<PAGE>
 
================================================================================


                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549
                            ______________________

                                        
                                   FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                    of the Securities Exchange Act of 1934
                                        
                 For the quarterly period ended June 27, 1997
                                        
                         Commission File Number 0-2115
                                        
                                        
                         KEYSTONE INTERNATIONAL, INC.
            (Exact name of registrant as specified in its charter)

                 TEXAS                                     74-1058689
     (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                     Identification No.)

                9600 WEST GULF BANK DRIVE, HOUSTON, TEXAS 77040
             (Address of principal executive offices)  (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 466-1176
                                        
     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  [ ]

As of August 6, 1997 the number of shares of common stock outstanding was
35,798,296 excluding 335,269 treasury shares.


================================================================================
<PAGE>
 
                                    PART I
                             FINANCIAL INFORMATION
                                        
                 KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                         13 WEEKS   3 MONTHS    26 WEEKS   6 MONTHS
                                           ENDED      ENDED      ENDED      ENDED
                                          JUNE 27,   JUNE 30,   JUNE 27,   JUNE 30,
                                           1997       1996       1997       1996
                                         --------   --------   --------   --------
<S>                                      <C>        <C>        <C>        <C>
Net Sales                                $  173.2   $  173.6   $  331.2   $  337.8
                                         --------   --------   --------   --------
 Cost and Expenses:
  Cost of sales                             106.7      108.9      204.3      212.2
  Selling, general and administrative        44.2       44.0       87.5       86.7
  Interest expense                            1.6        2.0        3.2        4.1
  Interest income                            (0.2)      (0.2)      (0.5)      (0.4)
  Other (income) expense, net                (0.9)       1.9       (0.4)       3.4
                                         --------   --------   --------   --------
 Income before Income Taxes                  21.8       17.0       37.1       31.8
 
Provision for Income Taxes                    8.3        6.3       14.1       11.8
                                         --------   --------   --------   --------
 
Net Income                               $   13.5   $   10.7   $   23.0   $   20.0
                                         ========   ========   ========   ========
 
Weighted Average Outstanding
 and Equivalent Shares                       35.6       35.5       35.6       35.5
                                         ========   ========   ========   ========
 
Earnings Per Share                       $    .38   $    .30   $    .65   $    .56
                                         ========   ========   ========   ========
 
Cash Dividends Per Share                 $   .185   $   .185   $    .37   $    .37
                                         ========   ========   ========   ========
</TABLE>



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

                                       2
<PAGE>
 
                 KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                             (AMOUNTS IN MILLIONS)

                                                      JUNE 27,      DECEMBER 31,
                                                       1997           1996
                                                   -----------      -----------
                                                   (UNAUDITED)      (AUDITED)
                                    ASSETS

Current Assets:
  Cash and cash equivalents                        $    23.1       $    24.8
  Receivables (principally trade accounts,
    net of allowances for doubtful accounts
    of $7.4 at 6/27/97 and $6.3 at 12/31/96)           170.7           162.9    
  Inventories                                          138.3           142.1
  Prepayments and other                                  6.2             6.3
                                                   ---------       ---------
                                                       338.3           336.1
                                                   ---------       ---------
Property, Plant and Equipment:
  Land                                                  20.6            22.4
  Buildings and improvements                            87.7            93.5
  Machinery and equipment                              242.2           237.5 
                                                   ---------       ---------
                                                       350.5           353.4
  Less - accumulated depreciation                      202.9           200.3
                                                   ---------       ---------
                                                       147.6           153.1 
 
Deferred Tax Asset                                       3.2             -   
Other Assets                                            49.3            53.6 
                                                   ---------       ---------
                                                        52.5            53.6
                                                   ---------       ---------
                                                   $   538.4       $   542.8
                                                   =========       =========

