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, 1998
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 30, 1998).
Common Stock 3,938,832
Class A Stock 17,301,243
PITTWAY CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Consolidated Statement of Income -
Three and Six Months Ended
June 30, 1998 and 1997 3
Consolidated Balance Sheet -
June 30, 1998 and December 31, 1997 4 - 5
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7 - 11
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14 - 16
ITEM 4. Submission of Matters to a Vote of Security Holders 17 - 18
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 18
ITEM 6. Exhibits and Reports on Form 8-K 18 - 19
SIGNATURES 19
2
<TABLE>
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 1998 AND 1997
(Unaudited; Dollars in Thousands, Except Per Share Data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1998 1997 * 1998 1997 *
CONTINUING OPERATIONS -
NET SALES.............................. $325,538 $285,158 $629,677 $537,650
OPERATING EXPENSES:
Cost of sales......................... 208,432 181,912 400,764 343,791
Selling, general and
administrative....................... 85,284 76,489 167,323 144,268
Provision for patent litigation....... 43,000
Depreciation and amortization......... 8,453 6,848 16,876 13,594
302,169 265,249 627,963 501,653
OPERATING INCOME....................... 23,369 19,909 1,714 35,997
OTHER INCOME (EXPENSE):
Equity in affiliate's gain on
divestiture.......................... 6,646
Income from marketable securities,
investments and other interest....... 690 1,039 1,469 1,673
Interest expense...................... (3,072) (3,012) (6,573) (5,420)
Income from investments............... 5,595 549 6,457 1,431
Miscellaneous, net.................... (501) (211) (473) (291)
2,712 (1,635) 7,526 (2,607)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES................... 26,081 18,274 9,240 33,390
PROVISION FOR INCOME TAXES............. 9,809 6,559 3,311 12,105
INCOME FROM CONTINUING OPERATIONS...... 16,272 11,715 5,929 21,285
DISCONTINUED OPERATIONS -
Earnings from discontinued
operations net of income taxes of
$2,619, $3,463, $4,285 and $5,397..... 3,673 4,883 6,021 7,609
Provision for divestiture expenses,
net of income taxes of $383........... (617) (617)
3,056 4,883 5,404 7,609
NET INCOME.............................. $ 19,328 $ 16,598 $ 11,333 $ 28,894
PER SHARE OF COMMON AND
CLASS A STOCK (NOTE 3):
Basic:
Income from continuing operations.... $ .77 $ .56 $ .28 $ 1.02
Income from discontinued operations.. .15 .23 .26 .36
Net income........................... $ .92 $ .79 $ .54 $ 1.38
Diluted:
Income from continuing operations.... $ .76 $ .55 $ .28 $ 1.00
Income from discontinued operations.. .14 .23 .25 .36
Net income........................... $ .90 $ .78 $ .53 $ 1.36
CASH DIVIDENDS DECLARED PER SHARE:
Common................................ $ .067 $ .067 $ .133 $ .133
Class A............................... $ .083 $ .083 $ .167 $ .167
AVERAGE SHARES OUTSTANDING (000's)...... 21,115 20,981 21,069 20,970
AVERAGE SHARES AND DILUTIVE
EQUIVALENTS OUTSTANDING (000's)........ 21,538 21,232 21,485 21,221
</TABLE>
* Restated for discontinued operations.
See accompanying notes.
3
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited; Dollars in Thousands)
June 30, December 31,
1998 1997 *
ASSETS
CURRENT ASSETS:
Cash and equivalents................... $ 39,425 $ 40,257
Marketable securities.................. 9,915 16,583
Accounts and notes receivable, less
allowance for doubtful accounts of
$10,423 and $9,691................... 231,220 199,222
Inventories............................ 262,163 240,228
Future income tax benefits............. 16,638 16,246
Prepayments, deposits and other........ 9,698 8,823
569,059 521,359
PROPERTY, PLANT AND EQUIPMENT, at cost:
Buildings.............................. 38,780 38,250
Machinery and equipment................ 214,383 194,479
253,163 232,729
Less: Accumulated depreciation......... (124,207) (109,118)
128,956 123,611
Land................................... 2,304 2,307
131,260 125,918
INVESTMENTS:
Marketable securities.................. 44,195 30,015
Investment in affiliate................ 28,343 20,441
Real estate and other ventures......... 40,911 43,388
Leveraged leases....................... 17,948 18,559
131,397 112,403
OTHER ASSETS:
Goodwill, less accumulated
amortization of $8,326 and $7,293.... 64,685 54,964
Other intangibles, less accumulated
amortization of $5,620 and $5,489.... 3,219 3,207
Notes receivable....................... 13,680 7,534
Investment in discontinued operations.. 60,699 58,397
Miscellaneous.......................... 26,791 26,912
169,074 151,014
$1,000,790 $910,694
* Restated for discontinued operations.
See accompanying notes.
4
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited; Dollars in Thousands)
June 30, December 31,
1998 1997 *
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable........................... $ 68,468 $ 32,336
Long-term debt due within one year...... 5,355 5,730
Dividends payable....................... 31 1,719
Accounts payable........................ 148,056 151,410
Accrued expenses........................ 45,540 43,166
Income taxes payable.................... 5,530 7,175
Retirement and deferred
compensation plans.................... 10,549 10,562
283,529 252,098
LONG-TERM DEBT, less current maturities... 99,325 95,215
DEFERRED LIABILITIES:
Income taxes............................ 50,905 62,611
Litigation.............................. 43,000
Other................................... 8,973 13,636
102,878 76,247
STOCKHOLDERS' EQUITY:
Preferred stock, none issued............
Common capital stock, $1 par value-
Common stock.......................... 3,939 3,939
Class A stock......................... 17,279 17,052
Capital in excess of par value.......... 36,323 24,523
Retained earnings....................... 448,489 440,536
Cumulative marketable securities
valuation adjustment.................. 17,533 8,823
Cumulative foreign currency translation
adjustment............................ (8,505) (7,739)
515,058 487,134
$1,000,790 $910,694
* Restated for discontinued operations.
See accompanying notes.
5
PITTWAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30 1998 AND 1997
(Unaudited; Dollars in Thousands)
1998 1997 *
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Income from continuing operations................ $ 5,312 $ 21,285
Adjustments to reconcile income from continuing
operations to net cash provided by continuing
operating activities:
Depreciation and amortization.................. 16,876 13,594
Equity in affiliate's gain on divestiture...... (4,154)
Deferred income taxes.......................... (3,749) (40)
Retirement and deferred compensation plans..... (3,274) 2,389
Income/loss from investments adjusted
for cash distributions received............... (1,118) (1,090)
Provision for losses on accounts receivable.... 1,866 1,849
Provision for patent litigation................ 26,875
Change in assets and liabilities, excluding
effects from acquisitions, dispositions
and foreign currency adjustments:
Increase in accounts and notes receivable.... (24,219) (20,182)
Increase in inventories...................... (17,861) (26,140)
Increase in prepayments and deposits......... (515) (3,319)
Decrease in accounts payable and accrued
expenses................................... (5,419) (5,300)
(Decrease) increase in income taxes payable.. (31) 324
Other changes, net............................. (355) 306
Net cash used by continuing operating activities. (9,766) (16,324)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................. (20,116) (27,230)
Proceeds from the sale of marketable securities.. 11,661 21,453
Purchases of marketable securities............... (4,988) (13,298)
Disposition of property and equipment............ 220 229
Additions to investments......................... (8) (5)
Increase in notes receivable..................... (8,291) (2,460)
Net assets of businesses acquired, net of cash... (11,616) (20,636)
Net cash used by investing activities............ (33,138) (41,947)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable.................... 35,521 33,627
Proceeds of long-term debt....................... 6,447 8,042
Repayments of long-term debt..................... (2,799) (6,062)
Stock options exercised.......................... 4,379 906
Dividends paid................................... (5,067) (3,372)
Net cash provided by financing activities........ 38,481 33,141
EFFECT OF EXCHANGE RATE CHANGES ON CASH............ (108) (217)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS....... 3,699 8,495
NET DECREASE IN CASH AND EQUIVALENTS............... (832) (16,852)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD........ 40,257 32,477
CASH AND EQUIVALENTS AT END OF PERIOD.............. $ 39,425 $ 15,625
* Restated for discontinued operations.
