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                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                               ----------------
                                   FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                               ----------------
 
      FOR FISCAL YEAR ENDED OCTOBER 31, 1995 COMMISSION FILE NUMBER 1-5407
 
                             WHITTAKER CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
               DELAWARE                              95-4033076
    (STATE OR OTHER JURISDICTION OF               (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)
 
        1955 N. SURVEYOR AVENUE                         93063
        SIMI VALLEY, CALIFORNIA                       (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE
               OFFICES)
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 526-5700
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
           TITLE OF EACH CLASS             NAME OF EACH EXCHANGE ON WHICH
                                                     REGISTERED
Common Stock, par value $.01 per share         New York Stock Exchange
                                               Pacific Stock Exchange
 
   Series A Participating Cumulative           New York Stock Exchange
    Preferred Stock Purchase Rights            Pacific Stock Exchange
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 
                                      NONE
                                (TITLE OF CLASS)
 
  Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES  X   NO
 
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of the Securities Exchange Act of 1934) is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]
 
  State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant: $178,675,097 as of December 29, 1995.
 
  Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: 8,588,982 shares of Common
Stock as of December 29, 1995.
 
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DOCUMENTS INCORPORATED BY REFERENCE
 
<TABLE>
<CAPTION>
                                                                  WHERE
                              DOCUMENT                         INCORPORATED
                              --------                         ------------
      <S>                                                      <C>
      Definitive Proxy Statement for the Annual Meeting of       Part III
       Stockholders to be held March 22, 1996 to be filed
       pursuant to Section 14(a) of the Securities Exchange
       Act of 1934 (the "Proxy Statement")
</TABLE>
<PAGE>
 
                                     PART I
 
ITEM 1. BUSINESS.
 
GENERAL
 
  Whittaker Corporation ("Whittaker" or the "Company") was incorporated in
California in 1947 and became a Delaware corporation in 1986. Whittaker
maintains its principal executive and administrative offices at 1955 N.
Surveyor Avenue, Simi Valley, California 93063 (telephone number 805-526-5700).
 
  The Company has been active during fiscal 1995 in the aerospace business,
including defense electronics, and has used its electronics technologies and
expertise and the acquisition in April 1995 of Hughes LAN Systems, Inc., which
has been renamed Whittaker Communications, Inc., to expand into data networking
and communications markets. During the past five years, the Company was also
active in biotechnology businesses. Set forth below is a description of the
current business of the Company.
 
  The Company develops specialized aerospace and electronic technologies to
create products and customer solutions for aircraft, defense, communications
and industrial markets. The Company's products and services are developed and
produced by two business segments: Aerospace, which manufactures and markets
proprietary fuel, hydraulic and pneumatic fluid control valves and fire
detection system products fitted on aircraft, ground-based gas turbines, and
other industrial installations, and designs, develops and sells a wide array of
highly reliable defense electronics products and systems; and Communications,
which designs, develops, and markets a comprehensive line of data networking
products and services including intelligent wiring concentrators, Ethernet and
Asynchronous Transfer Mode ("ATM") switches and wide area network ("WAN")
access devices and provides a full range of network design, consulting,
integration and support services. For the fiscal year ended October 31, 1995,
total Company sales were $159.5 million, of which 81% were generated by the
Aerospace segment and 19% were generated by the Communications segment.
 
Aerospace Segment
 
  The business and operations of the Aerospace segment are conducted by the
Company's Aerospace Group, which consists of the Company's aircraft, defense
electronics, industrial products, and federal sector product lines.
 
PRODUCTS
 
  Principal applications and representative products of the Company's Aerospace
segment 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 refueling devices for airports and
valving systems, heat exchangers, and fuel skids for land gas turbine power
plants, 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 and
Pratt & Whitney. Sales of fluid and pneumatic control products were $59.5
million in fiscal 1995, $52.9 million in fiscal 1994, and $43.0 million in
fiscal 1993.
 
  Fire and Overheat Detectors. The Company designs and manufactures continuous
length pneumatic fire and overheat detectors as well as optical flame and smoke
detectors and systems for commercial and military aircraft and gas turbine
engines. This equipment is widely used on a broad spectrum of aircraft
manufactured by Boeing, AirBus, McDonnell Douglas, Northrop Grumman and many
smaller manufacturers, as well as on small naval vessels, helicopters, and
railcars. The aircraft range from large commercial transports to small commuter
aircraft, private twin engine airplanes, helicopters, military fighters and
transport aircraft. The fire
 
                                       1
<PAGE>
 
and overheat detectors are used on aircraft engines manufactured by General
Electric, Pratt & Whitney and Rolls Royce. Industrial applications of such
products include complete fire protection systems for vehicles, turbine powered
pumping and electric power generation applications, as well as large scale
systems to protect oil platforms and refineries. Sales of fire and overheat
detectors and systems were $21.8 million in fiscal 1995, and $10.5 million in
fiscal 1994, the year during which the Company acquired the business.
 
  Command, Control and Communications. The Company designs and manufactures
electronic systems for command, control and communications, including display
and analysis systems, digital data links, signal data converters, tactical
simulation systems, and wide-band encrypted secure voice and data systems that
permit secure communications. The Company also has developed modular software
that is designed to be portable to any real-time operating system. A user-
friendly, window-based display and a unique table-driven architecture provide
easy interface between various equipment and facilitate the addition of new
equipment. Sales of command, control and communications systems were $18.9
million in fiscal 1995, $24.5 million in fiscal 1994, and $29.8 million in
fiscal 1993.
 
  Radio Frequency/Survivability Systems. The Company designs radar
countermeasure systems and electronic combat systems that provide radar and
proximity fuse jamming using an internally developed radio frequency memory
unit. Experience in technique development was used to invent a proprietary
monopulse radar countermeasures generator that is applicable to most modern
jamming systems. Also based on this experience, the Company is under contract
with the United States Army to develop enhancements to a Company-designed and
produced electronic protection system (the Shortstop Electronic Protection
System) that prematurely detonates incoming artillery, mortar, and other
proximity-fused weapons, providing significant protection to personnel and
facilities. A Company-designed radar system (TBMEWS) detects tactical ballistic
missiles, such as the SCUD, and allows early warning for the civilian
population and for deployment of weapons. Other ground-based radar surveillance
and tracking systems of the Company, including replicas of enemy radar systems,
are used in tactical training.
 
  Data Managers. The Company provides a unique combination of hardware and
software that interfaces very high speed computers with lower speed computers
as well as storage disks, recorders and other peripherals. The data manager
allows simultaneous input and output of large amounts of data, facilitating
real time analysis and storage. Data managers provide this capability in
applications for jet engine data recording, transfer of video data in
simulators, and command and control applications.
 
  Other Electronics Products. The Company designs and manufactures high
reliability silicon dioxide insulated coaxial and multiple conductor cable
systems which permit broad-band data transmission and control function
operation in extreme environments. Atmospheric monitoring systems are provided
for timely warning of emergency conditions. Applications for these technologies
include signal transmission and control functions inside nuclear power plants
and reactors, power and control monitoring and electronic valve control at oil
refineries, extreme environmental condition cable applications near jet
engines, and critical connections in airborne electronic countermeasure
systems. The Company also designs and manufactures expendable high-energy-
density batteries utilized primarily for missile and space applications. These
applications require watt seconds of energy and demand the highest availability
and reliability due to their critical functions. The Company supplies these
batteries to meet the extreme environmental requirement of airborne
applications.
 
PRODUCT DEVELOPMENT
 
  In August 1994, the Company was awarded a $10.9 million cost-reimbursement
contract from the United States Army to develop three new versions of the
Company's previously developed battlefield electronic countermeasures system,
capable of detonating incoming artillery and mortar rounds, designated the
Shortstop Electronic Protection System ("SEPS"). During 1995, the Company met
performance requirements and developed three full scale SEPS development
models. The contract did not contribute a material amount of revenue to the
Company in 1995, but successful development of the new SEPS versions slated for
delivery starting late in fiscal 1996 could, subject to all of the risks and
uncertainties that apply to military procurement generally, as discussed below,
result in subsequent SEPS production contracts, which could then have a
material effect on the Company's sales. There can be no assurance, however,
whether or when any such contracts would be awarded.
 
                                       2
<PAGE>
 
  The Company is discussing with various foreign governments the potential sale
and installation of a Company-designed radar system that detects tactical
ballistic missiles and allows early warning for the civilian population and for
deployment of weapons. There are currently no firm commitments for the system
at this date. If the discussions result in an agreement, annual sales of
defense electronics products could increase materially. Because of the
uncertainties of the military procurement processes of foreign governments, the
need for the foreign government to provide budget authority for the potential
procurement, and all the uncertainties that apply to military procurement
generally, as discussed below, there can be no assurance that an agreement will
be reached or, if reached, what the contract price would be.
 
  The Aerospace segment spent $3.4 million, $2.7 million, and $1.7 million on
research and development activities in fiscal 1995, 1994, and 1993,
respectively.
 
MARKETS AND CUSTOMERS
 
  Sales to commercial customers, including foreign customers, were the major
contributor to Aerospace sales and profit in 1995. In past years, the principal
contributor to sales and profit for the Aerospace segment had been the United
States Government and its prime contractors. Sales directly or indirectly to
the United States Government, primarily under military procurement contracts,
continued to decrease as a percentage of Aerospace sales, dropping to 41% of
sales in 1995, compared to 49% in 1994 and 68% in 1993. Export sales to
customers outside the United States continued to increase, representing 23% of
Aerospace sales for 1995, compared to 20% in 1994 and 11% in 1993.
 
  The Company has been able to achieve increased sales of its aircraft fluid
and pneumatic control devices over the past three years despite relatively low
new aircraft build rates. 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 now appears to be on the rise,
which may further contribute to an improved business climate for these Company
products. The Company has also positioned itself for continued growth in the
Aerospace segment by expanding its product offerings through acquisitions and
growth in related markets, including fire and overheat detection equipment and
industrial markets. During fiscal 1995, the Company also marketed its aircraft
fluid control and other aerospace products to manufacturers of industrial,
land-based gas turbines, which are similar to jet engines. The Company intends
to continue to do so. In certain geographic areas and 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, 1995, Aerospace backlog totaled $66.9 million (compared to
$69.3 million at October 31, 1994), of which $9.8 million is not expected to be
filled within fiscal 1996. Aerospace backlog includes no unfunded amounts
relating to government contracts.
 
COMPETITION
 
  The military and commercial industries in which the Aerospace segment
operates are generally highly competitive, with competition centering on price,
as well as 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.
 
 
                                       3
<PAGE>
 
Communications Segment
 
  The business and operations of the Communications segment are conducted by
Whittaker Communications, Inc. ("WCI"), which was acquired by the Company in
April of 1995. WCI designs, develops, and markets a comprehensive line of
networking products which allow its customers a migration path from their
existing legacy infrastructures to new and emerging data networking
architectures. In addition, WCI provides a full range of network design,
consulting, integration and support services for small businesses or large
enterprise-wide solutions.
 