                   LIABILITIES AND SHAREHOLDERS' INVESTMENT


Current Liabilities:
  Current portion of long-term debt                $     2.5          $  2.4
  Short-term bank borrowings                            13.3            13.5
  Accounts payable                                      45.0            40.5
  Accrued liabilities                                   67.6            76.9
  Dividends payable                                      6.6             6.6
  Income taxes payable                                   8.9             4.5 
                                                   ---------       ---------
                                                       143.9           144.4
                                                   ---------       ---------
Long-Term Debt:
  6.34% Senior Notes payable                            45.0            45.0
  Other long-term notes payable                         27.2            29.6
                                                   ---------       ---------
                                                        72.2            74.6
                                                   ---------       ---------
Deferred Income Taxes                                    -               3.9
Other Long-Term Liabilities                             18.1            19.1
                                                   ---------       ---------
                                                        18.1            23.0
                                                   ---------       ---------
 
Shareholders' Investment:
  Common stock $1.00 par value, 100 million
    shares authorized                                   36.0            35.9
  Additional paid-in capital                           114.2           113.8
  Retained earnings                                    166.6           156.7
  Treasury stock, at cost                               (5.3)           (5.7)
  Unamortized restricted stock grant expense            (3.1)           (3.5)
  Foreign currency translation adjustments              (4.2)            3.6
                                                   ---------       ---------
                                                       304.2           300.8
                                                   ---------       ---------
                                                   $   538.4       $   542.8
                                                   =========       =========


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

                                       3
<PAGE>
 
                 KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN MILLIONS)
                                  (UNAUDITED)
 
                                                      26 WEEKS       6 MONTHS
                                                       ENDED           ENDED
                                                   JUNE 27, 1997   JUNE 30,1996
                                                   -------------   ------------

Cash Flows From Operating Activities:
 Net income                                        $    23.0       $    20.0
 Adjustments to reconcile net income to net
   cash provided by operating activities:               
     Depreciation                                       12.9            12.3
     Amortization                                        3.3             3.4
     Decrease in deferred taxes                         (3.0)           (1.6)
     Gain on sale of property, plant and
       equipment, net                                   (2.5)           (0.1)
     Increase in receivables                            (7.8)          (12.1)
     Increase in prepayments and other assets           (1.9)           (1.6)
     Decrease in inventories                             3.8            13.2
     Decrease in accounts payable and other
       liabilities                                     (11.8)           (7.9)
     Increase in income taxes payable                    4.4             2.8
                                                   ---------       ---------  
Net Cash Provided by Operating Activities               20.4            28.4
                                                   ---------       ---------
 
Cash Flows From Investing Activities:
  Purchases of property, plant and equipment           (14.9)          (12.2)
  Proceeds from sale of property, plant and
    equipment                                            4.9             0.4
                                                   ---------       ---------
Net Cash Used by Investing Activities                  (10.0)          (11.8)
                                                   ---------       ---------
 
Cash Flows From Financing Activities:
  (Decrease) increase in short-term borrowings          (0.2)            5.7
  Payments of long-term debt                            (1.0)           (1.6)
  Proceeds from long-term borrowings                     1.3             1.8
  Cash dividends paid                                  (13.2)          (13.1)
  Proceeds from stock plans and other                    1.0             1.2
                                                   ---------       ---------
Net Cash Used by Financing Activities                  (12.1)           (6.0)
                                                   ---------       ---------
 
Increase (Decrease) in Cash and Cash Equivalents        (1.7)           10.6
                                                   ---------       ---------
 
Cash and Cash Equivalents at Beginning of Period        24.8            12.9
                                                   ---------       ---------
Cash and Cash Equivalents at End of Period         $    23.1       $    23.5
                                                   =========       =========
 




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

                                       4
<PAGE>
 
                 KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (AMOUNTS IN MILLIONS)
                                  (UNAUDITED)

(1) BASIS FOR PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

    The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures, including significant accounting policies normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. All adjustments which are, in the
opinion of management, necessary to present a fair statement of the results of
the interim periods have been included. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's latest Form 10-K.

    Effective in January 1997, the Company changed its fiscal year to consist of
three thirteen week periods and a fourth period which ends on December 31.
Management believes that the change in reporting periods did not have a material
impact on the Company's results of operations or financial position for the
first or second quarters of 1997.  Prior year interim financial statements have
not been restated to reflect the new reporting calendar.

    The Financial Accounting Standards Board has issued two new statements.
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", is effective for years beginning after December 15, 1997,
and adoption is not expected to impact the financial results of the Company.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", is also effective in fiscal year 1998.