See accompanying notes.
6
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"). Periods prior to 1998 have been restated
to reflect the discontinuation of certain businesses, as discussed in
Note 2. Except where otherwise indicated, the following notes relate
to continuing operations consisting principally of alarm systems
businesses.
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, 1997.
NOTE 2 - DISCONTINUED OPERATIONS
In December 1997 the Company announced its intention to distribute its
investment in Penton Media, Inc. ("Penton"), a wholly-owned subsidiary
of the Company, to stockholders in a tax-free spin-off. The Company
expects to complete the spin-off in August 1998 to stockholders of
record on July 31, 1998. The spin-off distribution will consist of one
share of Penton Media, Inc. common stock for each share of Pittway
outstanding, without distinction between Pittway's Common and Class A
shares. A provision was recorded for divestiture expenses totaling $617
net of taxes ($.03 per diluted share).
At June 30, 1998 and December 31, 1997 the investment in the net assets
of the discontinued operations consisted of:
June 30, Dec. 31,
1998 1997
Current assets $ 42,278 $ 39,126
Current liabilities (65,207) (64,346)
Net current assets (22,929) (25,220)
Net property, plant and equipment 27,180 27,242
Other non-current assets 76,970 76,923
Non-current liabilities (20,522) (20,548)
$ 60,699 $ 58,397
7
Net sales of the discontinued operations for the three month periods
ended June 30, 1998 and 1997 were $59,186 and $54,055, and for the six
month periods then ended were $111,671 and $102,721, respectively.
NOTE 3. EARNINGS PER SHARE AND STOCK SPLIT
Basic net income per common share amounts were calculated by dividing
earnings by the combined weighted average number of Class A and Common
shares outstanding. Diluted net income per share amounts were based on
the same reported earnings but assume the issuance of Class A stock
upon exercise of outstanding stock options and distributable as
performance and bonus share awards.
At the May 1998 annual stockholders' meeting, stockholders approved an
increase in the number of authorized shares to 100,000,000 for Class A
stock and 120,000,000 for Common stock. On July 22, 1998 the Board of
Directors declared a 2-for-1 stock split in the form of a 100% stock
dividend on the Company's Common and Class A Common stock, payable
September 11, 1998 to stockholders of record September 1, 1998. Had the
additional shares resulting from the proposed stock split been
outstanding throughout the three and six month periods ending June 30,
1998 and 1997, per share earnings would have been as follows:
Three Months Six Months
1998 1997 1998 1997
PRO FORMA EARNINGS PER SHARE
OF COMMON AND CLASS A STOCK:
Basic:
Income from continuing
operations $ .39 $ .28 $ .14 $ .51
Income from discontinued
operations .07 .12 .13 .18
Net income $ .46 $ .40 $ .27 $ .69
Diluted:
Income from continuing
operations $ .38 $ .28 $ .14 $ .50
Income from discontinued
operations .07 .11 .12 .18
Net income $ .45 $ .39 $ .26 $ .68
Financial information contained elsewhere in this report has not been
adjusted to reflect the impact of the stock split.
NOTE 4. CHANGE IN ACCOUNTING POLICY
Effective January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. (SFAS) 130 "Reporting
Comprehensive Income." The statement requires the addition of
comprehensive income and its components in the Company's annual
financial statements. Other comprehensive income (loss) includes
cumulative foreign currency translation adjustments and unrealized
8
investment gains and losses, which are not included in income under
current accounting principles. Total comprehensive income (loss) for
the three and six month periods ended June 30 was:
Three Months Six Months
1998 1997 1998 1997
Net income $19,328 $16,598 $11,333 $28,894
Other comprehensive income 6,050 (6,241) 7,944 (8,541)
Total comprehensive income $25,378 $10,357 $19,277 $20,353
NOTE 5. ACQUISITIONS
In the first six months of 1998, the Company acquired the assets and
business of a domestic distributor of alarms and other security
equipment and three foreign alarm businesses for stock and cash totaling
$15,716. During the same period in 1997, the Company acquired the
assets and businesses of a domestic manufacturer and distributor of
fire controls and a foreign distributor of alarms and other security
equipment for $20,636 cash and $1,000 in deferred payments through
2003. All of 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 6. INVENTORIES
The recorded value of inventories at June 30, 1998 and December 31,
1997 approximate current cost and consist of the following:
1998 1997
Raw materials $ 61,677 $ 58,323
Work in process 16,744 16,501
Finished goods -
Manufactured by the Company 93,767 89,776
Manufactured by others 89,975 75,628
$262,163 $240,228
NOTE 7. MARKETABLE SECURITIES
Information about the Company's marketable securities at June 30, 1998
and December 31, 1997 is as follows:
1998 1997
Current - Adjustable Rate Preferred Stocks -
Aggregate cost $ 10,001 $ 16,558
Net unrealized holding (loss) gain (86) 25
Aggregate fair value $ 9,915 $ 16,583
Non-Current - USSB Common Stock -
Aggregate cost $ 15,789 $ 15,789
Unrealized holding gain 28,406 14,226
Aggregate fair value $ 44,195 $ 30,015
9
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, 1998 and 1997 were not significant.
NOTE 8. INVESTMENT IN AFFILIATE
The investment in affiliate consists of the Company's interest in
Cylink Corporation (Cylink), which is carried at equity. In March 1998
Cylink sold its wireless division for $60.5 million. The Company
increased the carrying value of its investment in Cylink by $6,646 and
recorded an after-tax gain of $4,154, or $.20 per diluted share, to
reflect its equity in the gain on this divestiture. At June 30, 1998,
the Company's 8.6 million shares of Cylink stock had a quoted market
value of $103,273.
The summarized results of operations of Cylink for the three and six
month periods ended June 30 were:
Three Months Six Months
1998 1997 1998 1997
Revenue $18,035 $11,584 $33,864 $20,936
Gross profit 13,563 8,199 25,781 14,741
Income from continuing
operations 1,732 260 2,814 175
Net income 1,732 1,223 25,438 2,330
NOTE 9. 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. On April 1, 1998, the
trial court entered an order limiting the scope of the retrial in light
of the appellate court's ruling. On April 13, 1998, plaintiffs moved
for reconsideration of the trial court's April 1, 1998 order which
motion was denied on July 30, 1998. Retrial is expected to begin in
late 1998 or early 1999. The Company believes that the ultimate
outcome of the aforementioned lawsuit will not have a material adverse
effect on its financial statements.
10
In 1995 a lawsuit was brought against the Company by Interactive
Technologies, Inc. ("ITI"), seeking lost profits and royalty damages of
up to $66,800 on account of Company sales of products which the
plaintiff alleges infringed on its patent. The plaintiff also asserted
trebling of damages, if awarded, based upon alleged willful
infringement. The Company moved for summary judgment of non-
infringement and, in December 1997, the Court issued its order granting
the Company partial summary judgment, stating its products did not
literally infringe upon plaintiff's patent claims. In March 1998, the
jury handed down a verdict against the Company, which was entered by
the Court in April 1998, awarding damages of $35,954. The jury found
that the Company did not willfully infringe. The company has recorded a
provision of $43,000 in the first quarter of 1998 which considers the
judgment and interest. The company has appealed the verdict.
The Company in the normal course of business is subject to a number of
lawsuits and claims both actual and potential in nature. While
management believes that resolution of 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 CONTINUING OPERATIONS
Continuing operations primarily represent the Company's alarm
manufacturing and distribution operations. For the second quarter and
first six months of 1998, sales increased 14% to $325.5 million and 17%
to $629.7 million over the respective periods in 1997. Domestic and
international sales grew 14% and 15%, respectively, for the quarter and 17% and
18%, respectively, for the first six months over the same periods last year.
International business represents 17% of total revenues from continuing
operations in 1998 and 1997. Gross profit increased at about the same
rate as sales. Selling, general and administrative expenses increased
11% in the second quarter and 16% in the first half of 1998 primarily as
a result of increased costs associated with the higher sales volume.