  The Local Area Network ("LAN") market was born in the 1980's as mainframe
dominance was being seriously challenged by departmental minicomputers
supporting multiple users through terminals and personal computers.
Decentralized computing brought many advantages, but limitations on sharing
information and communicating quickly became evident. LANs provided the
foundation for cooperative computing concepts, better resource sharing, and the
further dissemination of computing power throughout businesses, government
agencies and schools. In the 1990's, new applications such as digital imaging,
client/server, and multimedia have begun to tax the bandwidth of early LAN
technologies such as Ethernet and Token Ring. Switching hubs are replacing
shared Ethernet and Token Ring networks. New technologies such as 100 megabit
per second ("Mbps") Fast Ethernet connectivity from the server to the desktop
and ATM are critical to keep up with the demands of emerging applications.
 
PRODUCTS
 
  WCI has created a high-speed switching product line and integrated service
offering that empowers users to successfully navigate the rapid changes in the
local and wide area network marketplaces. WCI provides network managers with a
migration path that preserves investment in legacy LANs and software while
providing practical and upgradeable products and support for emerging high-
speed network standards. With products ranging from a chassis-based enterprise
hub, a robust management network platform, and an ATM switch, WCI provides a
global high-performance networking solution. WCI's product family provides
seamless bandwidth solutions in three key high-speed networking scenarios: as a
workgroup accelerator; as the backbone of a campus network; and as the core of
a global network.
 
  Principal applications and representative products of the Company's
Communications segment include:
 
  Enterprise Hub--WCI's Enterprise Hub, available in five- and fourteen-slot
chassis designs, incorporates a distributed ATM cell-switching fabric in its
architecture, which offers scalable bandwidth, high reliability, low cost of
entry, and an incremental and modular upgrade to ATM technology. The Enterprise
Hub integrates Ethernet, Token Ring, and Fiber Distributed Data Interface
("FDDI") wiring concentration, bridging, edge routing, and ATM cell relay
technology in a hot-swappable, modular high-performance system. Among the key,
single-slot modules that WCI has designed and markets are:
 
    Model 908 ATM Network Interface Module, which provides ATM backbones
  between Enterprise Hubs and to ATM workgroup switches, as well as User
  Network Interface (UNI)-based connections to workstations and servers. The
  Model 908 integrates any mix of legacy LANs, switched workgroups, server
  clusters, and workstations with ATM.
 
    Model 708 ATM Ethernet Switch Module, which provides a full 10 Mbps of
  bandwidth per port to boost performance for workgroup LANs, servers and
  high-performance workstations and switches Ethernet packets locally between
  its eight 10BASE-T ports. Traffic destined for other ATM modules,
  Enterprise Hubs and workgroup switches is converted to ATM cells and
  forwarded using virtual circuit mapping.
 
  Sales of the Company's Enterprise Hub and integrated modules were $23.4
million in fiscal 1995, reflecting activity for the six-month period since the
business was acquired by the Company.
 
  Enterprise Network Access Switch (ENAS(TM))--WCI's ENAS, configured with a 5-
or 20-slot chassis, provides data integration for high-speed ATM services.
Achieving speeds of up to 155 Mbps, the ENAS integrates legacy
telecommunications for high-speed conversion to ATM by converting Ethernet and
T1
 
                                       4
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signals from their source media to ATM signals, linking existing LANs to the
ATM WAN. The ENAS is a LAN/WAN edge device that can be used as a wide area ATM
switch or as an interface between LANs and the ATM WAN switch.
 
  Integration and Support--WCI also provides a full range of integration and
support with full turn-key networking solution to its customers, including the
integration of third-party products and services with the Company's own
products and services.
 
PRODUCT DEVELOPMENT
 
  WCI's product development efforts are primarily focused on its strategic
product lines: LAN connectivity (both Ethernet and Token Ring), ATM switching
technology development, Ethernet switching, 100 Mbps Ethernet technology and
advanced network management software. WCI's core networking technologies create
opportunities to leverage its engineering investments and develop more
integrated products for simpler, more innovative networking solutions for
customers. WCI plans to invest in emerging technologies for use in existing and
future products, as well as to improve and enhance existing products to extend
their lifecycles, reduce manufacturing costs and increase functionality.
 
  In addition to the development of custom Application Specific Integrated
Circuits ("ASICs") to improve performance, increase reliability and reduce
costs, WCI is investing in the following areas: Fast Ethernet (100 Mbps
Ethernet), ATM capabilities on both LAN and WAN, Ethernet switching, Integrated
Service Digital Network ("ISDN") and Frame Relay connectivity. These efforts
are directed at simplifying network management, providing remote connectivity
and increased network performance. WCI spent $4.3 million on research and
development activities since its acquisition by the Company in fiscal 1995.
 
  The industry in which WCI competes is subject to rapid technological
developments, evolving industry standards, changes in customer requirements and
frequent new product introductions and enhancements. As a result, WCI's success
in part depends upon its ability, on a cost-effective and timely basis, to
continue to enhance its existing products and to develop and introduce new
products that take advantage of technological advances. There can be no
assurance that WCI will be able to successfully develop new products to address
new industry transmission standards and technological changes or to respond to
new product announcements by others or that such products will achieve market
acceptance.
 
MARKETS AND CUSTOMERS
 
  With installations at over 300 major hospitals domestically, WCI has
established a specialization as a network provider for the healthcare industry.
WCI also has a strong presence in the public sector as well as in
manufacturing, education, finance and government. WCI currently has 6,000
systems installed worldwide, 1,000 of which are ATM-based.
 
  Worldwide, WCI also serves its customers through indirect channels. Indirect
channels include systems integrators, value-added resellers, distributors,
resellers, and original equipment manufacturers (OEMs). WCI's multi-channel
sales strategy encourages broad market coverage, by allowing WCI's sales
personnel to create demand for its products while giving customers the
flexibility to choose the most appropriate delivery option. WCI maintains sales
offices in France, the United Kingdom, Germany and Mexico. In fiscal 1995,
approximately 44% of WCI's sales arose from exports to customers outside the
United States.
 
MANUFACTURING AND SUPPLIERS
 
  WCI's primary production activities are conducted at its Santa Clara,
California facilities. Purchasing, mechanical assembly, burn-in, testing, final
assembly, and quality assurance functions are performed at this facility. WCI
also procures certain products and subassemblies through subcontractors.
Products manufactured by WCI are warranted for periods of 90 days for software
and one year for hardware.
 
  Components purchased by WCI are generally available from multiple suppliers.
However, certain components may be available from sole sources. The inability
to obtain certain components could require WCI to redesign or delay shipments
of several of its data networking products. WCI has sought to establish
 
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close relationships with sole-source suppliers and/or to build up inventory of
such components; however, there can be no assurance that production would not
be interrupted due to the unavailability of components. WCI believes that its
inventory levels of these components are adequate for its currently forecasted
needs.
 
PATENTS, LICENSES AND RELATED MATTERS
 
  WCI relies on U.S. and foreign patents, copyrights, trademarks and trade
secrets to establish and maintain proprietary rights in its technology and
products. There can be no assurance that any of these patents would be upheld
as valid if litigated. Although WCI believes that its patents and applications
have value, it also believes that its competitive position depends primarily on
the innovative skills, technological expertise and management abilities of its
employees.
 
  Many of WCI's products are designed to include software or other intellectual
property licensed from third parties. WCI actively seeks to license software
that promotes the compatibility of its products with industry standards,
including standard protocols and architectures. The loss of rights in software
or other intellectual property licensed from a third party and designed into a
particular product might disrupt or delay WCI's distribution of that product.
Although it may be necessary in the future to seek or renew licenses relating
to various aspects of its products, WCI believes that, based upon past
experience and standard industry practice, such licenses generally could be
obtained on commercially reasonable terms.
 
BACKLOG
 
  WCI manufactures its products based upon its forecast of the demand of its
customers worldwide and maintains inventories of finished products in advance
of receiving firm orders from its customers. Product orders are generally
placed by the customer on an as-needed basis and products are usually shipped
within one to four weeks after receipt of an order. Such orders generally may
be canceled or rescheduled by the customer without significant penalty.
Accordingly, WCI does not maintain a substantial backlog, and backlog as of any
particular date may not be indicative of actual sales in any succeeding period.
At October 31, 1995, WCI backlog totaled $15.2 million, all of which is
expected to be filled in fiscal 1996.
 
COMPETITION
 
  Data networking encompasses both on-premises (i.e., desktop connectivity
devices, internetworking platforms and wiring hubs) and off-premises (i.e.,
WAN) technologies. WCI participates primarily in designing, manufacturing and
marketing on-premises equipment, and is entering the off-premises point-of-
presence market with its ENAS product. WCI's competitors typically compete in
one or more segments of the data networking market. These companies are using
their resources and technical expertise to improve and expand their product
lines in an effort to gain market share. The industry recently has witnessed a
wave of merger, acquisition and strategic partnering activity as many of these
companies seek to provide broader networking solutions.
 
  Competition in the network systems business, formerly characterized by niche-
based competitors focused on a single industry segment, is shifting toward more
broad-based suppliers offering multiple product lines. This has been achieved
through mergers and acquisitions, joint marketing agreements, and internally
developed products. This industry consolidation, and the convergence of hub,
switching and routing technologies on single platforms, will likely continue,
intensifying competition among a small group of companies with broad product
offerings. Principal competitors in the network systems products market include
Bay Networks, Cabletron, 3Com, UB Networks and Cisco Systems.
 
  Several of WCI's competitors have greater name recognition, more extensive
engineering, manufacturing and marketing capabilities, and greater financial,
technological and personnel resources than those available to WCI. There can be
no assurance that WCI will be able to compete successfully in the future with
existing or new competitors.
 
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<PAGE>
 
DISCONTINUED OPERATIONS
 
  In October 1991, the Company spun off its biotechnology business as
BioWhittaker, Inc. In addition, since the beginning of the Company's
divestiture program in 1989, the Company has sold its Anjac/Doron, Duall/Wind,
Chemical Coatings, Heico Chemicals, Park Chemical, Ram Chemicals, Specialty
Chemicals, Technibilt, Water Management, Whittaker Metals, Winters Industries
and Yardney Electric Corporation units. The divestiture program has been
substantially completed. Remaining to be divested is a 996-acre parcel of land
formerly used, until 1987, by the Company's former Bermite division, a
discontinued technology unit. The land is located in the City of Santa Clarita,
California, approximately 35 miles from downtown Los Angeles. In September
1995, the city granted the entitlements necessary to develop this property as a
mixed-use, residential, commercial, and light industrial development. The
Company has reached agreement in principle with City staff on a development
agreement with the City, which among other things, would extend the ten-year
life of the entitlements to 20 years. In January 1996, the City Council granted
preliminary approval to the agreement. Final approval is not expected before
February 1996, but there can be no assurance that final approval will be
obtained. See Note 3 to Consolidated Financial Statements in Part II, Item 8 of
this Form 10-K for information about the parcel remaining to be divested.
 
ACQUISITIONS
 
  On April 24, 1995, the Company acquired the stock of Hughes LAN Systems,
Inc., from Hughes Electronics Corporation for a purchase price consisting of
$16.0 million in cash, subject to certain adjustments, a $15.0 million
convertible subordinated note and deferred cash payments not to exceed $25.0
million. The deferred cash payments are payable over the years 1996 to 1999 and
are based on the sales of WCI hubs, hub products, and derivatives. The
subsidiary was renamed Whittaker Communications, Inc. The Company intends to
continue its previously announced strategy of growth by selective acquisitions
that complement the Company's existing businesses and product lines. See Note 2
to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for
additional information regarding acquisitions.
 
