<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10485
TYLER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2303920
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2121 SAN JACINTO STREET
SUITE 3200, DALLAS, TEXAS 75201
(Address of principal executive offices)
(Zip code)
(214) 754-7800
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report.)
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
----- -----
Number of shares of common stock of registrant outstanding at
May 9, 1997: 19,882,921
Page 1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TYLER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31 March 31
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 19,140,000 $ 15,773,000 $ 12,647,000
Accounts receivable (less allowance
for losses of: 3/31/97 - $1,371,000;
12/31/96 - $1,364,000; 3/31/96 -
$441,000) 5,945,000 11,633,000 8,915,000
Merchandise inventories 20,465,000 20,127,000 22,044,000
Income tax receivable 618,000 907,000 4,374,000
Prepaid expense 856,000 963,000 5,274,000
Deferred income tax benefit 3,438,000 3,438,000 1,406,000
------------ ------------ ------------
Total current assets 50,462,000 52,841,000 54,660,000
Property, plant and equipment, at cost 14,962,000 14,502,000 16,260,000
Less allowance for depreciation 6,882,000 6,369,000 6,714,000
------------ ------------ ------------
8,080,000 8,133,000 9,546,000
Other assets
Goodwill and other intangibles -- -- 53,688,000
Sundry 1,908,000 1,970,000 3,397,000
------------ ------------ ------------
1,908,000 1,970,000 57,085,000
------------ ------------ ------------
$ 60,450,000 $ 62,944,000 $121,291,000
============ ============ ============
</TABLE>
See accompanying notes.
- 2 -
<PAGE> 3
TYLER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31 March 31
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 6,621,000 $ 5,779,000 $ 6,773,000
Accrued liabilities 11,602,000 14,853,000 9,659,000
------------ ------------ ------------
Total current liabilities 18,223,000 20,632,000 16,432,000
Deferred income tax 5,922,000 6,136,000 8,058,000
Other liabilities -- -- 1,229,000
Other liabilities - TPI of Texas 4,123,000 4,135,000 2,296,000
Commitments and contingencies (1)
Shareholders' equity
Common stock ($.01 par value, 50,000,000
shares authorized, 21,309,277 shares
issued) 213,000 213,000 213,000
Capital surplus 48,516,000 48,520,000 48,538,000
Retained (deficit) earnings (9,944,000) (10,083,000) 51,161,000
------------ ------------ ------------
38,785,000 38,650,000 99,912,000
Less treasury shares, at cost: (3/31/97 -
1,426,356; 12/31/96 - 1,428,828;
3/31/96 - 1,433,823) 6,603,000 6,609,000 6,636,000
------------ ------------ ------------
Total shareholders' equity 32,182,000 32,041,000 93,276,000
------------ ------------ ------------
$ 60,450,000 $ 62,944,000 $121,291,000
============ ============ ============
</TABLE>
See accompanying notes.
- 3 -
<PAGE> 4
TYLER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 26,497,000 $ 30,764,000
Costs and expenses
Cost of sales 12,216,000 14,204,000
Selling, general and administrative
expenses 14,226,000 16,817,000
Interest (income), net (163,000) (70,000)
------------ ------------
26,279,000 30,951,000
------------ ------------
Income (loss) before
income tax (benefit) 218,000 (187,000)
Income tax (benefit) 79,000 (101,000)
------------ ------------
Net income (loss) $ 139,000 $ (86,000)
============ ============
Net earnings per common share $ .01 $ .00
============ ============
Average shares outstanding during
the period 19,882,000 19,875,000
</TABLE>
See accompanying notes.
