SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-4821
PITTWAY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 13-5616408
(State of Incorporation) (I.R.S. Employer Identification No.)
200 South Wacker Drive, Chicago, Illinois 60606-5802
(Address of Principal Executive Offices) (Zip Code)
312/831-1070
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (July 21, 1997).
Common Stock 3,938,832
Class A Stock 17,045,519
<PAGE>
PITTWAY CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1997
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Consolidated Statement of Income -
Three and Six Months Ended
June 30, 1997 and 1996 3
Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996 4 - 5
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7 - 9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12 - 14
ITEM 4. Submission of Matters to a Vote of Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
<PAGE>
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 1997 AND 1996
(Unaudited; Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
NET SALES............................ $339,213 $272,361 $640,371 $529,838
OPERATING EXPENSES:
Cost of sales....................... 206,071 165,901 390,162 323,538
Selling, general and administrative. 96,155 78,292 183,853 153,901
Depreciation and amortization....... 8,525 7,069 16,941 13,879
310,751 251,262 590,956 491,318
OPERATING INCOME..................... 28,462 21,099 49,415 38,520
OTHER INCOME (EXPENSE):
Gain on sale of investment.......... 13,162
Gain from Cylink stock offering..... (153) 23,279
Income from marketable securities,
investments and other interest.... 1,592 944 3,107 1,777
Interest expense.................... (3,221) (2,055) (5,835) (4,045)
Miscellaneous, net.................. (213) 257 (291) 444
(1,842) (1,007) (3,019) 34,617
INCOME BEFORE INCOME TAXES........... 26,620 20,092 46,396 73,137
PROVISION FOR INCOME TAXES........... 10,022 7,562 17,502 27,319
NET INCOME........................... $ 16,598 $ 12,530 $ 28,894 $ 45,818
NET INCOME PER SHARE OF COMMON AND
CLASS A STOCK...................... $ .79 $ .60 $ 1.38 $ 2.19
CASH DIVIDENDS DECLARED PER SHARE:
Common............................. $ .067 $ .067 $ .133 $ .133
Class A............................ $ .083 $ .083 $ .167 $ .167
AVERAGE NUMBER OF SHARES OUTSTANDING
(in thousands)..................... 20,981 20,921 20,970 20,916
See accompanying notes.
3
<PAGE>
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited; Dollars in Thousands)
June 30, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash and equivalents................... $ 15,170 $ 32,409
Marketable securities.................. 19,287 26,026
Accounts and notes receivable, less
allowance for doubtful accounts of
$11,042 and $9,670................... 227,108 208,182
Inventories............................ 231,355 203,254
Future income tax benefits............. 18,199 19,358
Prepayments, deposits and other........ 14,921 10,287
526,040 499,516
PROPERTY, PLANT AND EQUIPMENT, at cost:
Buildings.............................. 44,226 43,413
Machinery and equipment................ 251,747 224,268
295,973 267,681
Less: Accumulated depreciation......... (148,128) (132,867)
147,845 134,814
Land................................... 2,720 2,787
150,565 137,601
INVESTMENTS:
Marketable securities.................. 31,196 37,814
Investment in affiliate................ 32,178 31,183
Real estate and other ventures......... 39,599 39,242
Leveraged leases....................... 19,203 19,515
122,176 127,754
OTHER ASSETS:
Goodwill, less accumulated
amortization of $10,979 and $9,707... 88,147 54,068
Other intangibles, less accumulated
amortization of $10,882 and $10,668.. 4,972 5,022
Notes receivable....................... 10,567 8,070
Miscellaneous.......................... 6,985 7,062
110,671 74,222
$909,452 $839,093
See accompanying notes.
4
<PAGE>
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited; Dollars in Thousands)
June 30, December 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable........................... $ 93,573 $ 46,525
Long-term debt due within one year...... 5,711 3,933
Dividends payable....................... 1,717 1,724
Accounts payable........................ 97,545 102,077
Accrued expenses........................ 59,519 53,937
Income taxes payable.................... 5,728 5,685
Retirement and deferred
compensation plans.................... 9,202 6,782
Unearned income......................... 3,503 3,538
276,498 224,201
LONG-TERM DEBT, less current maturities... 91,142 87,916
DEFERRED LIABILITIES:
Income taxes............................ 62,865 65,738
Other................................... 12,445 14,366
75,310 80,104
STOCKHOLDERS' EQUITY:
Preferred stock, none issued............
