<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.   20549


                                   Form 8-K/A

                                 CURRENT REPORT


                     Pursuant to Section 13 or 15(d) of the

                         Securities Exchange Act of 1934


         Date of Report (date of earliest event reported)  March 1, 1996

                            -------------------------



                          NORTHROP GRUMMAN CORPORATION
               (Exact name of registrant as specified in charter)

        Delaware                     1-3229                    95-1055798
(State or other jurisdiction       (Commission              (I.R.S. Employer
     of incorporation)            File Number)              Identification No.)

1840 Century Park East, Los Angeles, California                 90067
(Address of principal executive offices)                     (Zip Code)


Registrant's telephone number, including area code:  (310) 553-6262


                                      NONE
          (Former name or former address, if changed since last report)


                                  Page 1 of 28


<PAGE>


ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

     On March 1, 1996, pursuant to the Asset Purchase Agreement dated as of 
January 3, 1996 (the "Purchase Agreement"), Northrop Grumman Corporation 
("Registrant") acquired from Westinghouse Electric Corporation (collectively 
"Seller") substantially all of the assets of Seller's Electronic Systems 
Group (excluding the security systems, wireless communications and airship 
businesses thereof and the business of Westinghouse Landmark GIS, Inc.) (the 
"Division"). The purchase includes the Seller's voting stock or other 
interests in several domestic and foreign subsidiaries and joint ventures. A 
copy of the Purchase Agreement is filed herewith as Exhibit 2.1, and 
certain ancillary agreements are filed as Exhibits 2.2 and 2.3, and 
reference is made thereto for the complete terms and conditions thereof.

     The purchase price of $3 billion cash (subject to adjustment following 
an audit of the closing date balance sheet of the Division) was based upon 
the estimated net assets to be acquired as well as the value of the ongoing 
business, and took into account the liabilities reflected on the balance 
sheet and assumed by Registrant.

     Registrant obtained the cash portion of the purchase price from (i) an 
offering made pursuant to Rule 144A promulgated under the Securities Act of 
1933, as amended, of $1 billion in debt securities having maturity dates of 
10, 20 and 30 years and (ii) a bank credit facility advanced under the Second 
Amended and Restated Credit Agreement dated as of April 15,  1994, Amended 
and Restated as of March 1, 1996 among Northrop Grumman Corporation, Bank of 
America National Trust and Savings Association, as Documentation Agent, 
Chemical Securities, Inc., as Syndication Agent, The Chase Manhattan Bank 
(National Association), as Administrative Agent and the Banks Signatories 
thereto (the "Credit Agreement"). A copy of the Credit Agreement is filed 
herewith as Exhibit 2.4 and reference is made thereto for the complete terms 
and conditions thereof.

     Registrant intends to continue to use the assets purchassed from Seller 
in the operation of the Division, which will be known as the Electronic 
Sensors and Systems Division of Registrant, and is reviewing these business 
areas and its strategic core competencies to determine whether any synergies 
may be achieved by repositioning or divesting certain assets or business 
areas. Based on information available to date, the Registrant does not 
anticipate that expense levels for corporate services in the near term will 
exceed historical levels charged to the Division as reflected in the 
Financial Statements of the Division filed pursuant to Item 7.

     No material relationship exists between Seller and Registrant or any of 
its affiliates, directors or officers, or any associate of any such directors 
or officers.

     The Press Release of Registrant dated March 1, 1996, announcing the 
completion of the acquisition described above is filed herewith as Exhibit 
99.1 and is incorporated herein by reference.


                                  Page 2 of 28

<PAGE>


ITEM 7.   FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS


          (a)  Financial Statements of the Division

          The following Financial Statements of the Division are included with
this amended Form 8-K:

          Report of Independent Accountants

          Combined Statement of Financial Position as of December 31, 1994 and
          1995

          Combined Statement of Earnings for the Years Ended December 31, 1993,
          1994 and 1995

          Combined Statement of Cash Flows for the Years Ended December 31,
          1993, 1994 and 1995

          Combined Statement of Changes in Invested Equity for the Years Ended
          December 31, 1993, 1994 and 1995


          Notes to Combined Financial Statements

          (b)  Exhibits


          The following Exhibit is included with this amended Form 8-K:

Exhibit Number                 Description of Exhibit
- --------------      -------------------------------------------

     2.1            Asset Purchase Agreement dated as of January 3, 1996,
                    between Westinghouse Electric Corporation, a Pennsylvania
                    corporation, as Seller, and Northrop Grumman Corporation,
                    a Delaware corporation, as Buyer.  (Schedules and Exhibits
                    have been omitted pursuant to Rule 601(b)(2) of Regulation
                    S-K.  Such Schedules and Exhibits are listed and described
                    in the Purchase Agreement.  Registrant hereby agrees to
                    furnish to the Securities and Exchange Commission, upon its
                    request, any or all such omitted Schedules and Exhibits.)*

     2.2            Letter Agreement dated February 28, 1996 from Westinghouse
                    Electric Corporation to Northrop Grumman Corporation.*

     2.3            Letter Agreement dated February 29, 1996 from Westinghouse
                    Electric Corporation to Northrop Grumman Corporation.
                    (Scheules have been omitted pursuant to Rule 601(b)(2) of
                    Regulation S-K.  Such Schedules are listed and described in
                    the Letter Agreement.  Registrant hereby agrees to furnish
                    to the Securities and Exchange Commission, upon its request,
                    any or all such omitted Schedules.)*

     2.4            Second Amended and Restated Credit Agreement dated as of 
                    April 15, 1994, Amended and Restated as of March 1, 1996
                    among Northrop Grumman Corporation, Bank of America National
                    Trust and Savings Association, as Documentation Agent, 
                    Chemical Securities, Inc., as Syndication Agent, The Chase
                    Manhattan Bank (National Association), as Administrative
                    Agent and the Banks Signatories thereto.  (Schedules and
                    Exhibits have been omitted pursuant to Rule 601(b)(2) of
                    Regulation S-K.  Such Schedules and Exhibits are listed and
                    described in the Credit Agreement.  Registrant hereby agrees
                    to furnish to the Securities and Exchange Commission, upon
                    its request, any or all such omitted Schedules and
                    Exhibits.)*

    23.1            Consent of Independent Accountants

    99.1            Press release of Registrant dated March 1, 1996*
                    


* Previously filed on Registrant's Form 8-K dated March 18, 1996.


                                  Page 3 of 28


<PAGE>
 
                      REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors
Westinghouse Electric Corporation
 
    In  our opinion, the  accompanying combined statement  of financial position
and the related combined statements of earnings, of cash flows and of changes in
invested equity present fairly, in all material respects, the financial position
of Electronic Systems (a unit of Westinghouse Electric Corporation) at  December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of  the three years  in the period  ended December 31,  1995, in conformity with
generally accepted  accounting principles.  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  of  these  statements  in accordance  with  generally  accepted auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement. An audit includes examining, on a test basis, evidence  supporting
the   amounts  and  disclosures  in  the  financial  statements,  assessing  the
accounting principles used  and significant  estimates made  by management,  and
evaluating  the overall  financial statement  presentation. We  believe that our
audits provide a reasonable basis for the opinion expressed above.
 
    As discussed in Note  12, the Company changed  its method of accounting  for
certain postemployment benefits in 1993.
 
    Electronic  Systems is a  unit of Westinghouse  Electric Corporation and, as
disclosed in the financial statements,  receives support services from, and  has
transactions  and relationships with, Westinghouse  Electric Corporation and its
affiliates.
 
