT IN LEASES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                              1996      1995
--------------                              ----      ----  
<S>                                       <C>       <C>
Rental payments receivable (net of
     principal and interest on              
     nonrecourse loans)                   $  737    $  775
Estimated residual value of leased          
assets                                       366       373
Unearned and deferred income                (303)     (328)
                                          ------    ------ 
Investment in leases (leasing                800       820
receivables)
Deferred taxes and deferred investment
     tax credits arising from leases        (575)     (584)
                                          ------    ------ 
Investment in leases, net                 $  225    $  236
                                          ======    ======
</TABLE>

At December 31, 1996 and 1995, deferred investment tax credits totalled $21
million and $23 million, respectively. These deferred investment tax credits
are amortized over the contractual terms of the respective leases.

Contractual maturities for the Corporation's leasing rental payments receivable
at December 31, 1996 are as follows:

CONTRACTUAL MATURITIES FOR LEASING RENTAL PAYMENTS RECEIVABLE (in millions) 
AT DECEMBER 31, 1996
--------------------
                                YEAR OF MATURITY
<TABLE>
<CAPTION>
                                                          AFTER
               TOTAL   1997   1998   1999   2000   2001   2001
               -----   ----   ----   ----   ----   ----   ----
    <S>        <C>     <C>    <C>    <C>    <C>    <C>    <C>
    Leasing    $737    $43     $45    $44    $58   $63    $484
</TABLE>

In accordance with APB 30, the consolidated financial statements reflect the
operating results of Discontinued Operations separately from Continuing
Operations. Interest expense on Continuing Operations debt totalling $8
million, $48 million, and $37 million for 1996, 1995 and 1994, respectively,
was allocated to Discontinued Operations based on the ratio of the net assets
of Knoll and the defense and electronic systems business to the sum of total
consolidated net assets plus consolidated debt.  Summarized operating results
of Discontinued Operations appear on the following page:

                                       37
<PAGE>   38
OPERATING RESULTS OF DISCONTINUED OPERATIONS - 1996 AND 1995 MEASUREMENT DATES
(in millions)
<TABLE>
<CAPTION>
                                                                                       DEFENSE &
                                                          ENVIRONMENTAL               ELECTRONIC
                                                 CISCO      SERVICES        WCI        SYSTEMS        KNOLL     TOTAL
                                                 -----      --------        ---        -------        -----     -----
 <S>                                             <C>        <C>            <C>       <C>            <C>          <C>
 YEAR ENDED DECEMBER 31, 1996
 Sales of products and services                  $ 337      $ 237          $   -     $   262        $  90        $   926
 Loss before income taxes                          (77)      (101)             -         (19)         (59)          (256)
 Income tax benefit (expense)                        7         33              -           -           (4)            36
 Net loss prior to measurement date                (46)       (11)             -           -            -            (57)
 Operating losses after measurement date
 charged to liability for estimated loss 
  on disposal                                      (24)       (57)             -         (19)         (63)          (163)

 YEAR ENDED DECEMBER 31, 1995
 Sales of products and services                  $ 361      $ 299          $ 108     $ 2,549        $ 621        $ 3,938
 Income (loss) before income taxes                  11        (52)            23         163           30            175
 Income tax benefit (expense)                       (4)        20             (8)        (57)         (16)           (65)
 Net income (loss) prior to measurement date         7        (32)            15         106           14            110

 YEAR ENDED DECEMBER 31, 1994
 Sales of products and services                  $ 314      $ 335          $ 248     $ 2,189        $ 562        $ 3,648
 Income (loss) before income taxes                  13        (20)            71         187          (84)           167
 Income tax benefit (expense)                       (6)         8            (26)        (68)          10            (82)
 Net income (loss) prior to measurement date         7        (12)            45         119          (74)            85
</TABLE>

OPERATING RESULTS OF DISCONTINUED OPERATIONS--NOVEMBER 1992 MEASUREMENT DATE
(in millions)
<TABLE>
<CAPTION>
                                FINANCIAL     DCBU &
                                 SERVICES      WESCO      TOTAL
                                 --------      -----      -----
    <S>                             <C>         <C>       <C>
    YEAR ENDED DECEMBER 31, 1996
    Sales of products and           $   26      $         $   26
      services
    Net loss                           (16)         -        (16)

    YEAR ENDED DECEMBER 31, 1995
    Sales of products and           $   31      $   -     $   31
      services
    Net loss                           (52)         -        (52)

    YEAR ENDED DECEMBER 31, 1994
    Sales of products and           $   41      $ 319     $  360
      services
    Net income (loss)                 (204)         4       (200)
</TABLE>


Operating cash flows from Discontinued Operations are presented separately from
operating cash flows from Continuing Operations in the consolidated financial
statements. Total operating cash flows from Discontinued Operations consist of
the following:

CASH FLOWS FROM OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
         YEAR ENDED DECEMBER 31      1996     1995        1994
         ----------------------      ----     ----        ----
    <S>                            <C>       <C>        <C>
    Financial Services             $    3    $  (81)    $ (187)
    DCBU and WESCO                      -         -       (170)
    WCI                                 -        18        113
    Knoll and Defense and
      Electronic Systems             (328)      306        167
    Environmental Services
      and CISCO                       (76)       (6)       (25)
                                   ------    ------     ------ 
    Cash provided (used) by
      operating activities         $ (401)   $  237     $ (102)
                                   ======    ======     ====== 
</TABLE>

The cash flows presented above include cash flows from the operations of the
businesses as well as payments for disposition-related costs.

                                       38
<PAGE>   39



NOTE 4: PENSIONS

The Corporation has a number of defined benefit pension plans covering
substantially all employees. Most plan benefits are based on either years of
service and compensation levels at the time of retirement or a formula based on
career earnings. Pension benefits are paid primarily from trusts funded by the
Corporation and employee contributions. The Corporation funds its qualified
U.S.  pension plans at amounts equal to or greater than the minimum funding
requirements of the Employee Retirement Income Security Act of 1974.
Substantially all plan assets are invested in equity and fixed income
securities. The Corporation also participates in various multi-employer,
union-administered defined benefit plans that cover certain broadcast employees
as a result of the acquisition of CBS. Pension expense related to these plans
for 1996 was $10 million and for 1995 was not material.

NET PERIODIC PENSION COST (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31              1996     1995     1994
-------------------------------   -------  -------   ------
<S>                               <C>     <C>        <C>
Service cost                      $   70   $   53    $   79
Interest cost on projected
      benefit obligation             371      391       404
Amortization of unrecognized
      net obligation                  25       35        36
Amortization of unrecognized
       prior service cost
       (benefit)                      (7)     (11)        6
Amortization of unrecognized
       net loss                      108       68       112
                                  ------   ------    ------
                                     567      536       637
                                  ------   ------    ------
Return on plan assets:
       Actual return on plan
       assets                       (437)    (584)      (18)
       Deferred gain (loss)           90      245      (385)
                                  ------   ------    ------ 
Recognized return on plan assets    (347)    (339)     (403)
                                  ------   ------    ------ 
Net periodic pension cost         $  220   $  197    $  234
                                  ======   ======    ======
</TABLE>


The Corporation's restructuring activities contributed to a high level of
lump-sum cash distributions from the Corporation's pension fund during 1994.
The magnitude of these cash distributions required that the Corporation apply
the provisions of SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits,"
and recognize a settlement loss of $308 million in 1994. This noncash charge to
income represents the pro rata portion of unrecognized losses associated with
the pension obligation that was settled. The recognition of this settlement
loss in 1994 reduced the amortization of unrecognized net loss included in net
periodic pension cost in subsequent years.

SIGNIFICANT PENSION PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
                                    1996     1995      1994
                                  -------- --------  ------
<S>                                  <C>      <C>       <C>
Discount rate:
       Periodic pension cost         6.75%     8.5%     7.25%
       Pension benefit obligation    7.75%    6.75%      8.5%
Compensation increase rate              4%       4%        4%
Long-term rate of return
       on plan assets                 9.5%    9.75%     9.75%
</TABLE>

Based on the requirements of SFAS No. 87, "Employers' Accounting for Pensions,"
the Corporation adjusts the discount rate to reflect current and expected-to-be
available interest rates on high quality fixed income investments at the end of
each year.

The table on the following page sets forth the funded status of the defined
benefit plans and amounts recognized in the Corporation's balance sheet at
December 31, 1996 and 1995:


                                       39
<PAGE>   40

<TABLE>
<CAPTION>
FUNDED STATUS - PENSION PLANS (in millions)
AT DECEMBER 31                                                      1996                                       1995
-------------------------------------------           ----------------------------------       -------------------------------------

                                                      ASSETS EXCEEDED    ACCUMULATED           ASSETS EXCEEDED       ACCUMULATED
                                                      ACCUMULATED        BENEFITS              EXCEEDED              BENEFITS
                                                      BENEFITS           EXCEEDED ASSETS       ACCUMULATED           EXCEEDED ASSETS
<S>                                                      <C>                 <C>                  <C>                   <C>
Actuarial present value of benefit obligation:
    Vested                                               $(693)              $(3,875)             $  (561)              $(4,944)
    Nonvested                                              (47)                 (265)                 (31)                 (328)
                                                         -----               -------              -------               ------- 
Accumulated benefit obligation                            (740)               (4,140)                (592)               (5,272)
Effect of projected future compensation levels            (116)                 (198)                (122)                 (261)
                                                         -----               -------              -------               ------- 
Projected benefit obligation for service rendered
  to date                                                 (856)               (4,338)                (714)               (5,533)
Plan assets at fair value                                  879                 3,051                  730                 3,407
                                                         -----               -------              -------               -------
Projected benefit obligation in excess of plan assets       23                (1,287)                  16                (2,126)
Unrecognized net (gain) loss                                (1)                1,402                   25                 2,120
Prior service cost (benefit) not yet recognized in
  net periodic pension cost                                  9                   (86)                   -                   (95)
Unrecognized net (asset) obligation                        (11)                  128                    -                   161
                                                         -----               -------              -------               -------
Prepaid pension cost                                        20                   157                   41                    60
Minimum pension liability                                    -                (1,246)                   -                (1,925)
                                                         -----               -------              -------               ------- 
Pension asset (liability) included in consolidated
  balance sheet                                          $  20               $(1,089)             $    41               $(1,865)
                                                         =====               =======              =======               =======
</TABLE>

At December 31, 1996 and 1995, included in the balance sheet of Continuing and
Discontinued Operations are the following pension assets and liabilities:

BALANCE SHEET STATUS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                  1996                       1995         
--------------          ---------------------     ----------------------
                           NET                       NET
                         PENSION    INTANGIBLE     PENSION    INTANGIBLE
                        LIABILITY      ASSET      LIABILITY      ASSET
<S>                       <C>          <C>        <C>            <C>
Continuing Operations     $(1,069)     $ 40       $(1,426)       $63
Discontinued Operations         -         -          (398)         3
                          -------      ----       -------        ---
Total                     $(1,069)     $ 40       $(1,824)       $66
                          =======      ====       =======        ===
</TABLE>

Included in plan assets at December 31, 1996 are 5,612,600 shares of the
Corporation's common stock having a market value of $112 million. Dividends
paid by the Corporation during 1996 on shares held by the pension fund totalled
$1 million.

During 1996 and 1995, respectively, the Corporation contributed $250 million
and $315 million of cash to its pension plans.

The accumulated benefit obligation in excess of assets at December 31, 1996
decreased $776 million compared to December 31, 1995. This decrease represents
the net effect of numerous factors but was driven primarily by the change in
the discount rate assumption from 6.75% to 7.75% and by the sale of the
Corporation's defense and electronic systems business.