- 4 -
<PAGE> 5
TYLER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 139,000 $ (86,000)
Adjustments to reconcile net income (loss)
to net cash provided by operations
Depreciation and amortization 689,000 1,023,000
Provision for losses on
accounts receivable 67,000 60,000
Deferred income tax benefit (214,000) --
Decrease in accounts receivable 5,621,000 7,275,000
(Increase) decrease in inventories (338,000) 214,000
(Increase) decrease in income tax receivable 289,000 (13,000)
Decrease in prepaid expense 107,000 255,000
Increase (decrease) in accounts payable 842,000 (814,000)
Decrease in accrued liabilities (3,251,000) (4,993,000)
Decrease in other liabilities (12,000) (133,000)
------------ ------------
Net cash provided by operations 3,939,000 2,788,000
------------ ------------
Cash flows from investing activities
Net amount due from Union
Acquisition Corporation -- 7,599,000
Additions to property, plant and
equipment (462,000) (664,000)
Cost of acquisition -- (1,320,000)
Proceeds from disposal of property,
plant and equipment 2,000 358,000
Other (114,000) 639,000
------------ ------------
Net cash (used) provided
by investing activities (574,000) 6,612,000
------------ ------------
Cash flows from financing activities
Issuance of common stock 2,000 --
------------ ------------
Net cash provided by
financing activities 2,000 --
------------ ------------
Net increase in cash and cash equivalents 3,367,000 9,400,000
Cash and cash equivalents at beginning
of period 15,773,000 3,247,000
------------ ------------
Cash and cash equivalents at end of period $ 19,140,000 $ 12,647,000
============ ============
Supplemental disclosures
Interest paid $ 4,000 $ 1,000
Income tax (received) paid $ 4,000 $ (268,000)
</TABLE>
See accompanying notes.
- 5 -
<PAGE> 6
Tyler Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Commitments and Contingencies
The New Jersey Department of Environmental Protection and Energy
("NJDEPE") has alleged that a site where a former affiliate of TPI of Texas,
Inc. ("TPI"), Jersey-Tyler Foundry Company ("Jersey-Tyler"), once operated a
foundry contains lead and possible other priority pollutant metals and may need
on-site and off-site remediation. The foundry was operated on the site from
the early part of this century to 1969 when it was acquired by Jersey-Tyler.
Jersey-Tyler operated the foundry from 1969 to 1976, at which time the foundry
was closed. Subsequently, the property was sold to other persons who have
operated a salvage yard on the site. Based on a remedial investigation
conducted by TPI, the NJDEPE has demanded TPI and other potentially responsible
parties remediate the foundry site and the contamination in the adjacent stream
and nearby lake. TPI has proposed that it conduct a feasibility study to
assess its remediation options, including costs, but does not intend to commit
to further action at this time.
In connection with TPI's sale of assets to Ransom Industries, Inc.
("Ransom"), on December 1, 1995, under the terms of the Acquisition Agreement
among the Company, TPI and Ransom (the "Acquisition Agreement"), Ransom agreed
to manage and direct the prosecution or defense of this matter on behalf of
TPI. In addition, Ransom agreed to reimburse TPI the first $3,000,000 of
certain costs and expenses incurred in connection with the investigation or
remediation of the New Jersey site, and one-half of such expenses in excess of
$3,000,000. Under any circumstances, however, the maximum amount that Ransom
agreed to reimburse TPI in connection with this matter is $6,500,000. Ransom,
on behalf of TPI, is proceeding against predecessor owners and operators of the
site, as well as others, to bear their share of the cost of the investigation
and any other costs, including any remediation costs incurred by TPI. Some
costs may also be covered by insurance although the insurance carriers have
initially denied coverage. TPI expects Ransom, on TPI's behalf, to proceed
against such insurance carriers seeking coverage of remediation costs.