Common capital stock, $1 par value-
Common stock.......................... 3,939 3,939
Class A stock......................... 17,045 16,987
Capital in excess of par value.......... 24,300 21,714
Retained earnings....................... 417,282 391,753
Cumulative marketable securities
valuation adjustment.................. 9,218 12,453
Cumulative foreign currency translation
adjustment............................ (5,282) 26
466,502 446,872
$909,452 $839,093
See accompanying notes.
5
<PAGE>
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30 1997 AND 1996
(Unaudited; Dollars in Thousands)
1997 1996
Cash Flows From Operating Activities:
Net Income....................................... $ 28,894 $ 45,818
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 16,941 13,879
Gain on sale of investment, net of taxes....... (8,149)
Gain from Cylink stock offering, net of taxes.. (14,413)
Deferred income taxes.......................... 442 (889)
Retirement and deferred compensation plans..... 1,889 3,282
Income/loss from investments adjusted
for cash distributions received............... (1,090) (232)
Provision for losses on accounts receivable.... 2,296 2,443
Change in assets and liabilities, excluding
effects from acquisitions, dispositions
and foreign currency adjustments:
Increase in accounts and notes receivable.... (18,986) (13,598)
Increase in inventories...................... (26,869) (18,969)
Increase in prepayments and deposits......... (4,034) (2,764)
Decrease in accounts payable and accrued
expenses................................... (4,571) (1,271)
Increase in income taxes payable............. 324 131
Other changes, net............................. (1,495) (131)
Net cash (used) provided by operating activities. (6,259) 5,137
Cash Flows From Investing Activities:
Capital expenditures............................. (29,434) (18,984)
Proceeds from sale of investment, net of taxes... 10,748
Proceeds from the sale of marketable securities.. 21,453 7,640
Purchases of marketable securities............... (13,298) (5,900)
Disposition of property and equipment............ 230 486
Additions to investments......................... (5) (566)
Increase in notes receivable..................... (2,435) (2,077)
Net assets of businesses acquired, net of cash... (34,676) (3,065)
Net cash used by investing activities............ (58,165) (11,718)
Cash Flows From Financing Activities:
Net increase in notes payable.................... 47,918 608
Proceeds of long-term debt....................... 8,042 74
Repayments of long-term debt..................... (6,092) (2,320)
Stock options exercised.......................... 906
Dividends paid................................... (3,372) (3,386)
Net cash provided (used) by financing activities. 47,402 (5,024)
Effect of Exchange Rate Changes on Cash............ (217) 15
Net Decrease in Cash and Equivalents............... (17,239) (11,590)
Cash and Equivalents at Beginning of Period........ 32,409 31,407
Cash and Equivalents at End of Period.............. $ 15,170 $ 19,817
See accompanying notes.
6
<PAGE>
PITTWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; Dollars in Thousands)
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Pittway Corporation and its majority-owned subsidiaries (the
"Company" or "Registrant"). Summarized financial information for the
limited real estate partnership ventures and other affiliates is
omitted because, when considered in the aggregate, they do not
constitute a significant subsidiary.
The accompanying consolidated financial statements are unaudited but
reflect all adjustments of a normal recurring nature which are, in the
opinion of management, necessary for a fair presentation of the
financial statements contained herein. However, the financial
statements and related notes do not include all disclosures normally
provided in the Company's Annual Report on Form 10-K. Accordingly,
these financial statements and related notes should be read in
conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
NOTE 2. ACQUISITIONS
In the first six months of 1997, the Company acquired the assets and
businesses of a domestic manufacturer and distributor of fire controls,
a foreign distributor of alarm and other security products and a
producer of trade shows and conferences. The total purchase price for
these businesses was $34,676 cash and $4,453 in deferred payouts
through 2002. These acquisitions were accounted for as purchase
transactions in the consolidated financial statements from their
respective dates of acquisition. The impact on consolidated results of
operations was not significant.