The Corporation sponsors various non-qualified supplemental pension plans that
provide additional benefits to certain employees and are paid from the
Corporation's assets held in rabbi trusts. For financial reporting purposes,
these plans are treated as non-funded pension plans. The unfunded accumulated
benefit obligation under these plans included in the table above at December
31, 1996 and 1995 was $260 million and $286 million, respectively.

For financial reporting purposes, a pension plan is considered unfunded when
the fair value of plan assets is less than the accumulated benefit obligation.
When that is the case, a minimum pension liability is recognized for the sum of
the unfunded amount plus any prepaid pension cost. In recognizing such a
liability, an intangible asset is usually recorded up to the sum of the prior
service cost not yet recognized and the unrecognized transition obligation.
When the liability to be recognized is greater than the intangible asset limit,
a charge is made to shareholders' equity for the difference, net of any tax
effects.

At December 31, 1996, a minimum pension liability of $1,246 million was
recognized for the sum of the unfunded amount of $1,089 million plus the
prepaid pension cost of $157 million. An intangible asset of $40 million and a
charge to shareholders' equity of $1,206 million, which was reduced to $796
million due to deferred tax effects of $410 million, offset the pension
liability. As a result of the year-end 1996 remeasurement, shareholders' equity
was increased by $424 million from December 31, 1995.

At December 31, 1995, a minimum pension liability of $1,925 million was
recognized for the sum of the unfunded amount of $1,865 million plus the
prepaid pension cost of $60 million. An intangible asset of $66 million and a
charge to shareholders' equity of $1,859 million, which was reduced to $1,220
million due to deferred tax effects of $639 million, offset the pension
liability. As a result of the year-end 1995 remeasurement, shareholders' equity
was decreased by $258 million from December 31, 1994.

                                       40
<PAGE>   41



NOTE 5: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, AND POSTEMPLOYMENT
BENEFITS

The Corporation has postretirement plans that provide defined medical, dental
and life insurance benefits for eligible retirees and dependents.

The components of net periodic postretirement benefit cost follow:

NET PERIODIC POSTRETIREMENT BENEFIT COST (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31       1996      1995      1994
-------------------------------  ------    ------    -----
<S>                              <C>       <C>       <C>
Service cost                     $   11    $   13    $   20
Interest cost on accumulated
 postretirement benefit
 obligation                          97       100        93
Amortization of unrecognized
 net (gain) loss                      4        (4)        4
Recognized return on plan
 assets                              (5)       (1)       (1)
                                 ------    ------    ------
Net periodic postretirement
 benefit cost                    $  107    $  108    $  116
                                 ======    ======    ======
</TABLE>

The assumptions used to develop the net periodic postretirement benefit cost
and the present value of benefit obligations are shown below:

SIGNIFICANT POSTRETIREMENT BENEFIT PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
     AT DECEMBER 31                 1996      1995     1994
----------------------------        ----      ----     ----
<S>                                 <C>       <C>      <C>
Discount rate                       7.75%     6.75%     8.5%
Health care cost trend rates          10%*    10.5%*     11%*
Compensation increase rate             4%        4%       4%
Long-term rate of return
 on plan assets                        7%        7%       7%
</TABLE>

*At December 31, 1996, the rate was assumed to decrease ratably to 6% in 2004,
    decrease to 5.75% in 2005 and remain at that level thereafter. At December
    31, 1995, the rate was assumed to decrease ratably to 5% in 2006, decrease
    to 4.75% in 2007 and remain at that level thereafter. At December 31, 1994,
    the rate was assumed to decrease ratably to 6.5% in 2003 and remain at that
    level thereafter.

Net periodic postretirement benefit cost is determined using the assumptions as
of the beginning of the year. The funded status is determined using the
assumptions as of the end of the year.

The funded status and amounts recognized in the Corporation's balance sheet at
December 31, 1996 and 1995 were as follows:

FUNDED STATUS--POSTRETIREMENT BENEFITS (in millions)
<TABLE>
<CAPTION>
          AT DECEMBER 31                  1996        1995
----------------------------------      --------    ------
<S>                                                 <C>
Accumulated postretirement 
 benefit obligation:
 Retirees                               $ (1,099)   $ (1,215)
 Fully eligible, active plan
   participants                              (61)        (40)
 Other active plan participants             (245)       (352)
                                        --------    -------- 
Total accumulated postretirement
   benefit obligation                     (1,405)     (1,607)
Unrecognized net loss                        152         257
Unrecognized prior service benefit           (33)        (45)
Plan assets at fair value                     68          72
                                        --------    --------
Accrued postretirement benefit cost     $ (1,218)   $ (1,323)
                                        ========    ======== 
</TABLE>

The accrued postretirement benefit cost for Discontinued Operations at December
31, 1995 was $108 million, which is included in the net assets of Discontinued
Operations at that date. These liabilities were assumed by the buyers of the
Corporation's defense and electronic systems business and Knoll.

The funded assets consist primarily of interest-bearing securities. The effect
of a 1% annual increase in the assumed health care cost trend rates would
increase the accumulated postretirement benefit obligation by approximately $27
million and would increase net periodic postretirement benefit cost by
approximately $3 million.

Certain of the Corporation's non-U.S. subsidiaries have private and
government-sponsored plans for retirees. The cost for these plans is not
significant to the Corporation.

The Corporation provides certain postemployment benefits to former or inactive
employees and their dependents during the time period following employment but
before retirement. At December 31, 1996 and 1995, the Corporation's liability
for postemployment benefits totalled $67 million and $81 million, respectively.
The liability for postemployment benefits included in the net assets of
Discontinued Operations was $2 million at December 31, 1995.

                                       41
<PAGE>   42



NOTE 6: INCOME TAXES

Income tax expense (benefit) included in the consolidated financial statements
follows:

COMPONENTS OF CONSOLIDATED INCOME TAX EXPENSE (BENEFIT) (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31         1996     1995    1994
-------------------------------    ------   ------  ------
<S>                               <C>       <C>
Continuing Operations             $ (423)   $  (6)  $ (30)
Discontinued Operations              925       34      82
Extraordinary item                   (60)       -       -
                                  ------    -----   -----
Income tax expense                $  442    $  28   $  52
                                  ======    =====   =====
</TABLE>

INCOME TAX EXPENSE (BENEFIT) FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31          1996    1995    1994
-------------------------------    -------  ------  -----
<S>                                <C>     <C>
Current:
 Federal                           $ (653)  $   2   $ (77)
 State                               (116)      1       6
 Foreign                               32      22      28
                                   ------   -----   -----
Total current income tax
 expense (benefit)                   (737)     25     (43)
                                   ------   -----   ----- 
Deferred:
 Federal                              304     (43)     38
 State                                 10      (4)    (13)
 Foreign                                -      16     (12)
                                   ------   -----   ----- 
Total deferred income tax
 expense (benefit)                    314     (31)     13
                                   ------   -----   -----
Income tax benefit                 $ (423)  $  (6)  $ (30)
                                   ======   =====   ===== 
</TABLE>

CONSOLIDATED INCOME TAX EXPENSE (BENEFIT) (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31         1996     1995    1994
-------------------------------    ------   ------  -----
<S>                                <C>     <C>
Current:
 Federal                           $   88   $  18   $  18
 State                                 52       7      24
 Foreign                               27      27      28
                                   ------   -----   -----
Total current income tax expense      167      52      70
                                   ------   -----   -----
Deferred:
 Federal                              269     (34)     12
 State                                 (2)     (5)    (16)
 Foreign                                8      15     (14)
                                   ------   -----   ----- 
Total deferred income tax
 expense (benefit)                    275     (24)    (18)
                                   ------   -----   ----- 
Income tax expense                 $  442   $  28   $  52
                                   ======   =====   =====
</TABLE>

In addition to the amounts in the tables above, during 1996, 1995 and 1994,
$229 million of income tax expense, $138 million of income tax benefit, and
$132 million of income tax expense, respectively, were recorded in
shareholders' equity as part of the pension liability adjustment. See note 4 to
the financial statements.

The foreign portion of income or loss before income taxes and minority interest
in income of consolidated subsidiaries included in the consolidated statement
of income was income of $32 million in 1996 and $128 million in 1995 and a loss
of $34 million in 1994. Such income or loss consisted of profits and losses
generated from foreign operations, both Continuing and Discontinued, that can
be subject to both U.S. and foreign income taxes.

Deferred federal income taxes have not been provided on cumulative
undistributed earnings from foreign subsidiaries totalling $476 million at
December 31, 1996, which have been reinvested for an indefinite time. It is not
practicable to determine the income tax liability that would result were such
earnings repatriated.

Income from Continuing Operations includes income of certain manufacturing
operations in Puerto Rico, which are eligible for tax credits against U.S.
federal income tax and partially exempt from Puerto Rican income tax under
grants of industrial tax exemptions. These tax exemptions provided net tax
benefits of $17 million in 1996, $17 million in 1995, and $14 million in 1994.
The exemptions will expire at various dates from 2002 through 2007.

Deferred income taxes result from temporary differences in the financial bases
and tax bases of assets and liabilities. The types of differences that give
rise to significant portions of deferred income tax liabilities or assets are
shown in the following table:

CONSOLIDATED DEFERRED INCOME TAXES BY SOURCE
(in millions)
<TABLE>
<CAPTION>
            AT DECEMBER 31                    1996      1995
--------------------------------------     ---------  ---------
<S>                                        <C>         <C>
Deferred tax assets:
 Provision for expenses and losses         $   1,352   $  1,133
 Long-term contracts in process                   38         84
 Minimum pension liabilities                     360        474
 Operating losses and carryforwards              796      1,405
 Postretirement and postemployment
   benefits                                      450        590
 Other                                           276        170
                                           ---------   --------
Total deferred tax assets                      3,272      3,856
Valuation allowance                              (52)       (98)
                                           ---------   -------- 
Net deferred tax asset                         3,220      3,758
                                           ---------   --------
Deferred tax liabilities:
 Accelerated depreciation and
   amortization                                 (992)      (814)
 Leasing activities                             (575)      (584)
 Other                                          (242)      (129)
                                           ---------   -------- 
Total deferred tax liabilities                (1,809)    (1,527)
                                           ---------   -------- 
Deferred income taxes, net asset           $   1,411   $  2,231
                                           =========   ========
</TABLE>

The valuation allowance for deferred taxes reflects foreign tax credits not
anticipated to be utilized and operating loss carryforwards of certain foreign
subsidiaries. The net balance of deferred income taxes is intended to offset
income taxes on future taxable income expected to be earned by the
Corporation's Continuing Operations.

                                       42
<PAGE>   43



At December 31, 1996, for federal income tax purposes, there were regular tax
net operating loss carryforwards of $1,401 million that expire by the year 2008
and $101 million that expire by the year 2010. At December 31, 1996, for
alternative minimum tax purposes, there were loss carryforwards of $783 million
that expire by the year 2008 and alternative minimum tax credit carryforwards
of $252 million that have no expiration date. At December 31, 1996, there were
$54 million of net operating loss carryforwards attributable to foreign
subsidiaries. Of this total, approximately $17 million has no expiration date.
The remaining amount will expire not later than 2003. A valuation allowance has
been established for $15 million of the deferred tax benefit related to those
loss carryforwards for which it is considered likely that the benefit will not
be realized.