- 6 -
<PAGE> 7
Ransom also agreed in the Acquisition Agreement to manage and direct the
prosecution or defense of certain other matters on behalf of TPI and to
reimburse related costs and expenses. Ransom agreed to reimburse TPI the first
$750,000 of all costs and expenses incurred in connection with each such matter
and one-half of such expenses in excess of $750,000. The maximum amount that
Ransom agreed to reimburse TPI in connection with all of these matters,
excluding Jersey-Tyler, is $8,000,000. Although it is impossible to predict
the outcome of legal or regulatory proceedings, based on negotiations and
activities before TPI's sale of assets, the Company believes that substantially
all of the costs, expenses and damages, if any, resulting from the legal
proceedings and environmental matters described above will be reimbursed by
Ransom pursuant to the Acquisition Agreement or have been adequately provided
for in the financial statements.
Ransom did not agree to reimburse TPI for, among other things, (a)
liabilities relating to the use, handling, manufacture or sale of products
containing asbestos or silica, (b) claims of individuals for health problems
such as (but not limited to) silicosis, or (c) offsite environmental
liabilities. Between 1968 and December 1995, TPI owned and operated foundries.
TPI is, and expects to continue to be, involved in different types of
litigation, including environmental claims and claims for work-related injuries
and physical conditions. In January 1997 two lawsuits were filed involving
silicosis claims. Based on the available facts, the Company is not able to
make a determination as to the likelihood of a favorable outcome or to estimate
the range of potential loss for any asserted or unasserted claims arising from
any of the sources described in this paragraph.
In June 1995 Forest City was sued by a former executive in the Court of
Common Pleas of Cuyahoga County, Ohio alleging that Forest City terminated the
plaintiff because of his age and making other common law claims arising out of
his termination. In March 1997 the plaintiff in this case, Forest City, the
Company and the other related parties settled this lawsuit by mutual agreement
- 7 -
<PAGE> 8
under the terms of the settlement. The plaintiff, among other things, released
Forest City, the Company and the related parties from all claims. The
settlement did not significantly affect the Company's consolidated financial
position or results of operations.
Other than ordinary course, routine litigation incidental to the
business of the Company and except as described herein, there are no other
material legal proceedings pending to which the Company or its subsidiaries are
parties or to which any of its properties are subject.
- 8 -
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
On March 31, 1997, Tyler Corporation announced the appointment of Bruce
W. Wilkinson as chief executive officer. On April 28, 1997, Richard W.
Margerison resigned as president and chief operating officer of the Company and
the board of directors appointed Bruce W. Wilkinson president and a director of
the Company. C.A. Rundell, Jr. continues as chairman of the board of the
Company.
The Company's first priority will be to improve near-term operating
performance at IFS and Forest City Auto Parts. Simultaneously, we will look
for acquisition opportunities. We are reexamining our acquisition criteria at
this time so as to assure a coherent and focused strategy is developed.
This Quarterly Report on Form 10-Q contains forward-looking statements
about the business, financial condition and prospects of the Company. The
actual results of the Company could differ materially from those indicated by
the forward-looking statements because of various risks and uncertainties
including, without limitation, changes in product demand, turnover in the sales
force, the availability of products, changes in competition, economic
conditions, various inventory risks due to changes in market conditions,
changes in tax and other governmental rules and regulations applicable to the
Company and other risks indicated in the Company's filings with the Securities
and Exchange Commission. These risks and uncertainties are beyond the ability
of the Company to control, and in many cases, the Company cannot predict the
risks and uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements. When used
in this Quarterly Report on Form 10-Q, the words "believes," "estimates,"
"plans," "expects," "anticipates," "intends" and similar expressions as they
relate to the Company or its management are intended to identify forward-
looking statements.
- 9 -
<PAGE> 10
In the opinion of the Company's management, the unaudited information
includes all adjustments which the Company considers necessary for a fair
summarized presentation of the condensed consolidated balance sheets at March
31, 1997 and 1996, the condensed consolidated results of operations for the
three months ended March 31, 1997 and 1996, and the condensed consolidated cash
flows for the three months ended March 31, 1997 and 1996. The consolidated
results of operations for the three months ended March 31, 1997, are not
necessarily indicative of the results of operations for the full year.
