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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                  FORM 10-K/A

             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE 
                        SECURITIES EXCHANGE ACT OF 1934
 
                               ----------------
 
FOR FISCAL YEAR ENDED OCTOBER 31, 1997           COMMISSION FILE NUMBER 0-20609
 
                             WHITTAKER CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                  DELAWARE                                       95-4033076
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)
 

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

 
      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 526-5700
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 

                                                         NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                          ON WHICH REGISTERED
             -------------------                         ---------------------
   Common Stock, par value $.01 per share               New York Stock Exchange
                                                         Pacific Exchange, Inc.
      Series A Participating Cumulative                 New York Stock Exchange
       Preferred Stock Purchase Rights                   Pacific Exchange, Inc.

 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                     NONE
                               (TITLE OF CLASS)
 
                               ----------------
 
  Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.    YES [X]    NO
 
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of the Securities Exchange Act of 1934) is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this 
Form 10-K. [_]
 
  State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant: $115,722,695 as of December 31, 1997.
 
  Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:11,204,658 shares
of Common Stock as of December 31, 1997.
 
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<PAGE>
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
<TABLE>
<CAPTION>
                                                                      WHERE
                         DOCUMENT                                  INCORPORATED
                         --------                                  ------------
<S>                                                          <C>
Definitive Proxy Statement for the Annual Meeting of Stock-
 holders to be held April 3, 1998 to be filed pursuant to
 Section 14(a) of the Securities Exchange Act of 1934 (the
 "Proxy Statement")........................................          Part III
</TABLE>
<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS. (as amended April 8, 1998 to revise "Continuing Operations -
        Aerospace Group - Backlog," and "Discontinued Operations - Assets Held
        for Sale or Development")
 
GENERAL
 
  Whittaker Corporation ("Whittaker" or the "Company") was incorporated in
California in 1947 and became a Delaware corporation in 1986. Whittaker
maintains its principal executive and administrative offices at 1955 N.
Surveyor Avenue, Simi Valley, California 93063 (telephone number 805-526-
5700).
 
  In its continuing operations the Company has been active during fiscal 1997
in the Aerospace business and in the Integration Services business. During the
fourth quarter of 1997, the Company decided to discontinue its Communications
segment and, on September 30, 1997, the Company sold its defense electronics
unit to Condor Systems, Inc. These actions implemented the Company's strategy
to reduce debt and explore strategic options. The decision to discontinue the
Communications segment followed the Company's evaluation of its core strengths
in the aerospace industry. Thus, the Company's financial statements report the
operating results and balance sheet items of these discontinued operations
separately from its continuing operations. See Notes 2 and 13 to Consolidated
Financial Statements in Part II, Item 8 of this Form 10-K for financial
information about discontinued operations and industry segments of continuing
operations. The Aerospace Group develops, manufactures and markets proprietary
fluid (pneumatic, hydraulic, and fuel) control valves and control systems and
fire and overheat detection products and systems for aircraft, land-based gas
turbines, and other industrial applications. The Company's Integration
Services business provides professional services for the integration of data
networks for hospitals and other enterprises. For the fiscal year ended
October 31, 1997, the Company's total sales from continuing operations were
$95.1 million, of which 94% were generated by the Aerospace Group and 6% were
generated by the Integration Services business. Set forth below is a
description of these two business areas and the operations of the discontinued
businesses.
 
CONTINUING OPERATIONS
 
 Aerospace Group
 
PRODUCTS
 
  Principal applications and representative products of the Company's
Aerospace group include:
 
  Fluid and Pneumatic Controls. The Company designs and manufactures a broad
range of fluid control devices for both commercial and military aircraft. The
products are designed to control pneumatic, hydraulic and fuel flows in
aircraft systems. In commercial applications, they are used on virtually all
Boeing, McDonnell Douglas, and AirBus commercial aircraft, and virtually all
other aircraft and jet engines manufactured in the world, with the exception
of those manufactured in the former Communist countries. In addition,
commercial and industrial applications include ground fueling devices for
airports and valving systems, heat exchangers, and fuel skids for land-based
gas turbines, off-shore oil platforms, and petrochemical complexes. In
military applications, the products are used on military transports, bombers,
helicopters, fighters and landing craft. Both commercial and military
applications include aircraft turbine engines built by General Electric, Rolls
Royce and Pratt & Whitney. Sales of fluid control products were $63.5 million
in fiscal 1997, $73.9 million in fiscal 1996 and $59.5 million in fiscal 1995.
 
  Fire and Overheat Detectors. The Company designs and manufactures continuous
length pneumatic fire and overheat detectors, optical flame detectors, smoke
detectors and bleed-air leak detection systems. These systems are used on
commercial and military aircraft, gas turbine engines, small naval vessels,
helicopters, and railcars. This equipment is widely used on a broad spectrum
of aircraft manufactured by Boeing, AirBus, McDonnell Douglas, Northrop
Grumman and many small manufacturers. The aircraft range from large commercial
transports to small commuter aircraft, private twin engine airplanes,
helicopters, military fighters and transport aircraft. The fire and overheat
detectors are used on aircraft engines manufactured by General Electric, Pratt
&
 
                                       1
<PAGE>
 
Whitney and Rolls Royce. Industrial applications of such products include
complete fire protection systems for vehicles, gas turbine powered pumping and
electric power generation applications, as well as large scale systems to
protect oil platforms and refineries. Sales of fire and overheat detectors and
systems were $19.5 million in fiscal 1997, $21.8 million in fiscal 1996 and
$21.8 million in fiscal 1995.
 
  Radio Frequency and High Temperature Cables. The Company designs and
manufactures high reliability silicon dioxide insulated coaxial and multiple
conductor cable systems which permit broad-band data transmission and control
function operation in extreme environments. Applications for these
technologies include signal transmission and control functions inside nuclear
power plants and reactors, power and control monitoring and electronic valve
control at oil refineries, extreme environmental condition cable applications
near jet engines, and critical connections in airborne electronic
countermeasure systems.
 
  Hydrogen and Oxygen Analyzers. The Company's hydrogen and oxygen analyzers
have been developed for use in the extreme environment surrounding a nuclear
reactor. The analyzers monitor and protect against the dangerous build up of
these gases, which, left unchecked, could result in a catastrophic fire or
explosion. The key features of the hydrogen and oxygen analyzers include the
rugged and stable electrochemical based sensors in combination with accurate
and dependable control and display units.
 
PRODUCT DEVELOPMENT
 
  In 1997 the Company developed a liquid fuel metering system for the
industrial gas turbine market which will be used to reduce the environmental
impact of power generation. This technology, incorporated into the gas
metering technology developed in 1996, should position Whittaker as a leader
in the turbine engine control segment of the industrial gas turbine market. In
addition to North America, the market potential for this product includes
Europe, Asia and Africa. The Company developed the ELIMINATOR design concept
for the ground fueling product line used in refueling aircraft at airports
throughout the world. This technology is a step up in the state of the art in
providing environmentally safe refueling of commercial and military aircraft.
The Company expanded its product lines in the sophisticated cryogenic and
missile fuel systems by providing a unique quick disconnect that assures no
spillage when systems are serviced.
 
  During 1997 the Company was awarded a major contract by The Boeing Company
to supply passenger air conditioning and cabin pressurization control valves
for the Boeing 757 and 767 aircraft. The Company was also awarded a major
contract by Rolls Royce, which is teamed with the Pratt & Whitney design team,
to develop valve equipment for the Boeing Joint Strike Fighter (JSF). The
components will be used to provide pitch/yaw/roll control for the JSF
aircraft.
 
  The Aerospace Group spent $0.9 million, $1.4 million and $0.9 million on
research and development activities in fiscal 1997, 1996 and 1995,
respectively.
 
MARKETS AND CUSTOMERS
 
  Sales to commercial customers, including foreign customers, were the major
contributor to Aerospace sales and profit in 1997. Sales directly or
indirectly to the United States Government, primarily under military
procurement contracts, continued to decrease as a percentage of Aerospace
sales, dropping to 19% of sales in 1997 compared to 27% of sales in 1996 and
28% in 1995. Export sales to customers outside the United States represented
21% of Aerospace sales in 1997, compared to 24% in 1996 and 22% in 1995.
 
  The Company has been able to achieve increased sales of its primary aircraft
fluid and pneumatic control devices over the past three years. Increased
emphasis has been placed on expanding sales from overhaul repairs, retrofits,
upgrades and spare components to end-users such as airlines, cargo carriers,
maintenance stations, military bases and government agencies. New aircraft
production is continuing to rise, which should contribute to an improved
business climate for these Company products. The Company has also positioned
itself for continued growth in the Aerospace segment by expanding its product
offerings in related markets, including fire and overheat detection equipment
and industrial markets.
 
                                       2
<PAGE>
 
  In certain geographic areas and for certain products, sales are often made
indirectly through independent representatives or distributors.
 
  Companies engaged in supplying military equipment to the United States
Government are subject to competition, changes in the continuing availability
of Congressional appropriations, changes in contract timing and scheduling,
complexity of designs and the potential for obsolescence, and other changes
which may result from world events. Contracts with the United States
Government are subject to termination for the convenience of the Government if
deemed in its best interests. Contracts which are terminated for convenience
generally provide for payments to a contractor for its costs and for fees or
profits related to work accomplished through the date of termination.
 
BACKLOG
 
  At October 31, 1997, Aerospace Group backlog totaled $70.5 million (compared
to $38.7 million at October 31, 1996), of which $10.9 million is not expected
to be filled within fiscal 1998. This backlog consisted of control valves and 
systems ($30.3 million), fire and overheat detectors ($18.3 million), spare 
parts ($9.3 million), cable and analyzer products ($3.9 million) and other 
products ($8.7 million).  At October 31, 1996 the Aerospace Group backlog 
totaled $38.7 million and consisted of control valves and systems ($16.5 
million), fire and overheat detectors ($10.7 million), spare parts ($5.4 
million), cable and analyzer products ($2.6 million) and other products ($3.5 
million).  The increase in backlog of control valves and systems from 1996 to 
1997 is the result of higher levels of production orders in 1997 compared to 
1996.  The increase in backlog of fire and overheat detectors from 1996 to 1997 
is the result of increased production orders in 1997 and the buildup of backlog 
in 1997 due to production and shipment delays caused by the move of the fire and
overheat detector operations from Concord, California to Simi Valley, 
California. Aerospace backlog includes no unfunded amounts relating to
government contracts.
 
COMPETITION
 
  The military and commercial industries in which the Aerospace Group operates
are generally highly competitive, with competition centering on price,
technical innovation, product performance and product support. Competitors of
the Company in such markets may have substantially greater financial
resources, research and design capabilities, and manufacturing capacity.
 
 Integration Services Segment
 
  The business and operations of the Integration Services segment are
conducted by Aviant Information, Inc. ("Aviant") a wholly owned subsidiary of
the Company. Aviant was formed in the second quarter of 1997 to serve the
growing requirements of health care information management. By assessing
network needs, diagnosing problems and implementing corrective actions, Aviant
addresses critical issues for health care organizations such as network
management, collaborative communication, security management, remote-access
implementation and high-speed networking. Aviant offers a full range of
customizable unique services in four main areas: network assessments, design /
redesign, integration / implementation and continuing services.
 
  Increasingly, health care providers are turning to information technology to
capture the business benefits of consolidation. Links can be built to
integrate disparate systems and connect users at remote facilities and across
the health care enterprise. By building flexible communications pathways,
organizations will be able to leverage existing legacy applications, implement
new strategic applications and capitalize on new business opportunities.
 
PRODUCTS AND SERVICES
 
  Aviant provides knowledge management and information communication system
optimization for the dynamically critical health care market. Aviant includes
among its customers representative hospitals from major health networks in the
United States.
 
  Principal services provided by Aviant include:
 
  Network Assessments--Aviant offers complete assessment of network inventory,
system integrity and reliability, capacity, topology, IP address space
requirements and existing network management practices.
 
  Network Design/Redesign--Aviant develops logical designs for bridge/routing,
mainframe connectivity and Internet access; makes technology-neutral
recommendations for network electronics, VLANs, IP address space network
management, protocol analyzers and remote monitoring; and creates guidelines
for acceptance testing.
 
                                       3
<PAGE>
 
  Network Integration and Implementation--Aviant offers project management,
including, procurement, staging, configurations, acceptance tests and
documentation.
 
  Continuing Services--Aviant offers customized, planned and managed
preventive maintenance programs which include, among other things, standard
break/fix hardware support, on-call and remote diagnostic support, time and
materials dispatch and onsite engineering.
 
MARKETS AND CUSTOMERS
 
  Aviant's customers include major hospitals and health care networks
throughout the United States. These health care providers are using Aviant's
concept of INFOnology to insure the delivery of complete and timely patient
information to every point of care in the enterprise system. Aviant has
established strong relationships with industry leading technology companies
and is affiliated with major healthcare management and information
associations.
 
  Aviant operates sales and support offices throughout the United States.
Sales of Aviant services for the eight months ended October 31, 1997 were $5.1
million. At October 31, 1997 Aviant's backlog totaled $5.3 million of which
$0.5 million was not expected to be filled in fiscal 1998.
 
COMPETITION
 
  The integration services business in which Aviant operates is generally
highly competitive and includes systems vendors offering integration services,
networking products vendors, software solutions providers and systems
integrators and consultants. Some of the competitors of the Company have
substantially greater financial resources and established reputations.
 
DISCONTINUED OPERATIONS
 
 Business to be Divested
 
  Xyplex Networks ("Xyplex") is a provider of network access solutions for the
enterprise edge market. Xyplex designs, develops and markets a comprehensive
line of networking products that allow its customers a migration path from
their existing legacy infrastructures to new and emerging data networking
architectures. In addition, Xyplex offers high-performance Ethernet and
Asynchronous Transfer Mode (ATM) Local Area Network switching and hub products
and provides a full range of network design, consulting, integration, and
support services for small businesses and large enterprise-wide solutions. On
January 19, 1998, the Company entered into a definitive agreement to sell all
of the common stock of its wholly-owned subsidiary, Whittaker Xyplex, Inc.,
the parent company of Xyplex, Inc., to MRV Communications, Inc., for $35
million in cash plus warrants to purchase up to 500,000 shares of common stock
of MRV Communications, Inc. The sale is subject to customary closing
conditions, including Hart-Scott-Rodino Act clearance.
 
 Assets Held for Sale or Development
 
  Also to be divested is a 996-acre parcel of land formerly used, until 1987,
by the Company's former Bermite division, a discontinued technology unit. The
land is located in the City of Santa Clarita, California, approximately 35
miles from downtown Los Angeles. In September 1995, the city granted the
entitlements necessary to develop this property as a mixed-use, residential,
commercial, and light industrial development. In February 1996 the city
approved a Development Agreement which, among other things, extended the ten-
year life of the entitlements to over 20 years. In connection with its ongoing
discussions with potential developers, the Company, in the fourth quarter of
1997, wrote down the carrying value of this land by $15.7 million to reflect
this asset at its estimated fair value. See Note 3 to Consolidated Financial
Statements in Part II, Item 8 of the Form 10-K for information about the
parcel remaining to be divested and a discussion of the factors considered by 
Management in determining the fair value of the land and the amount written down
for impairment.
 
 
                                       4
<PAGE>
 
 Divested Operations
 
  On September 30, 1997, the Company sold its defense electronics unit to
Condor Systems, Inc. This unit designed and manufactured electronic systems
for command, control and communications; radar countermeasure systems and
electronic combat systems and other radar surveillance and tracking systems
used in tactical training.
 