ENVIRONMENTAL
 
  Compliance with Federal, state and local provisions which 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 1996 or 1997.
 
EMPLOYEE RELATIONS
 
  As of October 31, 1995, the Company employed approximately 950 persons in its
businesses, about 11% of whom were represented by labor organizations. The
Company believes that it has generally good relations with its employees.
 
ITEM 2. PROPERTIES.
 
  The Company's corporate headquarters are located in its facilities in Simi
Valley, California, which consist of approximately 276,000 square feet in three
buildings owned by the Company. The Company owns a 30,000 square foot
production facility in Colorado.
 
  The Company also leases three facilities in California which consist of
approximately 305,000 square feet under leases that expire from March 1997 to
January 1999. The Company has an option to renew certain of these leases for
various terms. Approximately half 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 and Mexico.
 
                                       7
<PAGE>
 
  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 its 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 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,
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 property in anticipation of the
development of the property for a planned mixed-use residential and commercial
development.
 
  The Company's Denver, Colorado-based Power Storage Systems unit has been
cited by the City of Denver for violations arising from its failure to have a
waste water discharge permit for a sink used in the brazing operations of a
satellite welding facility. The Company believes it has defenses to many of the
 
                                       8
<PAGE>
 
allegations cited in the notice of violation from the City of Denver.
Discussions with the City to settle this matter were successful during fiscal
1995. The Company and the City are completing documentation and implementation
of the settlement, which is not expected to have a material adverse effect on
the Company.
 
  In 1995, the Company made cash expenditures of approximately $1.4 million on
environmental matters. This amount was charged to reserves for environmental
contingencies which were previously established as part of the Company's
divestiture and restructuring program for discontinued operations.
 
OTHER LEGAL MATTERS
 
  There are also various other claims and suits pending against the Company.
Based on an evaluation, which included consultation with counsel concerning the
legal and factual issues involved, the Company is of the opinion that such
claims and suits pending against the Company, including the environmental
matters discussed above, will not have a material adverse effect, singly or in
the aggregate, on the financial position of the Company. See Note 10 of Notes
to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
  Not applicable.
 
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
   ----                                 ---              ---------
   <C>                                  <C> <S>
   Thomas A. Brancati..................  60 Chief Executive Officer, President,
                                             and Chief Operating Officer
   Jack C. Cannady.....................  63 Vice President
   Richard Levin.......................  45 Vice President, Chief Financial
                                             Officer and Secretary
   John K. Otto........................  41 Treasurer
</TABLE>
 
  Mr. Brancati was President of the Company's Electronics Systems unit from
1987 until 1993, when he was elected President and Chief Operating Officer of
the Company, as well as a Director. Effective January 1, 1995, Mr. Brancati
became Chief Executive Officer of the Company.
 
  Mr. Cannady was Vice President of the Company's Electronics Systems unit from
1989 until his appointment as a Vice President of the Company in June 1994.
 
  Mr. Levin joined Whittaker in May 1994, at which time he was appointed Vice
President, Chief Financial Officer and Secretary. From 1978 until joining
Whittaker, Mr. Levin was a practicing attorney with the law firm of Stutman,
Treister & Glatt.
 
  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.
 
  The term of office of each executive officer will expire at the next annual
meeting of the Board of Directors, which is scheduled to be held March 22,
1996.
 
                                       9
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
       MATTERS.
 
PRINCIPAL MARKETS
 
  The Common Stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange (Symbol: WKR). The Series A Participating Cumulative Preferred
Stock Purchase Rights are listed on the New York Stock Exchange and the
Pacific Stock Exchange, and, at the present time, trade with the Common Stock
and are not separately transferable. The Series D Participating Convertible
Preferred Stock (the "Series D Preferred Stock") is not listed or traded on
any exchange. See Note 6 of Notes to Consolidated Financial Statements in Part
II, Item 8 of this Form 10-K.
 
COMMON STOCKHOLDERS
 
  As of December 31, 1995 there were 5,498 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>
   1994................ 16 5/8    12        17 7/8    13 1/2    15 5/8    13 5/8    20        15 5/8
   1995................ 20 5/8    16 1/8    21 1/8    17 3/8    24 5/8    20        23 1/8    18
</TABLE>
 
DIVIDENDS
 
  Dividends of $0.25 were declared on each share of Series D Preferred Stock,
for each quarter of the Company's two most recent fiscal years. Dividends of
$1.25 were declared on each share of the $5.00 Cumulative Convertible
Preferred Stock ("$5.00 Preferred Stock") for each quarter of fiscal 1994 and
for the first two quarters of fiscal 1995. On April 28, 1995, all of the
outstanding shares of $5.00 Preferred Stock were redeemed or converted into
Common Stock. No dividends have been declared on the Common Stock during the
two most recent fiscal years.
 
  Under the Company's current credit facility with a group of banks, there are
restrictions that materially limit the amount of cash dividends that may be
paid on the Common Stock. The Company may pay cash dividends on the Common
Stock if the Company satisfies a minimum tangible net worth requirement and
meets a cash flow test measured at the end of the fiscal quarter immediately
preceding the payment of the dividend, and the cumulative amount of all cash
dividends paid on the Common Stock does not exceed $100,000 plus 20% of the
net income of the Company determined on a cumulative basis from January 30,
1995 through the end of the fiscal quarter immediately preceding the payment
of the dividend. In the foreseeable future, in light of the Company's strategy
of using earnings from operations to fund growth internally and by selective
acquisitions, the Company's present intention is to refrain from paying cash
dividends on the Common Stock even if the Company is able to do so under its
current credit facility. See Note 5 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.
 
TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK
 
  CHEMICAL MELLON SHAREHOLDER SERVICES
  Four Station Square
  Third Floor
  Pittsburgh, Pennsylvania 15219
 
RIGHTS AGENT FOR SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE
RIGHTS
 
  MELLON BANK N.A.
  Post Office Box 444
  Pittsburgh, Pennsylvania 15230
 
                                      10
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA.
 
                             WHITTAKER CORPORATION
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                     1995     1994     1993      1992     1991
                                   -------- -------- --------  -------- --------
<S>                                <C>      <C>      <C>       <C>      <C>
SUMMARY OF OPERATIONS
Sales............................  $159,479 $126,448 $115,386  $159,915 $158,510
Income from continuing opera-
 tions, before
 accounting change...............  $  7,865 $ 10,061 $  7,698  $ 13,377 $ 11,374
Cumulative effect of accounting
 change..........................       --       --  $  1,512       --       --
Income (loss) from discontinued
 operations......................       --       --  $ (1,954) $  2,300 $ 11,201
Net income.......................  $  7,865 $ 10,061 $  7,256  $ 15,677 $ 22,575
Earnings (loss) per share
  Continuing operations, before
   accounting change.............  $    .82 $   1.06 $    .81  $   1.42 $   1.27
  Accounting change..............       --       --       .16       --       --
  Discontinued operations........       --       --      (.21)      .24     1.26
  Net income.....................  $    .82 $   1.06 $    .76  $   1.66 $   2.53
Average common and common equiva-
 lent shares outstanding (in
 thousands)......................     9,625    9,502    9,491     9,407    8,884
Dividends per common share.......       --       --       --        --       --
OTHER DATA
Working capital..................  $ 73,501 $ 79,983 $ 73,924  $ 85,926 $ 58,969
Total assets.....................  $250,959 $209,307 $201,869  $218,279 $199,344
Long-term debt...................  $ 70,694 $ 54,742 $ 56,782  $ 66,644 $ 54,920
Stockholders' equity.............  $102,424 $ 93,950 $ 83,748  $ 75,200 $ 58,470
Current ratio....................    2.46:1   3.18:1   2.77:1    2.74:1   2.10:1
Capital additions................  $  6,400 $  2,500 $  1,300  $  2,200 $  2,000
Stockholders of record...........     5,500    5,700    7,100     8,500    8,800
</TABLE>
 
                                       11
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
       FINANCIAL CONDITION.
 
RESULTS OF OPERATIONS
 
 Comparison of 1995 to 1994
 
  Sales for the Company for fiscal 1995 were $159.5 million, an increase of
$33.0 million (26.1%) over fiscal 1994. Sales increased in 1995 largely as a
result of the Company's acquisitions of a data networking and communications
business in April 1995, which contributed $30.5 million to 1995 sales, and an
aerospace business in March of 1994. In the aggregate, the acquired businesses
and product lines accounted for $52.3 million of 1995 sales, compared to $10.5
million in 1994, reflecting the implementation of the Company's previously
announced strategy of growth by selective acquisitions to complement the
Company's existing businesses and product lines. Management expects that the
acquired businesses and product lines will contribute to sales in fiscal 1996
at least at the annual rate at which they contributed in fiscal 1995.
 
  The acquisitions offset decreases in government sales and termination
claims. In the first quarter of 1994, $4.0 million of sales were recognized
related to the partial settlement of a termination claim against a defense
electronics products customer. An additional, final settlement of $1.1 million
was recognized in the second quarter of 1995.
 
  The Company has been able to achieve increased sales of its aircraft fluid
and pneumatic control devices over the past three years despite relatively low
new aircraft build rates. 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 now appears to be on the
rise, which may further contribute to an improved business climate for these
Company products. The Company has also positioned itself for continued growth
in the Aerospace segment by expanding its product offerings through
acquisitions and growth in related markets, including fire and overheat
detection equipment and industrial markets. During fiscal 1995, the Company
also marketed its aircraft fluid control and other aerospace products to
manufacturers of industrial, land-based gas turbines, which are similar to jet
engines. The Company intends to continue to do so.
 
  A reduced United States defense budget has contributed to both the decline
in sales to the U.S. government and delays in the receipt of new contract
bookings in the Aerospace segment. The outlook for future sales is difficult
to predict given the uncertainties related to the defense budget and related
reductions and terminations of U.S. Government defense contracts. Any negative
effect on Aerospace segment sales related to this uncertainty may be offset in
the future by contracts for new, technologically advanced electronic defense
systems, new commercial products, and sales of aerospace and electronic
products into industrial markets. Thus, past Company performance may not be a
reliable indicator of future performance.
 
  Gross margin for the Company increased in fiscal 1995 to $69.5 million, or
43.6% of sales, from $53.2 million, or 42.0% of sales in fiscal 1994. Gross
margin for the Communications segment was 44.5% in fiscal 1995. Gross margin
for the Aerospace segment increased to 43.4% of sales from 42.0% of sales in
fiscal 1994. Affecting the comparability of the years are three items which
had a net positive impact of $5.0 million on Aerospace gross margin in 1995,
compared to $4.1 million in 1994. The first item is recognition in 1995 of
$1.8 million of gross margin related to the Company's insurance claim for
earthquake damage brought about by the January 17, 1994 Northridge, California
earthquake. The second item is recognition in 1995 of $2.1 million of gross
margin related to the Company's defined benefit pension plan, while related
gross margin in 1994 was $0.6 million. This actuarially determined pension
income is the result of an expected return on plan assets which exceeded the
interest cost on the projected benefit obligation. The last item is a
termination claim settlement which contributed $1.1 million of gross margin in
1995, compared to $3.5 million in 1994. When the effects of these items are
removed from both years, Aerospace segment gross margin as a percentage of
sales is 40.4% in 1995 compared to 40.1% in 1994.
 
