<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 September 30, 1998
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 2900, DALLAS, TEXAS 75201
(Address of principal executive offices)
(Zip code)
(214) 754-7800
(Registrant's telephone number, including area code)
2121 SAN JACINTO STREET
SUITE 3200, DALLAS, TEXAS 75201
(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
November 11, 1998: 34,489,831
<PAGE> 2
TYLER CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets ................................ 3
Condensed Consolidated Statements of Operations ...................... 5
Condensed Consolidated Statements of Cash Flows ...................... 7
Notes to Condensed Consolidated Financial Statements ................. 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 13
Part II - Other Information
Item 1. Legal Proceedings ................................................... 20
Item 5. Other Information ................................................... 20
Item 6. Exhibits and Reports on Form 8-K .................................... 21
Signatures ............................................................................ 21
</TABLE>
Exhibit 10.18 Employment agreement between the Company and
Theodore L. Bathurst, dated October 7, 1998.
Exhibit 27 Financial Data Schedule (for SEC information only)
Page 2 of 21
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TYLER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,079,000 $ 8,877,000
Accounts receivable (less allowance
for losses of $576,000 and $42,000
at 9/30/98 and 12/31/97, respectively) 11,131,000 201,000
Note receivable from I.F.S. Acquisition Corp. -- 2,628,000
Merchandise inventories 23,370,000 22,901,000
Income tax receivable -- 516,000
Other current assets 2,882,000 394,000
Deferred income taxes 762,000 762,000
------------ ------------
Total current assets 40,224,000 36,279,000
Property, plant and equipment, net 18,232,000 5,580,000
Other assets
Goodwill, net 72,314,000 --
Other intangibles, net 23,005,000 --
Sundry 3,235,000 2,881,000
Other receivables 4,199,000 4,455,000
Note receivable from Business Resources Corporation -- 5,700,000
------------ ------------
102,753,000 13,036,000
------------ ------------
$161,209,000 $ 54,895,000
============ ============
</TABLE>
See accompanying notes.
Page 3 of 21
<PAGE> 4
TYLER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,027,000 $ 5,615,000
Accrued liabilities 7,701,000 6,172,000
Current portion of long-term debt 1,531,000 --
Deferred revenue 7,691,000 --
Income taxes payable 1,747,000 --
------------- -------------
Total current liabilities 23,697,000 11,787,000
Long-term debt, excluding current portion 33,751,000 --
Other liabilities 7,617,000 8,537,000
Deferred income taxes 9,231,000 3,168,000
Commitments and contingencies
Shareholders' equity
Common stock ($.01 par value, 100,000,000 and
50,000,000 shares authorized at 9/30/98 and
12/31/97, respectively; 35,913,313 and 23,309,277
shares issued at 9/30/98 and 12/31/97, respectively) 359,000 233,000
Capital surplus 103,837,000 51,216,000
Accumulated deficit (11,076,000) (13,431,000)
------------- -------------
93,120,000 38,018,000
Less treasury shares, at cost:
(1,423,482 and 1,552,965 shares at 9/30/98
and 12/31/97, respectively) 6,207,000 6,615,000
------------- -------------
Total shareholders' equity 86,913,000 31,403,000
------------- -------------
$ 161,209,000 $ 54,895,000
============= =============
</TABLE>
See accompanying notes
Page 4 of 21
<PAGE> 5
TYLER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
---------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues
Auto parts $ 19,697,000 $ 20,204,000
Information management 16,035,000 --
------------ ------------
Total revenues 35,732,000 20,204,000
Cost of revenues
Auto parts 12,035,000 11,688,000
Information management 7,751,000 --
------------ ------------
Total cost of revenues 19,786,000 11,688,000
------------ ------------
Gross profit 15,946,000 8,516,000
Selling, general and administrative 13,336,000 8,326,000
Store closing costs 100,000 --
------------ ------------
Operating income 2,510,000 190,000
Interest expense (income), net 686,000 (229,000)
------------ ------------
Income from continuing operations,
before income taxes 1,824,000 419,000
Income tax expense 915,000 151,000
------------ ------------
Income from continuing operations 909,000 268,000
Loss from operations of discontinued operations, after income taxes -- (498,000)
Estimated loss on disposal of discontinued operations -- (2,500,000)
------------ ------------
Net income (loss) $ 909,000 $ (2,730,000)
============ ============
Basic earnings (loss) per common share:
Continuing operations $ .03 $ .01
Discontinued operations -- (.14)
------------ ------------
Net earnings (loss) per common share $ .03 $ (.13)
============ ============
Diluted earnings (loss) per common share:
Continuing operations $ .03 $ .01
Discontinued operations -- (.14)
------------ ------------
Net earnings (loss) per common share $ .03 $ (.13)
============ ============
Weighted average outstanding common shares:
Basic 34,413,000 20,508,000
Diluted 36,226,000 20,994,000
</TABLE>
See accompanying notes.