ENVIRONMENTAL
 
  Compliance with Federal, state and local provisions that have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Company, nor is the Company estimating any material capital expenditures for
environmental control facilities in fiscal 1998 or 1999.
 
EMPLOYEE RELATIONS
 
  As of October 31, 1997, the Company employed approximately 500 persons in
its continuing businesses, about 7% of whom were represented by labor
organizations. The Company believes that it has generally good relations with
its employees.
 
ITEM 2. PROPERTIES.
 
  The Company's corporate headquarters are located in a portion of its
facilities in Simi Valley, California, which consist of approximately 276,000
square feet in three buildings leased by the Company. The Company owns a
30,000 square foot production facility in Colorado which was formerly used in
its discontinued defense electronics business.
 
  The Company, in its continuing operations, also leases one facility in
California which consists of approximately 93,000 square feet under a lease
that expires in 1999 and one facility in Massachusetts, used in its
discontinued communications segment, which consists of approximately 101,000
square feet under a lease that expires in 1998. The Company has options to
renew these leases for various terms. Approximately 59% of the square footage
is used for manufacturing, engineering, and product development, while the
remainder is used for sales, marketing, and other general and administrative
support.
 
  The Company also leases and occupies sales and technical support offices
throughout the United States as well as in Europe, Mexico, Southeast Asia, and
South Africa.
 
  The Company believes that in general its plants and equipment are adequately
maintained, in good operating condition and adequate for the Company's present
needs. The Company regularly upgrades and modernizes its facilities and
equipment and expands it facilities as necessary to meet customer
requirements.
 
ITEM 3. LEGAL PROCEEDINGS.
 
ENVIRONMENTAL MATTERS
 
  As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of
1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with
respect to past treatment and disposal of hazardous substances. The Company
also is a potentially responsible party in a number of actions brought under
state laws patterned after CERCLA.
 
  CERCLA and such other state laws provide for the imposition of clean-up
liability on anyone who arranges for the disposal or treatment of hazardous
substances at designated sites. Accordingly, anyone who generates hazardous
substances may be a potentially responsible party if the treatment, storage,
or disposal facility that
 
                                       5
<PAGE>
 
handles the substances becomes the subject of an environmental clean-up under
such laws. This is true even if the treatment, storage, or disposal facility
has the proper licenses and permits issued by appropriate governmental
authorities and treats, stores, or disposes of the hazardous substances in
accordance with the terms of such licenses and permits. The various state
environmental agencies and the U.S. Environmental Protection Agency take the
position under these environmental laws that all responsible parties are
jointly and severally liable for the costs of cleaning up sites subject to
their jurisdiction and for any environmental damages caused by the treatment
or disposal of hazardous substances at such sites.
 
  In nearly all of the environmental matters in which the Company is involved
as a potentially responsible party, the Company contributed a very small
amount (generally much less than 1%) of the total wastes treated or disposed
of at these various treatment or disposal facilities and participates as a so-
called "de minimis" party. De minimis parties are generally allowed to settle
their potential liability for clean-up activities by agreeing with the state
or Federal environmental authorities and the other, larger responsible parties
to bear a share of the past and estimated future clean-up costs based on the
volume of the waste each de minimis party contributed, plus a "premium" or
"multiplier." These premiums or multipliers are designed to allow for the
uncertainty of estimates of future costs and the desirability of settling
liability early to avoid so-called transaction costs, i.e., the legal,
consulting, and other expenses, which tend to consume a significant amount of
the funds actually spent on the resolution of environmental matters.
 
  Where the Company does not qualify for such treatment, the Company's
potential liability on a particular environmental matter could be significant,
or the Company believes that the premium or multiplier for a de minimis
settlement is unreasonable, the Company may elect to participate in the
settlement or remediation activities as, or on the same basis as, a major
party, generally paying its allocated share of remediation expenses and
transaction costs as they are incurred, often over several years.
 
  In addition to the CERCLA and similar actions described above, the Company
also, from time to time, conducts or participates in remedial investigations
and clean-up activities at facilities currently or formerly occupied by its
operating units. In the most significant of these sites, the Company has
"clean closed" 13 of 14 facilities regulated under the Resource Conservation
and Recovery Act at its former Bermite division in Santa Clarita, California.
The Company is currently working to close the 14th of such facilities and to
complete an investigation of the entire 996-acre property in anticipation of
the development of the property for a planned mixed-use residential and
commercial development.
 
  In 1997, the Company made cash expenditures of approximately $3.3 million on
environmental matters, excluding expenditures for clean-up activities at its
former Bermite division. This amount was charged to reserves for environmental
contingencies related to the Company's discontinued operations. In 1997, 1996
and 1995, the Company made cash expenditures for clean-up activities at its
former Bermite division of $2.6 million, $4.0 million and $0.8 million,
respectively.
 
OTHER LEGAL MATTERS
 
  There are also various other claims and suits pending against the Company.
Based on an evaluation, which included consultation with counsel concerning
the legal and factual issues involved, the Company is of the opinion that such
claims and suits pending against the Company, including the environmental
matters discussed above, will not have a material adverse effect, singly or in
the aggregate, on the financial position of the Company. See Note 10 of Notes
to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
  Not applicable.
 
                                       6
<PAGE>
 
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  The following table sets forth the names, ages and positions of the current
executive officers of the Registrant.
 
<TABLE>
<CAPTION>
NAME                     AGE                         POSITIONS
----                     ---                         ---------
<S>                      <C> <C>
Joseph F. Alibrandi.....  69 President and Chief Executive Officer
Lynne M. O. Brickner....  45 Vice President and Secretary
John K. Otto............  43 Vice President, Chief Financial Officer and Treasurer
Eva Jonutis.............  48 Controller
Roland G. Patitz........  61 President, Whittaker Controls, Inc.
John J. Stobie..........  43 President, Safety Systems Division
Michael C. Thurk........  44 President, Xyplex, Inc. and Whittaker Communications, Inc.
</TABLE>
 
  Mr. Alibrandi joined Whittaker in July 1970 as President and Director and
served as Chief Executive Officer from November 1974 through January 1995. He
became Chairman of the Board in December 1985 and has continuously served in
such capacity since then. He was appointed President and Chief Executive
Officer on September 30, 1996.
 
  Ms. Brickner joined Whittaker in September 1995 as Assistant General Counsel
and Assistant Vice President. She was named Secretary and General Counsel in
September 1996 and as Vice President in October 1996. Prior to joining
Whittaker, Ms. Brickner was a practicing attorney with Kaye, Scholer, Fierman,
Hays & Handler since 1990.
 
  Mr. Otto joined Whittaker in 1983 as Whittaker's Manager of Banking and
Cash. He was named Assistant Treasurer in 1986 and Treasurer in 1988. He was
appointed Vice President of the Company in December 1996 and Chief Financial
Officer in October 1997.
 
  Ms. Jonutis joined Whittaker in 1974 as a cost accountant and served as its
Director of Financial Services from 1987 to 1993. She rejoined Whittaker in
October 1996 and was appointed Controller in December 1996.
 
  Mr. Patitz joined Whittaker in 1976 as Vice President of Operations of
Whittaker Controls, Inc. He was named President of Whittaker Controls, Inc. on
December 1, 1997.
 
  Mr. Stobie joined Whittaker Controls in 1977 where he served as Materials
Manager, Manufacturing Manager and Manufacturing Engineering Manager prior to
his appointment in 1995 as Director of Operations of the Company's Safety
Systems Division. In 1996 he was appointed Executive Vice President of
Operations and on December 1, 1997, he was named President of Safety Systems.
 
  Mr. Thurk joined Whittaker in June 1996 as President of Xyplex, Inc. and of
Whittaker Communications, Inc. Prior to joining Whittaker, he was Senior Vice
President of General DataComm and served in that position since 1994. Prior to
1994, he held various positions at Digital Equipment Corp. where he was named
Vice President of its Networking Business Unit in 1991 and Vice President
Telecommunications Business Segment in 1993.
 
  The term of office of each executive officer (except for Mr. Patitz, Mr.
Stobie and Mr. Thurk, who serve at the discretion of the Board of Directors)
will expire at the next annual meeting of the Board of Directors, which is
scheduled to be held on April 3, 1998.
 
                                       7
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
       MATTERS.
 
PRINCIPAL MARKETS
 
  The Common Stock is listed on the New York Stock Exchange and the Pacific
Exchange, Inc. (Symbol: WKR). The Series A Participating Cumulative Preferred
Stock Purchase Rights are listed on the New York Stock Exchange and the
Pacific Exchange, Inc., and, at the present time, trade with the Common Stock
and are not separately transferable. The Series D Participating Convertible
Preferred Stock (the "Series D Preferred Stock") is not listed or traded on
any exchange. See Note 6 of Notes to Consolidated Financial Statements in Part
II, Item 8 of this Form 10-K.
 
COMMON STOCKHOLDERS
 
  As of December 31, 1997 there were 4,861 registered holders of the Common
Stock.
 
COMMON STOCK PRICES
 
  The following table sets forth the high and low sales prices of the Common
Stock during Whittaker's two most recent fiscal years.
 
<TABLE>
<CAPTION>
                                            QUARTER ENDED
                      ---------------------------------------------------------
                       JANUARY 31     APRIL 30       JULY 31      OCTOBER 31
                      ------------- ------------- ------------- ---------------
                       HIGH   LOW    HIGH   LOW    HIGH   LOW    HIGH     LOW
                      ------ ------ ------ ------ ------ ------ ------- -------
     <S>              <C>    <C>    <C>    <C>    <C>    <C>    <C>     <C>
     1996............ 24 3/4 16 7/8 26 3/8 22 1/4 23 1/8 13 5/8 14 3/4  13 1/8
     1997............ 14 1/4 11 5/8 11 7/8  9 1/8 11 3/4 10 1/2 15 3/16 10 7/16
</TABLE>
 
DIVIDENDS
 
  Dividends of $0.25 were last declared on each share of Series D Preferred
Stock for the first two quarters of fiscal 1996 and no dividends have been
declared or paid during the remainder of fiscal 1996 and fiscal 1997. At October
31, 1997 these accrued and unpaid dividends amounted to $865.76. No dividends
have been declared on the Common Stock during the two most recent fiscal years.
 
  Since April 30, 1996, the Company has been prohibited from declaring or
paying dividends on any of its outstanding shares by restrictions in its
credit agreement with a group of lenders and its 7% convertible subordinated
note. Thus, the Company has not paid or declared dividends (including any
quarterly dividend for the Series D Preferred Stock) or redeemed shares since
that date. However, dividends on the Series D Preferred Stock have been
accrued since that date. In the foreseeable future, in light of the Company's
current financial condition and its strategy of using earnings from operations
to fund growth internally, the Company's present intention is to refrain from
paying cash dividends on the Common Stock, even if the Company is otherwise
able to do so under its current credit facility and its convertible
subordinated note. See Note 5 and Note 6 of Notes to Consolidated Financial
Statements in Part II, Item 8 of this Form 10-K for further description of the
Company's credit facility and of the convertible subordinated note.
 
SALES OF UNREGISTERED SECURITIES
 
  During the three most recent fiscal years, the Company has issued 1,974,333
unregistered shares of common stock to Raytheon Company ("Raytheon") on April
10, 1996. Such shares were issued as partial consideration for the Company's
acquisition of Xyplex, Inc. and the holders of such shares are subject to
certain limitations set forth in the Stockholder's Agreement between Raytheon
and the Company. The shares were issued in reliance upon Section 3(b) and 4(a)
of the 1934 Act and Regulation D promulgated thereunder. A registration
statement on Form S-3 covering the shares was filed by the Company on May 15,
1996 and was amended on March 10, 1997.
 
                                       8
<PAGE>
 
TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK
 
  CHASE MELLON SHAREHOLDER SERVICES
  85 Challenger Road
  Overpeck Centre
  Ridgefield Park, New Jersey 07660
 
RIGHTS AGENT FOR SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE
RIGHTS
 
  MELLON BANK N.A.
  Post Office Box 444
  Pittsburgh, Pennsylvania 15230
 
ITEM 6. SELECTED FINANCIAL DATA.
 
                             WHITTAKER CORPORATION
               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                   1997       1996      1995     1994     1993
                                 ---------  --------  -------- -------- --------
<S>                              <C>        <C>       <C>      <C>      <C>
SUMMARY OF OPERATIONS*
Sales..........................  $  95,133  $ 98,647  $ 81,298 $ 71,276 $ 55,802
Income (loss) from continuing
 operations, before accounting
 change and extraordinary item.    (32,930)    9,817     6,627    6,046    1,304
Cumulative effect of accounting
 change........................        --        --        --       --     1,512
Income (loss) from discontinued
 operations....................   (122,452)  (26,944)    1,238    4,015    4,440
Loss on disposal of
 discontinued operations.......     (4,791)      --        --       --       --
Extraordinary item.............     (3,409)      --        --       --       --
Net income (loss)..............   (163,582)  (17,127)    7,865   10,061    7,256
Earnings (loss) per share
  Continuing operations, before
   accounting change and
   extraordinary item..........      (2.95)      .93       .69      .64      .13
  Accounting change............        --        --        --       --       .16
  Discontinued operations......     (11.42)    (2.55)      .13      .42      .47
  Extraordinary item...........       (.31)      --        --       --       --
  Net income (loss)............     (14.68)    (1.62)      .82     1.06      .76
Average common and common
 equivalent shares outstanding
 (in thousands)................     11,144    10,569     9,625    9,502    9,491
OTHER DATA*
Working capital................    (76,366)  (65,731)   72,272   79,983   73,924
Total assets...................    167,442   340,448   227,137  200,981  194,508
Long-term debt.................        222       453    70,694   54,742   56,782
Stockholders' equity (deficit).    (30,723)  131,136   102,424   93,950   83,748
Current ratio..................     0.55:1    0.65:1    3.40:1   3.81:1   3.15:1
Capital additions..............      2,300     1,700     2,000    1,300      700
Stockholders of record.........      4,900     5,200     5,500    5,700    7,100
</TABLE>
--------
* Operating results and balance sheet items reflect the segregation of
  continuing operations from discontinued operations. See Note 2 of Notes to
  Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
 
 
                                       9
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION. (as amended April 8, 1998 to revise "Results of Operations 
- Comparison of 1997 to 1996")
 
RESULTS OF OPERATIONS
 
  During the fourth quarter of 1997, the Company decided to discontinue its
Communications segment and sold its defense electronics business. These units
are reflected in the results of operations as discontinued operations. The
Company's continuing operations are now comprised of two operating business
segments: Aerospace and the newly formed Integration Services business. These
actions implemented a strategy to reduce debt and explore strategic options
after the Company's evaluation of its core strengths in the aerospace
industry.
 
  The Aerospace segment is comprised of Whittaker Controls, Inc., a wholly
owned subsidiary, which designs and manufactures a broad range of fluid
control devices and Whittaker Safety Systems division which designs and
manufactures continuous length pneumatic fire and overheat detectors, optical
flame and smoke detectors and silicon dioxide insulated coaxial and multiple
conductor cable systems. The Integration Services segment is comprised of
Aviant Information, Inc., a wholly owned subsidiary, which provides turnkey
data networking solutions for hospitals and other enterprises.
 
  The discontinued operations include the Company's defense electronics
business which designed and manufactured a wide range of command, control and
communication systems, radar countermeasure systems and electronic combat
systems and Xyplex Networks, including the operations of Whittaker
Communications, Inc. ("WCI"). Xyplex Networks designs, develops and markets a
comprehensive line of networking products.
 