  Engineering expenses for the Company as a percentage of sales increased to
4.9% in 1995 from 2.2% in 1994. This increase is due to the inclusion of six
months of results of the Communications segment in 1995. Management expects
engineering expenses as a percentage of sales to increase further in fiscal
1996 to reflect
 
                                      12
<PAGE>
 
full year operating results of the Communications segment. Engineering
expenses as a percentage of sales in the Aerospace segment increased to 2.7%
in 1995, from 2.2% in 1994, due to up-front costs related to its industrial
business product lines.
 
  Selling, general and administrative expenses for the Company as a percentage
of sales increased to 24.8% in 1995 from 24.1% in 1994. In 1995, the Aerospace
segment received a $1.3 million earthquake recovery which was reflected as a
reduction in selling, general and administrative expenses. Excluding the
effects of the termination claim included in 1994 and 1995 revenues, as well
as the earthquake recovery in 1995, the Aerospace segment's selling, general
and administrative expenses as a percentage of sales increased to 19.5% in
1995 from 19.3% in 1994. The Communications segment of the business spends
more on salespeople and marketing programs, as a percentage of sales, than the
Aerospace segment. Consequently, the inclusion of six months of Communications
segment results has increased the overall percentage for the Company.
Management expects selling, general, and administrative expenses to increase
further in fiscal 1996 to reflect full year operating results of the
Communications segment.
 
  During the second quarter of 1995, concurrent with the acquisition of WCI, a
charge to earnings was recorded related to acquired in-process research and
development. The effect was to reduce net income for the second quarter and
the year by $1.9 million, or $0.20 per share. During the third quarter of
1995, a charge to earnings was recorded to reflect restructuring actions at
WCI, along with expenses associated with combining a substantial portion of
the Company's Beaverton, Oregon operation into the WCI operation in Santa
Clara, California. The effect was to reduce net income for the third quarter
and year by $0.2 million, or $0.02 per share.
 
  Interest expense increased to $5.9 million for fiscal 1995 from $4.0 million
in fiscal 1994 primarily as a result of higher interest rates and incremental
debt from the purchase of WCI.
 
 Comparison of 1994 to 1993
 
  Sales for fiscal 1994 increased 9.6% to $126.4 million from fiscal 1993
sales of $115.4 million. Sales increased in 1994 in part as a result of the
Company's acquisition of a telecommunications business in July 1993, two
aircraft fluid control product lines in the fourth quarter of fiscal 1993, and
an aerospace business in March of 1994. The acquisitions offset decreases in
government sales. In the aggregate, the acquired businesses and product lines
accounted for $27.5 million of 1994 sales, compared to $1.7 million in 1993.
The aerospace business acquired in March 1994 contributed $10.5 million to
1994 sales.
 
  The increased sales in fiscal 1994 also included the recognition of $4.0
million of sales during the first quarter of 1994 related to the partial
settlement of a termination claim against a defense electronics products
customer. Sales of defense electronics products were adversely affected during
the first and second quarters of fiscal 1994 by the January 17 Northridge,
California earthquake and by delays in the receipt of new contract bookings.
 
  Gross margin increased in fiscal 1994 to $53.2 million, or 42.0% of sales,
from $44.2 million, or 38.3% of sales in fiscal 1993. The increase was due
primarily to a product mix that included a higher portion of after-market
aircraft fluid control products. Also contributing to the increase in gross
margin in 1994 was $3.5 million of gross margin resulting from the partial
termination claim settlement described above, under which the Company recorded
as revenue $4.0 million, with an associated cost of sale of $0.5 million. The
increase in gross margin was offset partially by lower margins in radio
frequency/survivability products resulting primarily from a higher mix of
cost-plus contracts in 1994 compared to 1993 and, to some degree, from the
effects of the interruption of the business and damage caused by the January
17 Northridge, California earthquake.
 
  As a percentage of sales, engineering, selling and general and
administrative expenses increased from 24.7% in fiscal 1993 to 26.2% in fiscal
1994. The increase primarily was the result of additional expenses of the
acquired aerospace business, and executive bonus payments made for 1994
compared to limited payments made for 1993. The increase was offset partially
by income associated with the Company's defined benefit pension plan.
 
                                      13
<PAGE>
 
 General
 
  In fiscal 1995, 1994, and 1993, approximately 34%, 49%, and 68%,
respectively, of the Company's sales were directly or indirectly attributable
to the United States Government. All of these sales, with the exception of a
minor amount in 1995, relate to the Aerospace segment. Companies engaged in
supplying military equipment to the United States Government are subject to
competition, changes in the continuing availability of Congressional
appropriations, changes in contract timing and scheduling, complexity of
designs and the potential for obsolescence, and other changes which may result
from world events. A loss of Government business, although not anticipated by
the Company, could have a material adverse effect on the Company's operations.
 
  In August 1994, the Company was awarded a $10.9 million cost-reimbursement
contract from the United States Army to develop three new versions of the
Company's previously developed battlefield electronic countermeasures system,
capable of detonating incoming artillery and mortar rounds, designated the
Shortstop Electronic Protection System ("SEPS"). During 1995, the Company met
performance requirements and developed three full scale SEPS development
models. The contract did not contribute a material amount of revenue to the
Company in 1995, but successful development of the new SEPS versions slated for
delivery starting late in fiscal 1996 could, subject to all of the risks and
uncertainties that apply to military procurement generally, as discussed above,
result in subsequent SEPS production contracts, which could then have a
material effect on the Company's sales. There can be no assurance, however,
whether or when any such contracts would be awarded.
 
  The Company is discussing with various foreign governments the potential sale
and installation of a Company-designed radar system that detects tactical
ballistic missiles and allows early warning for the civilian population and for
deployment of weapons. There are currently no firm commitments for the system
at this date. If the discussions result in an agreement, annual sales of
defense electronics products could increase materially. Because of the
uncertainties of the military procurement processes of foreign governments, the
need for the foreign government to provide budget authority for the potential
procurement, and all the uncertainties that apply to military procurement
generally, as discussed above, there can be no assurance that an agreement will
be reached or, if reached, what the contract price would be.
 
FINANCIAL CONDITION
 
  At October 31, 1995, the Company's debt totaled $76.7 million, which
consisted of $29.5 million of loans under a revolving bank credit facility,
$31.3 million under a bank term loan, a $15.0 million convertible subordinated
note, and $0.9 million of other debt. In addition, there were $12.9 million of
letters of credit outstanding under the revolving credit facility. On January
24, 1995, the Company and a group of banks entered into a credit agreement
which consists of a $65.0 million revolving credit facility with a three-year
term expiring in January 1998 and a term loan that is being repaid in quarterly
installments over five years. Interest on loans outstanding under the credit
agreement are based, at the Company's option, on LIBOR or the agent bank's
prime rate. The annual interest rate based on LIBOR may range between LIBOR
plus 1.0% and LIBOR plus 1.875%, and the annual interest rate based on the
prime rate may range between prime and prime plus 0.50%. The agreement includes
financial covenants with respect to financial leverage, cash flow, and tangible
net worth. Proceeds from the credit facility were used at closing to repay
$55.5 million of loans outstanding under a prior credit facility and will be
used in the future to fund working capital and acquisitions.
 
  The Company's ratio of long-term debt, including the current portion, to
capitalization (stockholders' equity plus debt) was 42.8% at October 31, 1995,
compared to 39.1% at the end of 1994. While stockholders' equity increased by
$8.5 million for the year, reflecting a $7.9 million contribution from 1995 net
income and $0.6 million from net exercises of employee stock options and
related tax benefits, debt increased by $16.5 million. This increase in debt
resulted from the additional debt used to finance the acquisition of WCI, which
was partially offset by cash from operations.
 
                                       14
<PAGE>
 
  Cash flow provided by operations in fiscal 1995 was $20.8 million, compared
to $21.6 million in fiscal 1994. The reduction in operating cash flow in 1995
compared to 1994 resulted from the buildup of recoverable income taxes not yet
received in cash, which caused a $4.8 million decrease, and a decrease in net
income of $2.2 million. These reductions were substantially offset by
increased cash flows from operating assets and liabilities and an increase in
non-cash expenses. Cash used in investing activities was $39.5 million in
fiscal 1995, which included $31.0 million for the acquisition of WCI and
capital expenditures of $6.4 million. During fiscal 1994, the Company used
cash of $13.0 million to make acquisitions and had capital additions of $2.5
million. Cash flow provided by financing activities was $15.4 million in
fiscal 1995, primarily the result of the issuance of a convertible
subordinated note to finance the acquisition of WCI, while $2.6 million of
cash was used in fiscal 1994, primarily to reduce debt.
 
  The Company expects to receive a net income tax refund of $5.2 million, plus
interest of approximately $5 million, under an agreement reached with the
Internal Revenue Service closing the audit of the Company's 1987 and 1988
income tax returns. The refund is subject to approval by the Congressional
Joint Committee on Taxation, which is not expected until the second quarter of
fiscal 1996.
 
  Included in accounts receivable at the end of fiscal 1995 are no significant
claims related to certain United States Government prime contracts and
subcontracts compared to $5.6 million at the end of fiscal 1994. An additional
claim of $1.6 million is included in other assets at the end of fiscal 1995.
These claims have been recorded in accordance with generally accepted
accounting principles to the extent of contract costs incurred. These costs
were incurred in connection with customer caused delays and disruptions,
errors in technical data, a partial termination for convenience and other
unanticipated causes. These claims were filed for amounts aggregating $13.7
million at October 31, 1995, compared to $31.8 million at year-end 1994,
substantially in excess of amounts recorded. While the outcome of these claims
presently cannot be determined, in the opinion of the Company and its counsel
the recorded amount is a reasonable estimate of the minimum amount expected to
be collected. These claims are subject to negotiation and audit by the U.S.
Government, the prime contractor customer, or both, and are presently at
various stages of negotiation, litigation or appeal.
 
  During the third quarter of fiscal 1994, the Company submitted a claim to
its insurance carriers to recover the costs of repair and replacement of
assets and for the costs of business interruption brought about by the January
17 Northridge, California earthquake. A final settlement in the amount of $8.3
million was reached in the third quarter of fiscal 1995, and full payment has
been received.
 
  Capital expenditures for fiscal 1995 were $6.4 million, compared to $2.5
million in fiscal 1994 and $1.3 million in fiscal 1993. The increase in fiscal
1995 reflects various costs associated with the relocation of the Company's
headquarters office from leased space into an existing owned manufacturing
facility, as well as upgrades to engineering equipment. At October 31, 1995,
there were approximately $0.5 million of approved capital expenditures
outstanding for the replacement and upgrade of existing plant and equipment at
the Company's various facilities. Funds for these and other capital
expenditures are expected to be provided from operations. Capital expenditures
are subject to limitations by covenants contained in the Company's credit
agreement. It is anticipated that the amounts under the covenants will be
sufficient to allow the Company to continue to maintain and upgrade existing
facilities.
 