Page 5 of 21
<PAGE> 6
TYLER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues
Auto parts $ 59,449,000 $ 58,172,000
Information management 32,836,000 --
------------ ------------
Total revenues 92,285,000 58,172,000
Cost of revenues
Auto parts 35,290,000 33,216,000
Information management 15,931,000 --
------------ ------------
Total cost of revenues 51,221,000 33,216,000
------------ ------------
Gross profit 41,064,000 24,956,000
Selling, general and administrative 34,972,000 24,313,000
Store closing costs 805,000 --
------------ ------------
Operating income 5,287,000 643,000
Interest expense (income), net 1,480,000 (613,000)
------------ ------------
Income from continuing operations,
before income taxes 3,807,000 1,256,000
Income tax expense 1,827,000 454,000
------------ ------------
Income from continuing operations 1,980,000 802,000
Loss from operations of discontinued operations, after income taxes -- (1,991,000)
Estimated gain (loss) on disposal of discontinued operations 375,000 (2,500,000)
------------ ------------
Net income (loss) $ 2,355,000 $ (3,689,000)
============ ============
Basic earnings (loss) per common share:
Continuing operations $ .06 $ .04
Discontinued operations .01 (.22)
------------ ------------
Net earnings (loss) per common share $ .07 $ (.18)
============ ============
Diluted earnings (loss) per common share
Continuing operations $ .06 $ .04
Discontinued operations .01 (.22)
------------ ------------
Net earnings (loss) per common share $ .07 $ (.18)
============ ============
Weighted average outstanding common shares:
Basic 31,979,000 20,145,000
Diluted 33,739,000 20,378,000
</TABLE>
See accompanying notes.
Page 6 of 21
<PAGE> 7
TYLER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 909,000 $ (2,730,000)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operations:
Depreciation and amortization 1,930,000 499,000
Deferred income tax benefit (801,000) (215,000)
Discontinued operations-noncash
charges and working capital changes -- (1,308,000)
Changes in operating assets and liabilities, net of
effects of acquired companies:
Accounts receivable (4,613,000) (47,000)
Inventories 818,000 (428,000)
Income taxes payable 2,240,000 (1,332,000)
Other current assets (787,000) 90,000
Other receivables 244,000 129,000
Accounts payable (844,000) 874,000
Accrued liabilities 1,143,000 (464,000)
Deferred revenue 529,000 --
Other liabilities (243,000) (55,000)
------------ ------------
Net cash provided (used) by operations 525,000 (4,987,000)
------------ ------------
Cash flows from investing activities
Additions to property, plant and equipment (1,348,000) (318,000)
Cost of acquisitions, net of cash acquired (2,580,000) --
Proceeds from disposal of property,
plant and equipment 317,000 --
Investing activities of discontinued operations -- 15,000
Other (893,000) (423,000)
------------ ------------
Net cash used by investing activities (4,504,000) (726,000)
------------ ------------
Cash flows from financing activities
Net long-term borrowings 3,451,000 --
Issuance of common stock -- 3,703,000
Payments of principal on capital lease obligations (22,000) --
------------ ------------
Net cash provided by financing activities 3,429,000 3,703,000
------------ ------------
Net decrease in cash and cash equivalents (550,000) (2,010,000)
Cash and cash equivalents at beginning of period 2,629,000 21,242,000
------------ ------------
Cash and cash equivalents at end of period $ 2,079,000 $ 19,232,000
============ ============
Supplemental disclosures
Interest paid $ 674,000 $ 36,000
Income tax (refunds) payments $ (787,000) $ 15,000
</TABLE>
See accompanying notes.
Page 7 of 21
<PAGE> 8
TYLER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 2,355,000 $ (3,689,000)
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation and amortization 4,780,000 1,483,000
Deferred income tax benefit (776,000) (644,000)
Discontinued operations-noncash
charges and working capital changes -- 5,217,000
Changes in operating assets and liabilities, net of
effects of acquired companies:
Accounts receivable (5,009,000) (79,000)
Inventories (50,000) (370,000)
Income taxes payable 3,203,000 (420,000)
Other current assets (1,537,000) 183,000
Other receivables 848,000 268,000
Accounts payable (2,295,000) 2,239,000
Accrued liabilities (476,000) (2,424,000)
Deferred revenue 2,653,000 --
Other liabilities (1,076,000) (286,000)
------------ ------------
Net cash provided by operations 2,620,000 1,478,000
------------ ------------
Cash flows from investing activities
Additions to property, plant and equipment (3,575,000) (734,000)
Cost of acquisitions, net of cash acquired (34,218,000) --
Proceeds from disposal of property,
plant and equipment 488,000 15,000
Investing activities of discontinued operations -- 15,000
Other (1,101,000) (666,000)
Net proceeds from sale of products for fund-raising
programs segment 2,628,000 --
------------ ------------
Net cash used by investing activities (35,778,000) (1,370,000)
------------ ------------
Cash flows from financing activities
Long-term borrowings 26,699,000 --
Sale of treasury shares to employee benefit plan 209,000 2,000
Issuance of common stock -- 3,703,000
Payments of principal on capital lease obligations (235,000) --
Debt issuance costs (313,000) --
------------ ------------
Net cash provided by financing activities 26,360,000 3,705,000
------------ ------------
Net (decrease) increase in cash and cash equivalents (6,798,000) 3,813,000
Cash and cash equivalents at beginning of period 8,877,000 15,419,000
------------ ------------
Cash and cash equivalents at end of period $ 2,079,000 $ 19,232,000
============ ============
Supplemental disclosures
Interest paid $ 1,438,000 $ 19,000
Income tax payments (refunds) $ (599,000) $ (49,000)
</TABLE>
See accompanying notes.