(2) ESTIMATES INVOLVED IN PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS

    The Company's interim financial statements are prepared in accordance with
the same accounting policies followed at year-end. Certain items in the
financial statements can be determined on an interim basis only by making
accounting estimates.  The accuracy of such amounts is dependent upon facts that
will exist and events that will occur later in the year.  Several of the
significant accounting estimates related to the accompanying interim financial
statements are set forth below.

    Inventories -

    The Company performs physical counts of its inventories at various times
during the year.  The amounts reflected as raw materials and parts, work-in-
process, and components, sub-assemblies and finished goods as of June 27, 1997,
and June 30, 1996, and thereby the related amounts for cost of sales, have been
determined using the Company's normal accounting procedures.

    The majority of the Company's domestic inventories (approximately 34% of
consolidated inventories at December 31, 1996) are priced at cost using the LIFO
(last-in, first-out) method.  Since amounts for inventories under the LIFO
method are based upon computations determined at year-end, the inventory at June
27, 1997, has been based on certain estimates of what quantities and costs will
be at December 31, 1997.

    Inventories at June 27, 1997, and December 31, 1996, are comprised of the
following:
 
                                                     JUNE 27,      DECEMBER 31,
                                                       1997            1996
                                                   -------------   ------------
 
    Raw materials and parts                        $    15.9       $    16.1
    Work-in-process                                     17.9            14.8
    Components, sub-assemblies and finished goods      106.8           113.3
    Less:  LIFO Adjustment                              (2.3)           (2.1)
                                                   ---------       ---------
                                                   $   138.3       $   142.1
                                                   =========       =========

                                       5
<PAGE>
 
    Income Taxes -

    The Company provides for income taxes for an interim period by making, at
the end of the interim period, an estimate of the effective tax rate expected to
be applicable for the full year and applying that rate to the current year-to-
date income before taxes.

(3) FOREIGN CURRENCY TRANSLATION AND COMMITMENTS

    An analysis of changes in the foreign currency translation adjustments
included in Shareholders' Investment is as follows:
 
    Balance as of December 31, 1996                $     3.6
    Currency translation adjustments                   (11.9)
    Income tax adjustments                               4.1
                                                   ---------
    Balance as of June 27, 1997                    $    (4.2)
                                                   =========

    From time to time, the Company enters into forward exchange contracts and
borrows in foreign currencies to mitigate the effect of exchange rate
fluctuations on its operations.  These hedging techniques limit exchange rate
exposure and the resulting impact on the Company's reported margins.

    At June 27, 1997, the Company had obligations of $6.3 under forward exchange
contracts primarily for  Italian lire and Japanese Yen at various dates through
the fourth quarter of 1997.  Deferred gains or losses related to these contracts
as of June 27, 1997, were not material.

(4) EARNINGS PER SHARE

    Earnings per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding. There is no
significant difference between earnings per share on a primary and a fully
diluted basis.

    The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which is effective for
fiscal years ending after December 15, 1997.  When adopted, this statement
requires restatement of prior years' earnings per share.  Had SFAS No. 128 been
adopted as of January 1, 1997, there would have been no effect on the Company's
earnings per share.

(5) INTEREST AND TAX PAYMENTS

    Interest payments made during the thirteen and twenty-six week periods ended
June 27, 1997, were $2.3 and $3.1, respectively.  This represented decreases of
$0.4 and $0.7 from the comparable periods of 1996.

    Payments for income taxes made during the second quarter of 1997 and the
first half of 1997 were $10.6 and $10.7, respectively.  Income tax payments for
the second quarter of 1996 and the first half of 1996 were $5.0 and $9.4,
respectively.

(6) FINANCIAL INSTRUMENTS

    The Company's financial strategy includes the limited use of two types of
derivative financial instruments. It periodically enters into forward exchange
contracts to mitigate the exposure risk related to known future foreign currency
transactions. These specific transactions are accounted for in accordance with
the guidelines established in SFAS No. 52, "Foreign Currency Translation."
Transaction gains and losses are included in Other Income and Expense.