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 31, 1996

 
                                     4 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
                    COMBINED STATEMENT OF FINANCIAL POSITION
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
                                       ASSETS
 

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                                        --------------------------
<S>                                                                                     <C>           <C>
                                                                                            1995          1994
                                                                                        ------------  ------------
Current assets
  Cash and cash equivalents...........................................................  $      3,996  $         81
  Trade accounts receivable, net (Note 5).............................................       283,027       237,197
  Inventories (Note 6)................................................................       182,562       203,554
  Costs and profits in excess of billings on long-term contracts (Note 6).............       178,783       219,030
  Deferred income taxes (Note 11).....................................................       135,644       129,162
  Prepaid expenses and other current assets...........................................        13,888         5,785
                                                                                        ------------  ------------
    Total current assets..............................................................       797,900       794,809
                                                                                        ------------  ------------
Property, plant and equipment, net (Note 7)...........................................       404,161       414,724
Goodwill and other intangible assets, net (Note 8)....................................       138,253       159,621
Deferred income taxes (Note 11).......................................................       173,057       128,733
Other noncurrent assets (Note 9)......................................................        11,662        25,135
                                                                                        ------------  ------------
Total assets..........................................................................  $  1,525,033  $  1,523,022
                                                                                        ------------  ------------
                                                                                        ------------  ------------
 
                                         LIABILITIES AND INVESTED EQUITY
Current liabilities
  Accounts payable....................................................................  $    105,110  $     84,160
  Accrued expenses (Note 10)..........................................................       314,131       252,639
  Billings in excess of costs and profits on long-term contracts (Note 6).............       128,307        75,912
                                                                                        ------------  ------------
    Total current liabilities.........................................................       547,548       412,711
                                                                                        ------------  ------------
Pension liability (Note 12)...........................................................       369,395       279,298
Postretirement and postemployment benefits (Note 12)..................................       279,024       279,414
Other noncurrent liabilities..........................................................        15,340        37,130
                                                                                        ------------  ------------
                                                                                             663,759       595,842
                                                                                        ------------  ------------
Commitments and contingencies (Notes 13 and 17)
Invested equity (Notes 12 and 13).....................................................       313,726       514,469
                                                                                        ------------  ------------
Total liabilities and invested equity.................................................  $  1,525,033  $  1,523,022
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
 
                                     5 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
                         COMBINED STATEMENT OF EARNINGS
                         (DOLLAR AMOUNTS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                                          ----------------------------------------
<S>                                                                       <C>           <C>           <C>
                                                                              1995          1994          1993
                                                                          ------------  ------------  ------------
Revenue.................................................................  $  2,554,490  $  2,184,785  $  2,348,073
                                                                          ------------  ------------  ------------
Costs and expenses
  Cost of sales.........................................................     1,997,466     1,684,615     1,782,640
  Selling, general and administrative (Note 13).........................       244,894       229,327       261,070
  Research and development..............................................        75,204        72,293        75,883
  Restructuring charges, net (Note 4)...................................        51,200         8,600        90,500
  Other expense, net (Note 14)..........................................        13,816        62,464        11,755
                                                                          ------------  ------------  ------------
                                                                             2,382,580     2,057,299     2,221,848
                                                                          ------------  ------------  ------------
Earnings before income taxes and cumulative effect of accounting
 change.................................................................       171,910       127,486       126,225
Provision for income taxes (Note 11)....................................        64,663        46,821        47,294
                                                                          ------------  ------------  ------------
Earnings before cumulative effect of accounting change..................       107,247        80,665        78,931
Cumulative effect of accounting change (Note 12)........................                                   (13,377)
                                                                          ------------  ------------  ------------
Net earnings............................................................  $    107,247  $     80,665  $     65,554
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
 
                                     6 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
                        COMBINED STATEMENT OF CASH FLOWS
                         (DOLLAR AMOUNTS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                                FOR THE YEAR ENDED DECEMBER 31,
                                                                             -------------------------------------
<S>                                                                          <C>          <C>          <C>
                                                                                1995         1994         1993
                                                                             -----------  -----------  -----------
Cash flow from operating activities:
  Net earnings.............................................................  $   107,247  $    80,665  $    65,554
  Noncash items included in earnings
    Depreciation and amortization..........................................       69,760       72,864       68,558
    Pension settlement loss................................................                    60,984
    Noncash restructuring charges..........................................       (3,200)         200       30,500
    Loss on sale of property, plant and equipment..........................        3,508        2,175        3,603
  Other changes that provided (used) cash, net of effects of acquisition of
   business
    Trade accounts receivable..............................................      (45,830)      44,641       52,494
    Inventories............................................................       20,992      104,594      (38,590)
    Costs and profits in excess of billings on long-term contracts.........       40,247      (28,879)     (30,060)
    Prepaid expenses and other current assets..............................       (8,103)       5,642       15,600
    Deferred income taxes..................................................       (6,972)     (43,166)     (20,495)
    Accounts payable.......................................................       20,950          781      (31,969)
    Accrued expenses.......................................................       86,592     (106,432)      21,082
    Billings in excess of costs and profits on long-term contracts.........       52,395     (106,800)     120,416
    Pension liability......................................................      (12,049)      42,536        3,547
    Postretirement and postemployment benefits.............................         (390)     (11,363)      18,794
    Other noncurrent assets and liabilities................................       (4,025)      69,462        8,850
                                                                             -----------  -----------  -----------
Net cash provided by operating activities..................................      321,122      187,904      287,884
                                                                             -----------  -----------  -----------
Cash flow from investing activities:
  Business acquisition.....................................................      (21,900)     (72,700)
  Purchases of property, plant and equipment...............................      (54,823)     (43,951)     (18,869)
                                                                             -----------  -----------  -----------
Net cash used in investing activities......................................      (76,723)    (116,651)     (18,869)
                                                                             -----------  -----------  -----------
Cash flow from financing activities:
  Net intercompany transactions............................................     (240,484)     (71,486)    (269,944)
                                                                             -----------  -----------  -----------
Net increase (decrease) in cash and cash equivalents.......................        3,915         (233)        (929)
Cash and cash equivalents at beginning of year.............................           81          314        1,243
                                                                             -----------  -----------  -----------
Cash and cash equivalents at end of year...................................  $     3,996  $        81  $       314
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
 
                                     7 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
                COMBINED STATEMENT OF CHANGES IN INVESTED EQUITY
                         (DOLLAR AMOUNTS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                               FOR THE YEAR ENDED DECEMBER 31,
                                                                             ------------------------------------
<S>                                                                          <C>          <C>         <C>
                                                                                1995         1994        1993
                                                                             -----------  ----------  -----------
Balance at beginning of year...............................................  $   514,469  $  457,234  $   784,877
Net earnings...............................................................      107,247      80,665       65,554
Equity translation adjustments.............................................       (1,761)     (4,120)       2,632
Minimum pension liability adjustments......................................      (65,745)     52,176     (125,905)
Intercompany transactions, net.............................................     (240,484)    (71,486)    (269,944)
                                                                             -----------  ----------  -----------
Balance at end of year.....................................................  $   313,726  $  514,469  $   457,234
                                                                             -----------  ----------  -----------
                                                                             -----------  ----------  -----------
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
 
                                     8 of 28


<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 

                     NOTES TO COMBINED FINANCIAL STATEMENTS
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 1 -- NATURE OF OPERATIONS AND RELATIONSHIPS WITH WESTINGHOUSE
 
    GENERAL
 
    Electronic   Systems  (the   Company),  a  unit   of  Westinghouse  Electric
Corporation (Westinghouse), provides advanced  electronic systems, products  and
technologies  primarily to U.S. and non-U.S. government agencies. The Company is
not a legal entity.  The operations included in  these financial statements  are
substantially  the Electronic  Systems segment  of Westinghouse  as disclosed by
Westinghouse for external  reporting purposes.  However, for  purposes of  these
financial  statements, operations disposed  of or transferred  to other business
units during the three year period ended December 31, 1995 and those  operations
which  will  be  retained  by  Westinghouse have  been  excluded  for  all years
presented because any remaining assets and liabilities related to these entities
are not included in the sale of the Company to Northrop Grumman Corporation (see
Note 18).
 
    The Company operates in one  business segment -- the research,  development,
production  and support  of advanced electronic  systems. The  Company derives a
substantial  portion  of  its  revenue  from  long-term  contracts  for  systems
development   and  production  and  related   services  principally  in  defense
electronics,  air  traffic  control  systems  and  space  systems.   Significant
customers  include the  U.S. Department of  Defense (DOD),  the Federal Aviation
Administration (FAA)  and  the  National Aeronautics  and  Space  Administration
(NASA).  Sales to U.S. government  agencies totalled $2,040,000, $1,789,000, and
$2,039,000 in 1995, 1994 and 1993, respectively.
 
    As more  fully described  in Notes  2,  3, 4,  5, 6,  and 17,  the  periodic
reporting  of results for long-term government contracts is inherently dependent
on the extensive use of estimates. All such estimates have been made to the best
of management's  ability based  upon facts  available  at the  time, but  it  is
possible that future developments may require revisions of those estimates.
 
    RELATED PARTY TRANSACTIONS
 
    The  Company  is an  integrated component  of Westinghouse's  operations and
receives a number of administrative  and support services from Westinghouse  and
participates  in a number of Westinghouse employee benefit plans and is included
in Westinghouse's insurance programs and income tax returns. Further information
about such relationships and transactions is included in Notes 2, 12, 13, 17 and
18.
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    PRINCIPLES OF COMBINATION
 
    The combined  financial statements  of the  Company primarily  comprise  the
accounts of one Westinghouse operating unit which is not a separate legal entity
and certain subsidiaries of Westinghouse. All material intercompany accounts and
transactions have been eliminated in combination.
 