Page 8 of 21
<PAGE> 9
Tyler Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited information for Tyler Corporation ("Tyler"
or the "Company") includes all adjustments which are, in the opinion
of the Company's management, of a normal or recurring nature and
necessary for a fair summarized presentation of the condensed
consolidated balance sheet at September 30, 1998, and the condensed
consolidated results of operations and cash flows for the periods
presented. Such financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. The consolidated results of operations for interim
periods may not necessarily be indicative of the results of operations
for any other interim period or for the full year and should be read
in conjunction with the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
(2) Acquisitions
The Company acquired the entities described below in transactions
which were accounted for by the purchase method of accounting. Results
of operations of the acquired entities are included in the Company's
condensed consolidated financial statements from their respective date
of acquisition.
On February 19, 1998, the Company completed the purchases of Business
Resources Corporation ("Resources"), The Software Group, Inc. ("TSG")
and Interactive Computer Designs, Inc. ("INCODE"). These acquisitions
represent the implementation of Tyler's previously announced strategy
to build an integrated information management services, system and
outsourcing company servicing local governments. Resources, TSG and
INCODE provide information management solutions to approximately 200
county governments and 225 cities, principally located in the
Southwestern United States.
The purchase price for each acquired company consisted of the
following: (i) Resources - 10.0 million shares of Tyler common stock
and approximately $27.4 million of cash and assumed debt (ii) TSG -
2.0 million shares of Tyler common stock and approximately $12.0
million of cash and (iii) INCODE - 225,000 shares of Tyler common
stock and approximately $1.3 million of cash. The Company financed the
acquisitions utilizing funds available under its bank credit
agreement. The purchase price has been preliminary allocated to the
assets (including identifiable intangible assets such as title plant,
workforce, customer lists and software) and liabilities of each
company based on their estimated respective fair values. The purchase
price exceeded fair value of each company's respective net assets by
approximately $45.9 million, $14.1 million and $2.6 million for
Resources, TSG and INCODE, respectively. The excess has been assigned
to goodwill, which is being amortized over 40 years for Resources and
20 years for TSG and INCODE. The purchase price for Resources does not
include certain potential additional consideration, as the
contingencies regarding such additional consideration are not
presently determinable beyond reasonable doubt.
On June 5, 1998, the Company acquired a line of document management
software and related customer installations and service contracts from
the Business Imaging Systems division of Eastman Kodak Company for
$3.6 million in cash and $1.9 million in assumed liabilities. Kofile,
Inc. ("Kofile"), a newly formed subsidiary in the Company's Resources
unit, is based in Rochester, New York and its business consists of the
development, support and marketing of the document management software
and related customer installations and service contracts. The excess
purchase price over the estimated fair values of the net assets
acquired was approximately $5.4 million and has been recorded as
goodwill.
Page 9 of 21
<PAGE> 10
On July 1, 1998, the Company completed the purchases of CompactData
Solutions, Inc. ("CompactData") and Ram Quest Software, Inc. ("Ram
Quest"). CompactData specializes in building and marketing large-scale
databases comprised of public record information, such as property
appraisals, motor vehicle registrations, drivers licenses and criminal
and civil court case records. Ram Quest is a producer of advanced
software for title companies, which provides automation solutions for
the closing, title plant management and imaging needs of its
customers. Ram Quest currently has installed software systems with
over 75 customers throughout Texas. Ram Quest currently operates as a
subsidiary of the Company's Resources unit. The purchase price for
CompactData and Ram Quest totaled approximately $2.3 million,
comprised of approximately $.8 million in cash and assumed debt and
145,000 shares of Tyler common stock. The excess purchase price over
the estimated fair values of the net assets acquired was $2.1 million
and has been recorded as goodwill.
Effective August 1, 1998, the Company completed the purchase of
Computer Management Services, Inc. ("CMS") for approximately $1.3
million in cash and assumed debt and 228,000 shares of Tyler common
stock. CMS provides integrated information management systems and
services to over 500 cities and 100 counties throughout Iowa,
Minnesota, Missouri, South Dakota, Illinois, Wisconsin and other
states, primarily in the upper Midwest. The excess purchase price over
the estimated fair value of the net assets acquired was approximately
$2.8 million and has been recorded as goodwill.
In 1998 the Company has also made other acquisitions which are
immaterial.
The following unaudited pro forma information presents the
consolidated results of operations as if all of the Company's
acquisitions occurred on January 1, 1997. The pro forma information
does not purport to represent what the Company's results of operations
actually would have been had such transactions or events occurred on
the dates specified, or to project the Company's results of operations
for any future period.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
---------------------------------------------
Net (loss) Earnings (loss)
Revenues income per diluted share
-------- --------- -----------------
<S> <C> <C> <C>
Three months ended
September 30, 1997 $ 32,417 $ (2,151) $ (.06)
Nine months ended
September 30, 1997 $ 94,623 $ (1,395) $ (.04)
Nine months ended
September 30, 1998 $104,309 $ 2,697 $ .07
</TABLE>
(3) Commitments and Contingencies
As discussed in Note 13 of the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, the Company, through some of its
subsidiaries, is involved in various environmental claims and claims
for work-related injuries and physical conditions arising from a
formerly-owned subsidiary which was sold in December 1995.