Operating income increased 17% for the quarter to $23.4 million and 24%
year to date to $44.7 million, excluding a charge of $43.0 million
related to a patent lawsuit.
Sales and operating income gains were achieved in spite of ongoing
economic problems in international markets and strong currencies in the
U.S. and the U.K. which have hurt exports from these countries
throughout the year. Domestically, the company's manufacturing
operations increased revenues by winning additional national account
business, through new product introductions and expanded market share.
Improved operating efficiencies also had a positive impact on operating
income. The company's domestic distribution operations achieved double
11
digit revenue growth despite margin pressure related to ongoing
consolidation in the alarm installation market. Part of the increase
also resulted from an acquisition in April 1998. International revenues
were enhanced through three acquisitions in the second quarter of 1998
and two acquisitions late in 1997.
Depreciation and amortization expense increased 23% in the second
quarter and 24% for the first six months, mainly as a result of capital
additions in the manufacturing operations.
Other income (expense) was very favorable in 1998 compared to 1997 due
to increased cash distributions from real estate ventures, a gain on the
sale of an investment in the second quarter of 1998 and a $6.4 million
gain recorded in the first quarter on the Company's share in a gain
recorded by Cylink Corporation (a 29% owned affiliate) on the
divestiture of its wireless division. Slightly offsetting the increased
gains in 1998 were increased interest expense on higher borrowing
levels, primarily for the first quarter of 1998 over 1997.
Effective tax rates were 37.6% and 35.8% for the second quarter and
first six months of 1998 and 35.9% and 36.3% for the second quarter and
first six months of 1997.
DISCONTINUED OPERATIONS
Publishing sales for the quarter and year-to-date grew to $59.2 million
and $111.7 million each representing a 9% increase over the same periods
in 1997. The increase is attributable to increased advertising
revenues, which include the results of a directory published every other
year and two newly launched publications, the inclusion of trade shows
acquired in December 1997, and increased revenues from external printing
customers. Operating income decreased 19% to $6.9 million for the second
quarter and 14% to $11.6 million for the first six months of 1998. The
decreased earnings reflect period costs related to trade shows acquired
in December 1997, interest and amortization expenses related to these
acquired trade shows and higher charges related to Pittway stock
appreciation rights held by Penton employees. The spin-off of the
publishing segment is expected to be completed in August 1998.
FINANCIAL CONDITION
The Company's financial condition remained strong during the first six
months of 1998. As of June 30, 1998 cash and equivalents totaled $39.4
million, down slightly from December 31, 1997 balances of $40.3 million.
Net working capital was $285.5 at June 30, 1998 up from $269.3 million
at December 31, 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.
12
In the first six months of 1998, continuing operations used a net cash
amount of $9.8 million, generated from net income from continuing
operations excluding depreciation, amortization, the net gain from the
Cylink divestiture, the provision for patent litigation and other non-cash
items. The cash was used to fund a $17.9 million increase in inventory, a $24.2
million increase in receivables and a $5.4 million reduction in accounts
payable and accrued liabilities. Short-term borrowings of $35.5 million,
net proceeds from the issuance of long term debt of $3.6 million, $6.7
million of net proceeds from the sale of marketable securities and $4.4
million received on the exercise of stock options, along with $4.4
million of cash and $.3 million from other sources were used to finance
the $9.8 million of net cash used in operations, four acquisitions
completed in the period totaling $11.6 million (in addition to $5.1
million of Pittway Class A Stock), $20.1 million of capital
expenditures, an $8.3 million increase in notes receivable, and $5.1
million of dividends.
Discontinued operations provided $3.7 million of funds in the period.
The Company continually investigates investment opportunities for growth
in related areas and is presently committed to invest up to $29.5
million in certain affordable housing ventures through 2005.
The Company has real estate investments in various limited partnerships
with interests in commercial rental properties carried at a zero basis
which are being offered for sale. Cash distributions received from
these ventures are recorded as other income. The company has
approximately $3.8 million accrued at June 30, 1998 to cover the
deferred income tax liability that would be due if all the properties
were sold.
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.
ACCOUNTING CHANGES
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). The statement is effective for fiscal
years beginning after December 15, 1997. The Company will disclose
segment information as determined under methods prescribed by SFAS No.
131 in its 1998 annual report.
13
****
This quarterly report, other than historical financial information,
contains forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995, 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, 1997. These include risks and
uncertainties relating to the potential spin-off of the Company's
publishing business, pending litigation, 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
Property Damage Claim
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 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
14
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. On April 1, 1998, the trial court
entered an order limiting the scope of a retrial in light of the
appellate court's ruling. On April 13, 1998, plaintiffs moved for
reconsideration of the trial court's April 1, 1998 order which motion
was denied on July 30, 1998. Retrial is expected to begin in late 1998
or early 1999.
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.
The Company believes that the ultimate outcome of the aforementioned
lawsuit will not have a material adverse effect on its financial
statements.
Patent Infringement Claim
On August 16, 1995, Interactive Technologies, Inc. commenced a lawsuit
in U.S. District Court against the Company alleging patent
infringement. The plaintiff claimed the Company infringed on their
patent by making, using and selling certain security system products in
the United States, and that the infringement was willful. Plaintiff
initially sought unspecified damages, and an injunction. The Company
denied infringement, maintaining the plaintiff's patent was invalid, as
well as unenforceable because the plaintiff committed inequitable
15
conduct before the Patent Office when applying for the patent. During
discovery, the plaintiff informed the Company it was seeking damages
measured by its lost profits or not less than a reasonable royalty on
sales of the Company. Fact discovery in the action closed on January
17, 1997. The Court conducted a Markman hearing in October 1997 to
construe the patent claims asserted by plaintiff and issued its Order
interpreting the claims on October 14, 1997. The Company moved for
summary judgment of non-infringement. On December 2, 1997 the Court
issued its Order granting partial summary judgment that the Company's
products did not literally infringe the patent claims, and denying
summary judgment of no infringement. Jury trial started on January 7,
1998. During the trial, the plaintiff indicated it was seeking lost
profits and royalty damages of up to $66.8 million. The plaintiff also
asserted trebling of damages, if awarded, based upon alleged willful
infringement. On March 9, 1998 the jury handed down a verdict against
the Company awarding damages of $36.0 million. The jury found that the
Company did not willfully infringe. The Court entered judgment on the
jury's verdict on April 9, 1998. Consequently, the company recorded a
provision of $43.0 million in the first quarter of 1998, which
considers the judgment and interest. The Company filed post-trial
motions on April 20, 1998 for judgment as a matter of law in favor of
the Company which were denied. The Company has appealed the verdict.
The ultimate outcome of this matter is uncertain but will result in
significant damages should the Company lose the appeal.
Other
The Company in the normal course of business is subject to a number of
lawsuits and claims both actual and potential in nature. While
management believes that resolution of 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.
16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 7, 1998 and the
following actions were taken:
(a) 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 * 2,749,730 4,282 900
F. Conforti 2,750,280 4,632 0
L. Guthart 2,750,687 4,225 0
I. Harris 2,746,369 7,643 900
K. Harris 2,750,615 4,297 0
N. Harris 2,746,369 7,643 900
W. Harris 2,750,515 4,297 100
J. Kahn. Jr. 2,750,630 4,182 100
J. McCarter 2,747,803 7,009 100
Class A Stock-
E. Barnett 13,162,715 226,643 0
E. Coolidge III 13,166,600 222,758 0
A. Downs 13,163,296 226,062 0
* Mr. Barrows died on July 12, 1998 leaving a vacancy on the
Board.
(b) The resolution to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares was approved.