  The Company intends to continue its previously announced strategy of growth
by selective acquisitions that complement the Company's core businesses,
financed by cash from operations and from borrowings under its revolving
credit facility and, where appropriate, by issuance of new debt or equity
securities of the Company. The Company intends to pursue its acquisition
strategy with careful regard for profitability and the Company's need for
liquidity. There can be no assurance, however, that any acquisitions will
occur or that an acquisition that does occur will not adversely affect the
Company's net income or liquidity.
 
                                      15
<PAGE>
 
  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.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
 
                                       16
<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, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended October 31, 1995. 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, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended October 31, 1995, in conformity with generally accepted accounting
principles.
 
  As discussed in Note 7 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for income taxes.
 
                                          ERNST & YOUNG LLP
 
Los Angeles, California
December 14, 1995
 
                                       17
<PAGE>
 
                             WHITTAKER CORPORATION
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                     FOR THE YEARS ENDED
                                                         OCTOBER 31,
                                                  ----------------------------
                                                    1995      1994      1993
                                                  --------  --------  --------
                                                    (DOLLARS IN THOUSANDS
                                                     EXCEPT FOR PER SHARE
                                                           AMOUNTS)
<S>                                               <C>       <C>       <C>
Sales............................................ $159,479  $126,448  $115,386
Costs and expenses
  Cost of sales..................................   89,974    73,286    71,139
  Engineering and development....................    7,741     2,720     1,700
  Selling, general and administrative............   39,608    30,429    26,835
  Acquired in-process research and development...    3,250       --        --
  Restructuring costs............................      382       --        --
                                                  --------  --------  --------
Operating income.................................   18,524    20,013    15,712
Interest expense.................................   (5,897)   (3,967)   (3,731)
Interest income..................................      568       568       712
Other expense....................................     (169)      (82)     (181)
                                                  --------  --------  --------
Income from continuing operations before provi-
 sion for taxes and
 cumulative effect of accounting change..........   13,026    16,532    12,512
Provision for taxes..............................    5,161     6,471     4,814
                                                  --------  --------  --------
Income from continuing operations before cumula-
 tive effect of accounting change................    7,865    10,061     7,698
Cumulative effect as of November 1, 1992 of
 change in method of
 accounting for income taxes.....................      --        --      1,512
Loss from discontinued operations................      --        --     (1,954)
                                                  --------  --------  --------
Net income....................................... $  7,865  $ 10,061  $  7,256
                                                  ========  ========  ========
Earnings per share
  Continuing operations before cumulative effect
   of accounting change.......................... $   0.82  $   1.06  $   0.81
  Cumulative effect of accounting change.........      --        --       0.16
  Loss from discontinued operations..............      --        --      (0.21)
                                                  --------  --------  --------
  Net income..................................... $   0.82  $   1.06  $   0.76
                                                  ========  ========  ========
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                       18
<PAGE>
 
                             WHITTAKER CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                              AT OCTOBER 31,
                                                             ------------------
                                                               1995      1994
                                                             --------  --------
                                                                (DOLLARS IN
                                                                THOUSANDS)
<S>                                                          <C>       <C>
CURRENT ASSETS
Cash........................................................ $    161  $  3,507
Receivables.................................................   65,394    65,292
Inventories.................................................   39,518    32,013
Prepaid expenses............................................    2,053     2,475
Income taxes recoverable....................................    1,452        66
Deferred income taxes.......................................   15,151    13,395
                                                             --------  --------
  Total Current Assets......................................  123,729   116,748
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements..................................    5,770     6,426
Buildings and improvements..................................   27,503    27,742
Equipment...................................................   44,381    34,729
Construction in progress....................................      405     1,376
                                                             --------  --------
                                                               78,059    70,273
Less accumulated depreciation and amortization..............  (36,641)  (33,506)
                                                             --------  --------
                                                               41,418    36,767
                                                             --------  --------
OTHER ASSETS
Goodwill, net of amortization...............................   33,414    19,604
Other intangible assets, net of amortization................   10,585     2,336
Notes and other noncurrent receivables......................    4,218     3,682
Other noncurrent assets.....................................   10,480     4,681
Assets held for sale........................................   27,115    25,489
                                                             --------  --------
                                                               85,812    55,792
                                                             --------  --------
                                                             $250,959  $209,307
                                                             ========  ========
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                       19
<PAGE>
 
                             WHITTAKER CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
                       LIABILITIES & STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                AT OCTOBER 31,
                                                               -----------------
                                                                 1995     1994
                                                               -------- --------
                                                                  (DOLLARS IN
                                                                  THOUSANDS)
<S>                                                            <C>      <C>
CURRENT LIABILITIES
Current maturities of long-term debt.......................... $  6,048 $  5,540
Accounts payable..............................................   14,650   10,713
Accrued liabilities...........................................   29,530   20,512
                                                               -------- --------
  Total Current Liabilities...................................   50,228   36,765
                                                               -------- --------
OTHER LIABILITIES
Long-term debt................................................   70,694   54,742
Other noncurrent liabilities..................................   11,340   11,880
Deferred income taxes.........................................   16,273   11,970
                                                               -------- --------
  Total Other Liabilities.....................................   98,307   78,592
                                                               -------- --------
Commitments and contingencies (Notes 3, 9, and 10)
STOCKHOLDERS' EQUITY
Capital Stock:
  Preferred Stock, par value $1 per share, authorized
   5,000,000 shares--
   $5.00 Cumulative Convertible Preferred Stock, outstanding 0
    shares at
    October 31, 1995 and 2,185 shares at October 31, 1994.....      --         2
   Series D Participating Convertible Preferred Stock, out-
    standing 895.18 shares at October 31, 1995 and October 31,
    1994......................................................        1        1
  Common Stock, authorized 40,000,000 shares--
   Par value, $.01 per share, outstanding 8,588,982 shares at
    October 31, 1995 and 8,486,174 shares at October 31, 1994.       86       85
Additional paid-in capital....................................   19,261   17,787
Retained earnings.............................................   83,076   76,075
                                                               -------- --------
  Total Stockholders' Equity..................................  102,424   93,950
                                                               -------- --------
                                                               $250,959 $209,307
                                                               ======== ========
</TABLE>
 
 
 
        The accompanying notes are an integral part of these statements.
 
                                       20
<PAGE>
 
                             WHITTAKER CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                      FOR THE YEARS ENDED
                                                          OCTOBER 31,
                                                   ----------------------------
                                                     1995      1994      1993
                                                   --------  --------  --------
                                                     (DOLLARS IN THOUSANDS)
<S>                                                <C>       <C>       <C>
OPERATING ACTIVITIES
Continuing Operations--
  Net income.....................................  $  7,865  $ 10,061  $  7,698
  Adjustments to reconcile net income to net cash
   provided (used) by operating activities:
    Depreciation and amortization................     8,065     5,658     5,078
    Net periodic pension cost (income)...........    (2,720)     (782)    1,363
    Acquired in-process research and development.     3,250       --        --
    Income taxes recoverable.....................    (1,386)    3,416    (3,482)
    Deferred taxes...............................     2,899     2,913       (24)
    Cumulative effect of accounting change.......       --        --      1,512
    Changes in operating assets and liabilities:
      Receivables................................     8,860     5,555    24,521
      Inventories and prepaid expenses...........      (427)   (2,372)    2,305
      Accounts payable and other liabilities.....    (5,650)   (2,889)  (23,541)
                                                   --------  --------  --------
  Total from continuing operations...............    20,756    21,560    15,430
                                                   --------  --------  --------
Discontinued Operations--
  Net loss.......................................       --        --     (1,954)
                                                   --------  --------  --------
Net cash provided by operating activities........    20,756    21,560    13,476
                                                   --------  --------  --------
INVESTING ACTIVITIES
Businesses acquired..............................   (31,013)  (12,992)  (12,969)
Business sold....................................       --        --      3,519
Purchase of property, plant and equipment........    (6,376)   (2,545)   (1,297)
Collections of notes receivable..................     1,147     2,553        52
Increase in assets held for sale.................    (1,626)     (851)      --
Other items, net.................................    (1,631)   (1,748)    1,252
                                                   --------  --------  --------
Net cash used by investing activities............   (39,499)  (15,583)   (9,443)
                                                   --------  --------  --------
FINANCING ACTIVITIES
Issuance of convertible subordinated debt........    15,000       --        --
Issuance of other debt...........................    56,960       --        --
Reduction of debt................................   (55,500)   (2,862)   (6,855)
Reduction (increase) in deferred debt costs......      (808)      119       492
Dividends paid...................................        (4)      (12)      (12)
Purchases of common stock........................    (1,094)      --        --
Proceeds from shares issued under stock option
 plans...........................................       843       115      (310)
                                                   --------  --------  --------
Net cash provided (used) by financing activities.    15,397    (2,640)   (6,685)
                                                   --------  --------  --------
Net increase (decrease) in cash..................    (3,346)    3,337    (2,652)
Cash at beginning of year........................     3,507       170     2,822
                                                   --------  --------  --------
Cash at end of year..............................  $    161  $  3,507  $    170
                                                   ========  ========  ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
  Interest.......................................  $  5,079  $  3,780  $  5,515
                                                   ========  ========  ========
  Income taxes...................................  $  1,424  $  3,918  $  5,930
                                                   ========  ========  ========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       21
<PAGE>
 
                             WHITTAKER CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                   FOR THE THREE YEARS ENDED OCTOBER 31, 1995
 
                                 (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,
 1992...................   $ 2    $ 1    8,167    $82    $13,643   $61,472   $ 75,200
Net income..............    --     --      --      --        --      7,256      7,256
Cash dividends--pre-
 ferred stock...........    --     --      --      --        --        (12)       (12)
Shares issued under
 stock option plans.....    --     --      305      3      2,377    (2,690)      (310)
Income tax benefits from
 stock options
 exercised..............    --     --      --      --      1,614       --       1,614
                           ---    ---    -----    ---    -------   -------   --------
BALANCE AT OCTOBER 31,
 1993...................     2      1    8,472     85     17,634    66,026     83,748
Net income..............    --     --      --      --        --     10,061     10,061
Cash dividends--pre-
 ferred stock...........    --     --      --      --        --        (12)       (12)
Shares issued under
 stock option plans.....    --     --       14     --        115       --         115
Income tax benefits from
 stock options
 exercised..............    --     --      --      --         38       --          38
                           ---    ---    -----    ---    -------   -------   --------
BALANCE AT OCTOBER 31,
 1994...................     2      1    8,486     85     17,787    76,075     93,950
Net income..............    --     --      --      --        --      7,865      7,865
Cash dividends--pre-
 ferred 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
                           ===    ===    =====    ===    =======   =======   ========
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                       22
<PAGE>
 
                             WHITTAKER CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  (A) Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
 
  (B) Inventories: Inventories are stated at the lower of cost or market. Cost
has been determined principally on the first-in, first-out (FIFO) method.
Inventories consisted of the following:
 
<TABLE>
<CAPTION>
                                                                 OCTOBER 31,
                                                               ----------------
                                                                1995     1994
                                                               -------  -------
                                                               (IN THOUSANDS)
      <S>                                                      <C>      <C>
      Raw materials........................................... $23,518  $18,391
      Work in process.........................................  11,500   11,643
      Finished goods..........................................   3,332    1,174
      Costs relating to long-term contracts...................   2,287      805
      Unliquidated progress billings..........................  (1,119)     --
                                                               -------  -------
                                                               $39,518  $32,013
                                                               =======  =======
</TABLE>
 
  (C) Intangibles: Goodwill is amortized using the straight-line method over
periods ranging from 20 to 40 years. Other intangible assets principally relate
to acquired intangibles and include patents, technology, and customer lists.
Amortization is recorded on a straight-line basis, generally over periods
ranging from 5 to 15 years.
 