At December 31, 1997, approximately fifty former employees of a
subsidiary of the Company, which, prior to December 1995, engaged in
pipe, fittings and other activities had filed several suits against
TPI of Texas, Inc. and/or Swan Transportation Company and/or Tyler
Sand Company, all subsidiaries or former subsidiaries of the Company
and Tyler Corporation, seeking to recover damages for alleged exposure
to asbestos and/or silica. As of September 30, 1998, more than 220
additional former employees have filed suits of a similar nature.
While the Company plans to defend this litigation vigorously, the
ultimate outcome of the litigation is uncertain.
Page 10 of 21
<PAGE> 11
As discussed in Note 13 of the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, the New Jersey Department of
Environmental Protection and Energy ("NJDEPE") has alleged that a site
where a former affiliate of Tyler Pipe Industries, Inc. (a
wholly-owned subsidiary of the Company known as 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 site was used for
foundry operations 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. In 1976,
Jersey-Tyler sold the property 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 remediate the foundry site and the
contamination in the adjacent stream and nearby lake. In the third
quarter of 1998 the NJDEPE has agreed with TPI's offer for TPI to
conduct a feasibility study to assess remediation options, including
costs, but TPI has not agreed to commit to further action at this
time. TPI never held title to the site and denies liability.
Other than ordinary course, routine litigation incidental to the
business of the Company and except as described herein, and in the
Company's Annual Report on Form 10-K for the year ended December 31,
1997, 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.
(4) Revenue Recognition
Information Management:
The Company sells off-the-shelf software packages and in some cases
software packages designed to the customers specification. In a
variety of instances, the Company also provides computer equipment,
related peripherals, installation and training. The Company recognizes
revenue, including those arrangements which entail a customer-specific
installation solution, when all of the elements have been delivered,
training completed, all significant contractual obligations satisfied
and collection of the related receivable for the entire arrangement is
probable. The Company also provides support, maintenance and
enhancements, which revenue is deferred based on vendor specific
evidence of fair value, and recognized ratably over the service
period. Incremental training is billable on a time and materials basis
and is recognized as revenue when the related services are performed.
To the extent computer hardware and related peripherals are
drop-shipped to a customer before the end of an accounting period, the
Company records contracts in progress for the corresponding cost of
such equipment.
The Company also provides computerized indexing and imaging of real
property records, records management and micrographic reproduction, as
well as information management and outsourcing and professional
services required by county and local government units and agencies
and provides title plant update services to title companies. The
Company recognizes service revenue when services are performed and
equipment sales when the products are shipped.
The Company also receives royalty revenue relating to the current
activities of two former subsidiaries of Resources. Royalty revenue is
recognized as earned upon receipt of royalty payments.
For certain long-term contracts entered into by the Company, revenue
is recognized using the percentage-of-completion method based on the
costs incurred to fulfill the Company's commitments to complete the
obligations specified in the agreements.
Deferred revenue consists primarily of payments received in advance of
revenue being earned under software licensing, software and hardware
installation, support and maintenance contracts.
Page 11 of 21
<PAGE> 12
Auto Parts:
Substantially all revenue is recognized when products are delivered to
customers.
(5) Discontinued Operations
Effective October 15, 1997, the Company sold all of the capital stock
of its subsidiary which provided products for fund-raising programs,
Institutional Financing Services, Inc. ("IFS"), to I.F.S. Acquisition
Corporation for approximately $8,400,000, resulting in a loss on
disposal of approximately $2,500,000. This estimated loss on disposal
included estimates regarding the value of certain assets that were
subject to change. In the second quarter of 1998, the Company adjusted
the estimated value of an asset, which resulted in a reduction of the
estimated loss on disposal of $375,000. Management expects final
resolution of all estimates by the fourth quarter of 1998 and that any
subsequent adjustments will not have a significant impact on the
estimated loss on disposal. Proceeds consisted of approximately
$5,800,000 in cash received at closing and approximately $2,600,000
received in January 1998.
(6) Earnings Per Share
In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share, which requires companies to present both basic and diluted
earnings per share. Basic earnings per share of common stock is
computed by dividing net income by the weighted-average number of
Tyler common shares outstanding during the period. Diluted earnings
per share is calculated in the same manner as basic earnings per share
except that the denominator is increased to include the number of
additional common shares that would have been outstanding, assuming
the exercise of all employee stock options and a warrant that would
have had a dilutive effect on earnings per share. The Company has
restated its earnings per share calculation for the three and nine
months ended September 30, 1997 to reflect the adoption of SFAS No.
128. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's 1997 Annual
Report on Form 10-K. The following table reconciles the numerators and
denominators used in the calculation of basic and diluted earnings
(loss) per share for each of the periods presented:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerators for basic and diluted earnings per share:
Net income (loss) $ 909,000 $ (2,730,000) $ 2,355,000 $ (3,689,000)
============ ============ ============ ============
Denominator:
Denominator for basic earnings per
weighted-average outstanding common shares 34,413,000 20,508,000 31,979,000 20,145,000
Effect of dilutive securities:
Employee stock options 380,000 431,000 363,000 215,000
Warrant 1,433,000 55,000 1,397,000 18,000
------------ ------------ ------------ ------------
Dilutive potential common shares 1,813,000 486,000 1,760,000 233,000
------------ ------------ ------------ ------------
Denominator for diluted earnings per
share-adjusted weighted-average outstanding
common shares for assumed conversion 36,226,000 20,994,000 33,739,000 20,378,000
============ ============ ============ ============
Basic earnings (loss) per share $ .03 $ (.13) $ .07 $ (.18)
============ ============ ============ ============
Diluted earnings (loss) per share $ .03 $ (.13) $ .07 $ (.18)
============ ============ ============ ============
</TABLE>
Page 12 of 21
<PAGE> 13
(7) New Accounting Standards
On January 1, 1998, the Company adopted the provisions of SFAS No.
130, Reporting Comprehensive Income. SFAS No. 130 establishes
standards for reporting and displaying comprehensive income and its
components. The statement also requires the accumulated balance of
other comprehensive income to be displayed separately from retained
earnings and additional paid-in capital in the equity section of the
statement of financial position. Comprehensive income for the three
months and nine months ended September 30, 1998 is the same as the
Company's reported net income for such periods.
In June 1998, SFAS No.133, Accounting for Derivative Instruments and
Hedging Activities, was issued. This statement establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. The provisions of SFAS No. 133 are effective for financial
statements beginning after June 5, 1999, although early adoption is
allowed. The Company has not determined if it will adopt the
provisions of this SFAS prior to its effective date. The adoption of
SFAS 133 is not expected to have a material impact on the Company's
consolidated financial statements and related disclosures.
In March 1998, Statement of Position (SOP) 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, was
issued. This SOP requires that certain costs related to the
development or purchase of internal-use software be capitalized and
amortized over the estimated useful life of the software. The
provisions of SOP 98-1 are effective for financial statements issued
for fiscal years beginning after December 15, 1998, although early
adoption is allowed. Initial application of SOP 98-1 is not expected
to have material impact on the Company's consolidated financial
statements. The Company has not determined if it will adopt the
provisions of this SOP prior to its effective date.
In April 1998, SOP 98-5, Reporting on the Costs of Start-up
Activities, was issued. This SOP provides guidance on the financial
reporting of start-up and organization costs and requires that these
costs be expensed as incurred. The provisions of SOP 98-5 are
effective for financial statements for fiscal years beginning after
December 15, 1998, although early adoption is allowed. Adoption of SOP
98-5 is not expected to have a material impact on the Company's
consolidated financial statements. The Company will adopt the
provisions of this SOP on January 1, 1999.
In June 1997, SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, was issued. This statement
establishes standards for reporting information about operating
segments in annual and interim financial statements, although this
statement need not be applied to interim financial statements in the
initial year of its application. This statement is effective for
fiscal years beginning after December 15, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward - Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than historical or current facts,
including, without limitation, statements about the business,
financial condition, business strategy, plans and objectives of
management, and prospects of the Company are forward-looking
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, such
forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from these
expectations. Such risks and uncertainties include, without
limitation, changes in product demand, the availability of products,
changes in competition, economic conditions, various inventory risks
due to changes in market conditions, changes in tax 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.
Page 13 of 21
<PAGE> 14
When used in this Quarterly Report, the words "believes," "plans,"
"estimates," "expects," "anticipates," "intends," "continue," "may,"
"will," "should" and similar expressions as they relate to the Company
or its management are intended to identify forward-looking statements
or the negative of such terms.
General
Tyler provides information management solutions through a group of
operating subsidiaries to hundreds of county governments and cities
located throughout the Southwest and Midwest United States.
The Company also continues to operate through Forest City Auto Parts
Company ("Forest City"), a retailer of automotive parts and supplies.
Forest City specializes in selling mechanical and electrical
hardparts, such as brake parts, rack-and-pinion steering and fuel
injectors, to do-it-yourself customers.
The Company believes that the information management industry today is
fragmented and that the county government and related markets are
primarily served by small, private companies. Given these industry
characteristics and the ability to identify suitable acquisition
candidates and complete acquisitions, the Company intends to pursue a
national consolidation strategy that, if successful, could lead to
significant revenue growth for the Company. The acquisitions of
Resources, TSG, and INCODE on February 19, 1998, positioned the
Company to grow rapidly through consolidating acquisitions and give it
the opportunity to obtain a larger share of the county and city
information management market. The Company intends to pursue
aggressively this consolidation strategy through an acquisition
program focused on entry into new geographic markets, expansion within
existing geographic markets and development of related services and
systems.
Analysis of Results of Operations
Tyler's 1998 consolidated results include the operations of its newly
acquired information management companies from their date of
acquisition as follows: Resources, TSG and INCODE acquired February
19, 1998; Kofile operations acquired June 5, 1998; CompactData and Ram
Quest acquired July 1, 1998; and CMS acquired August 1, 1998. The
results of continuing operations for 1997 consist of operations of
Forest City and exclude the results of operations from the newly
acquired information management group and the results of the
discontinued operations of IFS.