The results of the voting were as follows:
For Against Abstentions Broker Non-Votes
2,676,135 488,572 8,336 100
(c) The resolution to amend the Company's 1990 Stock Awards Plan was
approved. The results of the voting were as follows:
For Against Abstentions Broker Non-Votes
3,091,194 499,220 16,922 330,362
(d) The 1998 Director Stock Option Plan was approved. The results of
the voting were as follows:
For Against Abstentions Broker Non-Votes
3,164,827 428,373 14,136 330,362
17
(e) The potential financial performance criteria established by the
Compensation Committee for certain annual bonuses for three of the
Company's executive officers was approved. The results of the voting
were as follows:
For Against Abstentions Broker Non-Votes
3,903,007 65,115 13,509 11,312
ITEM 5. OTHER INFORMATION
Pursuant to an amendment to Securities Exchange Act Rule 14a-4(c)(1)
which became effective June 29, 1998, the persons acting under proxies
solicited by the Company's Board of Directors in connection with the
Company's 1999 annual meeting of stockholders will have discretionary
authority to vote the shares represented thereby on any matter properly
presented by a stockholder at such meeting that is not specifically set
forth in the notice of such meeting if the Company does not have notice
of such matter on or before February 15, 1999 (unless the date of the
1999 annual meeting is changed by more than 30 days from May 7, 1999 in
which event such persons will have such discretionary authority if the
Company does not have notice of such matter a reasonable time before
the Company mails its proxy materials for such meeting).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Number Description
2 Combination Agreement, dated May 21, 1998, by and
among Penton Media, Inc., DM Acquisition Corp.,
Pittway Corporation, Donohue Meehan Publishing
Company, William C. Donohue, and John J. Meehan
(incorporated by reference to Exhibit 2.1 of the
Penton Media, Inc. S-1 Registration Statement
Number 333-56877 filed with the commission on
June 15, 1998).
3.1 Restated Certificate of Incorporation of
Registrant
3.2 Certificate of Amendment of the Restated Certificate
of Incorporation of Registrant dated June 23, 1987
3.3 Certificate of Amendment of Restated Certificate of
Incorporation of Registrant dated December 28, 1989
3.4 Certificate of Amendment to Restated Certificate of
Incorporation of Registrant dated May 9, 1996
18
Exhibits. (continued)
Number Description
3.5 Certificate of Amendment to Restated Certificate of
Incorporation of Registrant dated May 7, 1998
27.1 Financial Data Schedule for the quarter ended
June 30, 1998 (submitted only in electronic
format).
27.2 Restated Financial Data Schedule for the quarter
ended March 31, 1998 (submitted only in
electronic format).
27.3 Restated Financial Data Schedule for the year
ended December 31, 1996 and 1997 and the first
three quarters of 1997 (submitted only in
electronic format).
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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, Treasurer
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
Date: August 4, 1998
19
EXHIBIT 3.1
PITTWAY CORPORATION
JUNE 30, 1998
FORM 10-Q
RESTATED
CERTIFICATE OF INCORPORATION
OF
STANDARD SHARES, INC.
_________________
Standard Shares, Inc. (the 'Corporation') was originally incorporated as
Standard Power and Light Corporation. The Corporation's original Certificate
of Incorporation was filed with the Secretary of State of Delaware on June 20,
1925. This Restated Certificate of Incorporation was proposed to the
stockholders of the Corporation by the Board of Directors on May 8, 1984 and
duly adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of Delaware by an affirmative vote of the holders of
two-thirds of all outstanding stock entitled to vote at the annual meeting of
stockholders of the Corporation held in Chicago, Illinois on June 22, 1984.
FIRST: The name of this Corporation is STANDARD SHARES, INC.
SECOND: Its principal office in the State of Delaware is located at No.
100 West 10th Street, in the City of Wilmington, County of New Castle. The
name and address of its resident agent is THE CORPORATION TRUST COMPANY, No.
100 West 10th Street, Wilmington, Delaware.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware and to act as a statutory agent for other
corporations.
FOURTH: 1. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is eight million
(8,000,000) shares of which two million (2,000,000) shares shall be designated
Preferred Stock with no par value and six million (6,000,000) shares shall be
designated Common Stock of the par value of One Dollar ($1.00) per share.
The designations and powers, preferences and rights, and the
qualifications, limitations or restrictions of the Preferred Stock and the
Common Stock of the Corporation are set forth in the following provisions:
(I) Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or
more series. All shares of any one series of Preferred Stock shall be
identical in all respects except that shares of any one series issued at
1
different times may differ as to the dates from which dividends thereon
shall be cumulative. Subject to the Certificate of Incorporation,
authority is expressly granted to the Board of Directors to authorize the
issuance of one or more series of Preferred Stock, and to fix by
resolution or resolutions providing for the issuance of each such series
the voting powers, designations, preferences, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, to the full extent now or
hereafter permitted by law, including but not limited to the following:
(1) The distinctive designations of such series and the number of
shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors
in creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by action of the
Board of Directors;
(2) The dividend rights of such series (including, without
limitation, the right, if any, of the holders of shares of such series
to participate with the holders of the outstanding shares of Common
Stock in any distribution of dividends in excess of the preferential
dividend fixed for shares of such series and the terms and conditions
of such participation), the extent, if any, to which such dividends
shall be cumulative, the conditions upon which and/or the dates when
such dividends shall be payable and the date from which dividends on
cumulative series shall accrue and be cumulative;
(3) Whether such series shall be redeemable and, if so, the terms
and conditions of such redemption, including the time or times when
and the price or prices at which shares of such series shall be
redeemed, which price or prices may vary at different redemption dates
or otherwise as permitted by law;
(4) The rights of such series in the event of the voluntary or
involuntary liquidation, merger, consolidation, dissolution, winding
up or distribution or sale of the assets of the Corporation;
(5) The terms and conditions, if any, upon which the shares of
such series shall be convertible into or exchangeable for shares of
any other series, class or classes, or any other securities, including
without limitation provisions for the adjustment of the conversion
rate in such events as the Board of Directors may determine; and
(6) The voting powers, if any, of the holders of shares of such
series which may, without limiting the generality of the foregoing,
include (i) the right to more or less than one vote per share on any
or all matters voted upon by the stockholders, or (ii) the right,
voting as a series by itself or with other series of Preferred Stock
or all series of Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred Stock or
under such other circumstances or on such particular matters as the
Board of Directors may determine.
2
(II) Common Stock
(1) Subject to provisions of law and the preferences of the
Preferred Stock and of any other stock ranking prior to the Common
Stock as to dividends, and after the Corporation shall have complied
with all requirements, if any, with respect to the setting aside of
sums as sinking funds or redemption or purchase accounts, the holders
of shares of Common Stock shall be entitled to receive dividends at
such times and in such amounts as may be determined by the Board of
Directors.
(2) Except as otherwise provided by law and in the Certificate of
Incorporation or except as determined pursuant to authority of the
Board of Directors as provided in this Article Fourth, all voting
rights shall be vested exclusively in the holders of the outstanding
shares of Common Stock and each such holder shall be entitled to one
vote per share for all purposes for each share of Common Stock held
of record by him.
(3) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, after payment or provi-
sion for payment of the debts and other liabilities of the
Corporation and the preferential amounts to which the holders of
shares of any stock ranking prior to the Common Stock in distribution
of assets shall be entitled upon liquidation, dissolution, or winding
up of the Corporation, the holders of shares of Common Stock shall be
entitled to share in the remaining assets of the Corporation according
to their respective interests.
2. Except as otherwise provided by law, the presence, in person or by
proxy, of the holders of a majority of the shares of the stock of the
Corporation issued, outstanding and entitled to vote thereat shall be requisite
and shall constitute a quorum at any meeting of the stockholders. If at any
meeting of stockholders there shall be less than a quorum so present, the
stockholders present in person or by proxy and entitled to vote thereat,
without further notice, may adjourn the meeting from time to time until a
quorum shall be present, but no business shall be transacted at any such
adjourned meeting except such as might have been lawfully transacted had the
meeting not been adjourned.
3. The holders of certificates representing shares of common stock and
common stock, Series B, of this Corporation heretofore authorized, issued and
outstanding (old common stock and old common stock, Series B, respectively)
shall have no rights under the old certificates of this Corporation except
the right to receive, in lieu of such certificates, certificates for shares of
common stock, at the rate of one share of such common stock for each share of
old common stock, and for each share of old common stock, Series B, and pending
such receipt, the holders of old common stock and old common stock, Series B,
shall have the rights to which they would be entitled upon receipt of such
common stock of the Corporation.