NOTE 3. INVENTORIES
The recorded value of inventories at June 30, 1997 and December 31,
1996 approximate current cost and consist of the following:
1997 1996
Raw materials $ 58,701 $ 41,568
Work in process 18,930 19,560
Finished goods -
Manufactured by the Company 85,066 69,020
Manufactured by others 68,658 73,106
$231,355 $203,254
7
<PAGE>
NOTE 4. MARKETABLE SECURITIES
Information about the Company's marketable securities at June 30, 1997
and December 31, 1996 is as follows:
1997 1996
Current - Adjustable Rate Preferred Stocks -
Aggregate cost $ 19,806 $ 27,937
Net unrealized holding loss (519) (1,911)
Aggregate fair value $ 19,287 $ 26,026
Non-Current - USSB Common Stock -
Aggregate cost $ 15,789 $ 15,789
Unrealized holding gain 15,407 22,025
Aggregate fair value $ 31,196 $ 37,814
In February 1996, the Company sold 13% of its investment in United
States Satellite Broadcasting Company, Inc. (USSB) as part of an
initial public offering of USSB's common stock. The sale of the shares
resulted in an after-tax gain of $8,149, or $.39 per share.
Realized gains and losses are based upon the specific identification
method. Such gains and losses on the adjustable rate preferred stock,
for the six months ended June 30, 1997 and 1996 were not significant.
NOTE 5. INVESTMENT IN AFFILIATE
The investment in affiliate consists of the Company's interest in
Cylink Corporation (Cylink), which is carried at equity. The carrying
value of this investment was increased by $23,279 in the first half of
1996 to reflect the increase in the Company's equity in Cylink's net
book value as a result of an initial public offering in February 1996.
The after-tax gain recorded on the increase in Cylink's equity was
$14,413, or $.69 per share. The quoted market value of the Company's
investment in Cylink was $97,894 at June 30, 1997.
NOTE 6. EARNINGS PER SHARE
Net income per share of common capital stock is based on the combined
weighted average number of Common and Class A shares outstanding during
each period and does not include Class A shares issuable upon exercise
of stock options or for other stock awards because the dilutive effect
is not significant.
8
<PAGE>
NOTE 7. LEGAL PROCEEDINGS
In 1989 a judgment was entered against Saddlebrook Resorts, Inc.
("Saddlebrook"), a former subsidiary of the Company, in a lawsuit which
arose out of the development of Saddlebrook's resort and a portion of
the adjoining residential properties owned and developed by the
Company. The lawsuit alleged damage to plaintiffs' adjoining property
caused by surface water effects from improvements to the properties.
Damages of approximately $8 million were awarded to the plaintiffs and
an injunction was entered requiring, among other things, that
Saddlebrook work with local regulatory authorities to take corrective
actions. In 1990 the trial court entered an order vacating the
judgment and awarding a new trial. In December 1994, Saddlebrook's
motion for summary judgment based on collateral estoppel was granted on
the ground that Plaintiffs' claims were fully retried and rejected in a
related administrative proceeding. Plaintiffs appealed the trial
court's decision granting summary judgment. In August 1996, the
appellate court affirmed all but three issues in the trial court's
summary judgment order in favor of Saddlebrook. A hearing took place on
May 15, 1997 to determine the scope of the three issues remaining for
retrial. The trial court's ruling is expected in August 1997 and the
retrial is expected to begin in early 1998. The Company believes that
the ultimate outcome of the aforementioned lawsuit will not have a
material adverse effect on its financial statements.
The Company in the normal course of business is subject to a
number of lawsuits and claims both actual and potential in nature
including a lawsuit claiming patent infringement that is scheduled for
trial in 1997. While management believes that resolution of the patent
infringement suit and other existing claims and lawsuits will not have
a material adverse effect on the Company's financial statements,
management is unable to estimate the magnitude of financial impact of
claims and lawsuits which may be filed in the future.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the second quarter and first six months of 1997, sales increased 25%
to $339.2 million and 21% to $640.4 million over the respective periods
in 1996. These increases reflect higher sales levels in the Company's
alarm group segment and to a lesser extent the publishing segment.
