-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cs4JLWWuPRm15E58l2JFTx5lj9RUDJ8vpptetrEr3CaQpCnI1u2V4fAWvGUrXC25 hplPPoQX5eDI2ftB4x29gg== 0000093469-96-000007.txt : 19960806 0000093469-96-000007.hdr.sgml : 19960806 ACCESSION NUMBER: 0000093469-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960805 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PITTWAY CORP /DE/ CENTRAL INDEX KEY: 0000093469 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 135616408 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04821 FILM NUMBER: 96603542 BUSINESS ADDRESS: STREET 1: 200 S WACKER DR STE 700 CITY: CHICAGO STATE: IL ZIP: 60606-5802 BUSINESS PHONE: 3128311070 MAIL ADDRESS: STREET 1: 200 S WACKER DR STE 700 CITY: CHICAGO STATE: IL ZIP: 60606-5802 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD SHARES INC DATE OF NAME CHANGE: 19900321 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD POWER & LIGHT CORP DATE OF NAME CHANGE: 19660905 10-Q 1 JUNE 30, 1996 FORM 10-Q 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, 1996 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 (April 26, 1996). Common Stock 3,938,832 Class A Stock 16,985,613 PITTWAY CORPORATION AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 1996 INDEX PART I. FINANCIAL INFORMATION Page ITEM 1. Financial Statements Consolidated Statement of Income - Three Months and Six Months Ended June 30, 1996 and 1995 3 Consolidated Balance Sheet - June 30, 1996 and December 31, 1995 4 - 5 Consolidated Statement of Cash Flows - Six Months Ended June 30, 1996 and 1995 6 Notes to Consolidated Financial Statements 7 - 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 11 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 12 - 13 ITEM 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 2 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited; Dollars in Thousands, Except Per Share Data) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 NET SALES............................ $272,361 $235,320 $529,838 $455,724 OPERATING EXPENSES: Cost of sales....................... 165,901 144,582 323,538 279,128 Selling, general and administrative. 78,292 69,306 153,901 135,828 Depreciation and amortization....... 7,069 5,354 13,879 10,427 251,262 219,242 491,318 425,383 OPERATING INCOME..................... 21,099 16,078 38,520 30,341 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.... 944 1,541 1,777 1,799 Interest expense.................... (2,055) (1,503) (4,045) (2,464) Miscellaneous, net.................. 257 966 444 1,238 (1007) 1,004 34,617 573 INCOME BEFORE INCOME TAXES........... 20,092 17,082 73,137 30,914 PROVISION FOR INCOME TAXES........... 7,562 6,352 27,319 11,464 NET INCOME........................... $ 12,530 $ 10,730 $ 45,818 $ 19,450 NET INCOME PER SHARE OF COMMON AND CLASS A STOCK...................... $ .60 $ .51 $ 2.19 $ .93 CASH DIVIDENDS DECLARED PER SHARE: Common............................. $ .067 $ .067 $ .133 $ .133 Class A............................ $ .083 $ .083 $ .167 $ .167 AVERAGE NUMBER OF SHARES OUTSTANDING (in thousands)..................... 20,921 20,911 20,916 20,911 See accompanying notes. 3 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 1996 AND DECEMBER 31, 1995 (Unaudited; Dollars in Thousands) June 30, December 31, 1996 1995 ASSETS CURRENT ASSETS: Cash and equivalents................... $ 19,817 $ 31,407 Marketable securities.................. 24,113 25,586 Accounts and notes receivable, less allowance for doubtful accounts of $9,598 and $8,493.................... 191,338 175,432 Inventories............................ 172,815 152,636 Future income tax benefits............. 19,360 16,996 Prepayments, deposits and other........ 14,551 11,929 441,994 413,986 PROPERTY, PLANT AND EQUIPMENT, at cost: Buildings.............................. 31,440 25,797 Machinery and equipment................ 205,402 190,780 236,842 216,577 Less: Accumulated depreciation......... (121,215) (109,021) 115,627 107,556 Land................................... 2,651 2,188 118,278 109,744 INVESTMENTS: Marketable securities.................. 139,086 20,000 Equity investment in affiliate......... 30,893 7,689 Leveraged leases....................... 20,806 21,046 Real estate and other ventures......... 34,932 33,874 225,717 82,609 OTHER ASSETS: Goodwill, less accumulated amortization of $8,600 and $8,432.... 53,160 48,714 Other intangibles, less accumulated amortization of $10,381 and $10,360.. 5,218 5,422 Notes receivable....................... 7,818 5,892 Miscellaneous.......................... 6,622 6,607 72,818 66,635 $858,807 $672,974 See accompanying notes. 4 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 1996 AND DECEMBER 31, 1995 (Unaudited; Dollars in Thousands) June 30, December 31, 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable........................... $ 34,516 $ 32,212 Long-term debt due within one year...... 4,436 3,788 Dividends payable....................... 