    REVENUE RECOGNITION
 
    The  majority  of  the  Company's  revenue  results  from  contract services
performed under a  variety of  contracts, including cost  plus, fixed-price  and
time-and-materials   type  contracts.  Sales  under  government  and  commercial
fixed-price incentive contracts are recorded at the time deliveries are made or,
for long-term  contracts  with a  duration  in excess  of  two years,  upon  the
completion   of   specific   tasks   (pre-defined   milestones).   Sales   under
cost-reimbursement contracts  are  recorded as  work  is performed  and  billed.
Estimated  contract profits are  recorded in proportion  to recorded sales. Some
contracts contain incentive provisions which provide for increased or  decreased
earnings  based  upon  performance  in  relation  to  established  targets. Such
adjustments are considered in estimating sales and profit rates and are recorded
when there is
 
                                     9 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
sufficient information  to  assess anticipated  contract  performance.  Revenues
relating  to contracts or contract changes that have not been completely priced,
negotiated, documented,  or  funded are  not  recognized unless  realization  is
considered probable.
 
    Major  contracts for  complex military  systems are  performed over extended
periods of time  and are  subject to changes  in scope  and delivery  schedules.
Pricing  negotiations  on changes  and settlement  of  claims often  extend over
prolonged periods of time. Estimates  of final contract revenues include  future
revenue  from expected recovery on claims. Such revenues are included when it is
probable that the  claim will result  in additional contract  revenue, when  the
amount can be reliably estimated and legal entitlement has been established.
 
    Estimates  are  reviewed  periodically, and  changes  in  estimated contract
revenue and  costs which  result in  changes to  estimated contract  profit  are
recognized   in  the  period  in  which  they  are  determined.  Provisions  for
anticipated losses on contracts are recorded in full as they are identified.
 
    A standard one year warranty  against defective material and workmanship  is
provided  for  products  sold.  Standard warranty  costs,  which  have  not been
significant, are reported as  incurred. Warranty beyond  the scope of  defective
material  and workmanship  is quoted  as a  separate contract  cost element, and
provision is made for the anticipated warranty costs as sales are recognized.
 
    CASH AND CASH EQUIVALENTS
 
    Westinghouse performs  cash  management  on a  centralized  basis  in  North
America for the Company as well as for other Westinghouse businesses. Under such
service  arrangements, accounts  receivable are  collected and  cash is invested
centrally. Activity in the Company's cash balances supporting its North American
operations is recorded  through the invested  equity account with  Westinghouse.
The  Company maintains certain  separate bank accounts  primarily related to its
non-North American operations;  the balances  in such accounts  are included  in
cash  and  cash  equivalents  in the  accompanying  balance  sheet.  The Company
considers cash and cash equivalents to include  cash on hand and on deposit  and
highly  liquid  investments  with  original maturities  at  date  of acquisition
generally of three months or less.
 
    DEBT AND INTEREST COST
 
    Westinghouse has not allocated any portion  of its debt or related  interest
cost  to  the Company,  and no  portion of  Westinghouse's debt  is specifically
related to the operations of  the Company. Accordingly, the Company's  financial
statements include no charges for interest or capitalized interest.
 
    INVENTORIES
 
    Inventories  consist  principally  of unreimbursed  costs  under fixed-price
contracts and  are stated  at  total costs  incurred  reduced by  the  estimated
average cost of deliveries. Inventoried costs include both direct contract costs
and  allocable overhead costs  (generally determined on  an average cost basis).
All other inventories are stated at  the lower of cost (generally determined  on
an average cost basis) or market.
 
    PROPERTY, PLANT AND EQUIPMENT
 
    Property,   plant  and  equipment   is  stated  at   cost  less  accumulated
depreciation. Depreciation is recorded using  the straight-line method over  the
estimated useful lives of the assets (buildings, 40-45 years; land improvements,
15-25  years; machinery and equipment, 8-12  years; furniture and fixtures, 5-10
years; and
 
                                     10 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
information systems equipment, 3-5 years). Leasehold improvements are  amortized
on  a straight-line basis  over the shorter  of the lease  term or the estimated
useful lives of  the improvements.  Capitalization of newly  acquired assets  is
limited  to  those with  cost  in excess  of  $1.5 (one  thousand,  five hundred
dollars).
 
    GOODWILL AND OTHER INTANGIBLE ASSETS
 
    Goodwill and other intangible assets  are amortized using the  straight-line
method  over  their  estimated lives,  but  not  exceeding 40  years  for assets
acquired prior to  January 1,  1994 and  not in excess  of 15  years for  assets
acquired after December 31, 1993.
 
    Subsequent to the acquisition of an intangible asset, management continually
evaluates  whether later events or circumstances have occurred that indicate the
remaining estimated useful life of an  intangible asset may warrant revision  or
that the remaining balance of such an asset may not be recoverable. When factors
indicate  that an intangible asset should  be evaluated for possible impairment,
management uses an estimate of the  undiscounted future cash flows of the  asset
over  its remaining  useful life  in measuring  whether the  intangible asset is
recoverable. If such an analysis indicates that impairment has in fact occurred,
the book  value  of  the intangible  asset  is  written down  to  its  estimated
realizable value.
 
    INCOME TAXES
 
    Historically,  the results  of the  Company's domestic  operations have been
included in the consolidated U.S. federal income tax return of Westinghouse. The
results of the  Company's foreign  operations have been  reported separately  in
their  respective  taxing  jurisdictions.  The  income  tax  expense  and  other
tax-related information in these statements is  presented as if the Company  had
not been eligible to be included in the consolidated tax returns of Westinghouse
or  other affiliates (i.e., the Company on a stand-alone basis). The recognition
and measurement of income tax expense and deferred income taxes required certain
assumptions, allocations, and  significant estimates  which management  believes
are  reasonable  to  measure  the  tax consequences  as  if  the  Company  was a
stand-alone taxpayer.
 
    The Company  accounts  for income  taxes  in accordance  with  Statement  of
Financial  Accounting Standards  (SFAS) No.  109 "Accounting  for Income Taxes."
SFAS 109 requires the asset and liability method of accounting for income taxes.
Deferred  tax  assets  and  liabilities  are  recognized  for  the  future   tax
consequences   attributable  to  differences  between  the  financial  statement
carrying amounts of  existing assets  and liabilities and  their respective  tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to  apply  to  taxable  income  in  years  in  which  those  temporary
differences are expected to be recovered or settled.
 
    For   purposes  of  these  financial  statements,  any  current  income  tax
liabilities are considered to  have been paid by  Westinghouse and are  recorded
through the invested equity account with Westinghouse.
 
    Deferred  federal  income taxes  have not  been  provided on  the cumulative
undistributed earnings of foreign affiliates as these earnings are considered to
be permanently reinvested.
 
    EMPLOYEE BENEFIT PLANS
 
    Westinghouse has a number of  employee benefit plans covering  substantially
all  employees. Historically, most of  the Company's employees have participated
in the  Westinghouse  plans for  pensions,  postretirement benefits  other  than
pensions,  and postemployment benefits. In  addition, the Company has maintained
its own pension and  postretirement benefit plans for  certain of its  employees
not  included in the Westinghouse plans. Most pension plan benefits are based on
years of service and compensation levels at the
 
                                    11 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
time of  retirement, a  formula based  on  career earnings  or a  final  average
compensation   amount.  Pension  benefits   are  paid  from   trusts  funded  by
contributions from employees  and Westinghouse.  The pension  funding policy  is
consistent  with the funding requirements of U.S. federal and other governmental
laws and  regulations. Plan  assets consist  primarily of  listed stocks,  fixed
income   securities   and  real   estate  investments.   Postretirement  benefit
arrangements consist  of  various retiree  medical,  dental and  life  insurance
arrangements sponsored by Westinghouse.
 
    For  purposes of these  financial statements, the  costs and related balance
sheet accounts and disclosures for pensions, postretirement benefits other  than
pensions,  and postemployment benefits have been  presented as if the portion of
the plans  relating to  the Company's  employees had  been segregated  from  the
Westinghouse  plans as separate plans.  The accumulated benefit obligation (ABO)
and  projected   benefit  obligation   (PBO)   for  pensions   and   accumulated
postretirement  benefit obligation  (APBO) were calculated  based on demographic
data for the active, inactive, and retired employees of the Company. Plan assets
and unrecognized net transition obligation, prior service cost and gain or  loss
were allocated based on the proportion of the Company's PBO or APBO to the total
Westinghouse  PBO or  APBO for pensions  and postretirement  benefits other than
pensions, respectively.  The  actuarially  determined  net  periodic  costs  and
related   balance  sheet  accounts  have   been  reflected  in  these  financial
statements.  Contributions  have  been  recorded  through  the  invested  equity
account.  Management believes that the assumptions, allocations, and significant
estimates used are reasonable.
 