INCOME TAX EXPENSE (BENEFIT) FROM CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31          1996     1995      1994
-------------------------------    -------   ------    -----
<S>                                <C>       <C>       <C>
Federal income tax benefit
  at statutory rate                $ (417)   $ (14)    $ (20)
Increase (decrease) in tax
 resulting from:
  Income taxes of prior years           -       11         6
  Amortization of goodwill             46        9         6
  Interest on prior years'
   federal income tax, net of
   federal effect                       -        -       (12)
  State income tax, net of
   federal effect                     (69)      (2)       (5)
  Lower tax rate on income of
   foreign sales corporations          (9)      (3)       (5)
  Lower tax rate on net income
   of Puerto Rican operations         (17)     (17)      (14)
  Gain on sale of stock of
   subsidiary and affiliate             -       12         -
  Valuation allowance for
   deferred taxes                     (14)      (2)       (4)
  Loss of foreign tax credit            3        3         8
  Foreign rate differential           (12)     (10)       (8)
  Nondeductible expenses                8        6         6
  Dividends from foreign
   investments                          8        2         7
  Other differences, net               50       (1)        5
                                   ------    -----     -----
Income tax benefit
 from Continuing Operations        $ (423)   $  (6)    $ (30)
                                   ======    =====     ===== 
</TABLE>

The federal income tax returns of the Corporation and its wholly owned
subsidiaries are settled through the year ended December 31, 1989. The
Corporation has reached an agreement with the Internal Revenue Service
regarding intercompany pricing adjustments applicable to operations in Puerto
Rico for the years 1990 through 1992 and a tentative agreement for 1993.
Management believes that adequate provisions for taxes have been made through
December 31, 1996.

NOTE 7: CUSTOMER RECEIVABLES

Customer receivables at December 31, 1996 included $120 million representing
the sales value of material under long-term contracts not billed to the
customer.  Billings will occur upon shipment of major components of the
contract.  Collection of these receivables is expected to be substantially
completed within one year.

Allowances for doubtful accounts of $33 million and $32 million at December 31,
1996 and 1995, respectively, were deducted from customer receivables. The
Corporation performs ongoing credit evaluations of its customers and generally
does not require collateral.

NOTE 8: INVENTORIES AND COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS

INVENTORIES (in millions)
<TABLE>
<CAPTION>
          AT DECEMBER 31                 1996        1995
----------------------------------     --------    ------
<S>                                    <C>         <C>
Raw materials                          $    127    $    85
Work in process                             493        467
Finished goods                              125        123
                                       --------    -------
                                            745        675
Long-term contracts in process              986        838
Progress payments to subcontractors          45         21
Recoverable engineering and
 development costs                           68         52
                                       --------    -------
                                          1,844      1,586
Inventoried costs related to
 contracts with progress
 billing terms                           (1,061)      (856)
                                       --------    ------- 
Inventories                            $    783    $   730
                                       ========    =======
</TABLE>

COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
<TABLE>
<CAPTION>
       AT DECEMBER 31                    1996        1995
---------------------------            -------     ------
<S>                                    <C>         <C>
Costs included in inventories          $  841      $  729
Progress billings on contracts           (155)       (187)
                                       ------      ------ 
Uncompleted contracts costs
 over related billings                 $  686      $  542
                                       ======      ======

Progress billings on contracts         $  554      $  445
Costs included in inventories            (220)       (127)
                                       ------      ------ 
Uncompleted contracts billings
 over related costs                    $  334      $  318
                                       ======      ======
</TABLE>

Raw materials, work in process, and finished goods included contract-related
costs of $525 million at December 31, 1996 and $415 million at December 31,
1995. Substantially all costs in long-term contracts in process, progress
payments to subcontractors, and recoverable engineering and development costs
were contract-related.

Inventories other than those related to long-term contracts are generally
realized within one year. Inventoried costs do not exceed realizable values.

                                       43
<PAGE>   44



NOTE 9: PLANT AND EQUIPMENT

PLANT AND EQUIPMENT (in millions)
<TABLE>
<CAPTION>
         AT DECEMBER 31                   1996          1995
-----------------------------------     ---------     ---------
<S>                                     <C>            <C>
Land and buildings                      $  1,068       $    929
Machinery and equipment                    2,391          2,398
Construction in progress                     146            165
                                        --------       --------
Plant and equipment, at cost               3,605          3,492
Accumulated depreciation                  (1,739)        (1,584)
                                        --------       -------- 
Plant and equipment, net                $  1,866       $  1,908
                                        ========       ========
</TABLE>

For the years ended December 31, 1996, 1995, and 1994, depreciation expense
totalled $225 million, $159 million, and $161 million, respectively. Of these
amounts, $160 million, $113 million, and $115 million, respectively, were
included in costs of products and services, and $65 million, $46 million, and
$46 million, respectively, were included in marketing, administration and
general expenses.

NOTE 10: OTHER INTANGIBLE AND NONCURRENT ASSETS

OTHER INTANGIBLE AND NONCURRENT ASSETS (in millions)
<TABLE>
<CAPTION>
          AT DECEMBER 31                  1996           1995
----------------------------------      -------        ------
<S>                                     <C>            <C>
Deferred income taxes (note 6)          $   774        $ 1,221
Other intangible assets                     425            152
Intangible pension asset (note 4)            40             63
Deferred charges                             39            231
Joint ventures and other affiliates         232             68
Noncurrent receivables                      384            161
Program rights                              142             21
Other                                       225            235
                                        -------        -------
Other intangible and noncurrent assets  $ 2,261        $ 2,152
                                        =======        =======
</TABLE>

Other intangible assets are shown in the preceding table net of accumulated
amortization of $34 million at December 31, 1996 and $23 million at December
31, 1995.

FCC licenses and goodwill are shown on the balance sheet net of accumulated
amortization of $252 million at December 31, 1996 and $87 million at December
31, 1995.

Joint ventures and other affiliates include investments in companies over which
the Corporation exercises significant influence but does not control.

NOTE 11: SHORT-TERM DEBT

In August 1996, the Corporation replaced its $7.5 billion credit facility with
a new $5.5 billion credit facility with a consortium of lenders under more
favorable terms. The $5.5 billion credit facility provides for short-term money
market loans and revolver borrowings. Borrowing rates under the current
facility are determined at the time of each borrowing and are based generally
on a floating rate index, the London Interbank Offer Rate (LIBOR), plus a
margin based on the Corporation's senior unsecured debt rating and leverage.
The cost of the facility includes commitment fees, which are based on the
unutilized facility and vary with the Corporation's debt ratings. For financial
reporting purposes, revolver borrowings are classified as long term.  See note
13 to the financial statements.

There are no compensating balance requirements under this facility.

SHORT-TERM DEBT (in millions)
<TABLE>
<CAPTION>

                     AT DECEMBER 31           DURING THE YEAR
                   ------------------  ------------------------------
                                         MAX.       AVG.     WEIGHTED
                              COMPO-     OUT-       OUT-       AVG.
1996               BALANCE  SITE RATE  STANDING   STANDING     RATE
<S>                 <C>       <C>       <C>       <C>          <C>
Credit facility     $295      7.6%       $440       $ 264      6.5%
Short-term foreign
   bank loans         76      4.5%        119          51      5.5%
Other                131      7.4%        253          72      6.3%
                    ----                                             
Total short-term    
   debt              502 
Short-term debt--
   Discontinued          
   Operations         (5)
                    ----
Short-term debt--
   Continuing          
   Operations       $497
                    ====
1995

Credit facility     $263      7.2%     $1,039       $ 809      6.8%
Short-term foreign
   bank loans         17      6.8%        100          75      5.8%
Other                110      7.1%        183          42      6.0%
                    ----                                           
Total short-term     
   debt              390
Short-term debt--
   Discontinued         
   Operations        (84)
                    ----    
Short-term debt--
   Continuing          
   Operations       $306
                    ====
</TABLE>

                                       44
<PAGE>   45



Average outstanding borrowings for Continuing Operations were determined based
on daily amounts outstanding for the credit facilities and on monthly balances
outstanding for short-term foreign bank loans.

NOTE 12: OTHER CURRENT LIABILITIES

OTHER CURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                              1996      1995
------------------                          ----      ----
<S>                                    <C>          <C>
Accrued employee compensation          $    248     $    241
Income taxes currently payable              189          176
Liabilities for talent and program
  rights                                    308          254
Accrued product warranty                     59           57
Accrued restructuring costs                 184          150
Liability for business dispositions          79           93
Accrued interest and insurance              210          202
Accrued expenses                            875          800
Environmental liabilities                    62           47
Other                                       364           92
                                       --------     --------
Other Current Liabilities              $  2,578     $  2,112
                                       ========     ========
</TABLE>

NOTE 13: LONG-TERM DEBT

LONG-TERM DEBT (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                         1996       1995
-------------------                  --------   ------
<S>                                  <C>        <C>
Term Loans I & II                    $     -    $ 5,000
Revolver (note 11)                     3,050          -
 8-3/8% notes due 2002                   348        348
 7-7/8% debentures due 2023              325        325
 7-3/4% notes due 1996                     -        300
 6-7/8% notes due 2003                   275        275
 8-5/8% debentures due 2012              273        273
 8-7/8% notes due 2001                   250        250
 8-7/8% notes due 2014                   150        150
 7-5/8% notes due 2002                   150        150
10-3/8% debentures due 2002              149          -
 7-3/4% notes due 1999                   125        125
 7-1/8% notes due 2023                    97         97
 8-7/8% debentures due 2022               92         92
Medium-term notes due through 2001       234        436
Other                                     54        157
                                     -------    -------
                                       5,572      7,978
Current maturities--Continuing
  Operations                              (4)      (330)
Current maturities--Discontinued
  Operations                              (2)      (265)
                                     -------    -------
Total long-term debt                   5,566      7,383
                                     -------    -------
Long-term debt--Discontinued
  Operations                            (417)      (157)
                                     -------    -------
Long-term debt--Continuing
  Operations                         $ 5,149    $ 7,226
                                     =======    =======
</TABLE>


Included in the previous table is $149 million of debentures issued by
Infinity.  The Corporation has given irrevocable notice to Infinity noteholders
of the Corporation's intent to call the debentures. Also included in the
previous table is senior debt of $464 million and $491 million at December 31,
1996 and 1995, respectively, issued by CBS prior to the acquisition.

At December 31, 1996, medium-term notes had interest rates ranging from 7.9% to
9.4%, with an average interest rate of 9.0% and an average remaining maturity
of two years.

In 1996, the Corporation entered into a new $5.5 billion credit facility to
replace its $7.5 billion credit facility. See note 11 to the financial
statements. The prepayment of Term Loans I & II under the previous facility
resulted in a $93 million after-tax extraordinary loss from a write-off of
deferred financing fees for the early extinguishment of debt.

The CBS 8 7/8% debentures due 2022 may be redeemed after June 1, 2002 at
specified redemption prices. Except for these debentures, the revolver
borrowings, and the $149 million of debentures assumed in connection with the
acquisition of Infinity, the remaining long-term debt outstanding at December
31, 1996 may not be redeemed prior to maturity.

To manage interest costs on its debt, the Corporation has entered into various
types of interest rate exchange agreements. A summary of the notional amounts
and maturity characteristics of the agreements outstanding at December 31, 1996
and 1995 is presented in the table below:

CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS
(in millions)
<TABLE>
<CAPTION>
                                   YEAR OF MATURITY
FIXED RATE SWAPS
(PAY FIXED)           TOTAL    1996    1997    1998    1999     2000
                      -----    -----   ----    -----   -----    ----
<S>                   <C>     <C>      <C>    <C>      <C>     <C>
Notional amount
  at Dec. 31, 1996    $   130       -     -    $  50   $  55    $ 25
Weighted average
  fixed rate paid        8.91%      -     -     8.73%   8.86%   9.36%
Notional amount
  at Dec. 31, 1995    $ 3,208  $3,078     -    $  50   $  55    $ 25
Weighted average
  fixed rate paid        5.68%   5.54%    -     8.73%   8.86%   9.36%
</TABLE>

                                       45
<PAGE>   46
For Discontinued Operations, an interest rate swap with a notional amount of
$74 million at December 31, 1995 matured in February 1996.