Domestic and international sales each grew 25% for the quarter and 21%
for the first six months. International business relates to the alarm
group segment and represents 14% of total consolidated sales for both
1997 and 1996. Most of the foreign sales growth in 1997 is from
expansion of European operations. Gross profit increased at about the
same rate as sales. Selling, general and administrative expenses
increased 23% in the second quarter and 19% in the first half of 1997
primarily as a result of increased costs associated with the higher
sales volume.
9
<PAGE>
Alarm Group sales for the quarter increased 27% to $285.2 million and
for the first six months increased 23% to $537.7 million accounting for
84% of consolidated revenues in 1997 versus 82% in 1996. This growth
was due to continuing gains in market share in key product areas and
ongoing expansion in the worldwide alarm systems market. Late in 1996,
the Company received significant equipment and distribution commitments
from two large installation companies, which are beginning to be
reflected in the Company's results. Operating income for this segment
increased 31% and 23% for the second quarter and first half,
respectively, primarily because of the expanded sales volume. In
addition, depreciation expense increased at a lower rate than sales in
the second quarter.
Publishing sales for the quarter and year-to-date grew to $54.1 million
and $102.7 million representing 12% and 10% increases over the same
periods in 1996. Operating income increased 42% to $8.5 million for the
second quarter and 44% to $13.4 million for the first six months of
1997. These favorable results were achieved through a combination of
increased revenues, including a newly acquired trade show held in the
second quarter, and stable operating costs. There was also some benefit
in 1997 from lower paper prices compared to the second quarter and first
half of 1996.
Depreciation and amortization expense increased 21% in the second
quarter and 22% for the first six months, mainly as a result of capital
additions in the alarm segment.
Other income (expense) in the first six months of 1996 included a pretax
gain of $13.2 million on the sale of 622,500 shares of USSB stock in
connection with its initial public offering and a pretax gain of $23.3
million on the increase in the book value of the Company's investment in
Cylink resulting from its initial public offering. Excluding these
gains, other income (expense) was less favorable for the quarter and
year-to-date due to increased interest expense from higher borrowing
levels partially offset by increased earnings recorded on the Company's
investments.
Effective tax rates were 37.6% for the second quarter of 1997 and 1996
and 37.7% and 37.4% for the first six months of 1997 and 1996,
respectively.
ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share" (EPS). The statement replaces primary EPS with basic EPS,
which excludes dilution, and requires presentation of both basic and
diluted EPS on the face of the income statement. Diluted EPS is
computed similarly to the current fully diluted EPS. The statement is
effective for financial statements issued for periods ending after
10
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December 15, 1997, and requires restatement of all prior-period EPS data
presented. The adoption of this statement is not expected to materially
affect either current or prior-period EPS.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". The statement requires the addition of comprehensive income
and its components in the primary financial statements. Comprehensive
income includes cumulative foreign currency translation adjustments and
unrealized investment gains and losses, which are not included in income
under current accounting principles. The statement is effective for
fiscal years beginning after December 15, 1997, and requires comparative
amounts in financial statements for earlier periods presented.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". The statement requires the
Company to report financial and descriptive information about its
reportable segments, determined using the management approach (i.e.
internal management reporting), in interim and year-end financial
statements. The statement is effective for fiscal years beginning after
December 15, 1997.
The Company has not yet determined the impact that SFAS No. 130 and No.
131 will have on its financial statements.
FINANCIAL CONDITION
The Company's financial condition remained strong during the first six
months of 1997. Management anticipates that operations, borrowings and
marketable securities will continue to be the primary source of funds
needed to meet ongoing programs for capital expenditures, to finance
acquisitions and investments and to pay dividends.