    RESEARCH AND DEVELOPMENT COSTS
 
    Research  and  development  costs   are  incurred  under  both   independent
Company-initiated  programs  and  under  contracts  for  specific  programs with
others, primarily the U.S. government.  Research and development costs  incurred
under  contract are charged  to inventory as  contracts in progress. Independent
research and development costs which are not incurred in performance of specific
contract  requirements  are  reimbursable   as  indirect  period  cost   through
government-mandated   cost  accounting  procedures.   Unallowable  research  and
development costs are charged against income as incurred.
 
    FOREIGN CURRENCY
 
    Non-U.S. operations utilize the local  currency as the functional  currency.
Assets  and liabilities  are translated into  U.S. dollars at  the exchange rate
applicable at the time of translation, while revenue and costs are translated at
the  average  rates  of  exchange   prevailing  during  the  year.   Translation
adjustments  are  accumulated in  invested  equity. Foreign  exchange  gains and
losses incurred on  foreign currency  transactions are included  in income.  The
Company  has  entered into  forward exchange  contracts to  hedge the  effect of
foreign  currency   fluctuations  on   certain  transactions   and   commitments
related to purchases and sales denominated  in foreign currencies. The Company's
foreign  exchange  policy  includes  matching  purchases  and  sales in national
currencies when possible  and hedging unmatched transactions  in excess of $250.
Gains and losses on commitment hedges  are deferred and included in the basis of
the  transaction  underlying  the  commitment.  Gains  and losses on transaction
hedges are recognized in income and offset the foreign exchange gains and losses
on the  related transactions.  The aggregate  foreign currency  transaction gain
(loss) for the years ended December 31, 1995, 1994 and 1993 was $(22), $(34) and
$480, respectively.
 
    CREDIT RISK
 
    Financial   instruments   which   potentially   subject   the   Company   to
concentrations of credit risk consist of billed accounts receivable and unbilled
accounts receivable (principally unreimbursed  costs and fees under  contracts).
Receivables  result primarily from contracts  with U.S. and non-U.S. governments
and from subcontracts with prime  contractors to the U.S. government.  Contracts
with the U.S. government do not
 
                                     12 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
require  collateral  or  other  security. The  Company  conducts  ongoing credit
evaluations  of  non-government  customers   and  generally  does  not   require
collateral  or other  security from these  customers. The  Company generally has
negotiated terms and conditions which provide for non-U.S. government  customers
to  make advance  payments in amounts  sufficient to limit  the Company's credit
risk. Historically, the Company has not incurred any significant credit  related
losses under its long-term contracts.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The  carrying amount  of the Company's  cash and cash  equivalents and trade
accounts receivable approximates fair value.
 
NOTE 3 -- ACQUISITION
    Effective June 1, 1994,  the Company acquired certain  assets of the  Norden
Systems  Division (Norden)  of United  Technologies Corporation  for $94,600, of
which $72,700 was paid at closing and the remaining $21,900 in January 1995, and
assumed certain liabilities. Norden designs and manufactures advanced electronic
systems for  combat  vehicles,  aircraft,  ships,  submarines  and  air  traffic
control.  The  transaction  was  accounted  for  using  the  purchase  method of
accounting and, accordingly,  the purchase  price has been  allocated to  assets
acquired  and  liabilities assumed  based on  the estimated  fair value  of such
assets and liabilities at the date  of acquisition. The purchase price  resulted
in  an excess of costs  over net assets acquired  of approximately $56,100. Such
excess is  being amortized  on a  straight-line basis  over 13  years.  Norden's
results  of  operations  have  been  included  in  the  consolidated  results of
operations since the date of acquisition.
 
    The following  unaudited  pro  forma information  presents  the  results  of
operations  of the Company and Norden for  the years ended December 31, 1994 and
1993, with pro forma adjustments as if the Norden acquisition had occurred as of
the beginning of  the periods  presented. The  pro forma  presentation does  not
purport  to be indicative of  what would have occurred  had the acquisition been
made as of those dates or of results which may occur in the future.
 

<TABLE>
<CAPTION>
                                                                        1994          1993
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
Revenue...........................................................  $  2,258,081  $  2,570,693
Earnings before cumulative effect of accounting change............        69,364        77,687
Net earnings......................................................        69,364        64,310
</TABLE>

 
    A $25  million liability  was  established in  conjunction with  the  Norden
acquisition for the consolidation of administrative and manufacturing facilities
at  the Norwalk and Melville locations into Baltimore, of which $1.7 million has
been expended to  date; the  consolidation is  to be  completed by  May 1997.  A
memorandum  of understanding for the treatment of the costs of the consolidation
actions has been reached with the Corporate Administrative Contracting  Officer.
Such  costs are  subject to  recovery through  inclusion in  allowable costs for
government rate purposes  over future  periods. However, because  the extent  of
recovery is not estimable, no asset has been recorded for any amounts that might
ultimately  be recovered  from inclusion  of these  costs in  future contracting
rates.
 
NOTE 4 -- SPECIAL RESTRUCTURING ACTIONS
    Management is committed to ongoing  restructuring actions that will  enhance
the  Company's competitive  position in the  defense industry. As  a result, net
restructuring  charges  principally  related  to  workforce  reductions,   asset
writedowns,  and consolidation of facilities of $51,200, $8,600 and $90,500 were
recorded by
 
                                     13 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 4 -- SPECIAL RESTRUCTURING ACTIONS (CONTINUED)
the Company and charged against income  in 1995, 1994 and 1993, respectively.  A
portion  of the  restructuring charges  are expected  to be  allowed as indirect
costs under the  Company's government  contracts in future  periods. The  amount
estimated  to  be  subject to  recovery  through inclusion  for  government rate
purposes for years after 1995 is  approximately $94 million. Because the  extent
of  recovery is not estimable,  no asset has been  recorded for any amounts that
might ultimately  be recovered  from  the inclusion  of  these costs  in  future
contracting rates.
 
    The  1993 and  1994 actions included  the separation  of approximately 1,000
employees, exiting of certain product  lines and closure of certain  facilities.
In  1995, management announced a series of additional restructuring actions that
included the  separation of  approximately 1,300  employees and  the closure  of
additional   facilities.  The  costs  related  to  these  actions are  primarily
employee  separation costs,  and are  included in  the 1995 provision.  The 1995
projects are  expected to  have pre-tax savings  of  approximately  $9,000  in
1995,  and  $60,000  in  1996  and  beyond.  A  substantial portion of these
savings will  be priced into  the Group's government  contracts. The majority of
the  cash  expenditures  related  to  the  1995  projects  will be  completed by
year-end  1996.  A  minimal  amount  will  be  expended  beyond  1996.  The 1994
adjustments   primarily  reflect  revised  cost   estimates  related  to   prior
provisions.    The  1995  adjustments   reflect  the  elimination  of  an  asset
provision  established  previously, which  was  subsequently  determined  to  be
recoverable  under  a  certified claim  which was submitted  to the U.S. Navy in
October 1995, as well as revised cost estimates related to prior provisions.

The  following  table   is  a  reconciliation  of  the
restructuring charges under  each of  the initiatives to  the remaining  amounts
accrued at December 31, 1995:
 

<TABLE>
<CAPTION>
                                          EMPLOYEE                   FACILITY CLOSURE &
                                         SEPARATION        ASSET       RATIONALIZATION
                                            COSTS       WRITEDOWNS          COSTS           OTHER       TOTAL
                                       ---------------  -----------  -------------------  ----------  ----------
<S>                                    <C>              <C>          <C>                  <C>         <C>
1993 provision.......................    $    37,600     $  30,500        $  15,700       $    6,700  $   90,500
Expenditures/disposals...............         (1,400)                          (800)                      (2,200)
                                       ---------------  -----------         -------       ----------  ----------
Balance at December 31, 1993.........         36,200        30,500           14,900            6,700      88,300
1994 provision.......................          6,000                                                       6,000
Expenditures/disposals...............        (34,600)      (22,100)          (5,600)          (5,900)    (68,200)
Adjustments..........................          5,300           200           (2,200)            (700)      2,600
                                       ---------------  -----------         -------       ----------  ----------
Balance at December 31, 1994.........         12,900         8,600            7,100              100      28,700
1995 provision.......................         61,000         5,700            1,700              400      68,800
Expenditures/disposals...............        (17,700)         (300)          (1,000)                     (19,000)
Adjustments..........................         (4,000)       (8,900)          (4,600)            (100)    (17,600)
                                       ---------------  -----------         -------       ----------  ----------
Balance at December 31, 1995.........    $    52,200     $   5,100        $   3,200       $      400  $   60,900
                                       ---------------  -----------         -------       ----------  ----------
                                       ---------------  -----------         -------       ----------  ----------
</TABLE>

 
    Actions  related  to the  above restructuring  programs  are expected  to be
substantially completed by December 1996.
 