Analysis of Results of Operations
Tyler Corporation posted pretax income of $218,000 for the three months
ended March 31, 1997, compared to a pretax loss of $187,000 in 1996. Sales
were $26.5 million, down 14% from the prior year.
Same-store sales at Forest City Auto Parts declined 12% as competitors
continued to open new stores in its markets. Despite the sales shortfall,
operating profit improved slightly on a 1.4% improvement in gross margin
coupled with lower operating payroll. Forest City completed installation of an
electronic point-of-sale system in early 1996 and a perpetual inventory system
for all hard-parts inventories in late 1996. Both of these systems and a
management program targeting stores for attention and improvement with gross
margins below a minimum standard contributed to the gross margin increase.
Sales at IFS fell 14% in the first quarter of 1997 versus the comparable
1996 period. The majority of the sales drop is attributable to turnover in the
sales force in 1996 and 1997. The fund-raising industry is consolidating
somewhat with fewer fund-raising companies and distributors than five years
ago. In this environment, competitors are actively recruiting salespersons
from IFS and other field sales organizations to act as distributors. In an
effort to minimize losses associated with sales declines, the company is
reducing head count and controlling fixed cost. The company posted a small
operating loss in the first quarter versus earning $134,000 in 1996.
-10-
<PAGE> 11
After elimination of a nonrecurring gain through sale of an asset in
1996, corporate expense declined 40% in the year-to-year comparison principally
as a result of lower personnel costs and rent expense.
Selling, general and administrative costs in the first quarter of 1996
includes $577,000 relating to amortization of goodwill and other intangibles at
Forest City and IFS. In December 1996 the Company wrote-off all goodwill and
other intangibles. The effective tax rate declined from 54% in 1996 to 36% in
1997. The 1996 tax rate was unusually high due to non-deductible goodwill
amortization and a one-time taxable gain associated with termination of an
employee benefit plan.
Liquidity and Capital Resources
As of March 31, 1997, the Company had $19.1 million in cash and cash
equivalents and no debt. Both operating companies are potentially strong cash
generators. We believe adequate cash resources will be available to fund our
annual seasonal increase in working capital at IFS and capital spending
requirements. We will not increase our investment in these underperforming
operations unless we are convinced that a superior return on asset opportunity
exists.
March 31, 1997 vs. December 31, 1996
Cash and cash equivalents increased $3.4 million mainly due to seasonal
working capital decreases occurring at IFS. Historically, IFS generates
approximately 60% of its sales in the fall, with working capital increasing in
the last six months of the year and subsequent liquidations occurring in the
first half of the following year.
The Company made final settlement and excise tax payments of
approximately $1.8 million in the first quarter of 1997 relating to several
employee benefit plans terminated in the fourth quarter of 1996. The decline
in accrued liabilities also reflects severance payments of $400,000.
-11-
<PAGE> 12
March 31, 1997 vs. March 31, 1996
Cash flow, combining the $139,000 income with depreciation and
amortization charges of $689,000, is relatively flat with $937,000 in the first
three months of 1996. Working capital at March 31, 1997, was down $6.0 million
from March 31, 1996, primarily due to the collection of an income tax refund of
$4.1 million in the third quarter of 1996. An additional decline occurred in
the fourth quarter of 1996 when the Company terminated its defined benefit
pension plan resulting in a $2.3 million cash reversion and a noncash reduction
in prepaid pension cost of $3.7 million.
Other liabilities declined $1.2 million from March 31, 1996, due to a
final payment in the third quarter of 1996 to former shareholders and
executives at IFS.
In January 1997 two lawsuits were filed involving silicosis claims.
Costs associated with investigation of such matters are included in other
liabilities - TPI of Texas at March 31, 1997. (See "Commitments and
Contingencies.")
-12-
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
10.21 Employment agreement between the Company and Bruce
W. Wilkinson, dated March 28, 1997.
27 Financial Data Schedule
(b) There were no reports filed on Form 8-K during the first quarter
of 1997.