 Comparison of 1997 to 1996
 
  Sales. The Company's sales, from continuing operations, for 1997 of $95.1
million decreased by $3.5 million (3.6%) from the sales in the prior fiscal
year. The Company's Aerospace segment sales for fiscal 1997 decreased by $8.8
million (8.9%) from 1996 due to reduced sales from contracts qualifying, under
the Company's current policy, for revenue recognition using the percentage of
completion method. The Company's policy allows for revenue recognition using the
percentage of completion method in accordance with generally accepted accounting
principles ("GAAP") when the contract value is greater than $1.0 million and the
contract term is longer than one year. With fewer multi-year contracts being
awarded to original equipment manufacturers, including the Company, and more
customers going to "just in time" ordering, the majority of the Company's
revenue in 1997 related to short term contracts where revenue is recorded, in
accordance with GAAP, on the completed contract basis. Also negatively impacting
1997 sales were inefficiencies in the production of fire and overheat detectors
for the industrial and aircraft markets resulting from the move of the fire and
overheat detector operations from Concord, California to Simi Valley,
California. Partially offsetting these decreases in the Aerospace segment sales
were the sales generated by the Company's newly formed Integration Services
business.
 
  Gross Margin. The Company's gross margin, from continuing operations, for
1997 as a percentage of sales was 29.2%, compared with 49.0% for 1996. The
1997 gross margin consists of Aerospace gross margin of $29.2 million
partially offset by losses at the Company's newly formed Integration Services
business. Aerospace segment gross margin as a percentage of sales decreased
from 49.0% of sales in 1996 to 32.6% in 1997 primarily reflecting production
inefficiencies associated with the move of the Concord, California operations
to Simi Valley, California, lower sales volume of fluid control devices,
increases in inventory valuation allowances in its Aerospace segment related to 
inventories that the Company had determined to be excess or obsolete.  In 
addition, based on current estimates of the costs to complete certain long term 
contracts and the related revenue to be derived from these contracts, the 
Company determined that the completion of these contracts will result in losses.
In compliance with AICPA Statement of Position 81-1, the Company has provided 
for the entire amount of these estimated losses in the current year.
 
  Engineering and Development. Engineering and development expenses, of the
Company's continuing operations, for 1997 decreased by $0.4 million from 1996.
The 1997 engineering and development expenses consist of Aerospace segment
expenses of $0.9 million and Integration Services segment expenses of $0.1
million.
 
  Selling, General and Administrative. Selling, general and administrative
expenses (SG&A) of the Company's continuing operations for 1997 increased by
$0.4 million from 1996. Aerospace segment SG&A expenses were $12.7 million
(14.1% of sales) for 1997 compared to $16.4 million (16.6% of sales) for 1996.
This decrease was primarily the result of the reduction of management
incentive costs. Substantially offsetting this reduction in Aerospace segment
SG&A expenses were $3.5 million of expenses related to the Integration
Services segment.
 
                                      10
<PAGE>
 
  Interest. Interest expense increased to $18.3 million in 1997 from $10.9
million in 1996 primarily as a result of higher interest rates. Interest
income decreased in 1997 by $5.8 million from 1996 which included interest
income received in 1996 associated with federal income tax refunds for prior
years.
 
  Assets Held for Sale or Development. In connection with ongoing discussions
with potential developers the Company, in 1997, wrote down the carrying value
of a 996 acre land parcel held for sale or development by $15.7 million to its
estimated fair value.
 
  Income Taxes. In compliance with FASB 109, the Company has established a
full valuation allowance against its current potential carry forward benefits.
The Company will continue to offset income tax benefits with a valuation
allowance until such time as its pretax profits would allow for the
elimination of these allowances. In the fourth quarter of 1997, the Company
recorded a $4.2 million tax benefit for continuing operations representing
loss carry-back benefits and the reversal of prior year overaccruals of tax
liabilities.
 
  Sales from discontinued operations for 1997 decreased by $23.4 million or
19.0% from 1996. Sales from the discontinued defense electronics business
decreased by $15.5 million from $31.7 million in 1996 to $16.2 million in
1997. Sales from the discontinued Communications segment decreased by $7.9
million from $91.5 million in 1996 to $83.6 million in 1997.
 
  Gross margin from discontinued operations decreased by $6.8 million from
$42.9 million in 1996 to $36.1 million in 1997. The defense electronics
business gross margin increased slightly from $0.3 million in 1996 to
$0.7 million in 1997. This increase reflected the absence, in 1997, of
inventory write-offs and contract cost growth included in 1996 results,
substantially offset by the effects of reduced sales volume. The discontinued
Communications segment gross margin was $35.4 million for 1997 compared to
$42.6 million in 1996. This decrease reflected primarily the effects of
reduced sales volume.
 
  The discontinued operations results for 1997 include a goodwill and other
intangibles impairment charge of $30.2 million to reflect the significant
deterioration in the Communications segment revenues and the reduced
amortization periods for certain goodwill and other intangibles, and a
restructuring charge of $5.3 million. In connection with the decision to
discontinue the Communications segment, the Company, in the fourth quarter of
1997, wrote down the assets of this segment by $55.7 million to their
estimated net realizable value. The results of operations of the discontinued
operations include tax benefits of $2.6 million representing loss carry-back
benefits and the reversal of prior year overaccruals of tax liabilities.
 
  The loss on disposal of discontinued operations is net of income tax
benefits of $0.3 million and includes estimated operating losses of the
Communications segment until the estimated disposal date. The loss on disposal
of discontinued operations may be adjusted in future periods depending on the
accuracy of these estimates.
 
  Extraordinary Item. The significant increase in the interest rate at which
the Company can borrow under the terms of its credit agreement represents a
substantial modification to that credit agreement. Accordingly, the Company
recorded a charge of $3.4 million (net of $0.2 million of taxes) representing
the write-off of the unamortized portion of debt issuance costs incurred in
connection with obtaining that credit agreement.
 
 Comparison of 1996 to 1995
 
  Sales. The Company's continuing operations for 1996 consisted solely of the
Aerospace segment. Sales of continuing operations were $98.6 million compared
to $81.3 million in 1995 primarily reflecting increased sales of aircraft and
pneumatic controls devices.
 
  Gross Margin. The Company's gross margin, from continuing operations for
1996 as a percentage of sales was 49.0%, compared with 47.0% for 1995. Gross
margin for 1996 was $48.3 million compared to $38.2 million in 1995. This
increase was attributable to increased margins and improved manufacturing
yields on commercial
 
                                      11
<PAGE>
 
aircraft after market and industrial product lines. Partially offsetting this
increase was pension income of $0.6 included in the 1995 gross margin.
 
  Engineering and Development. Engineering and development expenses of the
Company's continuing operations for 1996 increased by $0.5 million from $0.9
million in 1995 to $1.4 million in 1996.
 
  Selling, General and Administrative. Selling, general and administrative
expenses (SG&A) of the Company's continuing operations for 1996 increased by
$5.5 million from 1995. This increase was primarily the result of increased
management incentive costs and legal expenses in 1996 and the inclusion in
1995 of a recovery related to the Company's insurance claim for damage from
the 1994 Northridge, California earthquake and increased pension income.
 
  Interest. Interest expense increased to $11.0 million in 1996 from $5.9
million in 1995 primarily as a result of higher interest rates and the
incremental debt related to an acquisition made in 1995. Interest income
increased by $5.7 million from 1995 as a result of interest income received in
1996 associated with federal income tax refunds for prior years.
 
  Sales from discontinued operations for 1996 increased by $45.0 million or
57.6% from 1995. Sales from the discontinued defense electronics unit
decreased by $12.1 million from $43.8 million in 1995 to $31.7 million in
1996. Sales from the discontinued Communications segment increased by $57.2
million from $34.3 million in 1995 to $91.5 million in 1996 reflecting the
acquisition of Xyplex Inc. in April of 1996.
 
  Gross margin from discontinued operations increased by $11.5 million from
$31.3 million in 1995 to $42.8 million in 1996. This increase reflected the
acquisition of Xyplex Inc. in 1996 partially offset by lower margins
associated with lower sales of defense electronics products and favorable
settlements included in the 1995 gross margin related to insurance and
contract claims and higher pension income in 1995.
 
  Engineering and development expenses for the discontinued operations
increased from $6.8 million in 1995 to $18.6 million in 1996. This increase is
attributable to the acquisition of Xyplex, Inc. in April of 1996 and the
inclusion of WCI for a full year in 1996. Selling, general and administrative
expenses for the discontinued operations were $53.5 million in 1996 compared
to $18.8 million in 1995. This increase was primarily attributable to the
acquisition of Xyplex in 1996 and the inclusion of WCI for a full year in
1996. Amortization expense included in Communications segment SG&A expenses
for 1996 was $6.9 million compared to $1.0 million in 1995.
 
  The discontinued operations results for 1996 include the write-off of
acquired in-process research and development of $11.7 million compared to a
write-off of $3.3 million in 1995. During 1996 the Company's discontinued
defense electronics business incurred restructuring costs of $0.8 million and
the discontinued Communications segment incurred restructuring costs of $1.6
million.
 
 General
 
  In fiscal 1997, 1996 and 1995, approximately 18%, 27%, and 28%,
respectively, of the Company's continuing operations sales were directly or
indirectly attributable to the United States Government. Substantially all of
these sales relate to the Aerospace segment. Companies engaged in supplying
military equipment to the United States Government are subject to competition,
changes in the continuing availability of Congressional appropriations,
changes in contract timing and scheduling, complexity of designs and the
potential for obsolescence, and other changes which may result from world
events. A loss of Government business, although not anticipated by the
Company, could have a material adverse effect on the Company's operations.
 
                                      12
<PAGE>
 
FINANCIAL CONDITION AND LIQUIDITY
 
  On April 10, 1996, in conjunction with the purchase of Xyplex, Inc., the
Company amended and increased its bank credit facility and borrowed an
additional $76.5 million under such facility. At that time the amended credit
agreement consisted of an $85.0 million revolving credit facility with a five-
year term and an $85.0 million term loan repayable in quarterly installments
over five years. The cash payment to Raytheon Company for the purchase of
Xyplex, Inc. on April 10, 1996 was $67.3 million.
 
  At October 31, 1997, the Company's debt totaled $129.6 million, which
consisted of $79.9 million of loans under the revolving credit facility, $34.0
million under the term loan, $15.0 million of convertible subordinated debt,
and $0.7 million of other debt. In addition, there were $2.9 million of
letters of credit outstanding under the revolving credit facility. Since July
31, 1996, the Company has not been in compliance with one or more of the four
financial ratio covenants in its credit agreement and, at October 31, 1997,
the Company was not in compliance with any such covenants. The Company has
obtained successive waivers of these defaults. A waiver agreement dated as of
July 31, 1997 required the Company to make, in addition to previously
scheduled principal payments, principal payments on the term loan by September
30, 1997, in an aggregate amount of not less than $20 million and to pay a fee
on November 3, 1997 of $1.8 million. In addition, the waiver permitted the
Company to retain fifty percent of the net cash proceeds from certain asset
sales which previously would have been used to repay the term loan. A waiver
dated December 31, 1997, waived the defaults up to but not including January
31, 1998. Under the terms of this latest waiver, the interest rate on loans
outstanding under the credit agreement is equal to the agent bank's prime rate
plus 4.25%. There is no assurance that in future periods, the Company will be
in compliance with any of the financial covenants contained in its credit
agreement, or that, after expiration of the current waiver on January 31,
1998, additional waivers of the financial covenants will be obtained and, if
obtained, that any such waivers would contain terms which would be as
favorable to the Company as, or would materially differ from, waivers granted
in the past. Consequently, bank debt in the amount of $105.3 million, which
otherwise would have been classified as noncurrent, has been classified as
current. Furthermore, acceleration of the debt under the credit agreement by
the bank lending group upon the Company's failure, after January 31, 1998, to
comply with any of the financial ratio covenants would be an event of default
under the Company's $15 million 7% convertible subordinated note. Because of
this possible cross-default, the entire $15 million principal balance of the
7% convertible subordinated note has also been classified as current debt. At
October 31, 1997, the Company had unused and available credit of $0.2 million
under its revolving credit facility.
 
  The Company believes that its existing cash and available credit under its
revolving credit facility will be adequate to meet future operating cash needs
through the waiver period. Thereafter, the Company may need additional
financing to meet its operating cash needs. However, there can be no assurance
that the Company will be able to obtain such additional financing.
 
  Debt as a percent of total capitalization (stockholders' equity plus debt)
was 131.1% at October 31, 1997, compared with 55.3% at October 31, 1996. The
current ratio at October 31, 1997 was 0.55, compared with 0.65 at October 31,
1996, while working capital was ($76.4) million at October 31, 1997, compared
with ($65.7) million at October 31, 1996. Excluding the debt reclassifications
discussed above, the current ratio would have been 1.88 and working capital
would have been $44.0 million at October 31, 1997 and at October 31, 1996 the
current ratio and working capital would have been 3.31 and $85.3 million.
 
  Cash flow provided by continuing operations in 1997 was $5.5 million,
compared to $2.9 million in 1996. The $2.6 million increase from 1996 to 1997
was due primarily to significant non-cash charges incurred in 1997 totalling
$19.3 million, greater increases in accounts payable and accrued liabilities
in 1997 compared to 1996 totalling $11.6 million and greater reductions in
accounts receivable, inventories and prepaids and deferred and recoverable
income taxes in 1997 compared to 1996 totalling $17.4 million. Substantially
offsetting these was the net loss in 1997 of $36.3 million compared to net
income of $9.8 million in 1996.
 
  Capital expenditures of continuing operations during 1997 were $2.3 million,
compared to $1.7 million in 1996. At October 31, 1997, there were
approximately $0.7 million of approved capital expenditures outstanding for
the replacement and upgrade of existing plant and equipment at the various
facilities of the Company's
 
                                      13
<PAGE>
 
continuing operations. Funds for these and other capital expenditures are
expected to be provided from operations and advances under the credit
agreement. Capital expenditure amounts are a component of one of the financial
ratio covenants contained in the Company's credit agreement.
 
  The Company has been evaluating the most advantageous means to realize the
value of its 996-acre parcel of land, located in the City of Santa Clarita,
California. Since 1986, the Company has undertaken the environmental
remediation of this property and related cash expenditures during 1997
totalled $2.6 million. During the fourth quarter of 1997, in connection with
its strategy to reduce debt, the Company decided to sell this land and thus
recorded a non-cash write-down of $15.7 million to state this asset at its
estimated fair value. Financial Accounting Standards Board Statement No. 121
("FAS 121") requires that long-lived assets be reviewed for impairment
whenever events or circumstances indicate that the carrying amount of the
asset may not be recoverable. Under the standard, when an impairment write-
down is required, the related assets are adjusted to their estimated fair
value. For purposes of FAS 121, fair value has been determined to be the
amount a willing buyer would pay a willing seller for such assets in a current
transaction that is other than a forced or liquidation sale.
 
  The estimation process involved in determining if assets have been impaired
and in determining fair value is inherently uncertain since it requires
estimates of current market yields as well as future events and conditions. In
determining fair value the Company considered, among other things, the range
of preliminary purchase prices being discussed with potential buyers and
developers as well as estimates of the total cost of environmental
remediation.
 
  On February 26, 1997, the Company concluded the sale and leaseback of its
Simi Valley facilities. The net proceeds of $17.4 million from the sale were
used to prepay term debt under the Company's credit agreement. The lease term
covers the fifteen year period ending February 28, 2012 and calls for rent
escalations of 6% every three years beginning with the fourth year.
 