NOTE 5 -- TRADE ACCOUNTS RECEIVABLE
    Trade accounts receivable consist of the following:
 

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
<S>                                                                     <C>         <C>
                                                                           1995        1994
                                                                        ----------  ----------
Commercial............................................................  $   65,861  $   50,371
Government contracts
  Billed..............................................................     165,858     132,593
  Unbilled............................................................      53,488      57,041
                                                                        ----------  ----------
                                                                           285,207     240,005
Less: Allowance for doubtful and potentially unrecoverable amounts....      (2,180)     (2,808)
                                                                        ----------  ----------
                                                                        $  283,027  $  237,197
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

 
    Unbilled receivables consist of amounts  of revenue recognized on  contracts
for  which billings have not  been presented to the  customers. Such amounts are
usually billed and collected within one year.
 
                                     14 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 5 -- TRADE ACCOUNTS RECEIVABLE (CONTINUED)
    The Company generally has several open contract disputes with its customers,
particularly the U.S. government, at any point in time. These disputes arise  in
the  normal  course  of  long-term  contracting and  most  of  the  disputes are
formalized in Requests for Equitable  Adjustments (RFEAs) that relate  primarily
to  work beyond  the scope  of the  contracts. Customers  occasionally terminate
contracts before  completion, resulting  in Termination  for Convenience  Claims
(TCs).  Unbilled  accounts receivable  at December  31,  1995 and  1994 included
$29,800  and  $37,300,   respectively,  in  RFEAs   and  $13,300  and   $13,200,
respectively,  in  TCs. Management  believes  that the  amounts  are collectible
during 1996.
 
    Substantially all billed  accounts receivable are  expected to be  collected
within one year.
 
NOTE 6 -- INVENTORIES AND COSTS INCURRED UNDER LONG-TERM CONTRACTS
    Inventories consists of the following:
 

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                     -------------------------
<S>                                                                  <C>          <C>
                                                                        1995          1994
                                                                     -----------  ------------
Raw materials......................................................  $    10,689  $     17,908
Work-in-process....................................................      264,617       321,436
Finished goods.....................................................        1,748         1,866
                                                                     -----------  ------------
                                                                         277,054       341,210
 
Profit on long-term contracts-in-progress..........................      277,826       387,668
Progress payments to subcontractors................................       52,837        58,377
Recoverable engineering and development costs......................      197,556       290,302
                                                                     -----------  ------------
                                                                         805,273     1,077,557
Inventoried costs and profits related to contracts with progress
 billing terms.....................................................     (622,711)     (874,003)
                                                                     -----------  ------------
Inventories........................................................  $   182,562  $    203,554
                                                                     -----------  ------------
                                                                     -----------  ------------
</TABLE>

 
    Costs  of $81,087 and $90,212 are included in inventory at December 31, 1995
and 1994, respectively, for projects or  products which were not under  contract
at  those dates. Management of the Company believes that all inventories will be
recovered in the normal course of  business, and that costs incurred in  advance
of  contractual  coverage at  December 31,  1995  will receive  firm contractual
coverage in 1996.
 
    Costs and profits  on long-term  contracts with progress  billing terms  are
presented  in  the accompanying  financial  statements according  to  the funded
status of individual contracts as shown below:
 

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                      ------------------------
<S>                                                                   <C>          <C>
                                                                         1995         1994
                                                                      -----------  -----------
Costs and profits included in inventories...........................  $   554,518  $   795,342
Progress billing on contracts.......................................     (375,735)    (576,312)
                                                                      -----------  -----------
Uncompleted contract costs and profits over related billings........  $   178,783  $   219,030
                                                                      -----------  -----------
                                                                      -----------  -----------
Progress billings on contracts......................................  $   196,500  $   154,573
Costs and profits included in inventories...........................      (68,193)     (78,661)
                                                                      -----------  -----------
Uncompleted contracts billings over related costs and profits.......  $   128,307  $    75,912
                                                                      -----------  -----------
                                                                      -----------  -----------
</TABLE>

 
    The government has a  security interest in  the inventories identified  with
progress billable contracts.
 
                                     15 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 7 -- PROPERTY, PLANT AND EQUIPMENT
    Property, plant and equipment consists of the following:
 

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                    --------------------------
<S>                                                                 <C>           <C>
                                                                        1995          1994
                                                                    ------------  ------------
Land and land improvements........................................  $     16,815  $     13,732
Buildings and building improvements...............................       115,811       117,044
Machinery, equipment, furniture and fixtures......................       899,049       902,085
Leasehold improvements............................................        29,390        31,453
                                                                    ------------  ------------
                                                                       1,061,065     1,064,314
Less: Accumulated depreciation and amortization...................      (706,237)     (684,258)
                                                                    ------------  ------------
                                                                         354,828       380,056
Construction-in-progress..........................................        49,333        34,668
                                                                    ------------  ------------
                                                                    $    404,161  $    414,724
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>

 
    Depreciation  and amortization expense  was $60,117, $64,932  and $64,104 in
1995, 1994 and 1993, respectively.
 
NOTE 8 -- GOODWILL AND OTHER INTANGIBLE ASSETS
    Goodwill and other intangible assets comprise:
 

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
<S>                                                                     <C>         <C>
                                                                           1995        1994
                                                                        ----------  ----------
Patents and licenses..................................................  $   21,855  $   20,710
Excess of cost over fair value of acquired businesses.................     131,650     137,087
Intangible pension asset..............................................      19,288      26,721
                                                                        ----------  ----------
                                                                           172,793     184,518
Less: Accumulated amortization........................................     (34,540)    (24,897)
                                                                        ----------  ----------
                                                                        $  138,253  $  159,621
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

 
    Amortization expense was $9,643, $7,932 and  $4,454 in 1995, 1994 and  1993,
respectively.
 
NOTE 9 -- OTHER NONCURRENT ASSETS
    Other noncurrent assets comprise:
 

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
<S>                                                                       <C>        <C>
                                                                            1995       1994
                                                                          ---------  ---------
Long-term receivables...................................................  $   9,811  $  12,036
Equity investments......................................................        606      8,413
Other...................................................................      1,245      4,686
                                                                          ---------  ---------
                                                                          $  11,662  $  25,135
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>

 
                                     16 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 10 -- ACCRUED EXPENSES
 
    Accrued expenses comprise:
 

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
<S>                                                                     <C>         <C>
                                                                           1995        1994
                                                                        ----------  ----------
Price and fee reserves................................................  $   73,243  $   48,527
Restructuring reserve (Note 4)........................................      60,900      28,700
Vacation liability....................................................      44,027      46,043
Accrued payroll and employee benefits.................................      43,350      42,647
Reserve for contract loss.............................................      14,966       5,034
Current portion of Norden consolidation liability (Note 3)............      13,500      11,400
Accrued product warranty..............................................      12,283      16,236
Other.................................................................      51,862      54,052
                                                                        ----------  ----------
                                                                        $  314,131  $  252,639
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

 
NOTE 11 -- INCOME TAXES
    The  provision (benefit) for income taxes by taxing jurisdiction consists of
the following:
 

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                             ---------------------------------
<S>                                                          <C>        <C>         <C>
                                                               1995        1994        1993
                                                             ---------  ----------  ----------
Current
  U.S. federal.............................................  $  57,517  $   74,862  $   51,143
  State and foreign........................................     14,614      17,674      11,763
                                                             ---------  ----------  ----------
                                                                72,131      92,536      62,906
                                                             ---------  ----------  ----------
Deferred
  U.S. federal.............................................     (6,163)    (37,487)    (12,599)
  State and foreign........................................     (1,305)     (8,228)     (3,013)
                                                             ---------  ----------  ----------
                                                                (7,468)    (45,715)    (15,612)
                                                             ---------  ----------  ----------
Total provision for income taxes...........................  $  64,663  $   46,821  $   47,294
                                                             ---------  ----------  ----------
                                                             ---------  ----------  ----------
</TABLE>

 
    A reconciliation from  the statutory  U.S. federal  income tax  rate to  the
Company's effective income tax rate follows:
 

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                    -------------------------------
<S>                                                                 <C>        <C>        <C>
                                                                      1995       1994       1993
                                                                    ---------  ---------  ---------
Statutory U.S. federal income tax rate............................       35.0%      35.0%      35.0%
Increase (decrease) in the tax rate resulting from:
  State taxes, net of U.S. federal tax benefit....................        4.4        4.3        4.5
  Other...........................................................       (1.8)      (2.6)      (2.0)
                                                                          ---        ---        ---
Effective income tax rate.........................................       37.6%      36.7%      37.5%
                                                                          ---        ---        ---
                                                                          ---        ---        ---
</TABLE>