In the first six months of 1997, income before depreciation and
amortization provided $45.8 million of net cash which was used, in
addition to $6.3 million of cash, to finance the net increase in working
capital items including a $26.9 million increase in inventory balances
and a $19.0 million increase in accounts receivable. Three acquisitions
were completed in the period which were financed through $34.7 million
of short term borrowings. Additional net short term borrowings of $13.2
million, $8.2 million of net proceeds from the sale of marketable
securities, $2.0 million of net long term borrowings, $0.9 million of
proceeds from the exercise of stock options and $10.9 million of cash
were used to fund $29.4 million in capital expenditures, $3.4 million of
dividends paid to stockholders, and a net increase of $2.4 million in
notes receivable.
The Company continually investigates investment opportunities for growth
in related areas and is presently committed to invest up to $11.1
million in certain affordable housing ventures through 2003.
11
<PAGE>
The Company has real estate investments in various limited partnerships
with interests in commercial rental properties which may be sold or
turned over to lenders due to the weak commercial real estate market of
the past several years. Such events have no effect on net income
although they do have a negative impact on the Company's cash position
because tax payments become due when the properties are sold or returned
to the lenders. The Company has approximately $4.3 million accrued at
June 30, 1997 to fully cover the remaining tax payments that would be
due if all the properties were sold or returned to the lenders.
The Company presently intends to hold its existing investments in
preferred stocks, USSB and Cylink although occasional sales of preferred
and USSB stocks may be made selectively as conditions warrant.
****
This quarterly report, other than historical financial information,
contains forward-looking statements that involve a number of risks and
uncertainties. Important factors that could cause actual results to
differ materially from those indicated by such forward-looking
statements are set forth in Item 1 of the Company's annual report on
Form 10-K for the year ended December 31, 1996. These include risks and
uncertainties relating to government regulation, competition and
technological change, intellectual property rights, capital spending,
international operations, and the Company's acquisition strategies.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 10, 1989, the Circuit Court of the Sixth Judicial Circuit in and
for Pasco County, Florida, entered a judgment against Saddlebrook
Resorts, Inc. ("Saddlebrook"), a former subsidiary of the Company, in a
lawsuit which arose out of the development of Saddlebrook's resort and a
portion of the adjoining residential properties owned and developed by
the Company. The lawsuit (James H. Porter and Martha Porter, Trustees,
et al. vs. Saddlebrook Resorts, Inc. and The County of Pasco, Florida;
Case No. CA83-1860), alleges damage to plaintiffs' adjoining property
caused by surface water effects from improvements to the properties.
Damages of approximately $8 million were awarded to the plaintiffs and
an injunction was entered requiring, among other things, that
Saddlebrook work with local regulatory authorities to take corrective
actions. Saddlebrook made two motions for a new trial, based on
separate grounds. One such motion was granted on December 18, 1990.
Such grant was appealed by the plaintiffs. The other such motion was
denied on February 28, 1991. Saddlebrook appealed such denial. The
12
<PAGE>
appeals were consolidated, fully briefed and heard in February 1992.
Saddlebrook received a favorable ruling on March 18, 1992, dismissing
the judgment and remanding the case to the Circuit Court for a new
trial. An agreed order has been entered by the Court preserving the
substance of the injunction pending final disposition of this matter.
As part of its plan to comply with the agreed order, Saddlebrook filed
applications with the regulatory agency to undertake various remediation
efforts. Plaintiffs, however, filed petitions for administrative review
of the applications, which administrative hearing was concluded in
February 1992. On March 31, 1992, the hearing officer issued a
recommended order accepting Saddlebrook's expert's testimony. The
agency's governing board was scheduled to consider this recommended
order on April 28, 1992, however, shortly before the hearing, the
plaintiffs voluntarily dismissed their petitions and withdrew their
challenges to the staff's proposal to issue a permit.
At the April 28, 1992 hearing the governing board closed its file on the
matter and issued the permits. Saddlebrook appealed the board's refusal
to issue a final order. On July 9, 1993 a decision was rendered for
Saddlebrook remanding jurisdiction to the governing board for further
proceedings, including entry of a final order which was issued on
October 25, 1993. The plaintiffs appealed the Appellate Court decision
to the Florida Supreme Court and appealed the issuance of the final
order to the Second District Court of Appeals. The Florida Supreme
Court heard the appeal on May 3, 1994 and denied plaintiffs' appeal.