1,734 1,766 Accounts payable........................ 75,026 68,700 Accrued expenses........................ 44,603 46,310 Income taxes payable.................... 5,610 5,644 Retirement and deferred compensation plans.................... 8,252 6,503 Unearned income......................... 3,309 3,185 177,486 168,108 LONG-TERM DEBT, less current maturities... 84,603 85,966 DEFERRED LIABILITIES: Income taxes............................ 104,161 46,920 Other................................... 11,409 8,954 115,570 55,874 STOCKHOLDERS' EQUITY: Preferred stock, none issued............ Common capital stock, $1 par value- Common stock.......................... 3,939 3,939 Class A stock......................... 16,985 16,973 Capital in excess of par value.......... 21,489 21,423 Retained earnings....................... 367,884 325,420 Cumulative marketable securities valuation adjustment.................. 73,777 (2,019) Cumulative foreign currency translation adjustment............................ (2,926) (2,710) 481,148 363,026 $858,807 $672,974 See accompanying notes. 5 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited; Dollars in Thousands) 1996 1995 Cash Flows From Operating Activities: Net Income....................................... $ 45,818 $ 19,450 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................. 13,879 10,427 Gain on sale of investment, net of taxes....... (8,149) Gain from stock offering of affiliate, net of taxes.................................. (14,413) Deferred income taxes.......................... (889) (8,577) Retirement and deferred compensation plans..... 3,282 3,791 Income/loss from investments adjusted for cash distributions received............... (232) 1,314 Provision for losses on accounts receivable.... 2,443 1,900 Change in assets and liabilities, excluding effects from acquisitions, dispositions and foreign currency adjustments: Increase in accounts and notes receivable.... (13,598) (23,745) Increase in inventories...................... (18,969) (20,685) Increase in prepayments and deposits......... (2,764) (4,228) (Decrease) increase in accounts payable and accrued expenses....................... (1,271) 3,847 Increase in income taxes payable............. 131 3,242 Other changes, net............................. (131) (2,741) Net cash provided (used) by operating activities. 5,137 (16,005) Cash Flows From Investing Activities: Capital expenditures............................. (18,984) (22,127) Proceeds from sale of investment, net of taxes... 10,748 Proceeds from the sale of marketable securities.. 7,640 10,361 Purchases of marketable securities............... (5,900) (5,846) Disposition of property and equipment............ 486 1,685 Additions to investments......................... (566) (8) (Increase) decrease in notes receivable.......... (2,077) 243 Net assets of businesses acquired, net of cash... (3,065) (6,743) Disposition of business.......................... 177 Net cash used in investing activities............ (11,718) (22,258) Cash Flows From Financing Activities: Net increase in notes payable.................... 608 30,015 Proceeds of long-term debt....................... 74 3,249 Repayments of long-term debt..................... (2,320) (565) Dividends paid................................... (3,386) (3,351) Net cash (used) provided by financing activities. (5,024) 29,348 Effect of Exchange Rate Changes on Cash............ 15 68 Net Decrease in Cash and Equivalents............... (11,590) (8,847) Cash and Equivalents at Beginning of Period........ 31,407 10,359 Cash and Equivalents at End of Period.............. $ 19,817 $ 1,512 Supplemental Cash Flow Disclosure: 1996 1995 Interest paid.................................... $ 4,030 $ 2,399 Income taxes paid................................ 19,074 16,928 See accompanying notes. 6 PITTWAY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited; Dollars in Thousands) NOTE 1. STOCK SPLIT In January 1996 the Board of Directors declared a 3-for-2 stock split in the form of a 50% stock dividend on the Company's Common and Class A stock, payable March 1, 1996 to stockholders of record on February 14, 1996. All share and per share data, as appropriate, reflect this split. NOTE 2. 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. Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year classification. 