  On September 30, 1997, the Company sold its defense electronics unit and the
net proceeds of $18.4 million from the sale were used to prepay term debt
under the Company's credit agreement.
 
  As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of
1980 (CERCLA). See further discussion in Item 3 of this Form 10-K.
 
  See Note 10 of Notes to Consolidated Financial Statements in Part II, Item 8
of this Form 10-K for information regarding commitments and contingencies.
 
 Impact of Year 2000
 
  The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs or products that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions or send invoices, or could result in liability arising from such
product failures.
 
  Based on a recent assessment, the Company has determined that it will be
required to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will not pose
significant operational problems for its computer systems.
 
                                      14
<PAGE>
 
However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
 
  The Company will utilize both internal and external resources to reprogram
or replace and test the software for Year 2000 modifications. The Company is
not able at this time to estimate the cost of the Year 2000 project or its
anticipated completion date and therefore is unable to determine whether or
not the Year 2000 Issue will have a material impact on future financial
results.
 
 Subsequent Event
 
  On January 19, 1998, the Company entered into a definitive agreement to sell
all of the common stock of its wholly-owned subsidiary, Whittaker Xyplex,
Inc., the parent company of Xyplex, Inc., to MRV Communications, Inc., for $35
million in cash plus warrants to purchase up to 500,000 shares of common stock
of MRV Communications, Inc. The sale is subject to customary closing
conditions, including Hart-Scott-Rodino Act clearance.
 
  Statements made herein that are not based on historical fact are "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. The risk factors that could cause actual results to differ
from the forward looking statements include delay in developing new programs
and products, inability to qualify for new programs or to develop new
products, loss of existing business and inability to attract new business and
customers, reduced spending by commercial and defense customers and
development of competing products.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
 
                                      15
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Stockholders and Board of Directors of Whittaker Corporation
 
  We have audited the accompanying consolidated balance sheets of Whittaker
Corporation as of October 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended October 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Whittaker Corporation at October 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended October 31, 1997, in conformity with generally accepted
accounting principles.
 
                                          ERNST & YOUNG LLP
 
Los Angeles, California
December 12, 1997
 
                                      16
<PAGE>
 
                             WHITTAKER CORPORATION
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                      FOR THE YEARS ENDED
                                                          OCTOBER 31,
                                                   ----------------------------
                                                     1997       1996     1995
                                                   ---------  --------  -------
                                                              RESTATED--NOTE 2
                                                     (DOLLARS IN THOUSANDS
                                                           EXCEPT FOR
                                                       PER SHARE AMOUNTS)
<S>                                                <C>        <C>       <C>
Sales............................................. $  95,133  $ 98,647  $81,298
Costs and expenses
  Cost of sales...................................    67,308    50,355   43,095
  Engineering and development.....................       965     1,398      925
  Selling, general and administrative.............    26,982    26,618   21,153
  Restructuring costs.............................       --        200      --
  Write-down of asset held for sale or development    15,677       --       --
                                                   ---------  --------  -------
Operating income (loss)...........................   (15,799)   20,076   16,125
Interest expense..................................    18,299    10,937    5,897
Interest income...................................      (456)   (6,295)    (556)
Other expense.....................................     3,495       684      169
                                                   ---------  --------  -------
Income (loss) from continuing operations before
 extraordinary item and provision for taxes.......   (37,137)   14,750   10,615
Provision (benefit) for taxes (Note 7)............    (4,207)    4,933    3,988
                                                   ---------  --------  -------
Income (loss) from continuing operations before
 extraordinary item...............................   (32,930)    9,817    6,627
Discontinued operations (Note 2)
  Income (loss) from discontinued operations......  (122,452)  (26,944)   1,238
  Loss on disposal of discontinued operations.....    (4,791)      --       --
Extraordinary item, less income tax benefit of
 $224 (Note 14)...................................    (3,409)      --       --
                                                   ---------  --------  -------
Net income (loss)................................. $(163,582) $(17,127) $ 7,865
                                                   =========  ========  =======
Earnings (loss) per share
  Continuing operations........................... $   (2.95) $    .93  $   .69
  Discontinued operations
    Income (loss) from discontinued operations....    (10.99)    (2.55)     .13
    Loss on disposal of discontinued operations...      (.43)      --       --
Extraordinary item................................      (.31)      --       --
                                                   ---------  --------  -------
Net income (loss)................................. $  (14.68) $  (1.62) $   .82
                                                   =========  ========  =======
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                       17
<PAGE>
 
                             WHITTAKER CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                              AT OCTOBER 31,
                                                            --------------------
                                                              1997       1996
                                                            --------  ----------
                                                                      RESTATED--
                                                                        NOTE 2
                                                                (DOLLARS IN
                                                                THOUSANDS)
<S>                                                         <C>       <C>
CURRENT ASSETS
Cash....................................................... $  6,366   $  1,566
Receivables................................................   27,337     33,252
Inventories................................................   37,032     31,225
Prepaids and other current assets..........................      914        728
Income taxes recoverable...................................    3,238      5,443
Deferred income taxes......................................   11,244      8,079
Net current assets of discontinued units...................    7,766     41,834
                                                            --------   --------
  Total Current Assets.....................................   93,897    122,127
                                                            --------   --------
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements.................................      299      2,518
Buildings and improvements.................................    8,355     13,224
Equipment..................................................   22,343     20,204
Construction in progress...................................      384        891
                                                            --------   --------
                                                              31,381     36,837
Less accumulated depreciation and amortization.............  (21,550)   (19,323)
                                                            --------   --------
                                                               9,831     17,514
                                                            --------   --------
OTHER ASSETS
Goodwill, net of amortization..............................   14,032     14,387
Other intangible assets, net of amortization...............    1,119      1,362
Notes and other noncurrent receivables.....................    3,443      2,898
Other noncurrent assets....................................    7,672     11,327
Assets held for sale or development........................   15,214     31,129
Net noncurrent assets of discontinued units................   22,234    139,704
                                                            --------   --------
                                                              63,714    200,807
                                                            --------   --------
                                                            $167,442   $340,448
                                                            ========   ========
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                       18
<PAGE>
 
                             WHITTAKER CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
                       LIABILITIES & STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                              AT OCTOBER 31,
                                                           ---------------------
                                                             1997        1996
                                                           ---------  ----------
                                                                      RESTATED--
                                                                        NOTE 2
                                                               (DOLLARS IN
                                                                THOUSANDS)
<S>                                                        <C>        <C>
CURRENT LIABILITIES
Current maturities of long-term debt.....................  $ 129,353   $161,482
Accounts payable.........................................      9,579      7,225
Accrued liabilities......................................     31,331     19,151
                                                           ---------   --------
  Total Current Liabilities..............................    170,263    187,858
                                                           ---------   --------
OTHER LIABILITIES
Long-term debt...........................................        222        453
Other noncurrent liabilities.............................     12,603     12,019
Deferred income taxes....................................     15,077      8,982
                                                           ---------   --------
  Total Other Liabilities................................     27,902     21,454
                                                           ---------   --------
Commitments and contingencies (Notes 3, 9, and 10)
STOCKHOLDERS' EQUITY
Capital Stock:
  Preferred Stock, par value $1 per share, authorized
   5,000,000 shares--
  $5.00 Cumulative Convertible Preferred Stock, none
   outstanding at October 31, 1997 and October 31, 1996..        --         --
  Series D Participating Convertible Preferred Stock,
   outstanding 577.18 shares at October 31, 1997 and
   October 31, 1996......................................          1          1
  Common Stock, authorized 40,000,000 shares--
  Par value, $.01 per share, outstanding 11,204,658
   shares at October 31, 1997 and 11,029,155 shares at
   October 31, 1996......................................        112        110
Additional paid-in capital...............................     72,041     70,321
Retained earnings (deficit)..............................   (102,877)    60,704
                                                           ---------   --------
  Total Stockholders' Equity (deficit)...................    (30,723)   131,136
                                                           ---------   --------
                                                           $ 167,442   $340,448
                                                           =========   ========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       19
<PAGE>
 
                             WHITTAKER CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                      FOR THE YEARS ENDED 
                                                          OCTOBER 31,
                                                 -----------------------------
                                                   1997       1996      1995
                                                 ---------  --------  --------
                                                            RESTATED--NOTE 2
                                                   (DOLLARS IN THOUSANDS)
<S>                                              <C>        <C>       <C>
OPERATING ACTIVITIES
Continuing Operations
 Net income (loss).............................. $ (36,339) $  9,817  $  6,627
 Adjustments to reconcile net income (loss) to
  net cash provided (used) by operations:
   Depreciation and amortization................     2,841     2,629     2,385
   Net periodic pension (income) expense........       208       (63)   (1,119)
   Income taxes recoverable.....................     2,205    (3,991)   (1,386)
   Deferred taxes...............................     2,930     1,108       784
   Impairment charge............................    15,677        --        --
   Extraordinary loss...........................     3,633        --        --
   Changes in operating assets and liabilities:
     Receivables................................     5,785    (2,677)      174
     Inventories and prepaid expenses...........    (5,993)   (6,881)    2,116
     Accounts payable and other liabilities.....    14,534     2,973      (351)
                                                 ---------  --------  --------
 Total from continuing operations...............     5,481     2,915     9,230
                                                 ---------  --------  --------
Discontinued Operations
 Net income (loss)..............................  (127,243)  (26,944)    1,238
 Adjustments to reconcile net income (loss) to
  net cash provided (used) by operations:
   Depreciation and amortization................    20,869    16,010     5,680
   Intangible asset impairment charge and other
    write-offs..................................    90,376       --        --
   Net periodic pension (income) expense........       381      (142)   (1,601)
   Acquired in-process research and development.       --     11,700     3,250
   Deferred taxes...............................    (4,736)   (8,291)    2,115
   Changes in operating assets and liabilities..    19,043     5,181       844
                                                 ---------  --------  --------
 Total from discontinued operations.............    (1,310)   (2,486)   11,526
                                                 ---------  --------  --------
Net cash provided by operating activities.......     4,171       429    20,756
                                                 ---------  --------  --------
INVESTING ACTIVITIES
Continuing Operations
 Sale of property, plant and equipment..........    15,029       --        --
 Purchase of property, plant and equipment......    (2,320)   (1,661)   (2,005)
 Collections of notes receivable................      (415)    1,724     1,147
 (Increase) decrease in assets held for sale or
  development...................................       238    (4,014)   (1,626)
 Contingent payments on purchased business......       --     (1,839)      --
 Other items, net...............................     1,257     1,886     4,356
                                                 ---------  --------  --------
 Total from continuing operations...............    13,789    (3,904)    1,872
                                                 ---------  --------  --------
Discontinued Operations
 Net proceeds (expenditures) relating to
  discontinued operations.......................    17,476   (72,474)  (41,371)
                                                 ---------  --------  --------
Net cash provided (used) by investing
 activities.....................................    31,265   (76,378)  (39,499)
                                                 ---------  --------  --------
FINANCING ACTIVITIES
Issuance of convertible subordinated debt.......       --        --     15,000
Issuance of other debt..........................       --     84,800    56,960
Reduction of debt...............................   (32,360)      --    (55,500)
Reduction (increase) in deferred debt costs.....         4    (3,281)     (808)
Dividends paid..................................       --         (1)       (4)
Purchases of common stock.......................       --     (6,472)   (1,094)
Proceeds from shares issued under stock option
 plans..........................................     1,720     2,308       843
                                                 ---------  --------  --------
Net cash provided (used) by financing
 activities.....................................  (30,636)    77,354    15,397
                                                 ---------  --------  --------
Net increase (decrease) in cash.................     4,800     1,405    (3,346)
Cash at beginning of year.......................     1,566       161     3,507
                                                 ---------  --------  --------
Cash at end of year............................. $   6,366  $  1,566  $    161
                                                 =========  ========  ========
Supplemental disclosure of cash flow
 information:
Cash paid during the year for:
 Interest....................................... $  18,080  $  9,792  $  5,079
                                                 =========  ========  ========
 Income taxes................................... $     433  $    280  $  1,424
                                                 =========  ========  ========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       20
<PAGE>
 
                             WHITTAKER CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                   FOR THE THREE YEARS ENDED OCTOBER 31, 1997
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                          PREFERRED STOCK      COMMON STOCK   ADDITIONAL
                          -------------------  --------------  PAID-IN   RETAINED
                          $5.00     SERIES D   SHARES  AMOUNT  CAPITAL   EARNINGS     TOTAL
                          -------   ---------  ------  ------ ---------- ---------  ---------
<S>                       <C>       <C>        <C>     <C>    <C>        <C>        <C>
BALANCE AT NOVEMBER 1,
 1994...................   $     2    $     1   8,486   $ 85   $17,787   $  76,075  $  93,950
Net income..............        --         --     --     --        --        7,865      7,865
Cash dividends--
 preferred stock........        --         --     --     --        --           (4)        (4)
Conversion of preferred
 stock..................        (2)        --       4    --         (7)        --          (9)
Shares issued under
 stock option plans.....        --         --     154      1       842         --         843
Purchases of common
 stock..................        --         --     (55)   --       (225)       (860)    (1,085)
Income tax benefits from
 stock options
 exercised..............        --         --     --     --        864         --         864
                           -------    -------  ------   ----   -------   ---------  ---------
BALANCE AT OCTOBER 31,
 1995...................        --          1   8,589     86    19,261      83,076    102,424
Net loss................        --         --     --     --        --      (17,127)   (17,127)
Cash dividends--
 preferred stock........        --         --     --     --        --           (1)        (1)
Conversion of preferred
 stock..................        --         --     104      1       --           (1)       --
Shares issued under
 stock option plans.....        --         --     660      6     2,213         --       2,219
Shares reacquired.......        --         --    (298)    (3)   (1,226)     (5,243)    (6,472)
Shares issued on
 acquisition of
 business...............        --         --   1,974     20    49,984         --      50,004
Income tax benefits from
 stock options
 exercised..............        --         --     --     --         89         --          89
                           -------    -------  ------   ----   -------   ---------  ---------
BALANCE AT OCTOBER 31,
 1996...................        --          1  11,029    110    70,321      60,704    131,136
Net loss................        --         --     --     --        --     (163,582)  (163,582)
Shares issued under
 stock option plans.....        --         --     176      2     1,238         --       1,240
Income tax benefits from
 stock options
 exercised..............        --         --     --     --        482         --         482
Translation adjustment..        --         --     --     --        --            1          1
                           -------    -------  ------   ----   -------   ---------  ---------
BALANCE AT OCTOBER 31,
 1997...................   $    --    $     1  11,205   $112   $72,041   $(102,877) $ (30,723)
                           =======    =======  ======   ====   =======   =========  =========
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
 
                                       21
<PAGE>
 
                             WHITTAKER CORPORATION
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (as amended April 8, 1998 to 
        revise Notes 3 and 13)
 
  (A) Basis of Presentation: As discussed in Note 5, the Company has not been
in compliance with one or more financial ratio covenants in its credit
agreement with its lending group since July 31, 1996. The Company has obtained
a waiver of such defaults up to but not including January 31, 1998 and
anticipates receiving an additional waiver prior to that date. The Company has
adopted a plan to sell its non-core Communications business (see Note 2) and a
parcel of land in Santa Clarita, California (see Note 3), the net proceeds of
which will be used to repay debt. Management believes that it has current
financing in place in order to meet the Company's obligations as they come due
through October 31, 1998.
 
  (B) Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles may require management to make certain estimates and
assumptions that could affect the amounts reported in the financial statements
and accompanying notes. These estimates and assumptions include, among other
things, future costs to complete long-term contracts, valuation of slow moving
or obsolete inventories, and amounts of estimated liabilities for contingent
losses and future costs of litigation. Actual costs could differ from these
estimates.
 