    Additionally, the Company has entered into two interest rate swap agreements
in order to mitigate the risk of interest rate fluctuations on two specific
loans.  These agreements replaced the original floating interest rates with
fixed interest rates and thereby provide the Company with the stability of
fixed interest expense and cash payments.

                                       6
<PAGE>
 
(7) MERGER

    On May 20, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") by and among Tyco International Ltd., a Massachusetts
corporation ("Tyco"), T6 Acquisition Corp., a Texas corporation and direct,
wholly-owned subsidiary of Tyco (the "Subsidiary"), and the Company, which
Merger Agreement provides for the merger of the Subsidiary with and into the
Company.  Pursuant to the Merger Agreement, the shareholders of the Company will
receive 0.54183 shares of common stock of Tyco, or its successor, for each share
of outstanding Company common stock, subject to certain adjustments and limits
as provided in the Merger Agreement.  The transaction, which will be accounted
for as a pooling of interests, is contingent upon customary regulatory review
and approval by Keystone shareholders.  The Boards of Directors of both
companies have approved the transaction, which is expected to close in late
August, 1997.  It is also expected to be a tax-free transaction for Keystone
shareholders.  On July 18, 1997, the Antitrust Division of the U.S. Department
of Justice issued to Tyco and the Company a request for additional information
and documentation.  On July 29, 1997, Tyco filed an amended S-4 registration
statement in connection with the merger.  Additionally, on July 29, 1997, the
Company mailed a proxy statement/prospectus to its shareholders announcing a
special shareholders' meeting to be held on August 28, 1997, to approve the
merger.  Tyco and Keystone do not intend to consummate the Merger unless and
until the concerns identified by the Antitrust Division are resolved.  Each
state and country where either Tyco or Keystone has operations may also review
the Merger under such jurisdiction's antitrust law.  Keystone shareholders have
been asked to authorize a vote in favor of any proposal to adjourn the Special
Meeting to a later date, which adjournment is proposed or recommended by the
Chairman of the Special Meeting. There is no present intention to adjourn the
Special Meeting.  However, without modifying Keystone's obligations under the
Merger Agreement, the Chairman could determine to propose to adjourn the Special
Meeting for any reason deemed advisable and in the best interests of Keystone
shareholders.

                                       7
<PAGE>
 
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
                                                              


SUMMARY

    In management's discussion and analysis of financial condition and results
of operations, various comments are made regarding the Company's future
expectations or plans that constitute forward-looking statements for purposes of
the safe harbor provisions of the Private Securities Litigation Act of 1995.
Actual results may differ materially from those indicated by these forward-
looking statements as a result of certain factors described in the Company's
most recent Form 10-K and Annual Report to Shareholders.

    The following table sets forth for the periods indicated (i) percentages
which certain items reflected in the accompanying consolidated statements of
income represent of total net sales of the Company and (ii) the percentage
increase or decrease of amounts of such items as compared to the corresponding
prior year period.
<TABLE>
<CAPTION>
  
                                        PERCENTAGE OF NET SALES           PERCENTAGE OF NET SALES
                                        -----------------------           -----------------------
                                         13 WEEKS     3 MONTHS             26 WEEKS     6 MONTHS
                                           ENDED        ENDED                ENDED        ENDED
                                         JUNE 27,     JUNE 30,      %      JUNE 27,     JUNE 30,      %
                                           1997         1996     CHANGE      1997         1996     CHANGE
                                         --------     --------   ------    --------     --------   ------
<S>                                     <C>          <C>         <C>      <C>          <C>         <C>
 
Net Sales                                   100.0       100.0      (0.2)      100.0        100.0     (2.0)
 
Cost and Expenses:
  Cost of sales                              61.6         62.7     (2.0)       61.7         62.8     (3.7)
  Selling, general and administrative        25.5         25.3      0.5        26.4         25.7      0.9
  Interest expense                            0.9          1.0    (20.0)        1.0          1.2    (22.0)
  Interest income                             0.1          0.1      -           0.2          0.1     25.0
  Other expense, net                          0.5          1.0      *           0.1          1.0      *
 
Income before Income Taxes                   12.6          9.8     28.2        11.2          9.4     16.7
 
Provision for Income Taxes                    4.8          3.6     31.7         4.3          3.5     19.5
 