4. Without the affirmative vote, or consent in writing, of the holders
of at least two-thirds (2/3) of the full number of shares of common stock
issued and outstanding, the Corporation shall not have power:
3
(a) To liquidate, dissolve or wind up its affairs;
(b) To merge or consolidate with any other corporation,
association, trust, partnership or entity; or
(c) To sell, exchange, assign, convey, transfer or in any other
way dispose of all or substantially all of its property and assets,
including its good will and its corporate franchises, in one
transaction or in a series of related transactions.
Notwithstanding the foregoing, no vote or consent of the stockholders of
the Corporation shall be necessary to authorize a merger if (1) the Corporation
is a constituent corporation which survives the merger, (2) the agreement of
merger does not change the name or authorized shares of any class or otherwise
amend the certificate of incorporation of the Corporation, and (3) the
authorized unissued shares or the treasury shares of any class of the
Corporation to be issued or delivered under the plan of merger do not exceed 15
per cent of the shares of the Corporation of the same class outstanding
immediately prior to the effective date of the merger.
Without the affirmative vote, or consent in writing, of the holders of at
least two-thirds (2/3) of the full number of shares of common stock issued and
outstanding, the Corporation shall not have the power to amend this Section 4
of this Article Fourth.
FIFTH: This Corporation is to have perpetual existence.
SIXTH: The following provisions are made for the management of the
business and for the conduct of the affairs of the Corporation, including
provisions creating, defining, limiting and regulating the powers of the
Corporation, the directors and the stockholders, to wit:
1. Any contract or other transaction between the Corporation and one or
more of its directors, or between the Corporation and any firm of which one or
more of its directors are members or employees, or in which they are
interested, or between the Corporation and any corporation or association of
which one or more of its directors are shareholders, members, directors,
officers, or employees, or in which they are interested, shall be valid for
all purposes, notwithstanding the presence of such director or directors at the
meeting of the Board of Directors of the Corporation which acts upon, or in
reference to, such contract or transaction, if the fact of such interest shall
be disclosed or known to the Board of Directors and the Board of Directors
shall, nevertheless, authorize, approve and ratify such contract or transaction
by a vote of a majority of the directors present, such interested director or
directors to be counted in determining whether a quorum is present, but not to
be counted in calculating the majority necessary to carry such vote; and no
director or directors having such adverse interest shall be liable to the
Corporation or to any stockholder or creditor thereof, or to any other person,
for any loss incurred by it under or by reason of such contract or transaction;
nor shall any such director or directors be accountable for any gains or
profits realized thereon; always provided, however, that such contract or
transaction shall at the time at which it was entered into have been a
reasonable one to have been entered into and shall have been upon terms that at
the time were fair, and any such contract or transaction shall be prima facie
4
presumed to have been a fair and reasonable one to have been entered into and
upon terms that at the time were fair. This Section 1 of this Article Sixth
shall not be construed to invalidate any contract or other transaction which
would otherwise be valid under the common or statutory law applicable thereto.
2. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding to the
fullest extent permitted by law. The indemnification provided by this Section
shall not be deemed exclusive of any other rights to which any person may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue, as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
3. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths (3/4) in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this Corporation, as the case may be, agree to any compromise or arrangement,
and to any reorganization of this Corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, but subject in all respects to the provisions of the foregoing
Articles Fourth and Sixth, the Board of Directors is expressly authorized.
1. To make, amend, alter, change, add to or repeal the By-Laws for the
Corporation, without any action on the part of the stockholders; provided that
5
no By-Law which is subject to the provision that the same may not be amended,
altered, changed, added to or repealed without action on the part of the
stockholders or some portion or percentage thereof, or action by some portion
or percentage of the Board of Directors, may be amended, altered, changed,
added to or repealed without such designated action on the part of such
stockholders or by the Board of Directors. The By-Laws made by the directors
may be amended, altered, changed, added to or repealed by the stockholders,
subject to the foregoing provisions.
2. By the affirmative vote therefor of the majority of the full Board of
Directors, to designate one or more committees, which, to the extent provided
in said resolution or in the By-Laws of the Corporation, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it.
Signed and attested to on the 22nd day of June, 1984.
ATTEST: _______________________________
President
___________________________
Secretary
6
EXHIBIT 3.2
PITTWAY CORPORATION
JUNE 30, 1998
FORM 10-Q
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
STANDARD SHARES, INC.
Adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware
_______________________________________________________
The undersigned, Irving B. Harris and Nicholas J. Caccamo, being,
respectively, the President and Secretary of Standard Shares, Inc., a
Delaware corporation (the "Company"), do hereby certify as follows:
1. That the Restated Certificate of Incorporation of the Company
is hereby amended by the addition of Paragraph 4 to Article SIXTH thereto,
which shall read in its entirety as follows:
"4. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders,
( ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, ( iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived any improper personal benefit. If the Delaware
General Corporation Law is amended, after approval by the stockholders of
this provision, to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification."
2. That, in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware, such amendment was declared
advisable by unanimous vote of the Directors of the Company at a meeting held
on May 6, 1987, and has been duly adopted at a meeting held on June 24, 1987,
by a majority of the outstanding stock of the Company entitled to vote thereon,
including a majority of the votes cast by shares of stock which were not
beneficially owned either by members of the Harris family or by Directors of
the Company.
IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Amendment this 23rd day of June, 1987.
_____________________________
Irving B. Harris
President
Attest:
_____________________________
Nicholas J. Caccamo
Secretary
EXHIBIT 3.3
PITTWAY CORPORATION
JUNE 30, 1998
FORM 10-Q
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
STANDARD SHARES, INC.
_________________
Adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware
_________________
WE, _______________________, Vice President, and ______________________,
Secretary, of Standard Shares, Inc., a corporation existing under the laws of
the State of Delaware (the "Corporation"), do hereby certify as follows:
FIRST: That the Restated Certificate of Incorporation of said Corporation
is amended as follows:
By striking out the whole of Article FIRST thereof as it now
exists and inserting in lieu and instead thereof a new Article
FIRST, reading as follows:
"FIRST: The name of this Corporation is PITTWAY CORPORATION."
SECOND: That the Restated Certificate of Incorporation of said
Corporation is further amended as follows:
By striking out the whole of Article FOURTH thereof as it now exists
and inserting in lieu and instead thereof a new Article FOURTH, reading
as follows:
"FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is Fifty-Six
Million (56,000,000) shares, of which Two Million (2,000,000) shares
shall be designated Preferred Stock with no par value, Twenty-Four
Million (24,000,000) shares shall be designated Class A Stock of the
par value of $1.00 per share, and Thirty Million (30,000,000) shares
shall be designated Common Stock of the par value of $1.00 per share.
The Class A Stock and Common Stock are collectively hereinafter
referred to as "Common Capital Stock."
1
The designations and powers, preferences and rights and the
qualifications, limitations or restrictions of the Preferred Stock,
Class A Stock and Common Stock are set forth in the following
provisions.
(I) Preferred Stock.
Shares of Preferred Stock may be issued from time to time in one or
more series. Subject to the limitations prescribed by the General
Corporation Law of Delaware and any limitations prescribed by the
Certificate of Incorporation, authority is expressly granted to the
Board of Directors to authorize the issuance of one or more series of
Preferred Stock, and to fix by resolution or resolutions providing for
the issuance of each such series the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, to the
full extent now or hereafter permitted by law, provided, however, that
the holders of the shares of Preferred Stock or of any series of
Preferred Stock may not vote with the holders of the shares of Class A
Stock for the election of the Directors whom the holders of Class A
Stock voting as a class are entitled to elect pursuant to subparagraph
(A) of paragraph 4 of Part II of this Article FOURTH.
(II) Common Capital Stock.