The Corporation has a shelf registration for debt securities with an unused
amount of $400 million as of December 31, 1996.

The scheduled maturities of long-term debt outstanding at December 31, 1996 for
each of the next five years are as follows:

SCHEDULED MATURITIES OF LONG-TERM DEBT (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996               YEAR OF MATURITY
--------------------        1997   1998   1999   2000   2001
                           ------  -----  -----  -----  ----
<S>                        <C>    <C>     <C>    <C>   <C>
Continuing Operations      $  4   $   59  $ 314    $ 1  $2,958
Discontinued Operations       2       96     45     11     264
                            ---   ------  -----  -----  ------
Total long-term debt       $  6   $  155  $ 359    $12  $3,222
                           ====   ======  =====  =====  ======
</TABLE>

NOTE 14: OTHER NONCURRENT LIABILITIES

OTHER NONCURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
           AT DECEMBER 31               1996         1995
-----------------------------------   -------      ------
<S>                                   <C>          <C>
Postretirement benefits (note 5)      $ 1,218      $ 1,215
Postemployment benefits (note 5)           67           79
Accrued restructuring costs                94            8
Liability for business dispositions        87           19
Liabilities for talent and program
  rights                                   51           47
Accrued expenses                        1,112          661
Environmental liabilities                 404          237
Other                                     586          307
                                      -------      -------
Other noncurrent liabilities          $ 3,619      $ 2,573
                                      =======      =======
</TABLE>


NOTE 15: SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY (in millions)
<TABLE>
<CAPTION>
                                    1996      1995       1994
                                  --------  --------   ------
    <S>                           <C>       <C>        <C>
    Preferred stock:
    Balance at January 1          $      4  $     12   $      8
    Series B preferred shares
      converted                          -        (8)         -
    Series C preferred shares
      issued                             -         -          4
                                  --------  --------   --------
    Balance at December 31        $      4  $      4   $     12
                                  --------  --------   --------
    Common stock:
    Balance at January 1          $    426  $    393   $    393
    Shares issued                      183        33          -
                                  --------  --------   --------
    Balance at December 31        $    609  $    426   $    393
                                  --------  --------   --------
    Capital in excess of par
      value:
    Balance at January 1          $  1,847  $  1,931   $  1,475
    Series B preferred shares
      converted                          -       (25)         -
    Series C preferred shares
      issued                             -         -        501
    Shares issued under various
      compensation and benefit
      plans                            (41)      (55)       (38)
    Shares issued under dividend
      reinvestment plan                 (3)       (4)        (7)
    Shares issued under Infinity
      merger agreement               3,573         -          -
                                  --------  --------   --------
    Balance at December 31        $  5,376  $  1,847   $  1,931
                                  --------  --------   --------
    Common stock held in
    treasury:
    Balance at January 1          $   (720) $   (870)  $   (972)
    Shares issued under various
      compensation and benefit
      plans                            161       139         87
    Shares issued under dividend
      reinvestment plan                 13        11         15
                                  --------  --------   --------
    Balance at December 31        $   (546) $   (720)  $   (870)
                                  --------  --------   -------- 
    Minimum pension liability:
    Balance at January 1          $ (1,220) $   (962)  $ (1,215)
    Pension liability
      adjustments, net of
      deferred taxes (note 4)          424      (258)       253
                                  --------  --------   --------
    Balance at December 31        $   (796) $ (1,220)  $   (962)
                                  --------  --------   -------- 
    Cumulative foreign currency
      translation adjustments:
    Balance at January 1          $    (11) $    (15)  $    (28)
    Currency translation
      activity                          22         4         13
                                  --------  --------   --------
    Balance at December 31        $     11  $    (11)  $    (15)
                                  --------  --------   -------- 
    Retained earnings:
    Balance at January 1          $  1,116  $  1,285   $  1,390
    Net income                          95       (10)        48
    Dividends paid                    (127)     (159)      (153)
                                  --------  --------   -------- 
    Balance at December 31        $  1,084  $  1,116   $  1,285
                                  --------  --------   --------
    Shareholders' equity          $  5,742  $  1,442   $  1,774
                                  ========  ========   ========
</TABLE>

                                       46
<PAGE>   47


On December 31, 1996, the Corporation issued 183,002,086 shares of common stock
for the acquisition of Infinity. The common stock was issued at a price of
$18.875 per share, which was the closing price on June 19, 1996, the last
trading day prior to the execution of the merger agreement. The issuance of the
common stock and the conversion of outstanding Infinity options into options to
acquire 22,226,484 Westinghouse common shares resulted in an increase in
capital in excess of par value of $3,573 million, net of registration costs.

On September 1, 1995, the Corporation's 8,222,500 shares of Series B Conversion
Preferred Stock (Series B Preferred), outstanding since 1992, mandatorily
converted into 32,890,000 shares of common stock.

In March 1994, the Corporation sold, in a private placement, 36,000,000
depository shares (the $1.30 Depository Shares) at $14.44 per share. Each of
the $1.30 Depository Shares represents ownership of one-tenth of a share of the
Corporation's $1.00 par value Series C Conversion Preferred Stock (Series C
Preferred) and entitles the owner to all of the proportionate rights,
preferences and privileges of the Series C Preferred. A total of 3,600,000
Series C Preferred shares was deposited, all of which were outstanding at
December 31, 1996, 1995 and 1994.

The net proceeds to the Corporation, after commissions, fees and out-of-pocket
expenses, totalled $505 million. As a result, the par value of Series C
Preferred was established for $4 million, and capital in excess of par was
increased by $501 million.

The annual dividend rate for each $1.30 Depository Share is $1.30 (equivalent
to $13.00 for each Series C Preferred), payable quarterly in arrears on the
first day of March, June, September and December. Dividends are cumulative and
must be declared by the Board of Directors to be payable. Payments commenced on
June 1, 1994.

Each $1.30 Depository Share will automatically convert into one share of common
stock on June 1, 1997 unless called on May 30, 1997 by the Corporation or
converted at any time prior to June 1, 1997 by the holder. Conversion will also
occur upon certain mergers, consolidations or similar extraordinary
transactions involving the Corporation or in certain other events.

COMMON SHARES (shares in thousands)
<TABLE>
<CAPTION>
                                              IN          
                                   ISSUED   TREASURY   OUTSTANDING
<S>                                <C>       <C>         <C>
Balance at January 1, 1994         393,080   40,904      352,176
Shares issued for dividend
       reinvestment plan                 -     (621)         621
Shares issued for employee plans         -   (3,975)       3,975
Other                                    -      (20)          20
                                   -------   ------      -------
Balance at December 31, 1994       393,080   36,288      356,792
                                   -------   ------      -------
Shares issued for dividend
       reinvestment plan                 -     (450)         450
Shares issued for employee plans         -   (5,886)       5,886
Shares issued for conversion of
       Series B Preferred           32,890        -       32,890
                                   -------   ------      -------
Balance at December 31, 1995       425,970   29,952      396,018
                                   -------   ------      -------
Shares issued for dividend
       reinvestment plan                 -   (1,071)       1,071
Shares issued for employee plans         -   (6,254)       6,254
Shares issued under Infinity
       merger agreement            183,002        -      183,002
                                   -------   ------      -------
Balance at December 31, 1996       608,972   22,627      586,345
                                   =======   ======      =======
</TABLE>

Of the common stock held in treasury at December 31, 1996, 21,606,897 shares
were held by the Corporation's rabbi trusts for the payment of benefits under
executive benefit plans.

Earnings (loss) per common share was computed by dividing income or loss
available to common shareholders by the weighted average number of common
shares outstanding during the year plus the weighted average common stock
equivalents.  Common stock equivalents consist of shares subject to stock
options, shares potentially issuable under deferred compensation programs, and
as discussed below, the Series B Preferred.

Prior to their conversion, the Series B Preferred were considered common stock
equivalents at a rate of four Series B Preferred to one common share. Because
such treatment has an anti-dilutive effect on earnings per share for 1995 and
1994, these common stock equivalent shares were excluded from weighted average
shares outstanding, and the dividend requirement was deducted from net income
in computing earnings available to common shareholders. The common shares
issued upon conversion of the Series B Preferred were included in weighted
average shares outstanding from the conversion date, September 1, 1995. As of
December 31, 1996, there were no Series B Preferred outstanding.

                                       47
<PAGE>   48



Consistent with prevalent practice at the time of issuance, the Series C
Preferred were considered outstanding common stock at a rate of ten Series C
Preferred to one common share for the computation of earnings per share. If the
Series C Preferred had been treated as common stock equivalents for the
calculation of earnings per share, the Corporation's 1996, 1995 and 1994
per-share results would have been $.12, $(.24), and $(.10), respectively.

The weighted average number of common shares used for computing earnings or
loss per share was 443,399,000 in 1996; 410,138,000 in 1995; and 383,736,000 in
1994.

On December 29, 1995, the Board of Directors adopted a shareholder rights plan
providing for the distribution of one right for each share of common stock
outstanding on January 9, 1996. The rights become exercisable only in the
event, with certain exceptions, that an acquiring party accumulates 15% or more
of the Corporation's voting stock or a party announces an offer to acquire 30%
or more of the voting stock. The rights have an exercise price of $64 per share
and expire on January 9, 2006. Upon the occurrence of certain events, holders
of the rights will be entitled to purchase either Westinghouse preferred shares
or shares in an acquiring entity at half of market value. The Corporation is
entitled to redeem the rights at a value of $.01 per right at any time until
the tenth day following the acquisition of a 15% position in its voting stock.

NOTE 16: STOCK-BASED COMPENSATION PLANS

At December 31, 1996, the Corporation had five stock-based compensation plans,
which are described below.

The 1993 and 1991 Long-Term Incentive Plans (1993 and 1991 Plans) provide for
the granting of stock options, restricted stock, and other performance awards
to employees of the Corporation. At December 31, 1996 and 1995, approximately
15.3 million and 11.1 million shares, respectively, had been authorized for
awards under the 1993 Plan. Shares available for awards under the 1993 Plan at
December 31, 1996 and 1995 totalled 3,097,093 and 3,249,228, respectively. At
December 31, 1996 and 1995, a total of 21.5 million and 16.5 million shares,
respectively, had been authorized for awards under the 1991 Plan. Shares
available for awards under the 1991 Plan at December 31, 1996 and 1995 totalled
3,393,578 and 3,407,931, respectively.

The Deferred Compensation and Stock Plan for Directors (Director Plan) provides
for the granting of stock options, restricted stock, and other awards to
non-employee directors of the Corporation. At December 31, 1996 and 1995,
600,000 and 500,000 shares, respectively, had been authorized for awards under
the Director Plan. Shares available for awards under the Director Plan at
December 31, 1996 and 1995 totalled 470,859 and 406,806, respectively.

In 1996 and 1995, the Corporation granted 49,174 and 17,000 shares,
respectively, of restricted stock to employees and directors with
weighted-average grant date fair values of $18.41 and $14.88, respectively,
under the 1993, 1991, and Director Plans. The vesting periods of these shares
vary with a weighted average vesting period of two years for both 1996 and 1995
grants.

With the acquisition of Infinity, the Corporation assumed the Infinity
Broadcasting Corporation Stock Option Plan (Infinity Plan). The outstanding
options under this Plan as well as certain other one-time awards were converted
to options for Westinghouse common stock on December 31, 1996. The converted
options are included in the subsequent table as awards assumed in 1996. These
options have exercise prices ranging from $.0002 to $19.66. No additional
grants will be made under the Infinity Plan.