  Accumulated amortization of goodwill and of other intangible assets at
October 31, 1995 amounted to $2,722,000 and $6,906,000, respectively, and at
October 31, 1994 amounted to $1,852,000 and $5,858,000, respectively.
 
  (D) 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.
 
  (E) 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.
 
  (F) 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.
 
  (G) Earnings Per Share: Earnings per share have been computed based on the
weighted average number of common and common equivalent shares outstanding
during the periods, after deducting from net income the dividend requirements
on the $5.00 Cumulative Convertible Preferred Stock. Common stock equivalents
include Series D Participating Convertible Preferred Stock and dilutive
employee stock options, calculated using the treasury stock method.
 
  Fully diluted earnings 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 per share are not presented because the
calculations result in dilution of less than 3%.
 
  (H) Reclassification: Certain previously reported amounts have been
reclassified to conform to the current period presentation.
 
 
                                       23
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
  (I) New Accounting Standard: In March of 1995, the Financial Accounting
Standards Board issued a new standard, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," (SFAS 121). The
Company will not be required to adopt this standard until the first quarter of
fiscal 1997. The Company does not expect adoption of this standard to have a
material effect on its consolidated financial statements.
 
NOTE 2. ACQUISITIONS
 
  On April 24, 1995, the Company acquired all of the stock of Hughes LAN
Systems, Inc., a subsidiary of Hughes Electronics Corporation. The subsidiary
was renamed Whittaker Communications, Inc. ("WCI") and is a designer and
manufacturer of high speed switching and Asynchronous Transfer Mode ("ATM")
compatible local area network communication hubs and network management
software systems. WCI was acquired for a purchase price of $16.0 million in
cash, subject to certain adjustments, and a $15.0 million convertible
subordinated note. The 7% convertible subordinated note is due on May 1, 2005,
and is convertible to the Company's common stock at a price of $24.25 per
share. The agreement also provides for contingent deferred payments, not to
exceed $25 million, over the years 1996 to 1999 based on future sales of WCI's
hub products and derivatives.
 
  The acquisition was accounted for as a purchase and accordingly, the purchase
price was allocated to the net assets acquired based upon their estimated fair
market values. Goodwill amounted to $14.2 million, which will be amortized on a
straight-line basis over twenty years. Other intangible assets which resulted
from the acquisition include developed technology with a value of $3.3 million
and a customer list with a value of $5.6 million which will be amortized on a
straight-line basis over periods ranging from five to fifteen years. Acquired
in-process research and development valued at $3.3 million was expensed at the
acquisition date. The Company also assumed liabilities of $18.1 million at the
acquisition date.
 
  The accompanying consolidated statements of income reflect the operating
results of WCI since the effective date of the acquisition. The following
unaudited pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the respective periods, after
giving effect to certain pro forma adjustments, including additional
amortization expense as a result of goodwill and other intangible assets,
increased interest expense on acquisition debt, and related tax effects. The
pro forma results are summarized below (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                                1995     1994
                                                              -------- --------
      <S>                                                     <C>      <C>
      Net sales.............................................. $181,455 $170,269
      Net income.............................................    4,029   (1,728)
      Earnings (loss) per share..............................     0.42    (0.20)
</TABLE>
 
  These pro forma results have been prepared for comparative purposes only and
may not be indicative of the results of operations which actually would have
occurred had the combination been in effect at the beginning of the respective
periods or of future results of operations of the consolidated entities.
 
  The Company acquired other businesses for $13.0 million in cash during each
of fiscal 1994 and fiscal 1993. The acquisitions were accounted for under the
purchase method, and in the year of acquisition the results of operations for
1994 and 1993 include sales of $10.5 million and $1.7 million, respectively,
related to these businesses. These acquisitions resulted in goodwill of $5.6
million and $6.9 million in 1994 and 1993, respectively.
 
NOTE 3. DISCONTINUED OPERATIONS
 
  The 1993 loss from discontinued operations consists of pretax charges of $3.5
million as settlement of a patent infringement case and a $0.7 million
provision for ongoing costs related to previously discontinued
 
                                       24
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 3. DISCONTINUED OPERATIONS--(CONTINUED)
 
operations, partially offset by the receipt of $1.0 million of interest related
to the resolution of tax issues associated with previously discontinued
operations. The tax benefit relating to the loss from discontinued operations
was $1.2 million.
 
  Assets held for sale at October 31, 1995 and October 31, 1994 include $25.1
million and $23.7 million, respectively, of land formerly used by a
discontinued technology unit. The Company has obtained entitlements--the right
granted by political authorities to develop real property--for the land. Assets
held for sale are carried at the lower of cost or net realizable value.
 
  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 balance sheet.
 
NOTE 4. RECEIVABLES
 
  Receivables consisted of the following:
<TABLE>
<CAPTION>
                                                                 OCTOBER 31,
                                                               ----------------
                                                                1995     1994
                                                               -------  -------
                                                               (IN THOUSANDS)
      <S>                                                      <C>      <C>
      Trade accounts receivable--billed....................... $38,303  $30,107
      Trade accounts receivable--unbilled.....................  25,457   33,867
      Other receivables.......................................   2,810    2,619
      Allowance for doubtful accounts.........................  (1,176)  (1,301)
                                                               -------  -------
      Total receivables....................................... $65,394  $65,292
                                                               =======  =======
</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, 1995. A claim in the amount of $1.6 million which was included
in unbilled receivables at October 31, 1994, has been reclassified to other
long-term assets in 1995 because resolution is not expected within the next
year.
 
NOTE 5. LONG-TERM DEBT
 
  Long-term debt consisted of the following:
 
<TABLE>
<CAPTION>
                                                          OCTOBER 31,
                                               ---------------------------------
                                                     1995             1994
                                               ---------------- ----------------
                                                        (IN THOUSANDS)
                                                       INTEREST         INTEREST
                                               AMOUNT    RATE   AMOUNT    RATE
                                               ------- -------- ------- --------
<S>                                            <C>     <C>      <C>     <C>
Borrowings under revolving credit facility...  $29,500   7.6%   $42,500   6.1%
Borrowings under term loan...................   31,250   7.5%    16,500   6.4%
Other note, payable semiannually to 1999,
 with interest at the lesser of 10% or 65% of
 prime.......................................      659   5.7%       859   5.0%
7% convertible subordinated note due May 1,
 2005 (Note 2)...............................   15,000   7.0%       --    --
Capitalized lease obligations payable in va-
 rying monthly or quarterly installments
 through 1999, with interest rates ranging to
 9.67% (Note 9)..............................      333   8.8%       423   8.8%
                                               -------          -------
                                                76,742           60,282
Less current maturities......................    6,048            5,540
                                               -------          -------
                                               $70,694          $54,742
                                               =======          =======
</TABLE>
 
                                       25
<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>
             1996......................    $ 6,048
             1997......................      7,057
             1998......................     37,567
             1999......................      8,820
             2000......................      2,250
</TABLE>
 
  On January 24, 1995, the Company and a group of banks entered into a credit
agreement which consists of a $65.0 million revolving credit facility with a
three-year term expiring in January 1998 and a term loan that is being repaid
in quarterly installments over five years. Interest on loans outstanding under
the credit agreement are based, at the Company's option, on LIBOR or the agent
bank's prime rate. The annual interest rate based on LIBOR may range between
LIBOR plus 1.0% and LIBOR plus 1.875%, and the annual interest rate based on
the prime rate may range between prime and prime plus .50%. The Company is
obligated to pay letter of credit fees which may range between .625% per annum
and 2.0% per annum on the aggregate amount of outstanding letters of credit,
and commitment fees which may range between .25% per annum and .375% per annum
on the unused amount of the revolving credit facility. The agreement includes
financial covenants with respect to financial leverage, cash flow, and tangible
net worth. Proceeds from the credit facility were used to pay off and cancel a
prior credit facility and will be used going forward to fund working capital
and acquisitions. The Company's obligations under the credit agreement are
secured by shares of stock of subsidiaries of the Company, accounts receivable,
inventory, and other assets of the Company and its subsidiaries.
 
  On April 24, 1995, the Company issued a $15 million 7.0% convertible
subordinated note to Hughes Electronics Corporation, with a scheduled maturity
on May 1, 2005. The note is convertible at the option of the holders into
common stock of the Company at a conversion price of $24.25 per share, interest
is payable semiannually, and the note is redeemable, at the option of the
Company, at any time with no premium. The note prohibits the Company from
paying dividends or redeeming its capital stock if its tangible net worth is
less than $15 million.
 
  At October 31, 1995, there were $12.9 million of letters of credit
outstanding under the revolving credit facility.
 
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.
 
                                       26
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. CAPITAL STOCK--(CONTINUED)
 
  Common Stock reserved for issuance at October 31, 1995 was as follows:
 
<TABLE>
<CAPTION>
                                                                     SHARES IN
                                                                     THOUSANDS
                                                                     ---------
   <S>                                                               <C>
   For conversion of Series D Participating Convertible Preferred
    Stock...........................................................     292
   For stock options................................................   2,457
   For conversion of 7% subordinated note...........................     619
                                                                       -----
                                                                       3,368
                                                                       =====
</TABLE>
 
  On December 16, 1994, the Board of Directors adopted, and on March 24, 1995,
the shareholders approved, an amendment to the Whittaker Corporation Long-Term
Stock Incentive Plan (1989) (the "1989 Plan"), that increased from 1,000,000 to
2,000,000 the number of shares of Common Stock of the Company which may be made
subject to stock options and other awards authorized by the 1989 Plan.
 
  The Company had reserved 2,456,903 shares of Common Stock at October 31, 1995
for future issuances under the 1989 Plan, as well as a prior stock option plan
for employees, and a non-employee director stock option plan. Options to
purchase Common Stock generally are conditioned upon continued employment,
expire from five to ten years after the grant date, and become exercisable in
whole or in part either commencing with the second year or upon the attainment
of certain predetermined goals, or both. The following information for the
three years ended October 31, 1995 relates to options granted from 1981 through
1995 under the plans.
 