There shall be no differences in the voting powers, preferences, or
other rights, or qualifications, limitations or restrictions thereof,
of shares of Class A Stock from those of shares of Common Stock except
as specifically hereinafter set forth in this Part II. Without
limiting the generality of the foregoing, so long as any shares of
Class A Stock are outstanding, in the event the Corporation engages in
any merger or consolidation in which holders of Common Capital Stock
receive any consideration, provision shall be made so that the holders
of each class of Common Capital Stock receive the same consideration
per share; provided, however, that if such merger or consolidation is a
reincorporation in another jurisdiction, or is a merger of the
Corporation with and into a wholly-owned subsidiary of the Corporation,
the shares issued to the holders of the respective classes of Common
Capital Stock may reflect the differences between such classes set
forth in the Certificate of Incorporation or differences substantially
equivalent thereto.
(1) So long as any shares of Class A Stock are outstanding: (a) if
any dividend or other distribution is declared on the Common Capital
Stock which is payable in shares of (or in securities convertible into
or exchangeable or exercisable for shares of), or in subscriptions or
other rights to acquire shares of (or to acquire securities convertible
into or exchangeable or exercisable for shares of), any class of Common
Capital Stock, such dividend or distribution shall be declared in such
manner as to be payable to the holders of Class A Stock in shares of
(or in securities convertible into or exchangeable or exercisable for
shares of), or in subscriptions or other rights to acquire shares of
(or to acquire securities convertible into or exchangeable or
exercisable for shares of), Class A Stock and as to be payable to the
2
holders of Common Stock at the same rate in shares of (or in securities
convertible into or exchangeable or exercisable for shares of), or in
subscriptions or other rights to acquire shares of (or to acquire
securities convertible into or exchangeable or exercisable for shares
of), Common Stock; and (b) if shares of the Common Capital Stock are
combined or subdivided, such combination or subdivision shall be
effected in such manner as to result in per share decreases or
increases of Class A Stock and Common Stock which are identical.
(2) So long as any shares of Class A Stock are outstanding, if any
dividend or other distribution payable in cash (other than a dividend
or distribution in connection with the liquidation or dissolution of
the Corporation) is declared on the Common Capital Stock, such dividend
or distribution shall be declared in such manner that the amount
thereof per share of Class A Stock shall equal the amount thereof per
share of Common Stock plus two and one-half (2.5) cents (provided that
the aggregate excess of the dividends per share of Class A Stock
declared during any calendar year over the dividends per share of
Common Stock declared during such calendar year shall not exceed ten
(10) cents); provided, however, that if a Valuation Deficiency (as
hereinafter defined) shall occur, the additional amount per share of
Class A Stock shall be increased from two and one-half (2.5) cents to
twelve and one-half (12.5) cents for each dividend thereafter declared
on the Common Capital Stock during any of the ten full calendar
quarters immediately following the occurrence of the Valuation
Deficiency. A "Valuation Deficiency" shall be deemed to have occurred
if the average closing price of the Class A Stock for the American
Stock Exchange Composite Transactions during the period (the "Reference
Period") commencing on the day following the three month anniversary
of the Effective Time (as hereinafter defined) and ending on the six
month anniversary of the Effective Time shall be less than 90% of the
average closing price of the Common Stock for such Composite
Transactions during the Reference Period, except that no Valuation
Deficiency shall be deemed to have occurred if such average closing
price of the Class A Stock is at least equal to $30.15 (adjusted for
any percentage change in the Standard & Poor's 500 Stocks Index during
the period from March 15,1989 through the end of the Reference Period).
In the event of any combination or subdivision (including by way of a
stock dividend) of the Common Capital Stock, the monetary amounts set
forth in this paragraph 2 shall be equitably adjusted by the Board of
Directors. The "Effective Time" shall mean the Effective Time as
defined in the Amended and Restated Merger Agreement and Plan of
Reorganization dated as of October 11, 1989 between the Corporation and
Pittway Corporation, a Pennsylvania corporation (the "Merger
Agreement").
(3) Subject to the requirements of the business of the Corporation
and to the fiduciary obligations of the Board of Directors: (a) a
dividend of at least fifteen (15) cents per share of Common Stock (and
thus a dividend of at least seventeen and one-half (17.5) cents per
share of Class A Stock) shall be declared during each of the eight full
calendar quarters immediately following the Effective Time; and (b) in
the event a Valuation Deficiency occurs, a dividend on the Common
Capital Stock shall be declared during each of the ten full calendar
quarters immediately following such occurrence.
3
(4) Except as otherwise provided by the General Corporation Law of
Delaware or in the Certificate of Incorporation, or except as
determined by the Board of Directors pursuant to the authority of the
Board of Directors as provided in Part I of this Article FOURTH, all
voting rights shall be vested exclusively in the holders of the
outstanding shares of Common Capital Stock, and the holders of the
outstanding shares of Common Capital Stock shall be entitled to one (1)
vote per share on all matters voted upon by the stockholders of the
Corporation, except that:
(A) Prior to the Change of Control Date, as defined in
subparagraph (B) below, beginning with the first Annual or Special
Meeting of Stockholders occurring after the Effective Time, the
holders of the outstanding shares of Class A Stock voting as a class
shall be entitled to elect such number of Directors, but not less
than two, as shall equal 25% of the then total number of Directors
constituting the full Board of Directors, for purposes of which such
total number shall be deemed not to include the number of Directors,
if any, which the holders of Preferred Stock or of any series of
Preferred Stock voting as a class are then entitled to elect (such
number of Directors to be elected by such Class A Stock to be
rounded to the nearest larger whole number if such percentage does
not equal a whole number); and the holders of the Common Stock
voting as a class shall be entitled to elect the then remaining
number of Directors; provided, however, that all Directors elected
at any time when the outstanding shares of Common Stock amount to
fewer than 12 1/2% of the outstanding shares of the Common Capital
Stock, even though the Change of Control Date has not occurred,
shall be elected by the vote of all Common Capital Stock voting as
one class with one (1) vote per share and without distinction
between the votes of Class A Stock and Common Stock. In the event
any vacancy occurs in the Directors who shall have been, or are to
be, elected by the holders of the Class A Stock or the Common Stock,
as the case may be, such vacancy or vacancies may be filled, until
the next meeting of the holders of the shares of such class, by the
vote of a majority of the Directors who are then in office and who
were elected by such class or, if only one such Director is then in
office, by such Director. If any such vacancy is not so filled (or
if the holders of the class which elected the Director or Directors
who voted to fill such vacancy desire to remove or replace the
Director elected to fill such vacancy), a special meeting of the
holders of the shares of such class for the purpose of filling such
vacancy (or removing or replacing the Director elected to fill such
vacancy) may be called by the Chairman of the Board or President of
the Corporation and shall be called by the Chairman of the Board or
President of the Corporation within 30 days of receipt of written
request therefor by the holders of record of at least 25% of the
outstanding shares of such class. The date on which any such
special meeting so called shall be held shall be as soon as
reasonably practicable following such call. Notwithstanding the
provisions of this subparagraph (A), no special meeting of
stockholders shall be required to be held during the 120-day period
preceding the date fixed for the Annual Meeting of Stockholders. At
any Special or Annual Meeting for the election of Directors by the
4
holders of shares of Class A Stock or Common Stock, the presence, in
person or by proxy, of the holders of more than 50% of the then
outstanding shares of such class shall be required to constitute a
quorum for the election of Directors by such class; in the absence
of such a quorum, a majority of the holders of shares of the class
present, in person or by proxy, shall have the power, without notice
other than announcement of the adjournment at the meeting, to
adjourn the meeting for the purpose of such election from time to
time, until a quorum shall be present. For purposes of the
provisions of this subparagraph (A), outstanding shares shall
exclude shares of Common Capital Stock owned by the Corporation or
by any other corporation a majority of the shares of which entitled
to vote in the election of directors is owned, directly or
indirectly, by the Corporation.
(B) Prior to the Change of Control Date, except as provided in
subparagraph (A) above as to election of Directors or as hereinafter
provided in this subparagraph (B) or as may be required by the
General Corporation Law of Delaware, the holders of shares of
Common Stock shall be entitled to one (1) vote per share on all
matters voted upon by the stockholders of the Corporation for each
share of Common Stock held of record by each such holder and the
holders of shares of Class A Stock shall be entitled to one-tenth
(1/l0) of one (1) vote per share on all matters voted upon by the
stockholders of the Corporation for each share of Class A Stock held
of record by each such holder.