Stock options are also outstanding under the 1984 Long-Term Incentive Plan
(1984 Plan); however, no additional grants are permitted under that Plan.

Under the 1993, 1991, and 1984 Plans, the options were granted for terms of 10
years or less and generally become exercisable in whole or in part after the
commencement of the second year of the term. Under the Infinity Plan, the
options generally were granted for terms of 10 years and become exercisable
ratably over a five-year period.

Generally, options outstanding under the 1993, 1991, Director, and 1984 Plans,
except those granted during 1996, were exercisable at December 31, 1996.
Options granted during 1996 under these Plans generally will become exercisable
in 1997.  Under the Infinity Plan, approximately 17 million of the awards
assumed were exercisable at December 31, 1996.

Of the options granted by the Corporation in 1995, 2,423,060 were performance
stock options. The vesting of these options was contingent on attainment of
specific performance targets. One-half of these options terminated in January
1996 because the performance target for 1995 was not met. The remaining
performance options terminated in January 1997 because the performance target
for 1996 was not met.


                                       48
<PAGE>   49
STOCK OPTION INFORMATION (shares in thousands)
<TABLE>
<CAPTION>
                                            1996                                1995                                1994
                                ----------------------------        ---------------------------        ----------------------------
                                 SHARES          WEIGHTED                           WEIGHTED                           WEIGHTED
                                                  AVERAGE           SHARES           AVERAGE           SHARES           AVERAGE
                                              EXERCISE PRICE                     EXERCISE PRICE                     EXERCISE SHARES
<S>                                <C>              <C>               <C>              <C>               <C>              <C>
Balance at January 1               28,384           $ 17.41           20,504           $ 18.66           16,082           $ 20.70
Options granted                    10,990             19.09            8,945             14.17            5,079             11.89
Options exercised                  (1,728)            13.22             (481)            11.75              (24)            10.40
Options forfeited                  (1,750)            15.93             (584)            16.15             (633)            16.59
Options expired                      (306)            27.41                -                -                 -                -
Awards assumed (Infinity)          22,226              5.18                -                -                 -                -
                                 --------           -------         --------           ------          --------           -------
Balance at December 31             57,816           $ 13.15           28,384           $ 17.41           20,504           $ 18.66
                                 ========           -------         ========           -------         ========           -------
Exercisable at December 31         41,251           $ 12.07           18,456           $ 18.92                -                -
</TABLE>

<TABLE>
<CAPTION>
                                                    1996                                                1995
                                 ------------------------------------------          ------------------------------------------
                                 WEIGHTED AVERAGE          WEIGHTED AVERAGE          WEIGHTED AVERAGE          WEIGHTED AVERAGE
                                    FAIR VALUE              EXERCISE PRICE              FAIR VALUE              EXERCISE PRICE
<S>                                      <C>                      <C>                        <C>                       <C>
Options granted:
     Exercise price equaled
         grant date stock price          $ 7.41                   $ 18.86                    $ 5.95                    $ 14.31
     Exercise price exceeded
         grant date stock price            5.92                     20.74                      4.81                      18.67
</TABLE>

STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1996 (shares in thousands)
<TABLE>
<CAPTION>
                                                                      WEIGHTED AVERAGE                           
                                                                         REMAINING                               WEIGHTED AVERAGE
                                 OPTIONS AT       WEIGHTED AVERAGE    CONTRACTUAL LIFE      EXERCISABLE AT      EXERCISE PRICE OF
 RANGE OF EXERCISES PRICES   DECEMBER 31, 1996     EXERCISE PRICE        (IN YEARS)       DECEMBER 31, 1996        EXERCISABLE
               <S>                     <C>                <C>                    <C>               <C>                  <C>
               $.0002- 4.99            12,158             $  0.74                3.2               11,523               $  0.66
                    5- 9.99             5,823                7.01                7.5                3,519                  7.05
                   10-14.99            10,505               13.19                8.0                8,864                 13.09
                   15-19.99            22,572               17.13                7.8               11,901                 16.11
                   20-29.99             5,559               25.84                5.0                4,245                 27.42
                   30-36.53             1,199               34.60                2.3                1,199                 34.60
                                     --------                                                    --------                      
                      TOTAL            57,816                                                      41,251
                                     ========                                                    ========
</TABLE>

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively; risk-free interest
rates of 6.1% and 7.2%; expected dividend yields of 1.1% and 1.4%; expected
volatility of 30% and 31%; and expected lives of 7.4 years and 7.3 years.

The Corporation accounts for its stock-based compensation plans under APB 25.
For stock options granted, the option price is not less than the market value
of shares on the grant date; therefore, no compensation cost has been
recognized for stock options granted.

Had compensation cost for these plans been determined under the provisions of
SFAS 123, the Corporation's net income and earnings per share would have been
reduced to the following pro forma amounts:

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                1996                       1995
                       ----------------------     ----------------------

                       AS REPORTED  PRO FORMA     AS REPORTED  PRO FORMA
<S>                   <C>          <C>            <C>          <C>
Net income (loss)
    (in millions)        $95          $57            $(10)        $(29)
Earnings (loss)
  per common share       .22          .13            (.11)        (.15)
</TABLE>

                                       49
<PAGE>   50



NOTE 17: CONTINGENT LIABILITIES AND COMMITMENTS

URANIUM SETTLEMENTS

In the late seventies, the Corporation provided for the estimated future costs
for the resolution of all uranium supply contract suits and related litigation.
The remaining uranium reserve balance includes assets required for certain
settlement obligations and reserves for estimated future costs. The reserve
balance at December 31, 1996, is deemed adequate considering all facts and
circumstances known to management. The future obligations require providing the
remainder of the fuel deliveries through 2013. The supply of equipment and
services is essentially complete. Variances from estimates that may occur are
considered in determining if an adjustment of the liability is necessary.

LEGAL MATTERS

STEAM GENERATORS

The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Corporation as components of
nuclear steam supply systems. Since 1993, settlement agreements have been
entered resolving ten litigation claims. These agreements generally require the
Corporation to provide certain products and services at prices discounted at
varying rates. Two cases were resolved in favor of the Corporation after trial
or arbitration. One steam generator lawsuit remains.

The Corporation is also a party to five tolling agreements with utilities or
utility plant owners' groups that have asserted steam generator claims. The
tolling agreements delay initiation of any litigation for various specified
periods of time and permit the parties time to engage in discussions.

SECURITIES CLASS ACTIONS - FINANCIAL SERVICES

The Corporation has been defending derivative and class action lawsuits
alleging federal securities law and common law violations arising out of
purported misstatements or omissions contained in the Corporation's public
filings concerning the financial condition of the Corporation and certain of
its former subsidiaries in connection with charges to earnings of $975 million
in 1990 and $1,680 million in 1991 and a public offering of Westinghouse common
stock in 1991. The court dismissed both the derivative claim and the class
action claims in their entirety. In 1996, the United States Court of Appeals
for the Third Circuit affirmed the dismissal of the derivative claim and
affirmed in part and reversed in part the dismissal of the class action claims.
Those class action claims that were not dismissed by the Third Circuit have
been remanded to the lower court for further proceedings.

ASBESTOS

The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products, generally in
the pre-1970 time period. Typically, these lawsuits are brought against
multiple defendants. The Corporation was neither a manufacturer nor a producer
of asbestos and is oftentimes dismissed from these lawsuits on the basis that
the Corporation has no relationship to the products in question or the claimant
did not have exposure to the Corporation's product. At December 31, 1996, the
Corporation had approximately 103,000 claims outstanding against it.

In court actions that have been resolved, the Corporation has prevailed in the
vast majority of the asbestos claims and has resolved others through
settlement.  Furthermore, the Corporation has brought suit against certain of
its insurance carriers with respect to these asbestos claims. Under the terms
of a settlement agreement resulting from this suit, carriers that have agreed
to the settlement are now reimbursing the Corporation for a substantial portion
of its current costs and settlements associated with asbestos claims. The
Corporation has recorded a liability for asbestos-related matters that are
deemed probable and can be reasonably estimated, and has separately recorded an
asset equal to the amount of such estimated liabilities that will be recovered
pursuant to agreements with insurance carriers. The Corporation cannot
reasonably estimate costs for unasserted asbestos claims.

GENERAL

Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in the steam generator claims, the securities class action
and certain groupings of asbestos claims and, although management believes a
significant adverse judgment is unlikely, any such judgment could have a
material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described previously, and that the
Corporation has adequately provided for costs arising from potential settlement
of these matters when in the best interest of the Corporation. Management
believes that the litigation should not have a material adverse effect on the
financial condition of the Corporation.

                                       50
<PAGE>   51
ENVIRONMENTAL MATTERS

Compliance with federal, state and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations and technology; the adequacy of
information available for individual sites; the extended time periods over
which site remediation occurs; and the identification of new sites. The
Corporation has, however, recognized an estimated liability, measured in
current dollars, for those sites where it is probable that a loss has been
incurred and the amount of the loss can be reasonably estimated. The
Corporation recognizes changes in estimates as new remediation requirements are
defined or as more information becomes available.

With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation
is either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at approximately 90 sites, including the sites located in
Bloomington, Indiana. The Corporation believes that any liability incurred for
cleanup at these sites will be satisfied over a number of years, and in many
cases, the costs will be shared with other responsible parties. These sites
include certain sites for which the Corporation, as part of an agreement for
sale, has retained obligations for remediation of environmental contamination
and for other Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) issues.

In the second quarter of 1996, the Corporation and its external consultants
completed a study to evaluate the Corporation's environmental remediation
strategies. Based on the costs associated with the most probable alternative
remediation strategy for the above-mentioned sites, including Bloomington, the
Corporation has an accrued liability of $466 million, of which $175 million was
recognized in the second quarter of 1996. Depending on the remediation
alternatives ultimately selected, the costs related to these sites could differ
from the amounts currently accrued. The accrued liability includes $345 million
for site investigation and remediation, and $121 million for post-closure and
monitoring activities. Management anticipates that the majority of expenditures
for site investigation and remediation will occur during the next five to ten
years. Expenditures for post-closure and monitoring activities will be made
during periods of up to 30 years.

OTHER

The Corporation is involved with several administrative actions alleging
violations of federal, state or local environmental regulations. For these
matters, the Corporation has estimated its remaining reasonably possible costs
and determined them to be immaterial.

The Corporation currently manages under contract several government-owned
facilities that, among other things, are engaged in the remediation of
hazardous and nuclear wastes. To date, under the terms of the contracts, the
Corporation is not responsible for costs associated with environmental
liabilities, including environmental cleanup costs, except under certain
circumstances associated with the willful misconduct or lack of good faith of
its managers or their failure to exercise prudent business judgment. There are
currently no material claims for which the Corporation believes it is
responsible.

The Corporation has or will have responsibilities for environmental closure
activities or decommissioning of nuclear licensed sites. The Corporation has
estimated that the total potential cost to be incurred for these actions is
approximately $91 million, of which $23 million was accrued at December 31,
1996. The Corporation's policy is to accrue these costs over the estimated life
of the individual facilities, which in most cases approximates 20 years. The
anticipated annual costs currently being accrued are $6 million.

Capital expenditures related to environmental compliance in 1996 and 1995
totalled $8 million and $6 million, respectively. Operating expenses that are
recurring and associated with managing hazardous waste and pollutants in
ongoing operations totalled $6 million in 1996 and 1995.

                                       51
<PAGE>   52
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that
complying with existing government regulations will not materially impact the
Corporation's financial position, liquidity or results of operations.

FINANCING COMMITMENTS

CONTINUING OPERATIONS

In the ordinary course of business, standby letters of credit and surety bonds
are issued on behalf of the Corporation related to performance obligations
primarily under contracts with customers.