<TABLE>
<CAPTION>
                                                       OPTIONS
                                                     OUTSTANDING   PRICE RANGE
                                                     ------------ --------------
                                                     IN THOUSANDS
<S>                                                  <C>          <C>
Balance, October 31, 1992...........................    1,467      2.41 to 12.94
  Options granted...................................      325     12.00 to 15.06
  Options canceled or expired.......................      (69)     5.24 to 14.50
  Options exercised.................................     (472)     2.41 to 12.00
                                                        -----
Balance, October 31, 1993...........................    1,251      2.41 to 15.06
  Options granted...................................      191     14.19 to 16.37
  Options canceled or expired.......................      (61)     6.32 to 16.37
  Options exercised.................................      (14)     4.10 to 15.06
                                                        -----
Balance, October 31, 1994...........................    1,367      2.41 to 16.37
  Options granted...................................      544     18.00 to 22.50
  Options canceled or expired.......................      (35)    15.06 to 22.25
  Options exercised.................................     (154)     3.82 to 18.63
                                                        -----
Balance, October 31, 1995...........................    1,722      2.41 to 22.50
                                                        =====
</TABLE>
 
  At October 31, 1995, options for 1,143,777 shares were exercisable.
 
  The Company also had reserved 618,557 shares of Common Stock at October 31,
1995 for possible conversion of the 7% convertible subordinated note at the
option of the holders.
 
  The Company's Stockholder Rights Plan gives each holder of the Company's
Common Stock one right for each share of Common Stock held. Each right entitles
the holder to purchase from the Company 1/100 of a share of a new series of the
Company's preferred stock (Series A Participating Cumulative Preferred Stock)
at an exercise price of $125 per 1/100 of a share. The rights will become
exercisable and will detach from the Common Stock 10 days after any person or
group acquires 25% or more of the Company's Common
 
                                       27
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. CAPITAL STOCK--(CONTINUED)
 
Stock, or 10 business days after any person or group commences a tender or
exchange offer which, if consummated, would result in that person or group
owning at least 25% of the Company's Common Stock.
 
  If any person acquires 25% or more of the Company's Common Stock, each right
will entitle the holder, other than the acquiring person, to purchase for the
exercise price Common Stock of the Company with a value of twice the exercise
price. In addition, if following an acquisition by any person or group of 25%
or more of the Company's Common Stock, the Company is involved in a merger or
other business combination transaction, or sells more than 50% of its assets or
earning power to any person, each right will entitle the holder, other than the
acquiring person, to purchase for the exercise price Common Stock of the
acquiring person with a value of twice the exercise price.
 
  The Company may redeem the rights at $.01 per right at any time until the
tenth day after any person or group has acquired 25% or more of its Common
Stock. The rights will expire November 29, 1998, unless earlier redeemed. The
Stockholder Rights Plan may be supplemented or amended at the direction of the
Company without the approval of the holders of rights, except as otherwise set
forth in the Stockholder Rights Plan. At October 31, 1995, 150,000 preferred
shares were reserved for these rights.
 
NOTE 7. INCOME TAXES
 
  Effective November 1, 1992 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, (SFAS 109) "Accounting for
Income Taxes." The cumulative effect of adopting Statement 109 as of November
1, 1992 was to increase net income by $1,512,000.
 
  Income tax expense (benefit) relating to continuing operations consists of
the following:
 
<TABLE>
<CAPTION>
                                                          YEARS ENDED OCTOBER
                                                                  31,
                                                         ----------------------
                                                          1995     1994   1993
                                                         -------  ------ ------
                                                            (IN THOUSANDS)
   <S>                                                   <C>      <C>    <C>
   Current provision--
     U.S. Federal....................................... $(1,154) $1,247 $ (468)
     State..............................................     527   1,100    717
                                                         -------  ------ ------
                                                            (627)  2,347    249
   Deferred provision--
     U.S. Federal.......................................   5,634   4,124  4,392
     State..............................................     154     --     173
                                                         -------  ------ ------
                                                           5,788   4,124  4,565
                                                         -------  ------ ------
   Provision for taxes.................................. $ 5,161  $6,471 $4,814
                                                         =======  ====== ======
</TABLE>
 
  Foreign income taxes were not material.
 
                                       28
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 7. INCOME TAXES--(CONTINUED)
 
  The tax expense is different than the amount computed by applying the U.S.
federal income tax rate to income before income taxes. The reasons for these
differences are as follows:
 
<TABLE>
<CAPTION>
                                                     YEARS ENDED OCTOBER 31,
                                                     -------------------------
                                                      1995     1994     1993
                                                     -------  -------  -------
   <S>                                               <C>      <C>      <C>
   U.S. federal statutory rate.....................     34.2%    34.4%    34.0%
   State taxes, net of U.S. federal income tax ben-
    efit...........................................      3.4%     4.3%     4.7%
   Goodwill amortization...........................      1.8%     --       --
   Other items.....................................      0.2%     0.4%    (0.3%)
                                                     -------  -------  -------
   Effective Tax Rate..............................     39.6%    39.1%    38.4%
                                                     =======  =======  =======
</TABLE>
 
  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>
                                                                1995     1994
                                                               -------  -------
                                                               (IN THOUSANDS)
   <S>                                                         <C>      <C>
   Deferred tax assets:
     Receivables valuation.................................... $ 1,416  $ 1,395
     Inventory valuation......................................   4,033    4,030
     Self-Insurance reserves..................................   1,737    2,142
     Pending refund from federal tax audit....................   5,160    4,031
     Reserves for discontinued operations.....................     848    1,348
     Other....................................................   7,160    7,028
                                                               -------  -------
   Total before valuation allowance...........................  20,354   19,974
   Valuation allowance........................................    (490)    (757)
                                                               -------  -------
   Net deferred tax assets....................................  19,864   19,217
                                                               -------  -------
   Deferred tax liabilities:
     Excess of tax over book depreciation.....................   3,450    3,070
     Assets held for sale.....................................   6,148    5,937
     Intangible assets........................................   1,977       --
     Pension costs............................................   1,822      780
     Other....................................................   7,589    8,005
                                                               -------  -------
                                                               $20,986  $17,792
                                                               =======  =======
</TABLE>
 
  The Company expects to receive 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. This refund is subject to approval by the
Congressional Joint Committee on Taxation.
 
  The change in the valuation allowance from 1994 to 1995 is the result of
changes in temporary differences which impact the deferred state income tax
provision.
 
NOTE 8. EMPLOYEE BENEFIT PLANS
 
  Prior to October 31, 1994, most of the Company's domestic employees were
covered by the Whittaker Corporation Employees' Pension Plan (the "Pension
Plan"), its noncontributory defined benefit pension plan. The benefits are
based on years of service and the employee's highest compensation for five
consecutive years during the last ten years of credited service.
 
                                       29
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED)
 
  Effective October 31, 1994, the Company amended the Pension Plan to "freeze"
benefits for all participants: adjustments for changes in credited years of
service ceased on October 31, 1994 and adjustments for changes in remuneration
ceased on December 31, 1994. The effect of the amendment was to reduce the
Pension Plan's projected benefit obligation at October 31, 1994 by $3,877,000.
The amount was fully absorbed by unrecognized net losses at October 31, 1994
related to the Pension Plan and accordingly, no curtailment gain was
recognized. Vested service continues to accrue in accordance with applicable
Pension Plan provisions, and Pension Plan funding will continue until such time
that the Pension Plan is terminated and all benefit obligations are satisfied.
The Company funds the Pension Plan in accordance with the Employee Retirement
Income Security Act of 1974, as amended (ERISA).
 
  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,
                                                          --------------------
                                                            1995       1994
                                                          ---------  ---------
                                                            (IN THOUSANDS)
<S>                                                       <C>        <C>
Actuarial present value of benefit obligations:
  Accumulated benefit obligation, including vested bene-
   fits of $123,543 in 1995 and $112,821 in 1994......... $(124,457) $(114,149)
                                                          =========  =========
  Projected benefit obligation for service rendered to
   date.................................................. $(124,457) $(114,149)
Plan assets at fair value, primarily publicly traded
 stocks and fixed
 income securities.......................................   126,278    115,488
                                                          ---------  ---------
Plan assets in excess of projected benefit obligation....     1,821      1,339
Items not yet recognized in earnings:
  Unrecognized net (gain)/loss...........................     2,999      1,688
  Unrecognized net transition asset at November 1, 1985
   net of amortization...................................      (212)    (1,139)
                                                          ---------  ---------
Net prepaid pension cost recorded in the consolidated
 balance sheet........................................... $   4,608  $   1,888
                                                          =========  =========
</TABLE>
 
  The weighted average discount rates used in determining the actuarial present
value of the projected benefit obligation were 7.0% and 8.0%, respectively, at
October 31, 1995 and 1994. The expected long-term rate of return on plan assets
was 8.75% for the years ended October 31, 1995, 1994, and 1993. 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, 1995, the projected benefit obligation for those
plans totaled $5,180,000, of which $873,000 is subject to later amortization.
The remaining $4,306,000 is accrued as a liability in the consolidated balance
sheet.
 
  Effective November 1, 1994, the Company amended its defined contribution
401(k) plan and renamed it the Whittaker Partnership Plan ("Partnership Plan").
The amendment provides for new investment alternatives, added a profit sharing
component to Company contributions to the Partnership Plan, and allows certain
rollover contributions from other qualified plans. The Partnership Plan
contains a matched savings provision that permits pretax employee
contributions. Participants can contribute from 1% to 12% of compensation and
receive a maximum matching employer contribution of 50% on up to 6% of their
annual compensation.
 
  In addition to matching of employee contributions, beginning with fiscal
1995, the Company has recorded as expense amounts which may range from 0% to
7.5% of eligible employee compensation, based on the attainment of specified
financial goals by participating divisions of the Company. The Partnership Plan
 
                                       30
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED)
 
covers most of the Company's employees, excluding those employed by WCI. WCI
sponsors a defined contribution 401(k) plan covering a majority of its 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.
 
  Total pension and retirement expense was as follows:
 
<TABLE>
<CAPTION>
                                                    YEARS ENDED OCTOBER 31,
                                                   ----------------------------
                                                     1995      1994      1993
                                                   --------  --------  --------
                                                         (IN THOUSANDS)
   <S>                                             <C>       <C>       <C>
   Cost components of funded defined benefit
    plan:
     Service cost--benefits earned during the pe-
      riod.......................................  $    490  $  2,253  $  2,674
     Interest cost on projected benefit obliga-
      tion.......................................     8,658     8,723     9,108
     Actual return on plan assets................   (20,204)    5,086   (24,989)
     Net amortization and deferral...............     8,336   (16,844)   14,570
                                                   --------  --------  --------
   Net periodic pension cost (income) for funded
    defined benefit plan.........................    (2,720)     (782)    1,363
   Cost for unfunded defined benefit plans.......       549       644       529
   Cost for defined contribution plans...........     2,983       708       849
                                                   --------  --------  --------
   Total pension and retirement plan expense.....  $    812  $    570  $  2,741
                                                   ========  ========  ========
</TABLE>
 
NOTE 9. LEASED ASSETS AND LEASE COMMITMENTS
 
  Whittaker has various leases covering real property and equipment.
 