The "Change of Control Date" shall be the first date after the
Effective Time on which the shares of Harris Group Stock (as
hereinafter defined) are entitled to cast fewer than 1,496,110 votes
(counting the Class A Stock as entitled to cast one-tenth (1/l0) of
one (1) vote per share for this purpose); provided, however, that no
Change of Control Date shall occur as a result of a transaction
following which the shares of Harris Group Stock are entitled to
cast fewer than 1,496,110 votes but more than 1,458,707 votes
(counting the Class A Stock as entitled to cast one-tenth (1/l0) of
one (1) vote per share for these purposes) unless, within 90 days
following such transaction, the shares of Harris Group Stock are not
restored to a level entitled to cast at least 1,496,110 votes (in
which event, the Change of Control Date shall be the date of such
90th day); provided, further, that no Change of Control Date shall
occur as a result of a transaction (a "Successor Group Transaction")
in which the beneficial ownership of Harris Group Stock entitled to
cast at least 1,496,110 votes shall be transferred as an entirety to
a person or "group" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as such Section is in effect and
interpreted at the Effective Time) (such person or group being
referred to as a "Successor Group") unless such Successor Group
Transaction shall occur on or before, or pursuant to an agreement
entered into on or before, the first anniversary of the date on
which the Effective Time occurs and unless the Successor Group
involved as a purchaser in such Successor Group Transaction shall
not, by the three month anniversary of the date of such Successor
Group Transaction, have offered to purchase for at least Equivalent
5
Value (as hereinafter defined) all outstanding shares of Common
Capital Stock other than those involved in such Successor Group
Transaction (in which event, the Change of Control Date shall be the
date of such three month anniversary). In the event of a Successor
Group Transaction other than a Successor Group Transaction giving
rise to the Change of Control Date, references in the definitions of
"Harris Group Stock" and of "Equivalent Value" to the Harris Group
shall thereafter refer to the Successor Group involved as a
purchaser in such Successor Group Transaction, and Harris Group
Stock shall include shares purchased in such Successor Group
Transaction. In the event of any combination or subdivision
(including by way of a stock dividend) of the Common Capital Stock,
the numbers of votes set forth in the second preceding sentence
shall be equitably adjusted by the Board of Directors. The "Harris
Group" means Messrs. Irving B. Harris, Neison Harris, King Harris,
William W. Harris and Sidney Barrows and their respective spouses,
descendants and spouses of descendants , trustees of trusts
established for the benefit of such persons, and executors of
estates of such persons. "Spouses" includes widows and widowers
until first remarried. "Harris Group Stock" means, at any point in
time, shares of Common Capital Stock which, at such time, any member
of the Harris Group, either alone or in combination with any other
member or members of the Harris Group, directly or indirectly
beneficially owns (as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as such Rule is in effect and
interpreted at the Effective Time), without taking into account any
shares of Common Stock acquired by any member of the Harris Group
subsequent to May 31, 1989 in excess of shares of Common Stock
disposed of by members of the Harris Group subsequent to such date.
"Equivalent Value" means the same type and amount per share of
consideration paid to members of the Harris Group in the Successor
Group Transaction and, in determining such amount per share of
consideration, the aggregate amount paid to members of the Harris
Group in the Successor Group Transaction for all shares of Common
Capital Stock shall be divided by the total number of such shares.
(C) On the Change of Control Date, the authorized shares of
Class A Stock, both issued and unissued, shall automatically be
changed into Common Stock on a share for share basis and shall be
redesignated shares of Common Stock without any further action.
(D) Without the affirmative vote or consent in writing of the
holders of shares of Common Capital Stock entitled to cast at least
two-third (2/3) of the votes (counting the Class A Stock as entitled
to cast one-tenth (1/l0) of one (1) vote per share for this purpose
prior to the Change of Control Date) which the outstanding shares of
Common Capital Stock are entitled to cast at the time, the
Corporation shall not have the power:
(i) To liquidate, dissolve or wind up its affairs;
(ii) To merge or consolidate with or into any other
corporation, association, trust, partnership or entity; or
6
(iii) To sell, exchange, assign, convey, transfer or in any
other way dispose of all or substantially all of its property and
assets, including its good will and its corporate franchises, in
one transaction or in a series of related transactions.
Notwithstanding the foregoing, no vote or consent of the
stockholders of the Corporation shall be necessary to authorize a
merger if (1) the Corporation is a constituent corporation which
survives the merger, (2) the agreement of merger does not change the
name or authorized shares of any class or otherwise amend the
Certificate of Incorporation, and (3) the authorized unissued shares
or the treasury shares of common or capital Stock to be issued or
delivered under the plan of merger do not exceed 15% of the shares
of Common Capital Stock outstanding immediately prior to the
effective date of the merger.
(E) Without the affirmative vote or consent in writing of the
holders of shares of Common Capital Stock entitled to cast at least
two-thirds (2/3) of the votes (counting the Class A Stock as
entitled to cast one-tenth (1/l0) of one (1) vote per share for this
purpose prior to the Change of Control Date) which the outstanding
shares of Common Capital Stock are entitled to cast at the time, the
Corporation shall not have the power to amend Part I or Part 11 of
this Article FOURTH."
THIRD: That the Restated Certificate of Incorporation of said
Corporation is further amended as follows:
By inserting as a new Article EIGHTH the following:
"EIGHTH: The number of Directors constituting the full Board of
Directors shall be such number, not less than eight, fixed by, or in the
manner provided in, the By-Laws. Without the affirmative vote or consent
in writing of the holders of shares of Common Capital Stock entitled to
cast at least two-thirds (2/3) of the votes (counting the Class A Stock
as entitled to cast one-tenth (1/10) of one (1) vote per share for this
purpose prior to the Change of Control Date) which the outstanding shares
of Common Capital Stock are entitled to cast at the time, the Corporation
shall not have the power to amend this Article EIGHTH."
FOURTH: That such amendments have been duly adopted in accordance with
the provisions of the General Corporation Law of the State of Delaware by the
affirmative vote of the holders of two-thirds (2/3) of the outstanding shares
entitled to vote thereon at a meeting of stockholders.
IN WITNESS WHEREOF, we have signed this Certificate this 28th day of December,
1989.
_____________________________
Vice President
_____________________________
Secretary
7
EXHIBIT 3.4
PITTWAY CORPORATION
JUNE 30, 1998
FORM 10-Q
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
********
In accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware
********
Pittway Corporation, a corporation duly organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, on
March 12, 1996, at a meeting duly called and constituted, adopted
the following resolutions proposing an amendment to the Company's
Restated Certificate of Incorporation to increase the shares of
capital stock which the Corporation has authority to issue and
directing that such amendment be submitted to the stockholders for
consideration at said corporation's 1996 annual meeting:
RESOLVED, that in the opinion of the Board of
Directors it is advisable that the Restated Certificate of
Incorporation, as amended, of Pittway Corporation be
further amended as follows:
The first sentence of Article FOURTH shall be
amended in its entirety to read as follows:
The total number of shares of all classes
of capital stock which the Corporation shall have
authority to issue is Eighty Million (80,000,000) shares,
of which Two Million (2,000,000) shares shall be
designated Preferred Stock with no par value, Thirty-Six
Million (36,000,000) shares shall be designated Class A
Stock of the par value of $1.00 per share, and Forty-Two
Million (42,000,000) shares shall be designated Common
Stock of the par value of $1.00 per share.
FURTHER RESOLVED, that such amendment be
submitted to the stockholders of Pittway Corporation for
consideration at Pittway Corporation's 1996 annual meeting
of stockholders.
SECOND: That at the annual meeting of stockholders of said
corporation held May 9, 1996, the aforesaid amendment was approved
by vote of a majority of each of: (i) the votes which the
outstanding Common Stock and Class A Stock were entitled to cast at
such annual meeting, (ii) the outstanding Common Stock, voting as a
class, and (iii) the outstanding Class A Stock, voting as a class.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Pittway Corporation has caused this
certificate to be signed by King Harris, its President, this 9th day
of May, 1996.
