-----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, U5PMvujZrpmNJTyBqHmGJxhNAmZ98ieMYMWNUHEyZ8ClcZbxyn/keOM9nOGemJHl Q6+LngnyC+0NoOp44loeTA== 0000093469-98-000005.txt : 19980805 0000093469-98-000005.hdr.sgml : 19980805 ACCESSION NUMBER: 0000093469-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980804 SROS: NYSE 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: SEC FILE NUMBER: 001-04821 FILM NUMBER: 98676594 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 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 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)
Three Months Ended Six Months Ended June 30, June 30, 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
* 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 EX-3.1 2 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 EX-3.2 3 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 EX-3.3 4 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 EX-3.4 5 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 EX-3.5 6 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 EX-27.1 7
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 39,425 9,915 241,643 10,423 262,163 569,059 255,467 124,207 1,000,790 283,529 99,325 0 0 21,218 493,840 1,000,790 629,677 629,677 400,764 400,764 20,820 1,866 6,573 9,240 3,311 5,929 5,404 0 0 11,333 .54 .53 Included in total assets is an investment in discontinued operations of $60,699. 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).
EX-27.2 8
5 This financial data schedule is restated to reflect the discontinuation of certain businesses. 1,000 3-MOS DEC-31-1998 MAR-31-1998 25,296 12,440 223,689 9,802 261,308 538,234 243,989 116,187 943,599 261,321 94,970 0 0 21,034 459,476 943,599 304,139 304,139 192,332 192,332 10,282 783 3,501 (16,841) (6,498) (10,343) 2,348 0 0 (7,995) (.38) (.38) Included in total assets is an investment in discontinued operations of $62,074 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).
EX-27.3 9
5 This financial data schedule is restated to reflect the discontinuation of certain businesses. 1,000 YEAR 3-MOS 6-MOS 9-MOS YEAR DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1996 MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997 32,477 9,192 15,625 21,106 40,257 26,026 24,033 19,287 15,612 16,583 184,798 189,271 206,498 218,154 208,913 7,601 8,486 8,766 9,079 9,691 199,895 226,907 227,267 226,554 240,228 459,343 465,144 486,506 498,504 521,359 208,942 222,269 234,795 230,847 235,036 98,058 104,648 110,606 103,957 109,118 817,308 850,824 873,129 877,807 910,694 198,363 224,647 236,360 236,629 252,098 87,714 84,312 90,970 90,068 95,216 0 0 0 0 0 0 0 0 0 0 20,926 20,981 20,984 20,987 20,991 425,946 436,776 445,518 452,219 466,143 817,308 850,824 873,129 877,807 910,694 923,453 252,492 537,650 844,186 1,143,772 923,453 252,492 537,650 844,186 1,143,772 587,323 161,879 343,791 539,746 723,547 587,323 161,879 343,791 539,746 723,547 29,188 8,342 16,966 26,815 36,598 4,223 974 1,849 2,484 4,299 8,590 2,406 5,420 8,335 10,852 96,367 15,116 33,390 40,589 63,290 34,675 5,546 12,105 14,194 22,682 61,692 9,570 21,285 26,395 40,608 11,350 2,726 7,609 10,834 14,906 0 0 0 0 0 0 0 0 0 0 73,042 12,296 28,894 37,229 55,514 3.49 .59 1.38 1.77 2.65 3.46 .58 1.36 1.75 2.61 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. 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.
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