 
                                     17 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 11 -- INCOME TAXES (CONTINUED)
    The  components  of  deferred tax  assets  and liabilities  included  in the
combined statement of financial position are as follows:
 

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
<S>                                                                     <C>         <C>
                                                                           1995        1994
                                                                        ----------  ----------
Assets
  Provisions for expenses and losses..................................  $   97,126  $   77,222
  Employee related accruals...........................................     264,358     226,573
  Inventories.........................................................      14,238      16,423
  Long-term contracts in process......................................      10,583      21,896
                                                                        ----------  ----------
                                                                           386,305     342,114
                                                                        ----------  ----------
 
Liabilities
  Depreciation and amortization.......................................     (71,774)    (78,587)
  Other...............................................................      (5,830)     (5,632)
                                                                        ----------  ----------
                                                                           (77,604)    (84,219)
                                                                        ----------  ----------
Net deferred tax asset................................................  $  308,701  $  257,895
                                                                        ----------  ----------
 
Deferred taxes are displayed as follows:
  Net current deferred tax assets.....................................  $  135,644  $  129,162
  Net noncurrent deferred tax assets..................................     173,057     128,733
                                                                        ----------  ----------
                                                                        $  308,701  $  257,895
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

 
NOTE 12 -- EMPLOYEE BENEFIT PLANS
 
    PENSIONS
 
    Net periodic pension cost was as follows:
 

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                           -----------------------------------
<S>                                                        <C>          <C>         <C>
                                                              1995         1994        1993
                                                           -----------  ----------  ----------
Service cost.............................................  $    17,172  $   25,646  $   18,749
Interest cost on projected benefit obligations...........       87,909      91,591      95,815
Actual return on plan assets.............................     (133,863)      1,389     (88,605)
Net amortization and deferrals...........................       81,244     (53,425)     12,011
                                                           -----------  ----------  ----------
Net periodic pension cost................................  $    52,462  $   65,201  $   37,970
                                                           -----------  ----------  ----------
                                                           -----------  ----------  ----------
</TABLE>

 
    Net periodic pension cost  decreased $12,739 in 1995  compared to 1994,  due
primarily  to  reduced amortization  cost as  a result  of a  pension settlement
charge of $60,984 recognized in 1994.
 
    The Company's restructuring activities contributed  to a high level of  lump
sum cash distributions from the pension fund during 1994. The magnitude of these
cash  distributions required that  the Company apply the  provisions of SFAS No.
88, "Employers' Accounting for Settlements  and Curtailments of Defined  Benefit
Pension  Plans and for Termination Benefits," and recognize a settlement loss of
$60,984 during the
 
                                     18 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 12 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
fourth quarter of 1994. This charge was recorded as an other expense item in the
1994 statement  of  earnings  (see  Note 14).  This  noncash  charge  to  income
represents  the  pro-rata portion  of  unrecognized losses  associated  with the
pension obligation that was settled.
 
    The actuarial present value of benefit obligations and funded status were as
follows:
 

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                  ----------------------------
<S>                                                               <C>            <C>
                                                                      1995           1994
                                                                  -------------  -------------
Actuarial present value of benefit obligation
  Vested........................................................  $  (1,130,535) $  (1,008,994)
  Nonvested.....................................................        (33,604)       (29,501)
                                                                  -------------  -------------
Accumulated benefit obligation..................................  $  (1,164,139) $  (1,038,495)
                                                                  -------------  -------------
                                                                  -------------  -------------
Projected benefit obligation....................................  $  (1,270,998) $  (1,133,188)
Plan assets at fair value.......................................        794,744        759,197
                                                                  -------------  -------------
Projected benefit obligation in excess of plan assets...........       (476,254)      (373,991)
Unrecognized prior service cost (benefit).......................        (27,973)       (28,422)
Unrecognized losses, net........................................        506,062        384,317
Unrecognized net transition obligation..........................         47,261         55,143
                                                                  -------------  -------------
Prepaid pension cost............................................         49,096         37,047
Adjustment to recognize minimum liability.......................       (418,491)      (316,345)
                                                                  -------------  -------------
Accrued pension liability.......................................  $    (369,395) $    (279,298)
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>

 
    For financial reporting purposes, a pension plan is considered unfunded when
the fair value of plan assets  is less than the accumulated benefit  obligation.
When  that is the case,  a minimum pension liability  must be recognized for the
sum of the unfunded amount less any accrued pension cost. In recognizing such  a
liability,  an intangible asset is usually  recorded. However, the amount of the
intangible asset may not be greater than  the sum of the prior service cost  not
yet recognized and any unrecognized transition obligation. When the liability to
be  recognized is greater than the intangible asset limit, the excess is charged
to invested equity,  net of any  tax effects  which could be  recognized in  the
future.
 
    At December 31, 1995, a minimum pension liability of $418,491 was recognized
for  the sum of the unfunded amount of $369,395 plus the prepaid pension cost of
$49,096. An  intangible asset  of $19,288  and a  charge to  invested equity  of
$399,203, which was reduced to $239,522 due to tax deferrals of $159,681, offset
the pension liability. As a result of this remeasurement, year-end 1995 invested
equity was decreased by $65,745 from December 31, 1994.
 
    At December 31, 1994, a minimum pension liability of $316,345 was recognized
for  the sum of the unfunded amount of $279,298 plus the prepaid pension cost of
$37,047. An  intangible asset  of $26,721  and a  charge to  invested equity  of
$289,624, which was reduced to $173,777 due to tax deferrals of $115,847, offset
the pension liability. As a result of this remeasurement, year-end 1994 invested
equity was increased by $52,176 from December 31, 1993.
 
                                     19 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 12 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
    The  Company sponsors various nonqualified  supplemental pension plans which
provide additional benefits to certain employees and are paid from the Company's
assets. The  unfunded  accumulated  benefit  obligation  under  these  plans  at
December  31, 1995 was $37,500 and is  included in the accrued pension liability
above.
 
    Assumptions used  in  developing the  projected  benefit obligations  as  of
December 31 were as follows:
 

<TABLE>
<CAPTION>
                                                                     1995       1994       1993
                                                                   ---------  ---------  ---------
<S>                                                                <C>        <C>        <C>
Discount rate....................................................      6.75%      8.50%      7.25%
Rate of increase in compensation.................................      4.00%      4.00%      4.00%
Rate of return on plan assets....................................      9.75%      9.75%      9.75%
</TABLE>

 
    In  addition to the above described defined benefit pension plans, employees
of the Company meeting certain eligibility requirements may elect to participate
in employee  savings  plans sponsored  by  Westinghouse and  the  Company  which
qualify  as deferred  salary arrangements under  Section 401(k)  of the Internal
Revenue Code. Under these plans, participating employees may defer a portion  of
their  pretax earnings, subject to statutory  limitations. The Company matches a
portion of employees' contributions. Expense recorded by the Company related  to
these  plans  was  $16,338,  $15,869,  and  $15,939  in  1995,  1994  and  1993,
respectively.
 
    POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
 
    Net periodic postretirement cost was as follows:
 

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                               -------------------------------
                                                                 1995       1994       1993
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Service cost.................................................  $   2,768  $   4,360  $   3,286
Interest cost on accumulated postretirement benefit
 obligation..................................................     23,253     21,287     21,809
Amortization of unrecognized net loss........................                 1,053
Actual return on plan assets.................................       (218)
                                                               ---------  ---------  ---------
Net periodic postretirement benefit cost.....................  $  25,803  $  26,700  $  25,095
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>

 
    The actuarial present value of benefit obligations and funded status were as
follows:
 

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                      ------------------------
                                                                         1995         1994
                                                                      -----------  -----------
<S>                                                                   <C>          <C>
Accumulated postretirement benefit obligation:
  Retirees..........................................................  $  (220,801) $  (183,779)
  Fully eligible active participants................................      (11,517)      (9,801)
  Other active participants.........................................      (96,962)     (81,174)
                                                                      -----------  -----------
  Accumulated benefit obligation....................................     (329,280)    (274,754)
  Plan assets at fair value.........................................        3,000        2,748
                                                                      -----------  -----------
Accumulated benefit obligation in excess of plan assets.............     (326,280)    (272,006)
  Unrecognized net loss.............................................       62,250        8,244
                                                                      -----------  -----------
  Accrued postretirement benefits...................................  $  (264,030) $  (263,762)
                                                                      -----------  -----------
                                                                      -----------  -----------
</TABLE>

 
                                     20 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 12 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
    The accumulated postretirement benefit  obligation was calculated using  the
terms  of Westinghouse's medical, dental and life insurance plans, including the
effects of established maximums on covered costs.
 
    The effect of  a 1%  annual increase in  the assumed  healthcare cost  trend
rates  would  increase  the  accumulated  postretirement  benefit  obligation by
approximately $19,169  and would  increase net  periodic postretirement  benefit
cost by approximately $1,620.
 