REVENUES
Total revenues of $35.7 million for the three months ended September
30, 1998 increased 77% in comparison to $20.2 million reported for the
three months ended September 30, 1997. For the nine months ended
September 30, 1998, revenues of $92.3 million increased 59% from
revenues of $58.2 million reported for the nine months ended September
30, 1997. These increases are primarily due to the acquisitions of the
information management companies throughout the first nine months of
1998, as described in Note 2 to the Condensed Consolidated Financial
Statements. Revenues at Forest City declined 3% and increased 2%
during the three months and nine months ended September 30, 1998,
respectively.
Information Management Group
On a pro forma basis, the information management group reported total
revenues of $16.6 million for the three months ended September 30,
1998, an increase of approximately 36% over the comparable prior year
period. For the nine months ended September 30, 1998, the information
management group revenues of $44.9 million increased approximately 23%
compared to the prior year period, on a pro forma basis.
Page 14 of 21
<PAGE> 15
On a pro forma basis revenues for the information services outsourcing
and property records services were approximately $8.9 million and
$24.0 million for the three months and nine months ended September 30,
1998, respectively. Such revenues increased, on a pro forma basis, 32%
for the three months and 15% for the nine months ended September 30,
1998, respectively, compared to the same periods last year. The
increases are primarily the result of revenue earned from a contract
with the Cook County Recorder of Deeds in Chicago, Illinois, to design
and install an electronic document management and imaging system.
Implementation of the system began in the second quarter of 1998 and
the majority of the contract is expected to be completed by year-end.
Other sources of revenue increases were title plant update services
and royalty income. Royalty income is derived from the sale of
property tax information for real estate transactions. These increases
were offset by lower re-creation revenue compared to last year.
Re-creation services provide image-enhanced, archival-quality reprints
of old and deteriorating records, including photostatic prints, with
microfilm backup copies for improved security in case of fire, theft,
water damage, or other catastrophe. Re-creation revenue is generally
dependent on available county funds, which may result in uneven
revenue streams from year to year.
On a pro forma basis revenues for the information software systems and
services were approximately $7.7 million and $20.8 million for the
three months and nine months ended September 30, 1998, respectively.
Such revenues increased 42% and 34% for the three and nine months
ended September 30, 1998, respectively, as compared to the same
periods last year, on a pro forma basis. Results were benefited by an
overall movement by county and local governments to upgrade their
current computer systems. The movement has been driven in part by
municipal customers' need to solve their Year 2000 issues ("Y2K"). The
Y2K issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Thus, a date
using "00" may be recognized as the year 1900 rather than 2000. This
could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar
normal business activities. As with all new contracts, the Company
expects Y2K related sales to increase its customer base, which will
provide opportunities to increase future service and maintenance
revenues. Additional revenue growth was derived from product upgrades
and expansion into new markets in Georgia, Oregon, Washington,
Minnesota, Wisconsin and Illinois.
Auto Parts
As a result of store closures and continued competitive pressures
overall revenue for the three months ended September 30, 1998,
compared to the prior year period fell approximately 3%. Overall auto
parts revenue increased approximately 2% for the nine months ended
September 30, 1998, compared to the prior year period, which was
mainly attributable to the acquisition of ten stores in October 1997.
This increase was offset somewhat by the closure of eight stores at
the end of June 1998 and three more store closures in the third
quarter of 1998. Comparable store sales were down approximately 5% and
2% for the three months and nine months ended September 30, 1998,
respectively, compared to the prior year periods. The auto parts
retailing industry is quickly consolidating and redesigning inventory
distribution channels to improve efficiencies. Forest City is in the
process of consolidating inventory distribution channels.
COST OF REVENUES
For the three months ended September 30, 1998, total cost of revenues
increased $8.1 million, or 69%, to $19.8 million from $11.7 million
for the three months ended September 30, 1997. Cost of revenues of
$51.2 million for the nine months ended September 30, 1998 increased
54% in comparison to $33.2 million reported for the nine months ended
September 30, 1997. Approximately 3% and 6% of the overall cost of
revenue increase for the three months and nine months ended September
30, 1998, respectively, related to Forest City, while the remaining
increase is attributable to the acquisition of the information
management companies in 1998.
Page 15 of 21
<PAGE> 16
Information Management Group
Pro forma cost of revenues for the information management group were
$8.6 million and $23.2 million for the three months and nine months
ended September 30, 1998, respectively. These costs resulted in a
gross margin of approximately 48% for the three and nine months ended
September 30, 1998, on a pro forma basis.
The gross margin from information outsourcing and property records
services was moderately lower for the three months and nine months
ended September 30, 1998, compared to the prior year periods, on a pro
forma basis. This decline in margin is mainly attributable to changes
in product mix, primarily re-creation revenue, which was unusually
high in the first nine months of 1997 and has a higher gross margin
than other services.
The gross margin for information software systems and services for the
three months and nine months ended September 30, 1998 was down
slightly from the same periods in the prior year, on a pro forma
basis. Sales growth and a strong competitive market for computer
professionals resulted in increased salaries and other costs
associated with attracting and retaining quality employees.