  (C) Inventories: Inventories are stated at the lower of cost or market. Cost
has been determined principally on the first-in, first-out (FIFO) method.
Certain of the Company's inventories relate to long-term programs and may
require more than one year to be realized. Inventories consisted of the
following:
 
<TABLE>
<CAPTION>
                                                                  OCTOBER 31,
                                                                ---------------
                                                                 1997    1996
                                                                ------- -------
                                                                (IN THOUSANDS)
     <S>                                                        <C>     <C>
     Parts and materials......................................  $19,620 $19,779
     Work in process..........................................   15,595  10,012
     Finished goods...........................................    1,817   1,629
     Unliquidated progress billings...........................      --     (195)
                                                                ------- -------
                                                                $37,032 $31,225
                                                                ======= =======
</TABLE>
 
  (D) Intangibles: Goodwill is amortized using the straight-line method over
40 years. Other intangible assets principally relate to acquired intangibles
and include patents, technology, and software. Amortization is recorded on a
straight-line basis, generally over periods ranging from 5 to 15 years.
 
  Accumulated amortization of goodwill and of other intangible assets at
October 31, 1997 amounted to $1.5 million and $2.9 million, respectively, and
at October 31, 1996 amounted to $1.1 million and $2.6 million, respectively.
 
  (E) Property and Depreciation: Property, plant and equipment is recorded at
cost. Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of such assets, ranging from four to
thirty years. Depreciation of leasehold improvements is computed on a
straight-line basis over the shorter of the estimated useful lives of the
improvements or the terms of the leases. During 1997, 1996 and 1995
depreciation of $2.2 million, $1.8 million, and $1.6 million, respectively,
was charged to expense.
 
  (F) Revenue Recognition: For the majority of its operations, the Company
recognizes revenues upon shipment of its product or upon completion of the
services it renders. The Company accrues estimated warranty and installation
costs at the time of shipment. The Company generally uses the percentage-of-
completion method for recognition of revenues and profits on significant long-
term contracts.
 
                                      22
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
  (G) Engineering and Development Costs: Company-sponsored engineering and
development costs are expensed as incurred. Costs related to engineering and
development contracts are included in inventory and charged to cost of goods
sold upon recognition of related revenue.
 
  (H) Earnings (Loss) Per Share: Earnings (loss) per share have been computed
based on the weighted average number of common and common equivalent shares
outstanding during the periods, after deducting from 1995 net income the
dividend requirements on the $5.00 Cumulative Convertible Preferred Stock.
Common stock equivalents include Series D Participating Convertible Preferred
Stock, on an if converted method and dilutive employee stock options,
calculated using the treasury stock method. Common equivalent shares have been
excluded from the 1997 calculation as antidilutive. The statements of income
for prior periods have been restated to segregate continuing and discontinued
operations. This restatement resulted in a reduction to previously reported
net loss per share for 1996 of $0.08. There was no effect on the previously
reported net income per share for 1995.
 
  Fully diluted earnings (loss) per share include the additional potential
dilutive effect of employee stock options. The inclusion of additional shares
assuming the conversion of the convertible subordinated debt would have been
antidilutive. Fully diluted earnings (loss) per share are not presented
because the calculations result in dilution of less than 3%.
 
  (I) Reclassification: Certain previously reported amounts have been
reclassified to conform to the current period presentation.
 
  (J) Impairment of Long-Lived Assets: When indicators of impairment of long-
lived assets used in operations or long-lived assets to be disposed of, other
than long-lived assets of discontinued operations, are present and, the
undiscounted future cash flows estimated to be generated by those assets is
less than the carrying value of such assets, an impairment loss would be
recorded by the Company.
 
  (K) New Accounting Standards: In October 1996, the Accounting Standards
Executive Committee issued SOP 96-1 "Environmental Remediation Liabilities."
The Company is not required to adopt this standard until fiscal 1998, however,
the Company has elected to adopt this new standard in the current fiscal year.
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions under the
Comprehensive Environmental Response Compensation and Liability Act of 1980.
The Company is also a potentially responsible party in a number of actions
brought under similar state laws. The Company has provided for its aggregate,
estimated liability for contingencies, including the remediation costs related
to these federal and state actions, in compliance with Financial Accounting
Standards Board ("FASB") Statement No. 5. SOP 96-1 gives guidance on the
recognition and measurement of environmental remediation liabilities. In
addition to the incremental direct costs of the remediation efforts, the SOP
requires the accrual of costs of compensation and benefits for employees that
are expected to devote a significant amount of time to the remediation
efforts. These accruals are adjusted as further information develops or
circumstances change. The total remediation costs for the sites associated
with these federal and state actions is estimated to be $4.6 million. As of
October 31, 1997, all of these estimated costs have been accrued and are
reflected in accrued liabilities and, in the case of those costs to be
incurred beyond one year, other noncurrent liabilities in the Consolidated
Balance Sheet of the Company. The Company, at this time, does not anticipate
any additional significant costs, beyond those already recognized, will be
incurred in the remediation efforts for these sites. Costs of future
expenditures for environmental remediation efforts are not discounted to their
present value.
 
                                      23
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
  In February of 1997 the FASB issued FAS No. 128, "Earnings per Share,"
effective for the 1998 fiscal year. FAS No. 128 establishes new standards for
computing and reporting earnings per share. Under the new guidelines the
Company's basic and diluted net earnings (loss) per share would have been:
 
<TABLE>
<CAPTION>
                                                           1997     1996   1995
                                                          -------  ------  -----
       <S>                                                <C>      <C>     <C>
       Basic............................................. $(14.68) $(1.70) $0.92
       Diluted........................................... $(14.68) $(1.70) $0.82
</TABLE>
 
  The Company will adopt FAS No. 128 in the first quarter of fiscal 1998.
 
  In June of 1997 the FASB issued FAS No. 130, "Reporting Comprehensive
Income," effective for the 1999 fiscal year. FAS No. 130 establishes standards
for reporting and displaying comprehensive income and its components in the
financial statements. Comprehensive income is defined as the change in the
equity of a business enterprise during a period from transactions and other
events from nonowner sources. The Company does not expect the adoption of this
standard to have a material effect on its consolidated financial statements.
 
  In June of 1997 the FASB issued FAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," effective for the 1999 fiscal year.
FAS No. 131 requires the reporting of certain information about operating
segments of a business enterprise and replaces FAS No. 14. The Company does
not expect the adoption of this standard to have a material effect on its
consolidated financial statements.
 
NOTE 2. DISCONTINUED OPERATIONS
 
  During the fourth quarter of 1997, the Company, in connection with its
strategy to reduce debt and explore strategic options, sold its defense
electronics unit and discontinued its Communications segment. Accordingly, the
Company's continuing operations are now comprised of two operating segments:
Aerospace and Integration Services. Integration Services had previously been
included, since its formation in the second quarter of 1997, within the
Communications segment. Previously reported financial statements have been
restated to reflect the discontinuance of these businesses.
 
  The financial statements reflect the operating results and balance sheet
items of the discontinued operations separately from the continuing
operations.
 
  Operating results of the discontinued operations were as follows:
 
 
<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED
                                                           OCTOBER 31,
                                                    ----------------------------
                                                      1997       1996     1995
                                                    ---------  --------  -------
     <S>                                            <C>        <C>       <C>
     Sales......................................... $  99,818  $123,230  $78,181
     Costs and expenses............................   224,926   164,196   75,740
                                                    ---------  --------  -------
     Income (loss) before taxes....................  (125,108)  (40,966)   2,411
     Tax provision (benefit).......................    (2,656)  (14,022)   1,173
                                                    ---------  --------  -------
     Income (loss) from discontinued operations.... $(122,452) $(26,944) $ 1,238
                                                    =========  ========  =======
</TABLE>
 
                                      24
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 2. DISCONTINUED OPERATIONS--(CONTINUED)
 
  Net assets of the discontinued businesses at October 31, 1997 and October
31, 1996 were as follows:
 
<TABLE>
<CAPTION>
                                                                 OCTOBER 31,
                                                               ----------------
                                                                1997     1996
                                                               ------- --------
     <S>                                                       <C>     <C>
     Current assets........................................... $24,034 $ 67,308
     Current liabilities......................................  16,268   25,474
                                                               ------- --------
       Net current assets.....................................   7,766   41,834
                                                               ------- --------
     Property, plant and equipment............................   5,137   25,852
     Other noncurrent assets..................................  22,400  127,414
     Deferred taxes...........................................   5,303   13,562
                                                               ------- --------
       Net noncurrent assets..................................  22,234  139,704
                                                               ------- --------
       Net assets............................................. $30,000 $181,538
                                                               ======= ========
</TABLE>
 
  The 1997 discontinued operations loss before taxes includes a fourth quarter
charge of $55.7 million for the write-down of the net assets of Xyplex, Inc.
to their estimated net realizable value. Also included in the 1997 loss is a
goodwill and other intangibles impairment charge of $30.2 million and
restructuring costs of $5.3 million. The 1996 discontinued operations loss
before taxes includes the write-off of acquired in-process research and
development of $11.7 million.
 
  The 1997 loss on disposal of discontinued operations of $4.8 million is net
of tax benefits of $0.3 million and reflects proceeds realized from the
disposition of discontinued operations of $18.9 million. Of these proceeds,
$18.4 million was used to reduce the Company's bank debt. The loss on disposal
reflects provisions for accrued liabilities for retained obligations arising
directly as a result of the decision to dispose of these operations and the
estimated future results of operations of such businesses through the date of
disposition. The loss on disposal reported in 1997 may be adjusted in future
periods depending on the accuracy of these estimates.
 
NOTE 3. ASSETS HELD FOR SALE OR DEVELOPMENT
 
  Assets held for sale or development at October 31, 1997 and October 31,
1996, include $15.0 million and $29.1 million, respectively, of land formerly
used by a discontinued technology unit. The land is located in the City of
Santa Clarita, California.
 
  During the fourth quarter of 1997, in connection with its strategy to reduce
debt, the Company decided to sell this land and thus recorded a non-cash write-
down of $15.7 million dollars to reflect this asset at $15 million which is the
amount the Company estimates it will receive upon the sale of this asset after
deducting estimated selling costs. Under Financial Accounting Standards Board
Statement No. 121 ("FAS 121"), when an impairment write down is required, the
related assets are adjusted to their estimated fair value, net of estimated
selling costs. For purposes of FAS 121, fair value has been determined to be the
amount a willing buyer would pay a willing seller for such assets in a current
transaction that is other than a forced or liquidation sale.
 
  The cost to perform the environmental remediation of this property necessary
to prepare the property for development is estimated to be approximately $14.0
million. However, the Company does not plan to develop the property. In
addition, no claim has been asserted or is probable, and no assessment has been
made or is probable, against the Company by a governmental agency to remediate
this property. Consequently, the Company has not recorded a liability for these
costs. These costs are not considered selling costs because they are not costs
that must be incurred before legal title can be transferred nor is there a
contractual agreement for the sale of the land that obligates the Company to
incur these costs in the future. Prospective purchasers of the property,
however, have considered these costs when providing the Company with indications
of value for the property. The estimated fair value of this property at October
31, 1997 is based upon the current state of the property before remediation.

                                      25
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 3. ASSETS HELD FOR SALE OR DEVELOPMENT--(CONTINUED)
 
  The estimation process involved in determining if assets have been impaired
and in the determination of fair value is inherently uncertain since it
requires estimates of current market yields as well as future events and
conditions. 
 
NOTE 4. RECEIVABLES
 
<TABLE>
<CAPTION>
                                                                 OCTOBER 31,
                                                               ----------------
                                                                1997     1996
                                                               -------  -------
                                                               (IN THOUSANDS)
     <S>                                                       <C>      <C>
     Trade accounts receivable--billed........................ $25,366  $18,085
     Trade accounts receivable--unbilled......................     960   12,000
     Other receivables........................................   2,672    3,631
     Allowance for doubtful accounts..........................  (1,661)    (464)
                                                               -------  -------
     Total receivables........................................ $27,337  $33,252
                                                               =======  =======
</TABLE>
 
  Unbilled receivables represent recoverable costs and accrued profits, not
billable to customers at the balance sheet date, which are generally billable
upon product delivery and acceptance and/or completion of milestones. All
amounts are reduced by appropriate progress billings. Amounts representing
retainages under contracts are not material. Claims subject to further
negotiations and which may not be collected within one year are not
significant at October 31, 1997.
 
NOTE 5. LONG-TERM DEBT
 
  Long-term debt consisted of the following:
 
<TABLE>
<CAPTION>
                                                         OCTOBER 31,
                                             -----------------------------------
                                                   1997              1996
                                             ----------------- -----------------
                                                       (IN THOUSANDS)
                                                      INTEREST          INTEREST
                                              AMOUNT    RATE    AMOUNT    RATE
                                             -------- -------- -------- --------
<S>                                          <C>      <C>      <C>      <C>
Borrowings under revolving credit
 facility..................................  $ 79,936   12.5%  $ 65,000   8.6%
Borrowings under term loan.................    34,016   12.5%    81,000   8.6%
Other note, payable semiannually to 1999,
 with interest at the lesser of 10% or 65%
 of prime..................................       259    5.5%       459   5.4%
7% convertible subordinated note due May 1,
 2005 (Note 2).............................    15,000    7.0%    15,000   7.0%
Capitalized lease obligations payable in
 varying monthly or quarterly installments
 through 1999, with interest rates ranging
 to 9.67% (Note 9).........................       364    8.7%       476   8.0%
                                             --------          --------
                                             $129,575          $161,935
Less current maturities....................   129,353           161,482
                                             --------          --------
                                             $    222          $    453
                                             ========          ========
</TABLE>
 
                                      26
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 5. LONG-TERM DEBT--(CONTINUED)
 
  Maturities of long-term debt are as follows for the periods stated:
 
<TABLE>
<CAPTION>
       YEAR ENDING
        OCTOBER 31
       -----------                                                (IN THOUSANDS)
       <S>                                                        <C>
        1998.....................................................    $129,353
        1999.....................................................         162
        2000.....................................................          60
        2001.....................................................         --
        2002.....................................................         --
</TABLE>
 
 
  On April 10, 1996, the Company increased the amount of its bank credit
facility to $170.0 million. At October 31, 1997, the credit facility consisted
of an $85.0 million revolving credit facility that expires in April 2001, of
which the Company was permitted to utilize $83.0 million and a $34.0 million
term loan payable in quarterly installments until 2001. At the end of fiscal
1997, the interest rate on loans outstanding under the credit agreement was
equal to the agent bank's prime rate plus 4.0% with interest payable monthly.
At that time, the Company was obligated to pay letter of credit fees which
ranged between 4.625% per annum and 5.125% per annum on the aggregate amount
of outstanding letters of credit, and commitment fees on the unused amount of
the revolving credit facility. Additional borrowings under the credit facility
will be used to fund future working capital and other corporate requirements.
At October 31, 1997, the Company had $2.9 million of letters of credit
outstanding and unused and available credit of $0.2 million under its
revolving credit facility.
 