    Assumptions  used in developing the projected benefit obligation at December
31 were as follows:
 

<TABLE>
<CAPTION>
                                                                  1995       1994       1993
                                                                ---------  ---------  ---------
<S>                                                             <C>        <C>        <C>
Discount rate.................................................      6.75%      8.50%      7.25%
Compensation increase rate....................................      4.00%      4.00%      4.00%
Healthcare cost trend rates...................................     10.50%     11.00%     12.00%
Long-term rate of return on plan assets.......................      7.00%      7.00%      9.75%
</TABLE>

 
    POSTEMPLOYMENT BENEFITS
 
    The Company provides certain postemployment  benefits to former or  inactive
employees  and their dependents during the  time period following employment but
before  retirement.  These  amounts   include  salary  continuation  and   other
miscellaneous  postemployment benefits such as weekly accident and sickness pay,
life  insurance  and  death   gratuities.  Electronic  Systems'  liability   for
postemployment  benefits was $14,994 and $15,652  at December 31, 1995 and 1994,
respectively. In  December  1993,  Electronic Systems  adopted,  retroactive  to
January  1,  1993,  SFAS  No.  112,  "Employers  Accounting  for  Postemployment
Benefits". Electronic Systems'  charge for adoption  of SFAS 112  at January  1,
1993  was  $13,377,  net  of  $8,918  of  deferred  taxes,  and  was immediately
recognized as a cumulative effect of  a change in accounting for  postemployment
benefits.
 
NOTE 13 -- RELATED PARTY TRANSACTIONS
    The Company purchases products from and sells products to other Westinghouse
operations  on a limited basis. The Company also purchases certain services from
Westinghouse, including liability, property and workers' compensation insurance.
These transactions are discussed in further detail below. All transactions  with
Westinghouse  are  assumed  to  be  immediately  settled  and,  accordingly, are
recorded through the invested equity account.
 
    CORPORATE SERVICES
 
    The Company  uses,  and  is  charged directly  for,  certain  services  that
Westinghouse  provides to its  business units. These  services generally include
information systems support, certain  accounting functions, such as  transaction
processing,   legal  services,   environmental  affairs,   human  resources  and
telecommunications.   The    Company   also    purchases   other    Westinghouse
internally-provided  services  as needed,  including printing,  productivity and
quality consulting and other services.
 
    Westinghouse  centrally  develops,  negotiates  and  administers  Electronic
Systems'  insurance programs. The insurance includes broad all-risk coverage for
real  and  personal   property,  third-party   liability  coverage,   employer's
liability,  automobile liability, general product  liability, and other standard
liability coverage. Westinghouse also maintains a program of self-insurance  for
workers'  compensation in the  U.S. The cost  of this program  is charged to the
Company based on claims history.
 
    All of the  cost of services  described above are  included in the  combined
statement  of earnings. Such charges are based on costs which directly relate to
the Company on a basis that management believes is
 
                                     21 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 13 -- RELATED PARTY TRANSACTIONS (CONTINUED)
reasonable. However, management believes that it  is possible that the costs  of
these  transactions may  differ from those  that would  result from transactions
among unrelated  parties.   It  is  not  practical  to  estimate  costs of these
transactions had  the Company  operated as  a separate  stand-alone entity since
alternative procurement opportunities were not explored. Charges included in the
statement of earnings  related  to  the services above  are $51,323, $56,468 and
$69,857 for 1995, 1994 and 1993, respectively.
 
    OTHER CORPORATE EXPENSES
 
    Westinghouse allocates a certain  portion of its  corporate expenses to  its
business  units. These allocated costs include Westinghouse executive management
and corporate overhead; corporate legal, environmental, audit, treasury and  tax
services, and other corporate support and executive costs.
 
    These  corporate expenses are allocated  primarily based on payroll dollars.
Such allocations are not necessarily indicative of actual results and it is  not
practical  for management to estimate the level of expenses that might have been
incurred had the Company operated as a separate stand-alone entity.
 
    Amounts so  allocated included  in the  statement of  earnings are  $47,457,
$45,949  and  $46,078  for  1995,  1994  and  1993,  respectively, approximately
one-half of which  is allowable  for the Company's  government contract  pricing
purposes in accordance with government-mandated cost accounting procedures.
 
    GUARANTEES
 
    The  Company provides guarantees to customers in the form of standby letters
of credit  for Company  bids, advance  payments and  performance of  contractual
obligations. Such guarantees are supported by Westinghouse's lines of credit. At
December  31, 1995 there are  53 guarantees in the  amount of approximately $202
million outstanding.  The  cost  for  the lines  of  credit  which  support  the
guarantees  is charged to the Company and is inventoried if specifically related
to an ongoing contract or otherwise expensed as incurred.
 
NOTE 14 -- OTHER EXPENSE, NET
    Other (income) expense consists of the following:
 

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                               -------------------------------
<S>                                                            <C>        <C>        <C>
                                                                 1995       1994       1993
                                                               ---------  ---------  ---------
Loss on disposition of fixed assets..........................  $   3,508  $   2,175  $   3,603
Share of net losses of investees.............................      5,423        405      3,917
Pension settlement loss (Note 12)............................                60,984
Other........................................................      4,885     (1,100)     4,235
                                                               ---------  ---------  ---------
                                                               $  13,816  $  62,464  $  11,755
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>

 
NOTE 15 -- FORWARD EXCHANGE CONTRACTS
    At December 31, 1995, the Company had outstanding forward exchange contracts
to buy the U.S. dollar equivalent of  $6,592 of foreign currencies and sell  the
U.S.  dollar equivalent of $15,447 of foreign currencies. These contracts mature
in various periods  through March 1998  and were entered  into to hedge  foreign
currency  commitments.  The  aggregate  fair  value  of  these  forward exchange
contracts at  December  31,  1995  was  $6,414  and  $14,176  bought  and  sold,
respectively.   Management believes  that  the market end credit risk associated
with these contracts is not significant.
 
                                     22 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 16 -- GEOGRAPHIC INFORMATION
    A  summary  of  geographic  information  relating  to  foreign  and domestic
operations is presented below:
 

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                      ----------------------------------------
                                                          1995          1994          1993
                                                      ------------  ------------  ------------
<S>                                                   <C>           <C>           <C>
Sales
  U.S...............................................  $  2,510,433  $  2,135,503  $  2,299,698
  Non-U.S...........................................        44,057        49,282        48,375
                                                      ------------  ------------  ------------
                                                      $  2,554,490  $  2,184,785  $  2,348,073
                                                      ------------  ------------  ------------
                                                      ------------  ------------  ------------
Earnings before income taxes and cumulative effect
 of accounting change
  U.S...............................................  $    167,732  $    126,050  $    123,646
  Non-U.S...........................................         4,178         1,436         2,579
                                                      ------------  ------------  ------------
                                                      $    171,910  $    127,486  $    126,225
                                                      ------------  ------------  ------------
                                                      ------------  ------------  ------------
Assets
  U.S...............................................  $  1,492,617  $  1,484,836  $  1,569,868
  Non-U.S...........................................        32,416        38,186        42,934
                                                      ------------  ------------  ------------
                                                      $  1,525,033  $  1,523,022  $  1,612,802
                                                      ------------  ------------  ------------
                                                      ------------  ------------  ------------
</TABLE>

 
    Export sales  included  in U.S.  sales  above were  $546,529,  $466,970  and
$354,923 for 1995, 1994 and 1993, respectively.
 
NOTE 17 -- COMMITMENTS AND CONTINGENCIES
    The  Company leases certain office space  and facilities and equipment under
noncancelable operating leases which expire in various years through 2010. These
leases generally provide for renewal options ranging from one to five years.  In
addition, certain of such leases require the Company to share proportionately in
building  operating costs and  real estate taxes  and contain escalation clauses
for  periodic  increases.  Rental  expense   incurred  under  such  leases   was
approximately $32,067, $25,753 and $39,217 in 1995, 1994 and 1993, respectively.
These  amounts include payments to West  Quest Limited Partnership, of which the
Company is a 25%  owner, of $5,400,  $5,268 and $5,140 in  1995, 1994 and  1993,
respectively.  Future minimum  lease commitments  at December  31, 1995,  are as
follows:
 

<TABLE>
<S>                                                                 <C>
1996..............................................................  $  23,258
1997..............................................................     16,593
1998..............................................................     14,443
1999..............................................................     13,658
2000..............................................................     13,164
2001 and thereafter...............................................     40,196
                                                                    ---------
                                                                    $ 121,312
                                                                    ---------
                                                                    ---------
</TABLE>

 
    These minimum lease commitments  include amounts due  to West Quest  Limited
Partnership  of $5,335 -- 1996, $5,673 --  1997, $5,815 -- 1998, $5,960 -- 1999,
$6,109 -- 2000, and $9,164 -- thereafter.
 