The other appeal was voluntarily dismissed by the plaintiffs on June 17,
1994. On remand to the trial court, Saddlebrook's motion for summary
judgment, based on collateral estoppel on the ground that plaintiffs'
claims were fully retried and rejected in a related administrative
proceeding was granted on December 7, 1994. Plaintiffs filed for a
rehearing which was denied. Plaintiffs appealed the trial court's
decision granting summary judgment. In August 1996, the appellate court
affirmed all but three issues in the trial court's summary judgment
order in favor of Saddlebrook. A hearing took place on May 15, 1997 to
determine the scope of the three issues remaining for retrial. The
trial court's ruling is expected in August 1997 and retrial is expected
to begin in early 1998.
Until October 14, 1989, Saddlebrook disputed responsibility for ultimate
liability and costs (including costs of corrective action). On that
date, the Company and Saddlebrook entered into an agreement with regard
to such matters. The agreement, as amended and restated on July 16,
1993, provides for the Company and Saddlebrook to split equally the
costs of the defense of the litigation and the costs of certain related
litigation and proceedings, the costs of the ultimate judgment, if any,
and the costs of any mandated remedial work. Subject to certain
conditions, the agreement permits Saddlebrook to obtain subordinated
loans from the Company to enable Saddlebrook to pay its one-half of the
costs of the latter two items. No loans have been made to date.
13
<PAGE>
The Company believes that the ultimate outcome of the aforementioned
lawsuit will not have a material adverse effect on its financial
statements.
The Company in the normal course of business is subject to a number of
lawsuits and claims both actual and potential in nature including a
lawsuit claiming patent infringement that is scheduled for trial in
1997. While management believes that resolution of the patent
infringement suit and other existing claims and lawsuits will not have a
material adverse effect on the Company's financial statements,
management is unable to estimate the magnitude of financial impact of
claims and lawsuits which may be filed in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 8, 1997.
Management's slate of nominees for directors was unopposed and elected
in its entirety. The results of the voting were as follows:
Director For Withheld Broker Non-Votes
Common Stock-
S. Barrows 3,560,712 9,363 158,137
F. Conforti 3,561,212 8,863 158,137
L. Guthart 3,561,212 8,863 158,137
I. Harris 3,560,712 9,363 158,137
K. Harris 3,561,212 8,863 158,137
N. Harris 3,560,712 9,363 158,137
W. Harris 3,561,212 8,863 158,137
J. Kahn. Jr. 3,561,212 8,863 158,137
L. Mullin 3,561,212 8,863 158,137
Class A Stock-
E. Barnett 12,738,176 165,390 1,130,250
E. Coolidge III 12,738,626 162,027 1,130,250
A. Downs 12,738,526 162,145 1,130,250
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Number Description
27 Financial Data Schedule
(submitted only in electronic format)
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PITTWAY CORPORATION
(Registrant)
By /s/Paul R. Gauvreau
Paul R. Gauvreau
Financial Vice President
and Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
Date: August 1, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,170
<SECURITIES> 19,287
<RECEIVABLES> 238,150
<ALLOWANCES> 11,042
<INVENTORY> 231,355
<CURRENT-ASSETS> 526,040
<PP&E> 298,693
<DEPRECIATION> 148,128
<TOTAL-ASSETS> 909,452
<CURRENT-LIABILITIES> 276,498
<BONDS> 91,142
0
0
<COMMON> 20,984
<OTHER-SE> 445,518
<TOTAL-LIABILITY-AND-EQUITY> 909,452
<SALES> 640,371
<TOTAL-REVENUES> 640,371
<CGS> 390,162
<TOTAL-COSTS> 390,162
<OTHER-EXPENSES> 16,941
<LOSS-PROVISION> 2,296
<INTEREST-EXPENSE> 5,835
<INCOME-PRETAX> 46,396
<INCOME-TAX> 17,502
<INCOME-CONTINUING> 28,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,894
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.38
</TABLE>