Net Income                                    7.8          6.2     26.2         6.9          5.9     15.0
 
</TABLE>


 *    percentage not meaningful

 ()    denotes decrease

                                       8
<PAGE>
 
RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS)

    Net sales for the thirteen and twenty-six week periods ended June 27, 1997,
decreased 0.2% and 2.0%, respectively, from the comparable periods of the prior
year. The Company's sales and results of operations outside the United States
are subject to the inherent risk of fluctuations in currency rates. For the
thirteen and twenty-six week periods ended June 27, 1997, sales declined $6.0
and $11.9, respectively, as a result of the fluctuation of several currencies,
primarily the European currencies, the Japanese yen and the Korean won against
the U.S. dollar.

    Excluding currency effects, sales for the thirteen and twenty-six week
periods ended June 27, 1997, increased 3.4% and 1.6%, respectively, from the
comparable periods in 1996. These increases were primarily attributable to the
benefits of one additional shipping day during the second quarter of 1997. The
second quarter of 1997 also included sales of $1.4 for Century Valve and Machine
Ltd. and $0.7 for Keystone Valve India, both of which became fully consolidated
subsidiaries at the end of 1996. Additional sales increases resulted from
productivity improvements at Anderson Greenwood's Black Mountain facility and
Keystone Pacific plants.

    The Company is structured into two major operating groups.  The Industrial
Valves and Controls group provides standard flow control products to several
markets including the chemical, power, and food and beverage industries.  The
Engineered Products group meets the more technical needs of processing
industries such as the chemical and petrochemical, oil and gas, and power
industries.

    An analysis of net sales by operating group is shown below.
<TABLE>
<CAPTION>
 
                                                      % INCREASE                      % INCREASE
                                                    (DECREASE) vs.                  (DECREASE) vs.
                                       13 WEEKS        3 MONTHS        26 WEEKS        6 MONTHS
                                         ENDED           ENDED           ENDED           ENDED
                                     June 27, 1997   JUNE 30, 1996   JUNE 27, 1997   JUNE 30, 1996
                                     -------------  ---------------  -------------   -------------
<S>                                  <C>            <C>              <C>            <C>
 
    Industrial Valves and Controls     $  121.8          (1.9)         $  232.5          (3.9)
 
    Engineered Products                    51.4            3.8             98.7           2.9
                                       --------                         -------
 
    Total Net Sales                    $  173.2           (0.2)        $  331.2          (2.0)
                                       ========                        ========
 
</TABLE>

    For the thirteen and twenty-six week periods ended June 27, 1997, cost of
sales as a percentage of net sales decreased to 61.6% and 61.7% as compared to
the comparable prior year periods' percentages of 62.7% and 62.8%, respectively.
These improvements were based on cost reduction programs implemented at several
plants in the United States and Asia Pacific regions. The elimination of an
underperforming product line at Yarway further contributed to the reduction in
cost of sales for the first half of 1997.

    Selling, general and administrative expenses for the thirteen and twenty-six
week periods ended June 27, 1997, increased 0.5% and 0.9% in relation to their
comparable periods in 1996. Excluding the effect of the strong U.S. dollar, the
percentage increases for the applicable periods rose to 3.6% and 4.4%,
respectively. These increases resulted primarily from severance costs related to
reductions in Yarway's worldwide sales force. Other contributing factors to the
increase in selling, general and administrative expenses included annual salary
adjustments and the addition of normal expenses incurred by the two newly
consolidated operations, Century Valve and Machine Ltd. and India.

    Interest expense for the thirteen and twenty-six week periods ended June 27,
1997, decreased compared to the comparable periods in 1996 due primarily to a
decrease in the level of outstanding short-term debt.  Additionally, the Company
discontinued the practice of factoring the receivables at a French ball valve
operation, the costs of which were classified as interest expense in 1996.