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, 1995. NOTE 3. ACQUISITIONS During the first six months of 1996, the Company acquired a foreign distributor of alarm systems and a manufacturer of glass break detectors for $3,065 cash and a total of $2,619 payable over three years. The 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 4. MARKETABLE SECURITIES Information about the Company's available-for-sale securities at June 30, 1996 and December 31, 1995 is as follows: 1996 1995 Current - Adjustable Rate Preferred Stocks - Aggregate cost $ 26,636 $ 28,952 Net unrealized holding loss (2,523) (3,366) Aggregate fair value $ 24,113 $ 25,586 7 1996 1995 Non-Current - USSB Common Stock - Aggregate cost $ 17,401 $ 20,000 Unrealized holding gain 121,685 101,280 Aggregate fair value $139,086 $121,280 In February 1996, the Company reduced its holdings in United States Satellite Broadcasting Company, Inc. (USSB) by selling 622,500 of its 4,789,875 shares in connection with 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. At December 31, 1995, prior to the initial public offering, the Company's investment in USSB was recorded at a cost of $20 million, or $4.175 per share. The $121,685 unrealized gain on the 4,167,375 shares of USSB common stock held at June 30, 1996 is included, net of $46,347 deferred taxes, in the cumulative marketable security valuation adjustment component of stockholders' equity. Realized gains and losses are based upon the specific identification method. Such gains and losses on the adjustable rate preferred stock, for the quarters ended June 30, 1996 and 1995 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 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 approximately $148 million at June 30, 1996. NOTE 6. INVENTORIES Inventories at June 30, 1996 and December 31, 1995 consist of the following: 1996 1995 Raw materials $ 38,142 $ 34,440 Work in process 17,627 18,654 Finished goods - Manufactured by the Company 66,323 55,523 Manufactured by others 51,983 45,007 Total 174,075 153,624 Less LIFO reserve (1,260) (988) $172,815 $152,636 8 NOTE 7. 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 because the dilutive effect is not significant. NOTE 8. 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 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' have appealed the trial court's decision granting summary judgment. The Company believes that the ultimate outcome of the aforementioned lawsuit will not have a material adverse effect on its financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS For both the second quarter and first six months of 1996, sales increased 16% due to continued expansion within the alarm and other security products segment. On a year-to-date basis, domestic sales increased 12% while international sales, representing 14% of total consolidated sales, increased 56% reflecting further market penetration in the Company's European and other international operations and, to a lesser extent, acquisitions of foreign businesses. Gross profit grew at about the same rate as sales. Selling, general and administrative expenses in 1996 increased 13% over both the second quarter and first six months of 1995 primarily due to increased costs associated with the expanded sales volume. Alarm product sales, accounting for 82% of consolidated revenues in 1996 (78% in 1995), increased 23% both for the quarter and year-to-date to $224.1 million and $436.0 million, respectively. These results reflect continuing gains in market share in key product areas and ongoing expansion in the worldwide alarm systems market. The Company's distribution business made significant gains by expanding its outlet network, internally and through an acquisition in November 1995, and by capitalizing on the 1995 bankruptcy of a major competitor. Increases at the Company's manufacturing units reflect continued acceptance of numerous new product offerings. 9 Operating income for the segment increased 29% to $17.1 million for the quarter and 24% to $32.8 million year-to-date primarily because of the expanded sales volume partially offset by an increase in depreciation expense from recent capital expenditures. Publishing sales for the second quarter and year-to-date declined due to the inclusion in the prior year results of a conference and seminar business, which was sold in June 1995. Excluding this business from the 1995 results, sales increased 3% to $48.2 million for the quarter and 4% to $93.3 million year-to-date, while operating income increased 36% to $6.0 million for the quarter and 37% to $9.3 million year-to-date. The improved results reflect continuing efforts to build alternative revenue streams to supplement the primary source of revenues, display advertising, while improving magazine profit margins and streamlining operations. Magazine profits increased on slightly higher advertising pages and firmer prices despite the lingering effect of last year's paper price increases. Depreciation and amortization expense increased in 1996 as a result of capital