The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sports events. These contracts
permit the broadcast of such properties for various periods ending no later
than April 2002. As of December 31, 1996, the Corporation was committed to make
payments under such broadcasting contracts, along with commitments for talent
contracts, of $3,601 million.

The Corporation's other commitments consist primarily of those for the purchase
of plant and equipment totalling approximately $54 million at December 31,
1996.

DISCONTINUED OPERATIONS

At December 31, 1996, Financial Services commitments, consisting primarily of
guarantees, totalled $38 million compared to $45 million at year-end 1995. The
remaining commitments have fixed expiration dates from 1997 through 2002.
Management expects these commitments to expire unfunded.

HEDGING ACTIVITIES

The following is a schedule of the Corporation's foreign currency contracts,
their maturity and the unrealized gain (loss) on those contracts as of December
31, 1996. These contracts are entered into with high credit quality financial
institutions at customary terms.
<TABLE>
<CAPTION>
                                                     UNREALIZED
                              MATURES     MATURES       GAIN
   CURRENCY        TOTAL      IN 1997     IN 1998      (LOSS)
   --------        -----      -------     -------      ------
               (IN USD EQUIVALENT, IN MILLIONS)
FORWARDS
--------
<S>                <C>         <C>         <C>         <C>
Saudi Riyal        $  76       $  55       $  21       $   -
Japanese Yen          24          19           5          (1)
Belgian Franc         17          17           -           -
British Pound         17          17           -          (2)
Canadian Dollar        6           6           -           -
Other                  9           9           -           -
                 -------     ---------   -------     -------
                     149         123          26          (3)
OPTIONS
Average Rate
Basket Option         22          22           -           -
                 -------     -------     -------     -------
TOTAL              $ 171       $ 145       $  26       $  (3)
                 =======     =======     =======     ======= 
</TABLE>

NOTE 18: LEASES

The Corporation has commitments under operating leases for certain machinery
and equipment and facilities used in various operations. Rental expense for
Continuing Operations in 1996, 1995 and 1994 was $130 million, $95 million and
$105 million, respectively. These amounts include immaterial amounts for
contingent rentals. Rental expense included sublease income totalling $11
million, $17 million and $16 million for 1996, 1995 and 1994, respectively.

Additionally, the Corporation's transit advertising business has franchise
rights entitling it to display advertising on buses, taxis, trains, bus
shelters, terminals and phone kiosks. Under most of these franchise agreements,
the franchiser is entitled to receive the greater of a percentage of the
relevant advertising revenues, net of advertising agency fees, or a specified
guaranteed minimum annual payment.

MINIMUM RENTAL PAYMENTS - CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
                                            GUARANTEED       
                           LEASE            MINIMUM FRANCHISE
AT DECEMBER 31, 1996       OBLIGATIONS      PAYMENTS
--------------------       -----------      -----------------
<S>                           <C>           <C>
1997                          $ 95          $ 120
1998                            76            106
1999                            68             97
2000                            69             59
2001                            53             17
Subsequent years               189             10
                              ----          -----
Minimum rental payments       $550          $ 409
                              ====          =====
</TABLE>

NOTE 19: OTHER INCOME AND EXPENSES, NET

<TABLE>
<CAPTION>
OTHER INCOME AND EXPENSES, NET (in millions)
     YEAR ENDED DECEMBER 31         1996     1995       1994
--------------------------------  -------   ------    ------
<S>                               <C>       <C>       <C>
Interest on securities            $    9    $   11    $   12
Miscellaneous interest income         33         7         4
Gain (loss) on disposition
      of other assets               (135)      121        28
Operating results--
      non-consolidated affiliates      9         3        (2)
Foreign currency transaction and
      high-inflation              
      translation effect             (13)       (8)       (6)
Estimated loss on disposition
      of non-strategic businesses      -        (7)      (17)
Pension settlement loss (note 4)       -         -      (308)
Other                                 11        10         4
                                  ------    ------    ------
Other income and expenses, net    $  (86)   $  137    $ (285)
                                  ======    ======    ====== 
</TABLE>

The net loss on disposition of assets for 1996 includes an estimated loss of
$152 million resulting from a decision to sell certain miscellaneous
non-strategic assets and a gain of $17 million from the sale of equity
investments. The gain on disposition of other assets for 1995 includes a gain
of $115 million from the sale of the Corporation's 62% interest in MICROS
Systems, Inc. The gain on disposition of other assets for 1994 includes a gain
of $32 million from the sale of two California radio stations.

                                       52
<PAGE>   53
NOTE 20: RESTRUCTURING, LITIGATION AND OTHER MATTERS

The Corporation has undertaken a number of actions to streamline its businesses
and recognize the financial impact of certain matters. Certain of these actions
resulted in the recognition of charges to operating profit.

RESTRUCTURING, LITIGATION AND OTHER MATTERS
 (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31        1996      1995      1994
-------------------------------   ------     ----      ----
<S>                               <C>        <C>       <C>
Restructuring                     $  273     $  83     $ 19
Litigation matters                   486       236        -
Impairment of assets                  15         -        -
Environmental remediation
      activities                     175         -        -
Other                                 30         -        -
                                  ------     -----     ----
Total                             $  979     $ 319     $ 19
                                  ======     =====     ====
</TABLE>

In recent years, the Corporation has restructured many of its businesses and
its corporate headquarters in an effort to reduce its cost structure and remain
competitive in its markets. Restructuring activities primarily involve the
separation of employees, the closing of facilities, the termination of leases,
and the exiting of product lines. Costs for restructuring activities are
limited to incremental costs that directly result from the restructuring
activities and that provide no future benefit to the Corporation.

A summary of restructuring charges by business segment follows:

RESTRUCTURING COSTS BY SEGMENT (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31           1996    1995     1994
-------------------------------      ------  ------    -----
<S>                                  <C>     <C>        <C>
Media                                $ 41     $  -      $ (2)
Power Systems                         181       44        21
Thermo King                             6        -         -
Government Operations                   8        -         -
Corporate & Other                      37       39         -
                                     ----     ----      ----
Total                                $273     $ 83      $ 19
                                     ====     ====      ====
</TABLE>

Generally, separated employees received benefits under the Corporation's
Employee Security and Protection Plan or similar arrangements, including layoff
income benefits, permanent job separation benefits, retraining and/or
outplacement assistance. The amount included for these benefits in the
restructuring charge represents the incremental cost of such benefits over
those amounts previously accrued under SFAS No. 112, "Employers' Accounting for
Postemployment Benefits."

Based on the Corporation's current estimates, summarized below are the
restructuring costs for Continuing Operations:

RESTRUCTURING COSTS BY CATEGORY OF EXPENDITURE
 (dollars in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31         1996     1995     1994
-------------------------------    ------   ------   ------
<S>                               <C>     <C>        <C>
Number of employee separations      2,617    1,071      490
                                  -------  -------   ------
Employee separation costs         $   191  $    77   $   37
Pension and postretirement
      curtailment costs                14        -        -
Asset writedowns                       37        3        -
Facility closure/
      rationalization costs            37        3        -
Adjustments of prior plans             (6)       -      (18)
                                  -------  -------   ------ 
Total charge to operations        $   273  $    83   $   19
                                  =======  =======   ======
</TABLE>

Of the employee separations in the 1996 plans, nearly 50% were completed at
December 31, 1996. For the 1995 and 1994 plans, 85% and 100%, respectively,
were completed at December 31, 1996. The majority of the remaining separations
are expected to be completed in 1997. Employee separation costs generally are
paid over a period of up to two years following the separation.

In connection with the acquisition of CBS, the Corporation developed a
restructuring plan to integrate the operations of CBS with those of the
Corporation and eliminate duplicate CBS facilities and functions. The cost of
that plan, which approximated $100 million, was recorded in connection with the
purchase.

The following is a reconciliation of the restructuring liability for Continuing
Operations:

RECONCILIATION OF RESTRUCTURING LIABILITY (in millions)
<TABLE>
<S>                                                  <C>
Balance at January 1, 1994                           $  211
Provision for restructuring                              19
Cash expenditures                                      (129)
Noncash expenditures                                    (20)
                                                     ------
Balance at December 31, 1994                             81
                                                     ------
Provision for restructuring                              83
CBS acquisition plan                                    100
Cash expenditures                                      (101)
Noncash expenditures                                     (5)
                                                     ------
Balance at December 31, 1995                            158
                                                     ------
Provision for restructuring                             273
Cash expenditures                                      (104)
Noncash expenditures                                    (49)
                                                     ------
Balance at December 31, 1996                         $  278
                                                     ======
</TABLE>

Of the $278 million of restructuring costs accrued at December 31, 1996, $206
million was for employee severance costs associated with involuntary
separations, $50 million was for contractual lease obligations and other
facility closure costs, and $22 million was for unfavorable purchase
commitments. The accrued restructuring costs in the table above include $100
million at December 31, 1995 and $75 million at December 31, 1996, for the CBS
acquisition plan.

                                       53
<PAGE>   54

Additional restructuring costs totalling $2 million in 1996, $52 million in
1995, and $52 million in 1994 were included in the results of Discontinued
Operations primarily for the separation of approximately 1,400 employees and
the exiting of various product lines and facilities.

NOTE 21: SEGMENT INFORMATION

Westinghouse is a global corporation operating in the principal business areas
of television and radio broadcasting, cable programming, chemical and nuclear
materials management, transport temperature control, and power generation
systems. The Corporation's continuing businesses are aligned for reporting
purposes into the following four segments: Media, Power Systems, Thermo King,
and Government Operations. Results of international activities, including
manufacturing, export sales, and foreign licensee income, are included in the
financial information of the segment that has operating responsibility.

Media provides a variety of communications services consisting primarily of
commercial broadcasting, program production, and distribution. It operates the
CBS Television Network, a programming provider for approximately 200
affiliates.  It sells advertising time to radio, television and cable
advertisers through national and local sales organizations. Media currently
owns and operates 14 television broadcasting stations and 79 radio stations
including those acquired with Infinity. Media also provides programming and
distribution services to the cable television industry. Group W Satellite
Communications (GWSC) provides sports programming; the marketing and
advertising for two country music entertainment networks; and a 24-hour,
Spanish-language news service. The two country music entertainment networks are
expected to be acquired in 1997. See note 23 to the financial statements. GWSC
is currently developing a new cable channel, Eye on People.

The Power Systems segment designs, develops, manufactures and services nuclear
and fossil-fueled power generation systems and is a leading supplier of reload
nuclear fuel to the global electric utility market.

Thermo King is a leading supplier of mobile temperature control equipment for
trucks, trailers and seagoing containers, as well as air conditioning for
buses.

The Government Operations segment includes the management and operation of
several government-owned facilities for the U.S. Department of Energy (DOE) and
the U.S. Army, and support for the U.S. naval nuclear reactors program.

The Corporate & Other segment includes corporate activities that are managed
for the benefit of the entire Corporation.

Segment sales of products and services include products that are transferred
between segments, generally at inventoried cost plus a margin. Segment
operating profit or loss consists of sales of products and services less
segment operating expenses, which include costs of products and services,
marketing, administration and general expenses, depreciation and amortization,
and restructuring costs.