Pittway Corporation
By:___________________
King Harris, President
EXHIBIT 3.5
PITTWAY CORPORATION
JUNE 30, 1998
FORM 10-Q
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
PITTWAY CORPORATION
* * * *
Adopted in accordance with the
provisions of section 242 of the
General Corporation Law of the
State of Delaware
* * * *
Pittway Corporation, a corporation duly organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows:
FIRST: That the Board of Directors of the corporation, on
March 19, 1998, at a meeting duly called and constituted, adopted
the following resolutions proposing an amendment to the Restated
Certificate of Incorporation of the Corporation to increase the
shares of capital stock which the Corporation has authority to issue
and directing that such amendment be submitted to the stockholders
for consideration at the Corporation's 1998 annual meeting:
"RESOLVED, that in the opinion of the Board of
Directors it is advisable that the Restated Certificate of
Incorporation, as amended, of Pittway Corporation be further
amended as follows:
The first sentence of Article FOURTH shall be amended in its
entirety to read as follows:
The total number of shares of all classes of
capital stock which the Corporation shall have
authority to issue is Two Hundred Twenty-Two
Million (220,000,000) shares, of which Two
Million (2,000,000) shares shall be designated
Preferred Stock with no par value, One Hundred
Million (100,000,000) shares shall be
designated Class A Stock of the par value of
$1.00 per share, and One Hundred Twenty Million
(120,000,000) shares shall be designated Common
Stock of the par value of $1.00 per share.
FURTHER RESOLVED, that such amendment be submitted to
the stockholders of Pittway Corporation for consideration at
Pittway Corporation's 1998 annual meeting of stockholders."
SECOND: That at the annual meeting of stockholders of the
Corporation held May 7, 1998, the aforesaid amendment was approved by
vote of a majority of each of: (i) the votes which the outstanding
Common Stock and Class A Stock were entitled to cast at such annual
meeting, (ii) the outstanding Common Stock, voting as a class, and
(iii) the outstanding Class A Stock, voting as a class.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Pittway Corporation has caused this
certificate to be signed by its President, this 7th day of May, 1998.
Pittway Corporation
A Delaware corporation
By: ______________________
King Harris, President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 39,425
<SECURITIES> 9,915
<RECEIVABLES> 241,643
<ALLOWANCES> 10,423
<INVENTORY> 262,163
<CURRENT-ASSETS> 569,059
<PP&E> 255,467
<DEPRECIATION> 124,207
<TOTAL-ASSETS> 1,000,790<F1>
<CURRENT-LIABILITIES> 283,529
<BONDS> 99,325
0
0
<COMMON> 21,218
<OTHER-SE> 493,840
<TOTAL-LIABILITY-AND-EQUITY> 1,000,790
<SALES> 629,677
<TOTAL-REVENUES> 629,677
<CGS> 400,764
<TOTAL-COSTS> 400,764
<OTHER-EXPENSES> 20,820
<LOSS-PROVISION> 1,866
<INTEREST-EXPENSE> 6,573
<INCOME-PRETAX> 9,240
<INCOME-TAX> 3,311
<INCOME-CONTINUING> 5,929<F2>
<DISCONTINUED> 5,404
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,333
<EPS-PRIMARY> .54
<EPS-DILUTED> .53
<FN>
<F1>Included in total assets is an investment in discontinued operations of
$60,699.
<F2>Excluding a net after-tax charge of $26.9 million ($1.25 per diluted share)
from patent litigation and an after-tax gain of $4.2 million ($.20 per diluted
share) from a divestiture by Cylink Corporation, a 29 percent owned affiliate
of the Company, income from continuing operations would have been $28.6 million
($1.33 per diluted share).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule is restated to reflect the discontinuation of
certain businesses.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 25,296
<SECURITIES> 12,440
<RECEIVABLES> 223,689
<ALLOWANCES> 9,802
<INVENTORY> 261,308
<CURRENT-ASSETS> 538,234
<PP&E> 243,989
<DEPRECIATION> 116,187
<TOTAL-ASSETS> 943,599<F1>
<CURRENT-LIABILITIES> 261,321
<BONDS> 94,970
0
0
<COMMON> 21,034
<OTHER-SE> 459,476
<TOTAL-LIABILITY-AND-EQUITY> 943,599
<SALES> 304,139
<TOTAL-REVENUES> 304,139
<CGS> 192,332
<TOTAL-COSTS> 192,332
<OTHER-EXPENSES> 10,282
<LOSS-PROVISION> 783
<INTEREST-EXPENSE> 3,501
<INCOME-PRETAX> (16,841)
<INCOME-TAX> (6,498)
<INCOME-CONTINUING> (10,343)<F2>
<DISCONTINUED> 2,348
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,995)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
<FN>
<F1>Included in total assets is an investment in discontinued operations of
$62,074
<F2>Excluding a net after-tax charge of $26.9 million ($1.27 per diluted share)
from patent litigation and an after-tax gain of $4.2 million ($.20 per diluted
share) from a divestiture by Cylink Corporation, a 29 percent owned affiliate
of the Company, income from continuing operations would have been $6.7 million
($.55 per diluted share).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule is restated to reflect the discontinuation of
certain businesses.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 32,477 9,192 15,625 21,106 40,257
<SECURITIES> 26,026 24,033 19,287 15,612 16,583
<RECEIVABLES> 184,798 189,271 206,498 218,154 208,913
<ALLOWANCES> 7,601 8,486 8,766 9,079 9,691
<INVENTORY> 199,895 226,907 227,267 226,554 240,228
<CURRENT-ASSETS> 459,343 465,144 486,506 498,504 521,359
<PP&E> 208,942 222,269 234,795 230,847 235,036
<DEPRECIATION> 98,058 104,648 110,606 103,957 109,118
<TOTAL-ASSETS> 817,308<F1> 850,824<F1> 873,129<F1> 877,807<F1> 910,694<F1>
<CURRENT-LIABILITIES> 198,363 224,647 236,360 236,629 252,098
<BONDS> 87,714 84,312 90,970 90,068 95,216
0 0 0 0 0
0 0 0 0 0
<COMMON> 20,926 20,981 20,984 20,987 20,991
<OTHER-SE> 425,946 436,776 445,518 452,219 466,143
<TOTAL-LIABILITY-AND-EQUITY> 817,308 850,824 873,129 877,807 910,694
<SALES> 923,453 252,492 537,650 844,186 1,143,772
<TOTAL-REVENUES> 923,453 252,492 537,650 844,186 1,143,772
<CGS> 587,323 161,879 343,791 539,746 723,547
<TOTAL-COSTS> 587,323 161,879 343,791 539,746 723,547
<OTHER-EXPENSES> 29,188 8,342 16,966 26,815 36,598
<LOSS-PROVISION> 4,223 974 1,849 2,484 4,299
<INTEREST-EXPENSE> 8,590 2,406 5,420 8,335 10,852
<INCOME-PRETAX> 96,367 15,116 33,390 40,589 63,290
<INCOME-TAX> 34,675 5,546 12,105 14,194 22,682
<INCOME-CONTINUING> 61,692 9,570 21,285 26,395<F2> 40,608<F2>
<DISCONTINUED> 11,350 2,726 7,609 10,834 14,906
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 73,042 12,296 28,894 37,229 55,514
<EPS-PRIMARY> 3.49 .59 1.38 1.77 2.65
<EPS-DILUTED> 3.46 .58 1.36 1.75 2.61
<FN>
<F1>Included in total assets is an investment in discontinued operations of
$47,058, $49,701, $46,172, $47,693 and $58,397 at December 31, 1996, March 31,
1997, June 30, 1997, September 30, 1997 and December 31, 1997 respectively.
<F2>Excluding net after-tax charges of $7.8 million, or $.37 per diluted share,
resulting from an acquisition by the Company's affiliate, Cylink Corporation,
income from continuing operations was $18.6 million, or $1.38 per diluted
share, and $32.8 million or $2.24 per diluted share for the nine months ended
September 30, 1997 and the year ended December 31, 1997, respectively.
</FN>
</TABLE>