Auto Parts
Cost of revenues increased 3%, or $.3 million, to $12.0 million for
the three months ended September 30, 1998, from $11.7 million for the
same period in the prior year. For the nine months ended September 30,
1998, cost of revenues increased $2.1 million, or 6%, to $35.3 million
from $33.2 million for the same period in the prior year. The increase
in cost of revenue is mainly due to the acquisition of ten new stores
in October 1997, offset somewhat by the closing of eight unprofitable
stores late in the second quarter and three unprofitable stores in the
third quarter.
The gross margin declined approximately 3% to 38.9% for the three
months ended September 30, 1998 compared to the same period in the
prior year. For the nine months ended September 30, 1998, the gross
margin was down approximately 2% to 40.6% compared to the prior year
period. The decline in margin was due to changes in product mix and
unfavorable purchase margins in the third quarter, as well as to
competitive pressures from other auto-parts retailers. Forest City
anticipates completing its inventory distribution channel
consolidation in the fourth quarter of 1998 which is expected to
improve purchase margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses includes goodwill and
other intangibles amortization associated with several acquisitions in
1998 which was $.9 million and $2.0 million for the three months and
nine months ended September 30, 1998, respectively. Excluding goodwill
and other intangibles amortization, selling, general and
administrative expenses for the three months ended September 30, 1998,
were $12.5 million, an increase of 50% from $8.3 million in the
comparable prior year period. For the nine months ended September 30,
1998, selling, general and administrative expenses, excluding goodwill
and other intangibles amortization, was $33.0 million, an increase of
36% from $24.3 million in the comparable prior year period.
Approximately 5% and 8% of the overall selling, general and
administrative expense increase for the three months and nine months
ended September 30, 1998, respectively, relates to Forest City. The
remaining increases are due to the acquisition of the information
management companies in 1998 and increased employee costs associated
with hiring management personnel to accommodate present and planned
future growth.
Information Management Group
On a pro forma basis, selling, general and administrative expenses as
a percent of sales were down slightly for the three months ended
September 30, 1998, and flat for the nine months ended September 30,
1998, as compared to the same periods in the prior year.
Page 16 of 21
<PAGE> 17
Auto Parts
Selling, general and administrative expenses as a percent of sales
increased approximately 3% and 2% for the three months and nine months
ended September 30, 1998, respectively, compared to the same periods
last year. These increases are primarily due to the fixed expenses
associated with ten stores acquired in October 1997 and lower sales
volume at comparable stores. Although sales volume at the new
locations has been increasing over the last nine months it remains
lower than the average store. In addition store payroll costs have
increased over the prior year period as a result of low unemployment.
STORE CLOSING COSTS
In the third quarter, Forest City closed three underperforming stores,
bringing the total number of stores closed in 1998 to eleven. The
third quarter closings resulted in a pretax charge to earnings of
$100,000 for a total pretax charge of $805,000 for the nine months
ended September 30, 1998. Costs include future lease and real estate
obligations, inventory restocking charges and other miscellaneous
costs to be incurred in connection with these store closures. Forest
City will continue to review performance of existing stores, which may
result in the relocation or closure of additional unprofitable stores.
INTEREST EXPENSE
As a result of the debt incurred to finance acquisitions in 1998, the
Company recorded interest expense for the three months and nine months
ended September 30, 1998 of $.7 million and $1.5 million,
respectively. In the prior year, the Company only had interest income.
INCOME TAX PROVISION
The effective tax rate increased to 48% from 36% in the prior year
primarily due to the non-deductibility of goodwill and intangibles
amortization relating to the 1998 acquisitions.
NET INCOME AND OTHER MEASURES
Net income was $.9 million and $2.4 million for the three and nine
month periods ended September 30, 1998, respectively. Diluted earnings
per share for the three and nine month periods ended September 30,
1998 was $.03 and $.07, respectively.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") for the three and nine months ended September 30, 1998 was
$4.4 million and $10.1 million, respectively. EBITDA consists of
income from continuing operations before interest, income taxes,
depreciation and amortization. Although EBITDA is not calculated in
accordance with generally accepted accounting principles, the Company
believes that EBITDA is widely used as a measure of operating
performance. Nevertheless, the measure should not be considered in
isolation or as a substitute for operating income, cash flows from
operating activities, or any other measure for determining the
Company's operating performance or liquidity that is calculated in
accordance with generally accepted accounting principles. EBITDA is
not necessarily indicative of amounts that may be available for
reinvestment in the Company's business or other discretionary uses. In
addition, since all companies do not calculate EBITDA in the same
manner, this measure may not be comparable to similarly titled
measures reported by other companies.
YEAR 2000 COMPLIANCE
Introduction
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's hardware, software and embedded systems
("systems") that have time/ date-sensitive software and hardware may
recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculation.
The Company presently believes that, with modification to and
selective replacement of existing computer systems, as scheduled, the
Y2K issue will not pose significant operational problems for the
Company's systems, as so modified, and/or replaced.