                                       9
<PAGE>
 
    Other expense, net, generally represents amortization of intangible assets,
as well as exchange gains and losses related to currency fluctuations.  The
thirteen week period ended June 27, 1997, included a non-recurring gain of $1.9
related to the sale of property owned by Yarway.  Combined with the $0.5 gain on
the sale of assets during the first quarter of 1997, the year-to-date gain was
$2.4.  The fluctuation in foreign currencies compared to the U.S. dollar
resulted in a $0.3 gain for the second quarter of 1997 versus the $0.4 loss that
was incurred during the comparable period of 1996.  The foreign currency effect
for the twenty-six week period ended June 27, 1997, also resulted in a $0.3
gain, however, the currency effect for the comparable period of 1996 was a $0.6
loss.  Amortization costs for the thirteen and twenty-six week periods ended
June 27, 1997, were $0.2 and $0.4 less than the comparable periods of 1996.

    The Company's income tax rate was 38% for the twenty-six week period ended
June 27, 1997, and 37% for the six month period ended June 30, 1996.

    The Internal Revenue Service ("IRS") has examined the Company's federal
income tax returns for calendar years 1989 through 1992.  The Company has
resolved most issues with the IRS for calendar years 1989 through 1991. In
addition, the IRS has recommended an assessment of additional tax for calendar
year 1992.  The Company is vigorously contesting the remaining issues for these
years.  Management believes that any adjustment that may result from these
examinations will not have a material adverse impact on the Company's
consolidated financial position or future results of operations.

LIQUIDITY AND CAPITAL RESOURCES (AMOUNTS IN MILLIONS)

    At June 27, 1997, the Company had working capital of $194.4 compared to
$191.7 at December 31, 1996.  Management is not aware of any potential
impairments to the Company's liquidity and believes its internal and external
sources of cash will provide the necessary funds with which to meet its expected
capital requirements.

    During the fourth quarter of 1995, the Company recorded a charge of $14.4
before income taxes, or $.28 per share, for restructuring and severance-related
costs.  The fourth quarter 1995 charge related to restructuring plans focused on
streamlining of operations and divestiture of underperforming assets.  These
steps were originally expected to result in the reduction of an additional 260
positions.  Management currently believes the ultimate reduction of positions in
connection with these steps will be approximately 180, with 40 of these
positions related to business activities being divested and 140 associated with
ongoing operations.

    The fourth quarter 1995 restructuring charge included severance and related
costs of $9.3, the write-down of certain assets totaling $2.7, and $2.4 of other
costs associated with divesting assets.  The aggregate balance of the
restructuring-related liability as of June 27, 1997, was $2.2.  The majority of
the liability related to the original charge was paid or settled during 1996,
with the remaining amount to be paid or settled during 1997.  Management
believes the Company's restructuring plans are on track in terms of general
timing, charges against reserves, annualized savings and impact on results.

INFLATION

    Since 1994, inflation has had a relatively minor effect on the majority of
Keystone's operations.  However, in Brazil, which accounted for only 2% of net
sales and 5.9% of net income in the second quarter of 1997, inflation often
makes the operating environment somewhat difficult.  A portion of the 1997
translation losses reflected in "Other expense, net" in the Consolidated
Statements of Income, included in Part I of this Report, resulted from these
operations.

    At the end of 1996, Mexico's economy became highly inflationary.
Accordingly, effective January 1, 1997, the translation adjustments related to
the Company's operations in Mexico also have been reflected in "Other expense,
net" in the Consolidated Statements of Income.  Mexico accounted for only 1.0%
of net sales and 3.0% of net income in the second quarter of 1997.  The Company
does not expect this change to have a material effect on its consolidated
financial position or future results of operations.

                                       10
<PAGE>
 
                                    PART II
                               OTHER INFORMATION

  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

           (a)  Exhibits.

                1.1  Supplemental Executive Retirement Plan.

           (b)  Reports on Form 8-K.

                The Company filed a Form 8-K on May 27, 1997, covering the
                proposed merger with Tyco International, Ltd .

           (c)  Financial Data Schedule. 12

                                       11
<PAGE>
 
                                  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.



                                         KEYSTONE INTERNATIONAL, INC.



DATE:    August 8, 1997                  By: /s/ Francis S. Kalman
                                            _________________________
                                         Francis S. Kalman
                                         Senior Vice President and
                                         Chief Financial Officer



DATE:    August 8, 1997                  By: /s/ Michael J. Kershaw
                                            _________________________
                                         Michael J. Kershaw
                                         Corporate Controller

                                       12