  The Company's obligations under the credit agreement are secured by a pledge
of shares of stock of subsidiaries of the Company, accounts receivable,
inventory, equipment, intellectual property and other assets of the Company
and its subsidiaries. The agreement includes four financial ratio covenants
with respect to financial leverage, cash flow, and net worth. Since July 31,
1996, the Company has not been in compliance with one or more of the four
financial ratio covenants and at October 31, 1997 the Company was not in
compliance with any of such covenants. A waiver dated as of July 31, 1997
required the Company to make, in addition to previously scheduled principal
payments, principal payments on the term loan by September 30, 1997, in an
aggregate amount of not less than $20 million and to pay a fee on November 3,
1997 of $1.8 million. In addition, the waiver permitted the Company to retain
fifty percent of the net cash proceeds from certain asset sales which
previously would have been used to repay the term loan. A waiver dated
December 31, 1997 waives the defaults up to but not including January 31,
1998. Under the terms of this latest waiver, the interest rate on loans
outstanding under the credit agreement is equal to the agent bank's prime rate
plus 4.25%.
 
  There can be no assurance that in future periods the Company will be in
compliance with any of the financial ratio covenants contained in its credit
agreement, or that, after expiration of the latest waiver on January 31, 1998,
additional waivers of the financial covenants will be obtained. There can be
no assurance that any future waivers would contain terms which would be as
favorable to the Company as, or would materially differ from, waivers granted
in the past. Consequently, bank debt in the amount of $105.3 million, which
otherwise would have been classified as noncurrent, has been classified as
current. Acceleration of the debt under the credit agreement by the bank
lending group upon the Company's failure, after January 31, 1998, to comply
with any of the financial ratio covenants noted above would be an event of
default under the Company's $15 million 7% convertible subordinated note.
Because of this possible cross default, the entire $15 million principal
balance of the 7% convertible subordinated note has also been classified as
current debt.
 
  Under the Company's 7% convertible subordinated note, the Company may not
pay or declare cash dividends or redeem shares of the Company if the Company's
tangible net worth is less than $15 million. As of April 30, 1996, the
Company's tangible net worth was less than $15 million and the Company has not
paid or
 
                                      27
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 5. LONG-TERM DEBT--(CONTINUED)
 
declared dividends (including the quarterly dividend for the Series D
Preferred Stock) or redeemed shares since that date. However, dividends on the
Series D Preferred Stock have been accrued since that date.
 
  In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in the level of market
interest rates, the Company in June 1996 purchased an interest rate cap with
an initial notional amount of $42.5 million. Under the terms of the interest
rate cap, the Company will receive a payment at the end of each quarterly
period, as defined in the interest rate cap agreement, if three-month LIBOR at
the beginning of the period exceeds 7.5%. The amount of such payment will be
the interest for such period on the notional amount of the interest rate cap
at the beginning of such period calculated using an interest rate equal to the
positive difference, if any, between LIBOR at the beginning of such period and
7.5%. The interest rate cap expires in July 1999. The cost of this interest
rate cap is being amortized over its 37- month term. At October 31, 1997, the
unamortized cost was $151,000.
 
  On February 26, 1997, the Company concluded the sale and leaseback of its
Simi Valley facilities. The net proceeds of $17.4 million from the sale were
used to prepay term debt under the Company's credit agreement. The initial
lease term covers the fifteen year period ending February 28, 2012 and calls
for rent escalations of 6% every three years beginning with the fourth year.
On September 30, 1997, the Company sold its defense electronics unit and the
net proceeds of $18.4 million from the sale were used to prepay term debt
under the Company's credit agreement.
 
NOTE 6. CAPITAL STOCK
 
  On April 28, 1995, all the outstanding shares of $5.00 Cumulative
Convertible Preferred Stock were either redeemed or converted into Common
Stock. Each share of the $5.00 Cumulative Convertible Preferred Stock was
voting, cumulative and convertible into 1.854 shares of Common Stock plus
$74.16 in cash, was redeemable, at the Company's option, at $100 per share and
was entitled to preference of $100 per share upon voluntary liquidation and
$50 per share upon involuntary liquidation. Each share of Series D
Participating Convertible Preferred Stock is nonvoting, cumulative and, in
connection with a qualifying transfer, convertible into 326.531 shares of
Common Stock. Holders of the Series D Participating Convertible Preferred
Stock, of which there is presently only one, are entitled to a $1.00 per share
liquidation preference and to the greater of $.25 per share per quarter or any
dividends paid in respect of the number of shares of Common Stock underlying
each share of Series D Participating Convertible Preferred Stock. The Board of
Directors is authorized to issue preferred stock in series, to fix dividend
rates, conversion rights, voting rights, rights and terms of redemption and
liquidation preferences, and to increase or decrease the number of shares of
any series.
 
  Common Stock reserved for issuance at October 31, 1997 was as follows:
 
<TABLE>
<CAPTION>
                                                                     SHARES IN
                                                                     THOUSANDS
                                                                     ---------
     <S>                                                             <C>
     For conversion of Series D Participating Convertible Preferred
      Stock........................................................      188
     For stock options.............................................    1,721
     For conversion of 7% convertible subordinated note............      619
                                                                       -----
                                                                       2,528
                                                                       =====
</TABLE>
 
  On January 24, 1997, the Board of Directors adopted, and on April 4, 1997,
the shareholders approved, an amendment to the Whittaker Corporation 1992
Stock Option Plan for Non-Employee Directors (the "1992 Plan") that increased
from 50,000 to 150,000 the number of shares of Common Stock of the Company
which may be made subject to stock options and other awards authorized by the
1992 Plan.
 
                                      28
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. CAPITAL STOCK--(CONTINUED)
 
  The Company had reserved 1,721,180 shares of Common Stock at October 31,
1997 for future issuances under the Whittaker Corporation Long-Term Stock
Incentive Plan (1989) and the 1992 Plan. The Company also had reserved 618,557
shares of Common Stock at October 31, 1997 for possible conversion of the 7%
convertible subordinated note at the option of the holders. Options to
purchase Common Stock generally are conditioned upon continued employment,
expire from five to ten years after the grant date, and become exercisable in
whole or in part either commencing with the seventh month or upon the
attainment of certain predetermined goals, or both. The exercise price for
options granted is equal to the average market price on the date of grant. The
following information for the three years ended October 31, 1997 relates to
options granted from 1981 through 1997 under the Company's plans.
 
<TABLE>
<CAPTION>
                                    OPTIONS                    WEIGHTED AVERAGE
                                  OUTSTANDING    PRICE RANGE    EXERCISE PRICE
                                 -------------- -------------- ----------------
                                 (IN THOUSANDS)
   <S>                           <C>            <C>            <C>
   Balance, October 31, 1994....      1,367      2.41 to 16.37       7.50
     Options granted............        544     18.00 to 22.50      20.57
     Options canceled or
      expired...................        (35)    15.06 to 22.25      17.44
     Options exercised..........       (154)     3.82 to 18.63       5.47
                                     ------
   Balance, October 31, 1995....      1,722      2.41 to 22.50      11.56
     Options granted............      1,201     13.44 to 26.25      20.20
     Options canceled or
      expired...................     (1,150)    13.44 to 26.25      20.16
     Options exercised..........       (660)     2.41 to 22.50       3.63
                                     ------
   Balance, October 31, 1996....      1,113      4.10 to 26.25      16.65
     Options granted............        361      9.44 to 14.12      12.10
     Options canceled or
      expired...................       (640)    10.31 to 26.25      17.97
     Options exercised..........       (176)     4.10 to 12.44       7.07
                                     ------
   Balance, October 31, 1997....        658      5.24 to 26.25      15.42
                                     ======
</TABLE>
 
 
  In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," effective for the 1997 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be
recognized based on the fair value of the options at the date of grant using
an option pricing model. As permitted under SFAS No. 123, the Company may
either adopt the new pronouncement or continue to follow the accounting
methods as prescribed under APB No. 25. The Company has elected to continue to
recognize compensation expense in accordance with APB No. 25.
 
                                      29
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. CAPITAL STOCK--(CONTINUED)
 
  At October 31, 1997, options outstanding and options exercisable were as
follows:
 
 
<TABLE>
<CAPTION>
              NUMBER OF              RANGE OF       WEIGHTED    WEIGHTED AVERAGE
               OPTIONS               EXERCISE       AVERAGE        REMAINING
             OUTSTANDING              PRICES     EXERCISE PRICE CONTRACTUAL LIFE
             ------------         -------------- -------------- ----------------
     <S>                          <C>            <C>            <C>
       9,247....................       5.24           5.24         2.81 Years
     363,276....................  9.63 to 13.56      12.59         9.12 Years
     263,033....................  15.06 to 22.25     18.76         7.95 Years
      22,500....................      26.25          26.25         8.31 Years
    ---------
     658,056
    =========
<CAPTION>
              NUMBER OF              RANGE OF       WEIGHTED    WEIGHTED AVERAGE
               OPTIONS               EXERCISE       AVERAGE        REMAINING
             EXERCISABLE              PRICES     EXERCISE PRICE CONTRACTUAL LIFE
             -----------          -------------- -------------- ----------------
     <S>                          <C>            <C>            <C>
       9,247....................       5.24           5.24         2.81 Years
      76,777....................  9.63 to 13.56      11.19         9.12 Years
     100,138....................  15.06 to 22.25     18.90         7.95 Years
         883....................      26.25          26.25         8.31 Years
    ---------
     187,045
    =========
</TABLE>
 
  At October 31, 1996 and October 31, 1995 options for 380,040 and 1,143,777
shares, respectively, were exercisable.
 
  In the Integration Services segment, the 1997 Stock Option Plan of Aviant
Information, Inc. (the "Aviant Plan") was adopted as of October 14, 1997. The
plan provides for the granting of options to purchase the common stock of
Aviant Information, Inc. ("Aviant") a wholly owned subsidiary of the Company.
The term of each option may be five or ten years and become exercisable, with
respect to an individual, in annual installments of at least 25 percent of the
total number of options granted to that individual commencing one year from
the grant date and in full upon the consummation of an initial public offering
of the common shares of Aviant or the transfer of more than fifty percent of
the common stock of Aviant to a non-affiliate of Aviant, the Company or the
shareholders of the Company. The exercise price of an option shall be at least
the fair market value of the common stock of Aviant on the grant date of the
option. During 1997 there were 450,500 options granted under the Aviant Plan
all of which were outstanding at October 31, 1997. At October 31, 1997 there
were no common shares of Aviant which were publicly traded or quoted and
therefore, per the terms of the Aviant Plan, the exercise price was
established by the Board of Directors of Aviant at $0.50 per share. At October
31, 1997 the weighted average remaining contractual life of options under the
Aviant Plan was 9.96 years and there were 1,549,500 shares reserved for future
grants under the Aviant Plan.
 
  In the discontinued Communications segment, the 1997 Stock Option Plan of
Whittaker Xyplex, Inc. (the "WXI Plan") was adopted on January 24, 1997. The
WXI Plan provides for the granting of options to purchase the common stock of
Whittaker Xyplex, Inc. ("WXI") a wholly owned subsidiary of the Company. The
term of each option may be five or ten years and the option becomes
exercisable, with respect to an individual, in annual installments of at least
20 percent of the total number of options granted to that individual
commencing one year from the grant date and upon the consummation of an
initial public offering of the common shares of WXI or the transfer of more
than fifty percent of the common stock of WXI to a non-affiliate of WXI, the
Company or the shareholders of the Company. The option exercise price shall be
at least the fair market value of the common
 
                                      30
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. CAPITAL STOCK--(CONTINUED)
 
stock of WXI on the grant date of the option. During 1997 there were 2,764,400
options granted under the WXI Plan of which 443,900 were canceled and of which
2,230,500 were outstanding at October 31, 1997. At October 31, 1997 there were
no common shares of WXI which were publicly traded or quoted and therefore,
per the terms of the WXI Plan, the exercise price was established by the Board
of Directors of WXI at $3.25 per share. At October 31, 1997 the weighted
average remaining contractual life of options under the WXI Plan was 9.41
years and there were 969,500 shares reserved for future grants under the WXI
Plan.
 
  Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS
No 123. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996: risk-free interest rates of approximately
5.71%; dividend yields of 0.0%, volatility factors of the expected market
price of the Company's common stock of .33 and weighted-average expected life
of the option of 3.25 years.
 
  The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
 
  For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands except for earnings per
share information):
<TABLE>
<CAPTION>
                                                             1997       1996
                                                           ---------  --------
   <S>                                                     <C>        <C>
   Pro forma net loss..................................... $(164,753) $(17,871)
   Pro forma primary loss per share....................... $  (14.78) $  (1.69)
</TABLE>
 
  The Company's Stockholder Rights Plan gives each holder of the Company's
Common Stock one right for each share of Common Stock held. Each right
entitles the holder to purchase from the Company 1/100 of a share of a new
series of the Company's preferred stock (Series A Participating Cumulative
Preferred Stock) at an exercise price of $125 per 1/100 of a share. The rights
will become exercisable and will detach from the Common Stock 10 days after
any person or group acquires 25% or more of the Company's Common Stock, or 10
business days after any person or group commences a tender or exchange offer
which, if consummated, would result in that person or group owning at least
25% of the Company's Common Stock.
 
  If any person acquires 25% or more of the Company's Common Stock, each right
will entitle the holder, other than the acquiring person, to purchase for the
exercise price Common Stock of the Company with a value of twice the exercise
price. In addition, if following an acquisition by any person or group of 25%
or more of the Company's Common Stock, the Company is involved in a merger or
other business combination transaction, or sells more than 50% of its assets
or earning power to any person, each right will entitle the holder, other than
the acquiring person, to purchase for the exercise price Common Stock of the
acquiring person with a value of twice the exercise price.
 
  The Company may redeem the rights at $.01 per right at any time until the
tenth day after any person or group has acquired 25% or more of its Common
Stock. The rights will expire November 29, 1998, unless earlier
 
                                      31
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. CAPITAL STOCK--(CONTINUED)
 
redeemed. The Stockholder Rights Plan may be supplemented or amended at the
direction of the Company without the approval of the holders of rights, except
as otherwise set forth in the Stockholder Rights Plan. At October 31, 1997,
150,000 preferred shares were reserved for these rights.
 
NOTE 7. INCOME TAXES
 
  Income tax expense (benefit) consists of the following:
 
<TABLE>
<CAPTION>
                                                     YEARS ENDED OCTOBER 31,
                                                     -------------------------
                                                      1997      1996     1995
                                                     -------  --------  ------
                                                         (IN THOUSANDS)
     <S>                                             <C>      <C>       <C>
     Total provision--
       Continuing operations........................ $(4,207) $  4,933  $3,988
       Discontinued operations and other............  (3,195)  (14,022)  1,173
                                                     -------  --------  ------
                                                     $(7,402) $ (9,089) $5,161
                                                     =======  ========  ======
     Components of the provision--
       Federal...................................... $(4,902) $ (8,149) $4,480
       State........................................  (2,500)     (940)    681
                                                     -------  --------  ------
                                                     $(7,402) $ (9,089) $5,161
                                                     =======  ========  ======
     Classification of the provision--
       Current...................................... $(5,398) $ (5,048) $ (627)
       Deferred.....................................  (2,004)   (4,041)  5,788
                                                     -------  --------  ------
                                                     $(7,402) $ (9,089) $5,161
                                                     =======  ========  ======
</TABLE>
 
  Foreign income taxes were not material.
 