-13-
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TYLER CORPORATION
By: /s/Linda K. Hill
------------------------------------
Linda K. Hill, Vice President,
Controller, Treasurer and
Assistant Secretary -
principal financial officer,
principal accounting officer
and an authorized signatory
Date: May 12, 1997
-14-
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.21 Employment agreement between the Company and Bruce W. Wilkinson,
dated March 28, 1997.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
with
BRUCE W. WILKINSON
Offer for Bruce W. Wilkinson, 2020 Sunset Boulevard, Houston, Texas 77005, to
become the Chief Executive Officer of Tyler Corporation is outlined below:
1. Salary - $16,667 per month for the first thirty months and then an
automatic increase to $25,000 per month. You will also receive 125,000
shares of Tyler common stock. These shares will be returned pro rata
if you leave the Company within two and one-half years from date of
employment. In the event there is a change of control prior to April
1999, the requirement for returning these shares will be released.
2. Bonus - To be based on $300,000 salary depending on agreed upon goals.
Our standard bonus program, which you have read, calls for RONA levels
for bonus percentages, but performance to plan or other goals could be
considered. A discretionary bonus of up to 50% of $300,000 will be
considered for the first part year ending December 31, 1997.
3. Investment - You would invest $750,000 in the common stock of Tyler in
the open market, but Tyler would issue new stock to sell to you if the
price ran up so that your average price would not exceed $2.00 per
share.
4. Option - You will receive an option for 495,000 shares at the price on
the day you become an employee. Another option for the amount of
shares necessary to bring your total share market value to $1 million
would be granted subject to approval at the stockholders' meeting of
new shares for the option program. Should the stockholders not approve
the new shares, the second option would become a non-incentive option.
5. Location - There is no need for you to move to Dallas. We would
provide six to twelve months temporary living quarters in Dallas while
you decide where to locate the headquarters. During this period, the
company will support an office with one employee (your assistant) in
Houston.
<PAGE> 2
Employment Agreement
March 28, 1997
Page two
6. Position - At the board meeting following the stockholders' meeting on
April 28, 1997, I will recommend that you be elected President and
Chief Executive Officer and also be elected to the board. I would
serve as Chairman of the Board and would agree to spend one day per
week or the equivalent with the Company.
7. Perks - Normal for job including car allowance of $700 per month,
insurance, annual physical, reasonable expenses, etc. This will
include expenses associated with Worldwide Presidents Organization.
8. Severance - If during the first three years of your employment you are
terminated by Tyler for any reason other than fraud, theft, gross
negligence, or personal malfeasance, you will receive a cash severance
payment of $300,000 in release of all your claims against the Company.
After three years, if you were to be terminated as a result of a change
in control, you would receive a cash severance of one year's base
salary at that time, also in release of all your claims against the
Company.
9. Start Date - March 28, 1997
AGREED AND ACCEPTED:
By: /s/ Bruce W. Wilkinson
----------------------
Bruce W. Wilkinson
Date: March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,140,000
<SECURITIES> 0
<RECEIVABLES> 5,945,000
<ALLOWANCES> 1,371,000
<INVENTORY> 20,465,000
<CURRENT-ASSETS> 50,462,000
<PP&E> 14,962,000
<DEPRECIATION> 6,882,000
<TOTAL-ASSETS> 60,450,000
<CURRENT-LIABILITIES> 18,223,000
<BONDS> 0
0
0
<COMMON> 213,000
<OTHER-SE> 31,969,000
<TOTAL-LIABILITY-AND-EQUITY> 60,450,000
<SALES> 26,497,000
<TOTAL-REVENUES> 0
<CGS> 12,216,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67,000
<INTEREST-EXPENSE> 26,000
<INCOME-PRETAX> 218,000
<INCOME-TAX> 79,000
<INCOME-CONTINUING> 139,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,000
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