  Property, Plant and Equipment includes $183,000 at October 31, 1995 and
$242,000 at October 31, 1994 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, 1995, were as follows:
 
<TABLE>
<CAPTION>
                                                               CAPITAL OPERATING
      YEARS ENDED OCTOBER 31,                                  LEASES   LEASES
      -----------------------                                  ------- ---------
                                                                (IN THOUSANDS)
      <S>                                                      <C>     <C>
        1996..................................................  $123     1,394
        1997..................................................   123     1,335
        1998..................................................   123     1,103
        1999..................................................    10       253
        2000..................................................   --         10
        2001 and subsequent...................................   --        --
                                                                ----    ------
      Total commitments.......................................   379    $4,095
                                                                        ======
      Amounts representing interest...........................    46
                                                                ----
      Present value of net minimum lease payments.............  $333
                                                                ====
</TABLE>
 
  Rental expense of continuing operations for operating leases, net of rental
income from subleases, was as follows:
 
<TABLE>
<CAPTION>
             YEARS ENDED OCTOBER 31,    (IN THOUSANDS)
             -----------------------    -------------
             <S>                        <C>
               1995....................    $2,292
               1994....................     1,710
               1993....................     1,627
</TABLE>
 
 
                                       31
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. COMMITMENTS AND CONTINGENCIES
 
  In certain years, after evaluating the availability and cost of insurance,
the Company did not purchase insurance for certain risks, including workers'
compensation and product liability. Consequently, the Company is without
insurance for various risks, including product liability for certain products
it manufactured. The Company currently has workers' compensation insurance and
product liability insurance for products it currently manufactures. The
Company's insurance carriers have taken the position that in certain cases the
Company is uninsured for environmental matters, a position that the Company
disputes in certain instances.
 
  As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted
to address public health and environmental concerns arising with respect to the
past treatment and disposal of hazardous substances. The Company is also a
potentially responsible party in a number of other actions brought under state
laws patterned after CERCLA. In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste.
 
  At October 31, 1995, 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. 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.
 
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
  Summarized quarterly financial data for 1995 and 1994 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>
1995
Sales....................................  $26.7   $31.7   $44.3   $56.8  $159.5
Cost of sales............................   16.0    19.1    23.1    31.8    90.0
Net income...............................    1.7     0.2     1.8     4.2     7.9
Earnings per share.......................  $0.18   $0.02   $0.18   $0.44  $ 0.82
1994
Sales....................................  $25.8   $28.8   $33.1   $38.7  $126.4
Cost of sales............................   14.2    17.5    19.4    22.2    73.3
Net income...............................    1.7     1.9     2.9     3.6    10.1
Earnings per share.......................  $0.18   $0.20   $0.31   $0.37  $ 1.06
</TABLE>
 
                                       32
<PAGE>
 
                             WHITTAKER CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
 
    Long-term debt: The carrying amounts of the Company's borrowings
  approximate their fair value. The Company's bank credit facility is a
  variable rate facility that reprices frequently.
 
    Notes receivable: The carrying amounts of the Company's notes receivable
  approximate their fair value.
 
NOTE 13. BUSINESS SEGMENTS
 
  The Company develops specialized aerospace and electronic technologies to
create products and customer solutions for aircraft, defense, communications
and industrial markets. The Company operates in two business segments:
Aerospace, which designs, manufactures, and distributes a wide variety of
fluid control devices and fire detection systems, as well as defense
electronics products and systems, and Communications, which designs, develops,
and markets a comprehensive line of networking products and services. Prior to
fiscal year 1995, the Company's communications operations were not material
enough to comprise a separate business segment.
 
  Operating profit is total revenue less operating expenses. General corporate
expenses have not been allocated to the business segments and are shown as a
separate expense element of operating profit to reconcile to consolidated
operating income. 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,
1995, 1994, and 1993 and for the years then ended follows (in millions):
<TABLE>
<CAPTION>
                                                  DEPRECIATION AND
                           OPERATING IDENTIFIABLE   AMORTIZATION     CAPITAL
                    SALES   PROFIT      ASSETS        EXPENSE      EXPENDITURES
                    ------ --------- ------------ ---------------- ------------
<S>                 <C>    <C>       <C>          <C>              <C>
1995
  Aerospace........ $129.0   $29.2      $143.8          $5.8           $4.8
  Communications...   30.5    (3.4)       46.9           2.1            0.7
  Corporate........    --     (7.3)       60.3           0.2            0.9
                    ------   -----      ------          ----           ----
  Consolidated..... $159.5   $18.5      $251.0          $8.1           $6.4
                    ======   =====      ======          ====           ====
1994
  Aerospace........ $126.4   $26.8      $153.5          $5.4           $2.5
  Corporate........    --     (6.8)       55.8           0.3            --
                    ------   -----      ------          ----           ----
  Consolidated..... $126.4   $20.0      $209.3          $5.7           $2.5
                    ======   =====      ======          ====           ====
1993
  Aerospace........ $115.4   $22.9      $147.1          $4.8           $1.3
  Corporate........    --     (7.2)       54.8           0.3            --
                    ------   -----      ------          ----           ----
  Consolidated..... $115.4   $15.7      $201.9          $5.1           $1.3
                    ======   =====      ======          ====           ====
</TABLE>
 
  Communications operating profit for fiscal 1995 reflects the writeoff of
$3.3 million of in-process research and development cost, which was recorded
as an expense at the acquisition date.
 
  In fiscal 1995, 1994, and 1993 approximately 34%, 49%, and 68%,
respectively, of Whittaker's sales from continuing operations were directly or
indirectly to the United States Government. All of those sales, with the
exception of a minor amount in 1995, were attributable to the Aerospace
segment. In fiscal 1995, 1994 and 1993 approximately 27%, 20% and 11%,
respectively, of Whittaker's sales arose from exports to customers outside the
United States, primarily in Europe and the Middle East. Approximately 26% 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.
 
                                      33
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
  Not applicable.
 
                                    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
 
                                       34
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
  The following documents are filed as part of this report:
 
<TABLE>
<CAPTION>
                                                                         PAGE
                                                                       REFERENCE
                                                                       FORM 10-K
                                                                       ---------
<S>                                                                    <C>
(A-1) FINANCIAL STATEMENTS:
Report of Independent Auditors.......................................      17
Consolidated Statements of Income for the three years ended October
 31, 1995............................................................      18
Consolidated Balance Sheets as of October 31, 1995 and 1994..........      19
Consolidated Statements of Cash Flows for the three years ended Octo-
 ber 31, 1995........................................................      21
Consolidated Statements of Stockholders' Equity for the three years
 ended October 31, 1995..............................................      22
Notes to Consolidated Financial Statements...........................      23
</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.
       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).
       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.
       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).
                (Other instruments defining the rights of holders of long-term
                 debt are not filed because the total amount of securities
                 authorized under any such instrument does not exceed 10% of
                 the consolidated total assets of Registrant. Registrant hereby
                 agrees to furnish a copy of any such instrument to the
                 Commission upon request.)
      10.1      Amended and Restated 1977 Nonqualified Stock Option Plan
                 (Exhibit 10.5 to Form 10-K for fiscal year ended October 31,
                 1982).**
      10.2      Restated 1980 Nonqualified Stock Option Plan (Exhibit 10.7 to
                 Form 10-K for fiscal year ended October 31, 1982).**
      10.3      Whittaker Corporation 1992 Stock Option Plan for Non-Employee
                 Directors (Exhibit 10.4 to Form 10-K for fiscal year ended
                 October 31, 1991).**
      10.4      1981 Incentive and Nonqualified Stock Option Plan, as amended
                 January 22, 1982 (Exhibit 10.7 to Form 10-K for fiscal year
                 ended October 31, 1981), and as amended June 26, 1987 (Exhibit
                 10.6 to Form 10-K for fiscal year ended October 31, 1987).**
</TABLE>
 
 
                                       35
<PAGE>
 
<TABLE>
 <C>            <S>
     10.5       Directors' Deferred Compensation Plan dated February 1983
                 (Exhibit 10.9 to Form 10-K for fiscal year ended October 31,
                 1984), as amended on May 18, 1990 (Exhibit 10.7 to Form 10-K
                 for fiscal year ended October 31, 1990).**
     10.6       Restated Directors' Retirement Plan effective as of August 2,
                 1985 (Exhibit 10.10 to Form 10-K for fiscal year ended October
                 31, 1990).**
     10.7       Whittaker Corporation Long-Term Stock Incentive Plan (1989)
                 (Annex 1 to Form S-8, Registration No. 33-35762), as amended
                 and restated as of December 16, 1994.
                 (Form S-8, Registration No. 33-58323)**
     10.8       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).**
     10.9       Draft of Whittaker Corporation Supplemental Executive
                 Retirement Plan, dated as of January 1, 1996.**
     10.10      Amendment and Restatement of Whittaker Corporation Employees'
                 Pension Plan dated December 22, 1994, as amended December 15,
                 1995.**
     10.11      Whittaker Corporation Partnership Plan (formerly the Whittaker
                 Corporation Savings and Stock Investment Plan), as amended and
                 restated effective November 1, 1994.**
     10.12      Credit Agreement dated as of January 23, 1995 among Registrant,
                 NationsBank of Texas, N.A., as Agent, and certain other
                 financial institutions as signatories thereto (Exhibit 10.8 to
                 Form 10-K for fiscal year ended October 31, 1994).
     10.13      First Amendment to Credit Agreement dated as of April 21, 1995
                 among Registrant, NationsBank of Texas, N.A., as Agent, and
                 certain other financial institutions as signatories thereto.
     10.14      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).
     11.        Calculation of earnings per share for the three years ended
                 October 31, 1995.
     21.        Subsidiaries of the Registrant.
     23.        Consent of Independent Auditors.
     27.        Financial Data Schedule.
</TABLE>
--------
*  Exhibits followed by a parenthetical reference are incorporated by reference
   to the document described therein. Upon written request to the Secretary of
   the Company, a copy of any exhibit referred to above will be furnished
   without charge.
** Management contract or compensatory plan or arrangement required to be filed
   as an exhibit to this Form 10-K.
 
(B) REPORTS ON FORM 8-K:
 
  During the quarter ended October 31, 1995, the Company did not file any
reports on Form 8-K.
 
                                       36
<PAGE>
 
                                   SIGNATURES
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
 
                                          WHITTAKER CORPORATION
 
                                          By           Richard Levin
                                            ___________________________________
                                                      (Richard Levin,
                                                      Vice President)
 
                                          Date       January 24, 1996
                                             __________________________________
 
  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>
         Thomas A. Brancati             Director and Principal   )
____________________________________      Executive Officer      )
        (Thomas A. Brancati)                                     )
                                                                 )
           Richard Levin                      Principal          )
____________________________________      Financial Officer      )
          (Richard Levin)                                        )
                                                                 )
        Joseph F. Alibrandi                    Director          )
____________________________________                             )
       (Joseph F. Alibrandi)                                     )
                                                                 )
       George H. Benter, Jr.                   Director          )
____________________________________                             )
      (George H. Benter, Jr.)                                    )
                                                                 )   January 24, 1996
                                                                 )
          Jack L. Hancock                      Director          )
____________________________________                             )
         (Jack L. Hancock)                                       )
                                                                 )
          Edward R. Muller                     Director          )
____________________________________                             )
         (Edward R. Muller)                                      )
                                                                 )
         Gregory T. Parkos                     Director          )
____________________________________                             )
        (Gregory T. Parkos)                                      )
                                                                 )
         Malcolm T. Stamper                    Director          )
____________________________________                             )
        (Malcolm T. Stamper)                                     )
</TABLE>       
 
                                       37