  The tax expense (benefit) is different than the amount computed by applying
the U.S. federal income tax rate to income (loss) before income taxes. The
reasons for the differences are as follows:
 
<TABLE>
<CAPTION>
                                 YEARS ENDED
                                 OCTOBER 31,
                               --------------------
                               1997    1996    1995
                               -----   -----   ----
     <S>                       <C>     <C>     <C>
     U.S. federal statutory
      rate...................  (34.0)% (34.0)% 34.2%
     State taxes, net of U.S.
      federal income tax
      benefit................   (0.2)%  (2.4)%  3.4%
     Goodwill amortization...   15.4 %   3.5 %  1.8%
     Valuation allowance.....   16.0 %   0.0 %  0.0%
     Other items.............   (1.5)%  (1.8)%  0.2%
                               -----   -----   ----
     Effective tax rate......   (4.3)% (34.7)% 39.6%
                               =====   =====   ====
</TABLE>
 
                                      32
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 7. INCOME TAXES--(CONTINUED)
 
  Deferred income taxes reflect the net tax effects of temporary differences
between the reported amounts of assets and liabilities in the financial
statements and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities at October 31
are as follows:
 
<TABLE>
<CAPTION>
                                                      1997     1996     1995
                                                    --------  -------  -------
                                                         (IN THOUSANDS)
     <S>                                            <C>       <C>      <C>
     Deferred tax assets:
       Receivables valuation....................... $  1,280  $   858  $ 1,416
       Inventory valuation.........................    6,770    8,397    4,033
       Self-insurance reserves.....................    1,367    1,384    1,737
       Pending refund from federal tax audit.......      --       --     5,160
       Reserves for discontinued operations........    2,380    1,163      848
       Benefits from net operating loss
        carryforward...............................   13,293      --       --
       Other.......................................   14,905   12,553    7,160
                                                    --------  -------  -------
     Total before valuation allowance..............   39,995   24,355   20,354
     Valuation allowance...........................  (29,372)    (390)    (490)
                                                    --------  -------  -------
     Net deferred tax assets....................... $ 10,623  $23,965  $19,864
                                                    ========  =======  =======
     Deferred tax liabilities:
       Excess of tax over book depreciation........ $   (884) $ 1,487  $ 3,450
       Assets held for sale or development.........    2,088    7,919    6,148
       Intangible assets...........................    7,890   15,667    1,977
       Pension costs...............................    1,671    1,904    1,822
       Other.......................................    2,556    2,745    7,589
                                                    --------  -------  -------
                                                    $ 13,321  $29,722  $20,986
                                                    ========  =======  =======
</TABLE>
 
  In March 1996 the Company received a net tax refund of $5.2 million under an
agreement reached with the Internal Revenue Service closing the audit of the
1987 and 1988 income tax returns.
 
  The Company in 1997, in compliance with FASB 109, has established a full
allowance against its net operating loss carryforward and deferred tax assets.
At October 31, 1997 the Company has $50.6 million total net operating loss
carryforward that will expire in 2011 and 2012.
 
NOTE 8. EMPLOYEE BENEFIT PLANS
 
  Prior to October 31, 1994, most of the Company's domestic employees were
covered by the Whittaker Corporation Employees' Pension Plan (the "Pension
Plan"), its noncontributory defined benefit pension plan. The benefits are
based on years of service and the employee's highest compensation for five
consecutive years during the last ten years of credited service.
 
  Effective October 31, 1994, the Company amended the Pension Plan to "freeze"
benefits for all participants. Adjustments for changes in credited years of
service ceased on October 31, 1994 and adjustments for changes in remuneration
ceased on December 31, 1994. The effect of the amendment was to reduce the
Pension Plan's projected benefit obligation at October 31, 1994 by $3.9
million. The amount was fully absorbed by unrecognized net losses at October
31, 1994 related to the Pension Plan and accordingly, no curtailment gain was
recognized. Vested service continues to accrue in accordance with applicable
Pension Plan provisions, and Pension Plan funding will continue until such
time that the Pension Plan is terminated and all benefit obligations are
satisfied. The Company funds the Pension Plan in accordance with the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
 
                                      33
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED)
 
  The following table sets forth the Pension Plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
 
<TABLE>
<CAPTION>
                                                              OCTOBER 31
                                                          --------------------
                                                            1997       1996
                                                          ---------  ---------
                                                            (IN THOUSANDS)
   <S>                                                    <C>        <C>
   Actuarial present value of benefit obligations:
     Accumulated benefit obligation, including vested
      benefits of $112,811 in 1997 and $118,782 in 1996.. $(122,373) $(119,525)
                                                          =========  =========
     Projected benefit obligation for service rendered
      through October 31, 1994...........................  (122,373)  (119,525)
   Plan assets at fair value, primarily government,
    government agency and fixed income securities .......   122,635    119,892
                                                          ---------  ---------
   Plan assets in excess of projected benefit obligation
    .....................................................       262        367
   Items not yet recognized in earnings:
     Prior service cost..................................       192        293
     Unrecognized net loss...............................     3,770      4,153
                                                          ---------  ---------
   Net prepaid pension cost recorded in the consolidated
    balance sheet........................................ $   4,224  $   4,813
                                                          =========  =========
</TABLE>
 
  The weighted average discount rates used in determining the actuarial
present value of the projected benefit obligation were 7.15% and 7.5%,
respectively, at October 31, 1997 and 1996. The expected long-term rate of
return on plan assets was 7.5% for the years ended October 31, 1997 and 1996,
and 8.75% for the year ended October 31, 1995. As a result of the amendment
described above, there are no projected increases in future compensation
levels.
 
  The Company also sponsors unfunded supplemental nonqualified executive and
director plans. At October 31, 1997, the projected benefit obligation for
those plans totaled $5.8 million, of which $0.8 million is subject to later
amortization. The remaining $5.0 million is accrued as a liability in the
consolidated balance sheet.
 
  Effective November 1, 1994, the Company amended its defined contribution
401(k) plan and renamed it the Whittaker Corporation Partnership Plan
("Partnership Plan"). The amendment provided for new investment alternatives,
added a profit sharing component to Company contributions to the Partnership
Plan, and allowed certain rollover contributions from other qualified plans.
The Partnership Plan contains a matched savings provision that permits pretax
employee contributions. Participants can contribute from 1% to 12% of
compensation and receive a maximum matching employer contribution of 50% on up
to 6% of their annual compensation.
 
  In addition to matching of employee contributions, beginning with fiscal
1995, the Company has recorded as expense profit-sharing contributions to the
Partnership Plan which may range from 0% to 7.5% of eligible employee
compensation, based on the attainment of specified financial goals by
participating divisions of the Company. The Partnership Plan covers most of
the Company's employees, excluding those employed by Xyplex and Whittaker
Communications, Inc. ("WCI"), which comprise the discontinued Communications
segment. Xyplex and WCI sponsor defined contribution 401(k) plans covering a
majority of their domestic employees under which participants can make pretax
contributions of up to 15% of eligible compensation and receive a matching
contribution of 75% on up to 6% of their eligible compensation.
 
                                      34
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED)
 
  Total pension and retirement expense was as follows:
 
<TABLE>
<CAPTION>
                                                    YEARS ENDED OCTOBER 31,
                                                   ----------------------------
                                                     1997      1996      1995
                                                   --------  --------  --------
                                                         (IN THOUSANDS)
     <S>                                           <C>       <C>       <C>
     Cost components of funded defined benefit
      plan:
       Service cost--benefits earned during the
        period.................................... $    516  $    540  $    490
       Interest cost on projected benefit
        obligation................................    8,603     8,500     8,658
       Actual return on plan assets...............  (12,724)  (15,892)  (20,204)
       Net amortization and deferral..............    4,194     6,647     8,336
                                                   --------  --------  --------
     Net periodic pension (income) for funded
      defined benefit plan........................      589      (205)   (2,720)
     Cost for unfunded defined benefit plans......      658       703       549
     Cost for special termination benefit.........      440       --        --
     Cost for defined contribution plans..........    2,293     1,589     2,983
                                                   --------  --------  --------
         Total pension and retirement plan
          expense................................. $  3,980  $  2,087  $    812
                                                   ========  ========  ========
</TABLE>
 
NOTE 9. LEASED ASSETS AND LEASE COMMITMENTS
 
  Whittaker has various leases covering real property and equipment.
 
  Property, Plant and Equipment includes $360,000 at October 31, 1997 and
$500,000 at October 31, 1996 for leases that have been capitalized. The
amortization of these assets is included in depreciation expense.
 
   Future minimum payments under capital leases and under noncancellable
operating leases, net of rentals to be received from existing noncancellable
operating subleases, as of October 31, 1997, were as follows:
 
<TABLE>
<CAPTION>
                                                               CAPITAL OPERATING
       YEARS ENDED OCTOBER 31,                                 LEASES   LEASES
       -----------------------                                 ------- ---------
                                                                (IN THOUSANDS)
       <S>                                                     <C>     <C>
          1998................................................  $224    $ 2,356
          1999................................................   112      2,037
          2000................................................    62      1,820
          2001................................................   --       1,855
          2002................................................   --       1,855
          2003 and subsequent.................................   --      19,398
                                                                ----    -------
       Total commitments......................................   398    $29,321
                                                                        =======
       Amounts representing interest..........................    34
                                                                ----
       Present value of net minimum lease payments............  $364
                                                                ====
</TABLE>
 
   Rental expense for operating leases, net of rental income from subleases,
was as follows:
 
<TABLE>
<CAPTION>
       YEARS ENDED OCTOBER 31,                                    (IN THOUSANDS)
       -----------------------                                    -------------
       <S>                                                        <C>
          1997...................................................    $1,621
          1996...................................................       272
          1995...................................................       937
</TABLE>
 
 
                                       35
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 10. COMMITMENTS AND CONTINGENCIES
 
  In certain years, after evaluating the availability and cost of insurance,
the Company did not purchase insurance for certain risks, including workers'
compensation and product liability. Consequently, the Company is without
insurance for various risks, including product liability for certain products
it manufactured. The Company currently has workers' compensation insurance and
product liability insurance. The Company's insurance carriers have taken the
position that in certain cases the Company is uninsured for environmental
matters, a position that the Company disputes in certain instances.
 
  As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of
1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with
respect to the past treatment and disposal of hazardous substances. The
Company is also a potentially responsible party in a number of other actions
brought under state laws patterned after CERCLA. In nearly all of these
matters, the Company contributed a small amount (generally less than 1%) of
the total treated or disposed of waste. In addition to the CERCLA and similar
actions described above, the Company also, from time to time, conducts or
participates in remedial investigations and cleanup activities at facilities
currently or formerly occupied by its operating units. There are also various
other claims and suits pending against the Company.
 
  At October 31, 1997, the Company had provided for its aggregate liability
related to various claims, including uninsured risks and potential claims in
connection with the environmental matters noted above, excluding the
environmental remediation activities related to the property located in the
City of Santa Clarita, California. The amounts provided on the Company's books
for contingencies, including environmental matters, are recorded at gross
amounts. Because of the uncertainty with respect to the amount of probable
insurance recoveries, these potential insurance recoveries are not taken into
account as a reduction of those amounts provided unless an insurance carrier
has agreed to such coverage. The Company does not anticipate that these
matters will have a material adverse effect on the Company's financial
position or on its ability to meet its working capital and capital expenditure
needs. Although the Company has recorded estimated liabilities for contingent
losses, including uninsured risks and claims in connection with environmental
matters, in accordance with generally accepted accounting principles, the
absence of or denial of various insurance coverages and the filing of future
environmental claims which are unknown to the Company at this time represent a
potential exposure for the Company, and the net income of the Company in
future periods could be adversely affected if uninsured losses in excess of
amounts recorded were to be incurred.
 
  In connection with the discontinuance of various businesses, the Company
remains liable for certain retained obligations and for certain future claims,
principally environmental and product liability. The noncurrent portion of
such items is included in "Other Noncurrent Liabilities" in the consolidated
balance sheet.
 
  The Company periodically assesses the adequacy of its accruals for these and
other liabilities, as well as the carrying value of assets, related to former
operations and programs and makes adjustments as required. During 1996,
certain of these adjustments were offset, in part, by the reversal of tax
related reserves arising from operations prior to 1990 which were determined
to be excess.
 
 
                                      36
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
  Summarized quarterly financial data for 1997 and 1996 follow (in millions of
dollars except for per share amounts):
 
<TABLE>
<CAPTION>
                                    FIRST    SECOND   THIRD    FOURTH
                                   QUARTER  QUARTER  QUARTER  QUARTER   YEAR
                                   -------- -------- -------- -------- -------
     <S>                           <C>      <C>      <C>      <C>      <C>
     1997
     Sales........................  $ 19.7   $ 22.9   $ 24.0   $ 28.5  $  95.1
     Cost of sales................    12.3     14.9     19.8     20.3     67.3
     Loss--continuing operations..    (2.5)    (4.7)    (7.9)   (17.8)   (32.9)
     Loss--discontinued
      operations..................   (15.6)   (29.7)   (19.2)   (62.7)  (127.2)
     Extraordinary item...........     --       --       --      (3.4)    (3.4)
     Net loss.....................   (18.1)   (34.4)   (27.1)   (83.9)  (163.5)
     Loss per share*
       Continuing operations......  $ (.23)  $ (.42)  $ (.71)  $(1.60) $ (2.95)
       Discontinued operations....   (1.40)   (2.67)   (1.72)   (5.61)  (11.42)
       Extraordinary item.........     --       --       --      (.31)    (.31)
       Net loss...................   (1.63)   (3.09)   (2.43)   (7.52)  (14.68)
     1996
     Sales........................  $ 21.9   $ 24.8   $ 23.8   $ 28.1  $  98.6
     Cost of sales................    10.8     13.1     12.2     14.2     50.3
     Income--continuing
      operations..................     2.4      5.7      0.8      0.9      9.8
     Loss--discontinued
      operations..................    (0.5)   (10.6)    (6.7)    (9.1)   (26.9)
     Net income (loss)............     1.9     (4.9)    (5.9)    (8.2)    17.1
     Earnings (loss) per share*
       Continuing operations......  $  .26   $  .55   $  .07   $  .08  $   .93
       Discontinued operations....    (.06)   (1.03)    (.58)    (.79)   (2.55)
       Net income (loss)**........     .20     (.48)    (.51)    (.71)   (1.62)
</TABLE>
--------
 * The sums of quarterly per share amounts do not equal the annual amounts
   reported since per share calculations are made independently for each
   quarter and the full year based upon respective average shares outstanding.
 
** The financial statements for prior periods have been restated to reflect
   the segregation of continuing and discontinued operations. This restatement
   resulted in the reduction of net loss per share for the second, third and
   fourth quarters of 1996 of $0.04, $0.03 and $0.03, respectively.
 
NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
 
  Long-term debt: The carrying amounts of the Company's borrowings approximate
their fair value. The Company's bank credit facility is a variable rate
facility that reprices frequently.
 
  Notes receivable: The carrying amounts of the Company's notes receivable
approximate their fair value.
 
NOTE 13. BUSINESS SEGMENTS
 
  The Company develops and provides specialized aerospace and data network
services to create products and customer solutions for aircraft, defense and
industrial markets and hospitals and other enterprises. The
 
                                      37
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 13. BUSINESS SEGMENTS--(CONTINUED)
 
Company operates in two business segments: Aerospace, which designs,
manufactures, and distributes a wide variety of fluid control devices and fire
detection systems, and Integration Services, which provides professional
services for the integration of data networks for hospitals and other
enterprises. Prior to fiscal year 1997, the Company's Integration Services
operation did not exist.
 
  Operating profit is total revenue less operating expenses. General corporate
expenses have not been allocated to the business segments and are shown as a
separate expense element of operating profit to reconcile to consolidated
operating income or loss. Identifiable assets are those assets used in the
Company's operations in each industry. Corporate assets are principally cash,
notes receivable, deferred income taxes, and assets held for sale.
 