additions, principally in the alarm systems segment. Other income (expense) for the first six months of 1996 included a pre-tax gain of $13,162 on the sale of 622,500 shares of USSB stock in connection with its initial public offering and a pretax gain of $23,279 on the increase in the Company's Cylink investment (after $153 of additional expenses charged in the second quarter) resulting from Cylink's initial public offering. Excluding these gains, other income was less favorable in 1996 principally due to higher interest expense and reduced foreign currency transaction gains. Earnings from affiliates and other long-term investments were higher in the 1995 second quarter due to higher income recorded on cash distributions from real estate ventures. The effective tax rates in 1996 versus 1995 rose slightly to 37.6% from 37.2% for the second quarter and to 37.4% from 37.1% for the first six months. ACCOUNTING CHANGE In October 1995 SFAS No. 123, "Accounting for Stock Based Compensation", was issued. The statement became effective for the 1996 fiscal year and establishes a fair value based method of accounting for employee stock based compensation plans and encourages adoption of that method. However, companies may elect to continue to apply the method prescribed under previously existing accounting rules, provided certain pro forma disclosures are made. The Company has made such election and will provide the necessary disclosures in the December 31, 1996 year-end consolidated financial statements. FINANCIAL CONDITION The Company's financial condition remained strong in the first six months of 1996. Management anticipates that operations, borrowings and marketable securities will continue to be the primary source of funds needed to meet 10 ongoing programs for capital expenditures, to finance acquisitions and investments and to pay dividends. In the first six months of 1996, operating profits, before the gains on the sale of USSB stock and the increase in Cylink carrying value and depreciation and amortization, provided $37.1 million of net cash which was used primarily to finance the net increase in working capital items. The remaining $5.0 million of cash generated from operations, along with $12.5 million of net proceeds from the sale of USSB stock and other marketable securities, were used to fund $19.0 million in capital expenditures, the acquisition of two new businesses for $3.0 million, $3.4 million of dividends paid to stockholders, $1.6 million of net payments on borrowings and a $2.1 million net increase in notes receivable. This net use of cash resulted in a decrease in cash and cash equivalents to $19.8 million at June 30, 1996 from $31.4 million at December 31, 1995. Following a $.5 million investment in the first six months of 1996, the Company's remaining commitment in certain affordable housing ventures through 1997 is $1.5 million at June 30, 1996. However, the Company continues to actively investigate additional investment opportunities for growth in related areas. 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 present weak commercial real estate market. Such events have no effect on net income although they do have a negative impact on the Company's cash position because significant tax payments become due when the properties are sold or returned to the lenders. The Company has approximately $4.8 million accrued at June 30, 1996 to fully cover the remaining tax payments that would be due if all the properties are sold or returned to the lenders. In February 1996, the Company sold 622,500 shares of its investment in United States Satellite Broadcasting ("USSB") in connection with its initial public offering and realized net cash proceeds of $15.8 million or $10.7 million after taxes. The Company's remaining 4,167,375 USSB shares are recorded as a non-current investment in marketable securities. The Company 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. 11 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 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 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 have appealed the trial court's decision granting summary judgment. 12 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. The Company believes that the ultimate outcome of the aforementioned lawsuit will not have a material adverse effect on its financial statements. 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. 13 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 5, 1996 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 19,817 24,113 200,936 9,598 172,815 441,994 239,493 121,215 858,807 177,486 84,603 0 0 20,924 460,224 858,807 529,838 529,838 323,538 323,538 13,879 2,443 4,045 73,137 27,319 45,818 0 0 0 45,818 2.19 2.19
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