                                     23 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 17 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
    All of the costs that are directly or indirectly allocable to the  Company's
U.S.  government contracts or  subcontracts are subject to  audit by the Defense
Contract Audit Agency (DCAA) or other government agencies. Payments made to  the
Company  under cost-reimbursable contracts, which represent approximately 30% of
total revenue during 1995, are subject  to adjustment (including refunds to  the
government)  in  the event  that  claimed overhead  costs  are determined  to be
unallowable  for  reimbursement.  In  addition,   the  DCAA  has  made   various
allegations  under the Truth in Negotiation Act (TINA). Certain of these matters
are currently  under review  by the  DCAA or  other government  agencies. As  of
December  31, 1995,  DCAA had  completed rate audits  through 1988  and has open
allegations dating  back  to  1985.  While  the  outcome  of  these  matters  is
uncertain,  the Company believes that its existing accruals for any such matters
are adequate  and that  future audits  and  final adjustments  will not  have  a
significant impact on the Company's financial position.
 
    In  the normal  course of  its operations,  the Company  becomes involved in
certain legal proceedings,  including contract claims  and disputes,  employment
related  disputes or  litigation, environmental  matters, and  investigations of
compliance with government laws and  regulations. In the opinion of  management,
based  upon  information presently  available,  after consideration  of existing
accruals, none of these matters is likely to have a significant effect upon  the
financial  position, operating results or liquidity  of  the Company.  The  more
significant of  these matters are discussed below:
 
    - Herman/EEOC
 
      In January 1993, Herman and 96 (later 106) other former Electronic Systems
      employees filed suit for unlawful termination associated with a  reduction
      in  force (RIF) of approximately 1,200  employees. In April 1993, the EEOC
      filed suit  in  connection  with  the same  RIF.  These  cases  have  been
      consolidated for the purpose of discovery. Both suits are based on alleged
      age  discrimination and together involve 385  plaintiffs, 126 of whom have
      been dismissed  with  prejudice from  the  action. The  Federal  Court  in
      Baltimore has adopted a multi-phase trial structure plan pursuant to which
      in  the initial phase  only a few  of the remaining  259 plaintiffs claims
      would be tried and resolved. The  first phase trial is presently  expected
      to commence in 1996.
 
    - Abu Dhabi
 
      In  April 1994, suit was brought in  Abu Dhabi Civil Court for $21 million
      in compensation allegedly due to the plaintiff under an oral agreement  to
      provide  information  and  consulting services  to  Electronic  Systems in
      support of  its  efforts to  win  a contract.  The  trial court  issued  a
      judgment  in November 1995, awarding $3  million to the plaintiff. Both of
      the parties have appealed  this decision, and a  QUASI-DE NOVO trial  will
      now be held on this matter at the next higher court.
     Over  and above any judgment the Court  may render in this case, Electronic
      Systems could be  subject to  a penalty  of up  to $70  million under  the
      contract  if  the Court  determines that  the plaintiff  was an  agent for
      Electronic Systems.
 
    - Iran-Iranian Air Force Claim
 
      In 1982, Electronic Systems filed  claims against the Islamic Republic  of
      Iran  Air Force (IRIAF) with the Iran -- U.S. Claims Tribunal. The Company
      is claiming compensation in  respect of the failure  of IRIAF to pay  sums
      due  under  several  contracts,  and  IRIAF  has  submitted  counterclaims
      challenging the Company's performance of the contracts. The trial in  this
      case  was  completed  in March  1992,  and  the parties  are  awaiting the
      decision of the Tribunal.
 
                                     24 of 28

<PAGE>
                               ELECTRONIC SYSTEMS
                 (A UNIT OF WESTINGHOUSE ELECTRIC CORPORATION)
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1995, 1994 AND 1993
 
                         (DOLLAR AMOUNTS IN THOUSANDS)
 
NOTE 17 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
    - Iran-Iranian Defense Ministry Claim
 
      In October 1991, the Ministry of  Defense of the Islamic Republic of  Iran
      brought  an arbitration before  the International Court  of Arbitration of
      the International Chamber of Commerce against the Company alleging  breach
      of  nine radar  equipment contracts that  had been  executed and performed
      prior to  the  1979  Iranian  Revolution.  Only  one  of  those  contracts
      contained  an arbitration clause, and as a preliminary matter, the Company
      sought to  dismiss the  arbitration proceeding  with regard  to the  other
      eight  contracts. The Company also sought to  dismiss all of the claims as
      untimely because the arbitration  was filed well  after the expiration  of
      the applicable statutes of limitations.
     A  hearing was held in July 1995 with respect to Electronic Systems' motion
      to dismiss  this case  and the  parties  are awaiting  a decision  of  the
      arbitrators.
 
NOTE 18 -- SUBSEQUENT EVENT
    On  January 3, 1996, Westinghouse and Northrop Grumman Corporation (Northrop
Grumman) entered into an Asset  Purchase Agreement whereby substantially all  of
the  operations and assets of the Company  will be sold to Northrop Grumman, and
Northrop Grumman  will  assume  substantially  all of  the  liabilities  of  the
Company.  The consummation of  the sale is  scheduled to take  place on March 1,
1996, pending regulatory approval.
 
                                     25 of 28

<PAGE>



 
                                  SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this amendment to current report to be signed on its
behalf by the undersigned hereunto duly authorized.


                                   NORTHROP GRUMMAN CORPORATION

Date: May 31, 1996                 By:  /s/ James C. Johnson
     ---------------                    ----------------------------
                                               James C. Johnson
                                        Corporate Vice President and
                                        Secretary


                                  Page 26 of 28



<PAGE>



                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit Number                 Description of Exhibit                                 Page
- --------------      -------------------------------------------                      -------
<C>                <S>                                                              <C>

     2.1            Asset Purchase Agreement dated as of January 3, 1996,
                    between Westinghouse Electric Corporation, a Pennsylvania
                    corporation, as Seller, and Northrop Grumman Corporation,
                    a Delaware corporation, as Buyer.  (Schedules and Exhibits
                    have been omitted pursuant to Rule 601(b)(2) of Regulation
                    S-K.  Such Schedules and Exhibits are listed and described
                    in the Purchase Agreement.  Registrant hereby agrees to
                    furnish to the Securities and Exchange Commission, upon its
                    request, any or all such omitted Schedules and Exhibits.)*

     2.2            Letter Agreement dated February 28, 1996 from Westinghouse
                    Electric Corporation to Northrop Grumman Corporation.*

     2.3            Letter Agreement dated February 29, 1996 from Westinghouse
                    Electric Corporation to Northrop Grumman Corporation.
                    (Scheules have been omitted pursuant to Rule 601(b)(2) of
                    Regulation S-K.  Such Schedules are listed and described in
                    the Letter Agreement.  Registrant hereby agrees to furnish
                    to the Securities and Exchange Commission, upon its request,
                    any or all such omitted Schedules.)*

     2.4            Second Amended and Restated Credit Agreement dated as of 
                    April 15, 1994, Amended and Restated as of March 1, 1996
                    among Northrop Grumman Corporation, Bank of America National
                    Trust and Savings Association, as Documentation Agent, 
                    Chemical Securities, Inc., as Syndication Agent, The Chase
                    Manhattan Bank (National Association), as Administrative
                    Agent and the Banks Signatories thereto.  (Schedules and
                    Exhibits have been omitted pursuant to Rule 601(b)(2) of
                    Regulation S-K.  Such Schedules and Exhibits are listed and
                    described in the Credit Agreement.  Registrant hereby agrees
                    to furnish to the Securities and Exchange Commission, upon
                    its request, any or all such omitted Schedules and
                    Exhibits.)*

    23.1            Consent of Independent Accountants

    99.1            Press release of Registrant dated March 1, 1996*
                    
</TABLE>


* Previously filed on Registrant's Form 8-K dated March 18, 1996.


                                  Page 27 of 28






<PAGE>

                      CONSENT OF INDEPENDENT ACCOUNTANTS
                      ----------------------------------

We hereby consent to the incorporation by reference in the Prospectus 
constituting part of this Amendment No. 2 to Registration Statement on Form 
S-3 of Northrop Grumman Corporation of our report regarding Electronic 
Systems (a unit of Westinghouse Electric Corporation) dated January 31, 1996 
appearing in the Current Report on Form 8-K/A for Northrop Grumman 
Corporation dated May 31, 1996.


PRICE WATERHOUSE, LLP
Baltimore, Maryland
May 31, 1996




                                 EXHIBIT 23.1




                                   28 of 28