  Information about Whittaker's operations by business segment at October 31,
1997, 1996, and 1995 and for the years then ended follows (dollars in
millions):
<TABLE>
<CAPTION>
                                                               DEPRECIATION AND
                                      OPERATING   IDENTIFIABLE   AMORTIZATION     CAPITAL
                              SALES PROFIT (LOSS)    ASSETS        EXPENSE      EXPENDITURES
                              ----- ------------- ------------ ---------------- ------------
     <S>                      <C>   <C>           <C>          <C>              <C>
     1997
     Aerospace............... $89.8    $ 15.6        $ 81.2          $2.3           $2.1
     Integration Services....   5.3      (4.9)          4.1           0.2            0.1
     Corporate...............   --      (26.5)         82.1           0.3            0.1
                              -----    ------        ------          ----           ----
     Consolidated............ $95.1    $(15.8)       $167.4          $2.8           $2.3
                              =====    ======        ======          ====           ====
     1996
     Aerospace............... $98.6    $ 30.5        $ 79.7          $2.4           $1.6
     Corporate...............   --      (10.4)        260.7           0.2            0.1
                              -----    ------        ------          ----           ----
     Consolidated............ $98.6    $ 20.1        $340.4          $2.6           $1.7
                              =====    ======        ======          ====           ====
     1995
     Aerospace............... $81.3    $ 23.5        $ 77.7          $2.2           $1.1
     Corporate...............   --       (7.4)        149.4           0.2            0.9
                              -----    ------        ------          ----           ----
     Consolidated............ $81.3    $ 16.1        $227.1          $2.4           $2.0
                              =====    ======        ======          ====           ====
</TABLE>
 
  The financial statements for prior periods have been restated to reflect the
segregation of continuing and discontinued operations. The information
presented above for 1996 and 1995, reflects the removal from the Aerospace
segment of amounts relating to the discontinued defense electronics business
and the removal of the discontinued Communications segment. The net assets of
discontinued businesses are included in the Corporate Identifiable Assets for
each year.
 
  In fiscal 1997, 1996, and 1995 approximately 17.8%, 27.0% and 27.8%,
respectively, of Whittaker's sales from continuing operations were directly or
indirectly to the United States Government. Substantially all of those sales
were attributable to the Aerospace segment. In fiscal 1997, 1996, and 1995
approximately 19.7%, 24.0% and 22.1% respectively, of Whittaker's sales from
continuing operations arose from exports to customers outside the United
States, primarily in Europe. Approximately 8% of the Company's accounts
receivable are from the U.S. Government, and the balance is primarily from
commercial customers, prime defense contractors with the U.S. Government, and
foreign customers.
 
  In connection with the formation of Aviant, the Integration Services segment
incurred costs in 1997 which may not be representative of costs in future
periods.
 
 
                                      38
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 14. EXTRAORDINARY ITEM
 
  In connection with the Company obtaining, during 1997, certain of the
waivers of default for non-compliance with the financial ratio covenants under
the terms of its bank credit agreement, there has been a significant increase
in the interest rate at which the Company can borrow under the terms of that
agreement. This increase represents a substantial modification of the credit
agreement. Accordingly, the Company during the fourth quarter of 1997 recorded
a charge of $3.4 million (net of $0.2 million of tax benefit) representing the
write off of the unamortized portion of debt issuance costs incurred in
connection with obtaining that credit agreement. This charge has been
reflected in the Company's consolidated statements of income as an
extraordinary item.
 
NOTE 15. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITORS
(UNAUDITED)
 
  On January 19, 1998, the Company entered into a definitive agreement to sell
all of the common stock of its wholly-owned subsidiary, Whittaker Xyplex,
Inc., the parent company of Xyplex, Inc., to MRV Communications, Inc., for $35
million in cash plus warrants to purchase up to 500,000 shares of common stock
of MRV Communications, Inc. The sale is subject to customary closing
conditions, including Hart-Scott-Rodino Act clearance.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
  Not applicable.
 
                                      39
<PAGE>
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  The information called for by Item 10 is incorporated by reference to the
information under the following captions in the Proxy Statement:
 
    CAPTION
 
    Election of Directors--Directors
    Compliance with Section 16(a) of the Securities Exchange Act
 
  Certain of the information called for by Item 10 with respect to executive
officers of the Registrant appears as Item 4A in Part I of this Report.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
  The information called for by Item 11 is incorporated by reference to the
information under the following caption in the Proxy Statement:
 
    CAPTION
 
    Election of Directors--Executive Compensation and Other Information
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
  The information called for by Item 12 is incorporated by reference to the
information under the following caption in the Proxy Statement:
 
    CAPTION
 
    Equity Securities and Principal Holders Thereof
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
 The information called for by Item 13 is incorporated by reference to the
information under the following caption in the Proxy Statement:
 
    CAPTION
 
    Election of Directors--Directors
 
                                      40
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
  The following documents are filed as part of this report:
 
 (a-1) Financial Statements:
<TABLE>
<CAPTION>
                                                                        PAGE
                                                                      REFERENCE
                                                                      ---------
                                                                      FORM 10-K
   <S>                                                                <C>
   Report of Independent Auditors....................................     16
   Consolidated Statements of Income for the three years ended
    October 31, 1997.................................................     17
   Consolidated Balance Sheets as of October 31, 1997 and 1996.......     19
   Consolidated Statements of Cash Flows for the three years ended
    October 31, 1997.................................................     20
   Consolidated Statements of Stockholders' Equity for the three
    years ended October 31, 1997.....................................     21
   Notes to Consolidated Financial Statements........................     22
</TABLE>
 
 (a-2) Financial Statement Schedules:
 
  All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or
the Notes to Consolidated Financial Statements.
 
 (a-3) Exhibits:*
 
<TABLE>
   <C>  <S>
    3.1 Restated Certificate of Incorporation (Exhibit 3.1 to Form 10-K for
         fiscal year ended October 31, 1989), as amended on March 16, 1990
         (Exhibit 3.1 to Form 10-K for fiscal year ended October 31, 1995).
    3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended October
         31, 1989), as amended on September 30, 1994 (Exhibit 3.2 to Form 10-K
         for fiscal year ended October 31, 1994), and on December 16, 1996
         (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1996).
    4.1 Reference is made to Exhibit 3.1.
    4.2 Reference is made to Exhibit 3.2.
    4.3 Rights Agreement dated as of November 18, 1988 between Registrant and
         Manufacturers Hanover Trust Company (currently being performed by
         Mellon Bank N.A. as rights agent) concerning Series A Participating
         Cumulative Preferred Stock Purchase Rights (Exhibits 1 and 2 to
         Form 8-A filed on November 23, 1988), as amended as of June 28, 1989
         (Exhibit 4.4 to Form 10-K for fiscal year ended October 31, 1989).
    4.4 Certificate of Designation of Series D Participating Convertible
         Preferred Stock (Exhibit 4.2 to Form S-4, Registration No. 33-29028),
         as amended on March 16, 1990 (Exhibit 4.4 to Form 10-K for fiscal year
         ended October 31, 1995).
    4.5 7% Convertible Subordinated Note dated April 24, 1995 (Exhibit 10.1 to
         Form 8-K dated May 8, 1995).
    4.6 Registration Rights Agreement dated April 24, 1995 between Registrant
         and Hughes Electronics Corporation (Exhibit 10.1 to Form 8-K dated May
         8, 1995).
    4.7 Stockholder's Agreement dated April 10, 1996 between Registrant and
         Raytheon Company (Exhibit 4.1 to Form 8-K dated April 24, 1996).
    4.8 Term Note dated April 10, 1996 by the Registrant in favor of
         NationsBank of Texas, N.A. (Exhibit 4.2 to Form 8-K dated April 24,
         1996).
</TABLE>
 
                                       41
<PAGE>
 
<TABLE>
   <C>   <S>
    4.9  Revolving Note dated April 10, 1996 by the Registrant in favor of
          NationsBank of Texas, N.A. (Exhibit 4.3 to Form 8-K dated April 24,
          1996).
         (Other instruments defining the rights of holders of long-term debt
          are not filed because the total amount of securities authorized under
          any such instrument does not exceed 10% of the consolidated total
          assets of Registrant. Registrant hereby agrees to furnish a copy of
          any such instrument to the Commission upon request.)
   10.1  Amended and Restated Whittaker Corporation 1992 Stock Option Plan for
          Non-Employee Directors (Exhibit 10.3 to Form 10-K for fiscal year
          ended October 31, 1996).**
   10.2  Restated Directors' Retirement Plan effective as of August 2, 1985 as
          amended on January 24, 1991 (Exhibit 10.10 to Form 10-K for fiscal
          year ended October 31, 1990), as amended on December 16, 1996
          (Exhibit 10.6 to Form 10-K for fiscal year ended October 31, 1996).**
   10.3  Amended and Restated Whittaker Corporation Long-Term Stock Incentive
          Plan (1989) (Exhibit 10.7 to Form 10-K for fiscal year ended October
          31, 1996).**
   10.4  Whittaker Corporation Supplemental Benefit Plan dated November 23,
          1988, as amended June 12, 1990 and as amended July 12, 1991 (Exhibit
          10.8 to Form 10-K for fiscal year ended October 31, 1996).**
   10.5  Whittaker Corporation Excess Benefit Plan dated November 23, 1988, as
          amended June 21, 1990 (Exhibit 10.9 to Form 10-K for fiscal year
          ended October 31, 1996).**
   10.6  Whittaker Corporation Supplemental Disability Benefit Plan dated
          November 23, 1988 (Exhibit 10.10 to Form 10-K for fiscal year ended
          October 31, 1996).**
   10.7  Whittaker Corporation Supplemental Retirement and Disability Trust
          Agreement dated November 23, 1988 (Exhibit 10.13 to Form 10-K for
          fiscal year ended October 31, 1988).**
   10.8  Amended and Restated Whittaker Corporation Supplemental Executive
          Retirement Plan, dated as of January 1, 1996, as amended January 24,
          1997 (Exhibit 10.12 to Form 10-K for fiscal year ended October 31,
          1996).**
   10.9  Amendment and Restatement of Whittaker Corporation Employees' Pension
          Plan dated December 22, 1994, as amended December 15, 1995 (Exhibit
          10.10 to Form 10-K for fiscal year ended October 31, 1995), and as
          amended effective October 1, 1996 (Exhibit 10.13 to Form 10-K for
          fiscal year ended October 31, 1996).**
   10.10 Whittaker Corporation Partnership Plan (formerly the Whittaker
          Corporation Savings and Stock Investment Plan), as amended and
          restated effective November 1, 1994 (Exhibit 10.11 to Form 10-K for
          fiscal year ended October 31, 1995), as amended June 21, 1996
          (Exhibit 10.2 to Form 10-Q dated September 13, 1996) and as amended
          December 12, 1997 (Exhibit 10.10 to Form 10-K dated January 28,
          1998).**
   10.11 Amended and Restated Credit Agreement dated as of April 10, 1996 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.2 to Form
          8-K dated April 24, 1996).
   10.12 First Amendment and Waiver dated as of September 9, 1996 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.1 to Form
          10-Q dated September 13, 1996).
   10.13 Second Amendment and Waiver dated as of October 30, 1996 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.17 to Form
          10-K for fiscal year ended October 31, 1996).
   10.14 Third Amendment and Waiver dated as of December 17, 1996 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.18 to Form
          10-K for fiscal year ended October 31, 1996).
</TABLE>
 
                                       42
<PAGE>
 
<TABLE>
   <C>   <S>
   10.15 Fourth Amendment and Waiver dated as of February 26, 1997 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.1 to Form
          10-Q dated January 31, 1997).
   10.16 Fifth Amendment and Waiver dated as of April 29, 1997 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.1 to Form
          10-Q dated April 30, 1997).
   10.17 Sixth Amendment and Waiver dated as of May 30, 1997 among Registrant,
          NationsBank of Texas, N.A., as Agent, and certain other financial
          institutions as signatories thereto (Exhibit 10.2 to Form 10-Q dated
          April 30, 1997).
   10.18 Seventh Amendment and Waiver dated as of June 30, 1997 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.1 to Form
          10-Q dated July 31, 1997).
   10.19 Eighth Amendment and Waiver dated as of July 31, 1997 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.2 to Form
          10-Q dated July 31, 1997).
   10.20 Ninth Amendment and Waiver dated as of December 31, 1997 among
          Registrant, NationsBank of Texas, N.A., as Agent, and certain other
          financial institutions as signatories thereto (Exhibit 10.20 to Form 
          10-K dated January 28, 1998).
   10.21 Stock Purchase Agreement dated as of March 23, 1995 between Registrant
          and Hughes Aircraft Company, as amended on April 24, 1995 (Exhibit
          10.1 to Form 8-K dated May 8, 1995).
   10.22 Stock Purchase Agreement dated as of March 2, 1996, between Registrant
          and Raytheon Company (Exhibit 10.1 to Form 8-K dated April 24, 1996).
   10.23 Stock Purchase Agreement dated as of January 19, 1998, between
          Registrant and MRV Communications, Inc. (Exhibit 10.23 to Form 10-K 
          dated January 28, 1998).
   11.   Calculation of earnings per share for the three years ended October
          31, 1997 (Exhibit 11 to Form 10-K dated January 28, 1998).
   21.   Subsidiaries of the Registrant (Exhibit 21 to Form 10-K dated January 
          28, 1998).
   23.   Consent of Independent Auditors.
   27.   Financial Data Schedule (Exhibit 27 to Form 10-K dated January 28, 
          1998).
</TABLE>
--------
 * Exhibits followed by a parenthetical reference are incorporated by reference
   to the document described therein. Upon written request to the Secretary of
   the Company, a copy of any exhibit referred to above will be furnished
   without charge.
 
** Management contract or compensatory plan or arrangement required to be filed
   as an exhibit to this Form 10-K.
 
 (b) Reports on Form 8-K:
 
    During the quarter ended October 31, 1997, the Company did not file any
    reports on Form 8-K.
 
                                       43
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                          WHITTAKER CORPORATION
 
 Date: April 8, 1998                             /s/  John K. Otto
                                          By __________________________________
                                                      John K. Otto
                                             Vice President, Chief Financial
                                                  Officer and Treasurer
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF REGISTRANT
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
 
<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
 
<S>                                  <C>                           <C>

   /s/   Joseph F. Alibrandi         Director and Principal        April 8, 1998
____________________________________ Executive Officer        
        Joseph F. Alibrandi                                   
                                                              
       /s/  John K. Otto             Principal                     April 8, 1998
____________________________________ Financial Officer        
            John K. Otto                                      
                                                              
    /s/   Eva H. L. Jonutis          Principal                     April 8, 1998
____________________________________ Accounting Officer       
        (Eva H. L. Jonutis)                                   
                                                              
  /s/   George H. Benter, Jr.        Director                      April 8, 1998
____________________________________                          
       George H. Benter, Jr.                                  
                                                              
                                     Director                      
____________________________________                          
         George Deukmejian                                    
                                                              
                                     Director                      
____________________________________                          
         (Jack L. Hancock)                                    
                                                              
     /s/  Edward R. Muller           Director                      April 8, 1998
____________________________________                          
         (Edward R. Muller)                                   
                                                              
      /s/  Gregory T. Parkos         Director                      April 8, 1998
____________________________________                          
        (Gregory T. Parkos)                                   
                                                               
     /s/ Malcolm T. Stamper          Director                      April 8, 1998
____________________________________                          
       (Malcolm T. Stamper)                                   
                                                              
</TABLE>
 
                                      S-1
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                  SEQUENTIALLY
 EXHIBIT                                                            NUMBERED
   NO.                                                                PAGE
 -------                                                          ------------
 <C>     <S>                                                      <C>

 23      Consent of Independent Auditors.
</TABLE>