Segment operating profit for 1996, 1995, and 1994 included special charges
consisting of costs for restructuring, litigation, and other matters (see note
20 to the financial statements) as follows:

SPECIAL CHARGES INCLUDED IN SEGMENT OPERATING PROFIT
 (in millions)
<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31          1996     1995      1994
-------------------------------    -------  -------    ------
<S>                                <C>        <C>       <C>
Media                              $    41    $   -     $ (2)
                                   -------    -----     ---- 
Industries & Technology:
      Power Systems                    486      280       21
      Thermo King                        6        -        -
      Government Operations              8        -        -
                                   -------    -----     ----
Total Industries & Technology          500      280       21
Corporate & Other                      438       39        -
                                   -------    -----     ----
Total                              $   979    $ 319     $ 19
                                   =======    =====     ====
</TABLE>

                                       54
<PAGE>   55



SALES OF PRODUCTS AND SERVICES AND OPERATING PROFIT BY SEGMENT (in millions)

<TABLE>
<CAPTION>
                                          SALES OF PRODUCTS AND SERVICES                    OPERATING PROFIT (LOSS)
                                      ---------------------------------------      --------------------------------------
     YEAR ENDED DECEMBER 31              1996           1995           1994           1996           1995          1994
-------------------------------       ---------      ---------      ---------      ---------      ---------      --------
<S>                                    <C>            <C>            <C>             <C>            <C>             <C>
Media                                  $ 4,145        $ 1,016        $   650         $ 310          $ 212           $ 197
                                       -------        -------        -------         -----          -----           -----
Industries & Technology:
      Power Systems                      3,234          2,949          2,845          (467)          (248)            117
      Thermo King                        1,013          1,065            877           180            176             135
      Government Operations                121            155            133            63             81              77
                                       -------        -------        -------         -----          -----           -----
Total Industries & Technology            4,368          4,169          3,855          (224)             9             329
Corporate & Other                          133            393            674          (734)          (161)           (165)
Intersegment Sales                         (41)           (30)           (54)            -              -               -
                                       -------        -------        -------         -----          -----           -----
Total                                  $ 8,605        $ 5,548        $ 5,125         $(648)         $  60           $ 361
                                       =======        =======        =======         =====          =====           =====
</TABLE>


OTHER SEGMENT FINANCIAL INFORMATION (in millions)
<TABLE>
<CAPTION>
                                      IDENTIFIABLE ASSETS       DEPRECIATION AND AMORTIZATION        CAPITAL EXPENDITURES
AT OR FOR THE YEAR ENDED          --------------------------    -----------------------------     ---------------------------
      DECEMBER 31                 1996      1995        1994      1996      1995      1994        1996       1995        1994
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>       <C>          <C>         <C>     <C>         <C>        <C>         <C>
Media                            $14,194    $ 8,889    $   794      $ 277     $  57     $  31       $  93      $  32       $  35
                                 -------    -------    -------      -----     -----     -----       -----      -----       -----
Industries & Technology:
      Power Systems                2,596      2,558      2,397         93        93        95          72        101          87
      Thermo King                    400        381        354         15        15        13          20         23          19
      Government Operations           60         99         83          3         1         2           2          2           2
                                 -------    -------    -------      -----     -----     -----       -----      -----       -----
Total Industries & Technology      3,056      3,038      2,834        111       109       110          94        126         108
Corporate & Other                  2,639      2,663      3,001         17        27        39           1         21          21
                                 -------    -------    -------      -----     -----     -----       -----      -----       -----
Total Continuing Operations       19,889     14,590      6,629        405       193       180         188        179         164
Discontinued Operations            1,418      3,958      5,168         71       124       140          18        111          95
                                 -------    -------    -------      -----     -----     -----       -----      -----       -----
Total                            $21,307    $18,548    $11,797      $ 476     $ 317     $ 320       $ 206      $ 290       $ 259
                                 =======    =======    =======      =====     =====     =====       =====      =====       =====
</TABLE>


Corporate & Other assets in the table above are not identifiable to operating
segments and principally include cash and cash equivalents, deferred income
taxes, plant and equipment associated with corporate headquarters, and certain
noncurrent receivables.

The increase in identifiable assets of Continuing Operations in 1996 and 1995
reflects the acquisitions of Infinity and CBS, respectively.

Included in income from Continuing Operations is income of subsidiaries located
outside the United States. These subsidiaries reported net income of $70
million in 1996, $81 million in 1995, and $15 million in 1994. Subsidiaries
located outside the United States comprised 5% of total assets of Continuing
Operations in 1996, 5% in 1995, and 17% in 1994. Subsidiaries located outside
the United States comprised 2% of total liabilities of Continuing Operations in
1996, 2% in 1995, and 5% in 1994.

The following table reflects selected financial information based on the
geographic area where the sale originated:

FINANCIAL INFORMATION BY GEOGRAPHIC AREA (in millions)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31        1996       1995      1994
------------------------------------     ---------   --------  --------
<S>                                       <C>        <C>        <C>
Sales of products and services
      from Continuing Operations:
    U.S.                                  $  7,689   $  4,634   $ 4,327
    Outside the U.S.                           916        914       798
                                          --------   --------   -------
Sales of products and services            $  8,605   $  5,548   $ 5,125
                                          --------   --------   -------
Operating profit (loss) from
      Continuing Operations:
    U.S.                                  $   (748)  $    (56)  $   310
    Outside the U.S.                           100        116        51
                                          --------   --------   -------
Operating profit (loss)                   $   (648)  $     60   $   361
                                          --------   --------   -------
Segment identifiable assets of
      Continuing Operations:
    U.S.                                  $ 18,816   $ 13,877   $ 5,506
    Outside the U.S.                         1,073        713     1,123
                                          --------   --------   -------
Segment identifiable assets               $ 19,889   $ 14,590   $ 6,629
                                          ========   ========   =======
</TABLE>

The Corporation sells products manufactured domestically to customers
throughout the world using domestic divisions and subsidiaries doing business
primarily outside the United States. Generally, products manufactured outside
the United States are sold outside the United States.


                                       55
<PAGE>   56

SALES OF PRODUCTS AND SERVICES SOLD OUTSIDE THE U.S. (in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31                        1996                         1995                        1994
----------------------                  -----------------------       ----------------------     ----------------------
                                        AMOUNT       % OF SALES       AMOUNT      % OF SALES     AMOUNT      % OF SALES
                                        ------       ----------       ------      ----------     ------      ----------
<S>                                     <C>             <C>           <C>           <C>         <C>             <C>
Subsidiaries outside the U.S.:
    Europe, Africa, Middle East        $   550           6.4%         $  568        10.2%        $  486           9.5%
    Canada                                 273           3.2%            256         4.6%           227           4.4%
    All other                               93           1.1%             90         1.6%            85           1.7%
                                       -------         -----          ------       -----         ------          -----
Total                                  $   916          10.7%         $  914        16.4%        $  798          15.6%
                                       =======         =====          ======       =====         ======          ===== 
U.S. exports:
    Europe, Africa, Middle East        $   353           4.1%         $  306         5.5%        $  380           7.4%
    Asia-Pacific                           798           9.3%            762        13.7%           465           9.1%
    Latin America                          333           3.9%            105         1.9%           143           2.8%
    Canada                                  41           0.5%             48         0.9%            53           1.0%
                                       -------         -----          ------       -----         ------         ----- 
Total                                  $ 1,525          17.8%         $1,221        22.0%        $1,041          20.3%
                                       =======         =====          ======       =====         ======         =====
 
</TABLE>


Purchases by the U.S. Government and its agencies accounted for 3%, 6% and 6%
of sales of products and services from Continuing Operations for 1996, 1995 and
1994, respectively. Sales to the utility segment accounted for 25% of sales of
products and services from Continuing Operations during 1996, 35% in 1995 and
40% in 1994.

RESEARCH AND DEVELOPMENT BY CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31          1996      1995     1994
----------------------          ----      ----     ----
<S>                            <C>       <C>     <C>
Westinghouse-sponsored:
      Power Systems            $   29    $   40   $   66
      Other                        13        14       20
Customer-sponsored:
      Power Systems                73        66       47
      Other                        26        45       52
                               ------    ------   ------
Total research and
      development
      expenditures             $  141    $  165   $  185
                               ======    ======   ======
</TABLE>

NOTE 22: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined by the
Corporation using the best available market information and appropriate
valuation methodologies. However, considerable judgment is necessary in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amounts that the
Corporation could realize in a current market exchange or the value that
ultimately will be realized by the Corporation upon maturity or disposition.
Additionally, because of the variety of valuation techniques permitted under
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
comparability of fair values among entities may not be meaningful. The use of
different market assumptions or estimation methodologies may have a material
effect on the estimated fair value amounts.

                                       56
<PAGE>   57



FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUING OPERATIONS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                                                     1996                                1995
--------------                                      --------------------------------    --------------------------------
                                                    CARRYING    ESTIMATED   CONTRACT    CARRYING    ESTIMATED   CONTRACT
                                                      AMOUNT    FAIR VALUE    AMOUNT      AMOUNT    FAIR VALUE    AMOUNT
<S>                                                   <C>         <C>         <C>         <C>          <C>         <C>
ASSETS:
Cash and cash equivalents                             $   220     $  220      $    -      $  196       $ 196      $    -
Investments in marketable securities                       48         47           -          55          55           -
Noncurrent customer and other receivables                 384        377           -         161         150           -

LIABILITIES:
Short-term debt                                           497        497           -         306         306           -
Current maturities of long-term debt                        4          4           -         330         330           -
Long-term debt                                          5,149      5,147           -       7,226       7,239           -

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Interest rate swap agreements:
    Unrealized losses                                       -         (7)          -           -         (14)          -
Foreign currency exchange contracts:
    Unrealized gains (losses)                               -         (4)          -           -           4           -
Letters of credit                                           -          -         522           -           -         503
</TABLE>


FAIR VALUE OF FINANCIAL INSTRUMENTS--DISCONTINUED OPERATIONS (in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31                                                     1996                                1995
--------------                                      --------------------------------    --------------------------------
                                                    CARRYING    ESTIMATED   CONTRACT    CARRYING    ESTIMATED   CONTRACT
                                                      AMOUNT    FAIR VALUE    AMOUNT      AMOUNT    FAIR VALUE    AMOUNT
<S>                                                   <C>        <C>         <C>          <C>         <C>         <C>
ASSETS:
Cash and cash equivalents                             $    13    $    13     $     -      $   30      $   30      $    -
Noncurrent customer and other receivables                  29         27           -         109         108           -
Portfolio investments:
    Real estate                                             2          2           -          35          16           -
    Corporate finance                                       -          1           -           1          (1)          -

LIABILITIES:
Short-term debt                                             5          5           -          84          84           -
Current maturities of long-term debt                        2          2           -         265         341           -
Long-term debt                                            417        423           -         157         164           -

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Interest rate and currency exchange
  agreements:
    Unrealized gains                                        -          -           -           -          72           -
Letters of credit                                           -          -          94           -           -         317
</TABLE>

                                       57
<PAGE>   58



The following methods and assumptions were used to estimate the fair value of
financial instruments for which it was practicable to estimate that value.

CASH AND CASH EQUIVALENTS

The carrying amount for cash and cash equivalents approximates fair value.

INVESTMENTS IN MARKETABLE SECURITIES

The fair value of investments in marketable securities is based on quoted
market prices.

NONCURRENT CUSTOMER AND OTHER RECEIVABLES

The fair value of noncurrent customer and other receivables is estimated by
discounting the expected future cash flows at interest rates commensurate with
the creditworthiness of the customers and other third parties.

PORTFOLIO INVESTMENTS

At December 31, 1996 and 1995, the fair value of portfolio investments was
determined using financial information prepared by independent third parties,
discounted cash flow projections, financial statements for investee companies
and letters of intent or other asset sale agreements.

SHORT-TERM DEBT

The carrying amount of the Corporation's borrowings under credit facilities and
other arrangements approximate fair value.

LONG-TERM DEBT

The fair value of long-term debt has been estimated using quoted market prices
or discounted cash flow methods based on the Corporation's current borrowing
rates for similar types of borrowing arrangements with comparable terms and
maturities.

INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS

The fair value of interest rate and currency exchange agreements is the amount
that the Corporation would receive or pay to terminate the agreements, based on
quoted market prices or discounted cash flow methods, considering current
interest rates, currency exchange rates and remaining maturities.

FINANCING COMMITMENTS

Most of the unfunded commitments relate to, and are inseparable from, specific
portfolio investments. When establishing the fair value for those portfolio
investments, consideration was given to the related financing commitments.

FOREIGN CURRENCY EXCHANGE CONTRACTS

The fair value of foreign exchange contracts is based on quoted market prices
to terminate the contracts.

NOTE 23: SUBSEQUENT EVENT  (Unaudited)

On February 10, 1997, the Corporation announced that it reached a definitive
merger agreement with Gaylord Entertainment Company (Gaylord) whereby the
Corporation will acquire Gaylord's two major cable networks-The Nashville
Network (TNN) and Country Music Television (CMT). The acquisition includes
domestic and international operations of TNN, the U.S. and Canadian operations
of CMT, and approximately $50 million of working capital. The purchase price of
$1.55 billion will be paid in Westinghouse common stock. The number of shares
to be issued will depend on the average closing price of the Corporation's
stock during a trading period just prior to closing the transaction, subject to
certain limits on the total number of shares to be issued and certain
termination rights under the merger agreement. This transaction is subject to
several conditions, including regulatory approvals, the receipt of a favorable
ruling from the Internal Revenue Service, and the approval of Gaylord's
shareholders.

NOTE 24:  ADDITIONAL MATTERS
a)   In June 1997, the Westinghouse Board of Directors modified the
     separation plan described in note 1. Under the modified separation plan,
     Thermo King Corporation will remain with the media company, along with the
     existing pension and other postretirement benefit obligations of
     Westinghouse. The Corporation will consider options to enhance Thermo
     King's value to shareholders, including a sale, public offering or
     spin-off to shareholders.

b)   In 1996, the Corporation modified its accounting practices related to 
     certain long-term contracts. The Corporation accounts for long-term
     contracts to supply major apparatus and parts for major apparatus under
     the percentage of completion method. Previously, the Corporation
     recognized revenue on parts contracts when the parts were procured but now
     recognizes revenue when the parts are delivered to the customer. For major
     apparatus contracts, the Corporation previously recognized a portion of
     the contract revenue approximating pre-contract costs when the contract
     was signed. The Corporation now recognizes all of the contract revenue
     over the life of the contract. In connection with these modifications, the
     Corporation recorded an adjustment to reduce pre-tax earnings by $128
     million.
 

     After discussions with the SEC, the Corporation agreed to retroactively
     apply the modified accounting practices for all periods presented. The
     impact of this restatement on the Corporation's loss from Continuing
     Operations, net income (loss) and related per share amounts is presented
     below:
<TABLE>
<CAPTION>
IMPACT OF RESTATEMENT              1996      1995      1994
                                   ----      ----      ----
(IN MILLIONS EXCEPT PER-
SHARE AMOUNTS)
<S>                                <C>       <C>      <C>
Loss from Continuing Operations:
     As previously reported         $(838)   $  (19)   $   (8)
     As restated                     (773)      (44)      (37)
Net income (loss)
     As previously reported          $ 30    $   15    $   77
     As restated                       95       (10)       48
Earnings (loss) per common share:
   Continuing Operations
     As previously reported        $(1.89)    $(.13)    $(.15)
     As restated                    (1.74)     (.19)     (.23)
   Net income (loss)
     As previously reported         $ .07     $(.05)    $ .07
     As restated                      .22      (.11)     (.01)
</TABLE>

                                       58

<PAGE>   59
QUARTERLY FINANCIAL INFORMATION (Unaudited, in millions except per-share
amounts)
<TABLE>
<CAPTION>
                                             1996 QUARTER ENDED                             1995 QUARTER ENDED
                                --------------------------------------------      ------------------------------------------
                                DEC. 31    SEPT. 30    JUNE 30      MARCH 31      DEC. 31    SEPT. 30    JUNE 30    MARCH 31
                                -------    --------    -------      --------      -------   --------    -------    --------
<S>                            <C>         <C>         <C>        <C>            <C>         <C>        <C>         <C>
Sales of services and
  products                     $ 2,451     $ 1,967     $ 2,148    $  2,039       $ 1,849     $1,204     $1,367      $1,128
Gross margin                       766         677         762         532           627        348        413         314
Restructuring, litigation,
  and other matters               (150)          -        (175)       (654)         (200)      (114)        (5)          -
Operating profit (loss)             (2)         90         (30)       (706)           11        (55)        85          19
Other income and expenses, net      27          25           8        (146)           14        124          1          (2)
Income (loss) from
  Continuing Operations            (32)          6         (89)       (658)          (64)        15         23         (18)
Income (loss) from
  Discontinued Operations (a)       (2)         (4)          -         967            47        (72)        33          26
Extraordinary loss                   -         (30)          -         (63)            -          -          -           -
Net income (loss)                  (34)        (28)        (89)        246           (17)       (57)        56           8
Earnings (loss) per
  common share:
 Continuing Operations            (.07)        .01        (.20)      (1.50)         (.15)       .02        .03        (.08)
 Discontinued Operations          (.01)       (.01)          -        2.20           .11       (.18)       .08         .07
 Extraordinary loss                  -        (.06)          -        (.14)            -          -          -           -
 Earnings (loss) per
  common share                    (.08)       (.06)       (.20)        .56          (.04)      (.16)       .11        (.01)
Dividends per common share         .05         .05         .05         .05           .05        .05        .05         .05

New York Stock Exchange 
market price per share:
 High                             21 1/8        19        20 1/8      21            17 7/8      15 1/2     16 3/8      16
 Low                              17            15 3/8    17 3/8      16 5/8        13 3/8      12 5/8     13 7/8      12 1/8
</TABLE>

(a)Includes  a net gain of $1,018  million from  disposals of business
    segments in the first  quarter of 1996 and a net loss of $76 million from a
    disposal in the third quarter of 1995.

Certain amounts have been restated as discussed in note 24.


                                       59
<PAGE>   60
FIVE-YEAR SUMMARY SELECTED FINANCIAL AND STATISTICAL DATA (Unaudited, dollars
in millions except per-share amounts)
<TABLE>
<CAPTION>
                                                  1996              1995              1994             1993            1992
                                                  ----              ----              ----             ----            ----
<S>                                          <C>                 <C>              <C>              <C>              <C>
Sales of services and products                $    8,605          $ 5,548          $  5,125         $  5,153         $  5,272
Operating profit (loss)                             (648)              60               361                1              460
Other income and expenses, net                       (86)             137              (285)             (75)             (32)
Interest expense                                    (456)            (236)             (134)            (164)            (169)
Income (loss) from Continuing
  Operations before income taxes
  and minority interest                           (1,190)             (39)              (58)            (238)             259
Income tax benefit (expense)                         423                6                30               73              (79)
Income (loss) from Continuing
  Operations                                        (773)             (44)              (37)            (174)             175
Income (loss) from Discontinued
  Operations                                         961               34                85              (99)          (1,236)
Extraordinary loss                                   (93)               -                 -                -                -
Cumulative effect of changes  
  in accounting principles                             -                -                 -              (56)            (338)
Net income (loss)                                     95              (10)               48             (329)          (1,399)   
------------------------------------------- -------------    -------------    -------------    --------------     ----------- 
Earnings (loss) per common share:
  Continuing Operations                       $    (1.74)        $   (.19)        $    (.23)        $   (.64)        $    .43
  Discontinued Operations                           2.17              .08               .22             (.28)           (3.57)
  Extraordinary loss                                (.21)               -                 -                -                -
  Cumulative effect of changes 
    in accounting principles                           -                -                 -             (.16)            (.98)
  Earnings (loss) per 
    common share                                     .22             (.11)             (.01)           (1.08)           (4.12)
Dividends per common share                           .20              .20               .20              .40              .72    
------------------------------------------- -------------     -------------   -------------    --------------     ----------- 
Total assets:
  Continuing Operations                       $   19,889          $14,590          $  6,629         $  6,893         $  6,220
  Discontinued Operations                          1,418            3,958             5,168            7,616           11,696
  Total assets                                    21,307           18,548            11,797           14,509           17,916
Long-term debt: 
  Continuing Operations                            5,149            7,226             1,865            1,869            1,314
  Discontinued Operations                            417              157               589              663            1,629
Total debt:   
  Continuing Operations                            5,650            7,862             2,497            2,500            2,800
  Discontinued Operations                            424              506             1,240            3,850            7,133
Shareholders' equity                               5,742            1,442             1,774            1,050            2,226    
------------------------------------------- -------------    -------------   --------------    --------------     ----------- 
Average common and common
   equivalent shares outstanding             443,399,290      410,137,941       383,736,249      352,901,670      346,103,408
Market price range per share             $ 21 1/8-15 3/8   $17 7/8-12 1/8    $15 1/4-10 7/8   $17 1/8-12 3/4    $20 7/8-9 3/4
Market price at year end                          19 7/8           16 3/8            12 1/4           14 1/8           13 3/8
Common shareholders at year end                  127,802          125,962           125,376          125,806          127,559
Average number of employees                       59,275           77,813            84,399          103,063          109,050
</TABLE>

Previously reported amounts have been restated to segregate the results of
Discontinued Operations from Continuing Operations. Certain amounts have been
restated as discussed in note 24.

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<PAGE>   61

                                    PART IV

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

(A)(1) FINANCIAL STATEMENTS

    The financial statements required by this item are listed under Part II,
Item 8, which list is incorporated herein by reference.

(A)(3) EXHIBITS

           (11)      Computation of Per Share Earnings
           (12)(a)   Computation of Ratio of Earnings to Fixed Charges
           (12)(b)   Computation of Ratio of Earnings to Combined Fixed 
                     Charges and Preferred Stock Dividends
           (23)(a)   Consent of Independent Auditors
           (23)(b)   Consent of Independent Accountants
                     Directors
           (27)      Financial Data Schedule


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<PAGE>   62



                                   SIGNATURE

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 14th day of
July, 1997.

                                        Westinghouse Electric Corporation

                                        By: /s/ CAROL V. SAVAGE 
                                            ----------------------------
                                                  Carol V. Savage
                                                Vice President and
                                             Chief Accounting Officer

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

<TABLE>
<CAPTION>
              Signature and Title
<S>                                                            <C>      
Frank C. Carlucci, Director
Robert E. Cawthorn, Director
Gary M. Clark, Vice Chairman, President
  and Director
George H. Conrades, Director
William H. Gray, III, Director
Michael H. Jordan, Chairman and Chief Executive
  Officer (principal executive officer) and Director
Mel Karmazin, Chairman and Chief Executive Officer,            By: /s/ CAROL V. SAVAGE
  CBS Radio, and Director                                          --------------------
Dr. David K.P. Li, Director                                            Carol V. Savage 
David T. McLaughlin, Director                                          Attorney-In-Fact
Richard R. Pivirotto, Director                                         July 14, 1997
Fredric G. Reynolds, Executive Vice President and
  Chief Financial Officer (principal financial officer)
Carol V. Savage, Vice President and Chief
  Accounting Officer (principal accounting officer)
Raymond W. Smith, Director
Dr. Paula Stern, Director
Robert D. Walter, Director
</TABLE>

    Original powers of attorney authorizing Carol V. Savage and certain others,
individually, to sign this report on behalf of the listed directors and
officers of the Corporation and a certified copy of resolutions of the Board of
Directors of the Corporation authorizing Carol V. Savage and certain others to
sign on behalf of the Corporation have been filed with the Securities and
Exchange Commission and are included as Exhibit 24 to the report on Form 10-K.

                                       62