Page 17 of 21
<PAGE> 18
The Company has established a Program Office to centralize and
coordinate its efforts and to further define, evaluate and conduct
audits of the Company and its progress toward Y2K compliance. The
Program Office is chaired by the Chief Financial Officer and reports
periodically to the Executive Committee of the Board of Directors. A
Y2K Task Force, comprised of representatives from each of the
Company's principal operating units, has been established and is
charged with evaluating and implementing the Company's Y2K effort in
addition to regularly reporting results to the Program Office. The
Executive Committee of the Board of Directors is charged with
evaluating the progress reported by the Program Office and addressing
any issues as they arise.
Status of Progress
Each of the Company's operating units has conducted an inventory and
assessment of its technology to identify the computer systems that
could be affected by the Y2K issue. The operating units that make up
the information management group have completed testing of their
products for Y2K compliance. Certain portions of the information
management group's customers currently have Y2K compliant versions of
the Company's products. The Company's Y2K plan calls for a majority of
customers to have compliant versions installed by July 1999 and the
remainder by September 1999.
The Company primarily uses third party software for its internal
computer systems. A majority of the installed systems in the
information management group are purported to be Y2K compliant. The
Company plans to purchase and install, at one of its principal
operating units, an enhanced accounting application that is Y2K
compliant to replace the current system in the first half of 1999.
Forest City has generally replaced their internal systems with Y2K
compliant systems, however the primary purpose of the upgrades was to
manage growth and increase efficiency. Forest City uses a third party
application for its point-of-sale system. The vendor has released a
Y2K upgrade and Forest City is currently in the process of testing it.
It is expected that the test will be successful and that Forest City
will install the upgrade in all stores during the first quarter of
1999.
The Company cooperates with many business partners to provide products
and services to its customers. Each of the Company's significant
business partners purports to be Y2K compliant and anticipate
continuous operations through the millenium change. The Company is in
the process of obtaining written confirmation from those partners. All
responses will be evaluated as received to determine if additional
action is required to ensure compliance of the business partner.
Costs to Address
Given the nature of the information management group's ongoing system
development activities throughout their businesses, it is difficult to
quantify, with specificity, all of the costs being incurred to address
this issue. A significant portion of these costs is not likely to be
incremental costs to the Company, but will represent the redeployment
of existing information technology resources. The Company's employees
have conducted the majority of the work performed thus far in
executing the implementation plans. In connection with Forest City,
its most significant Y2K initiative involves upgrading store systems,
for which the software vendor is not charging a fee.
The costs incurred to date are estimated to be approximately $2.3
million, and the estimated costs to complete will comprise an
additional $1 million over the current and the next fiscal year. A
majority of the estimated costs to complete will be capitalized since
such costs represent hardware and software packages. Some of the prior
costs were incurred by the Company's operating units before they were
acquired by the Company. The prior costs do not include Forest City
upgrades that were primarily made to allow for growth and increase
efficiencies. The new accounting application in the information
management group is being purchased primarily to accommodate the
unit's expansion and anticipated future acquisitions and secondarily
to obtain Y2K compliance. However, the cost for the accounting
application is included in the aforementioned amount. The total cost
estimate of the implementation plan may be revised because the plan is
constantly evaluated and revised as a result of many factors. These
factors include but are not limited to, the results of any phase of
the implementation plan, customer requirements, acquisitions, or
recommendations by business partners. The Company does not expect that
the opportunity costs of executing the implementation plan will have a
material effect on the financial condition of the Company or its
results of operations.
Page 18 of 21
<PAGE> 19
Risks
The Y2K issue creates risk for the Company from unforeseen problems in
its own computer, telephone and security systems and from third
parties upon which the Company relies. Accordingly, the Company is
requesting assurances from certain software vendors from which it has
acquired, or from which it may acquire software, that the software
will correctly process all date information at all times. The Company
exerts no control over their efforts to become Y2K compliant. The
services provided by these parties are critical to the operations of
the Company and the Company is heavily reliant upon these parties to
successfully address the Y2K issue. Therefore, if any of these parties
fail to provide the Company with services, the Company's ability to
conduct business could be materially impacted. The result of such
impact may have a material adverse effect on the financial condition
and results of operations of the Company.
In addition, the Company is beginning the process of querying certain
of its customers and suppliers as to their progress in identifying and
addressing problems that their computer systems will face in correctly
processing date information as the year 2000 approaches and is
reached. Failure to appropriately address the Y2K issue by a major
customer or supplier or a material percentage of the smaller customers
could have a material adverse effect on the financial condition and
results of operations of the Company.
The Company does not expect any material product development
activities to be delayed due to the Y2K compliance efforts, however if
certain initiatives are delayed, the result could have an adverse
effect to the Company.
Contingency
The Company's Y2K compliance activities are being monitored and
evaluated. Contingency plans are being established and implemented as
the risks are identified. Additional steps are being taken to further
minimize the risks associated with the Y2K issue. For example, one of
the Company's units in the information management group is developing
plans to allow for additional customer support after January 1, 2000
in anticipation of questions they may receive from their customers,
even if the questions do not relate to the software the unit sells. In
the case of Forest City, plans are in place under which merchandise
can be ordered from an alternative vendor, thus increasing the
likelihood that merchandise for sale will be available. All
contingency plans will be presented to the Executive Committee for
approval.
Summary
There can be no assurances that the Company will identify all
date-handling problems in its business systems or those of its
customers and suppliers in advance of their occurrence or that the
Company will be able to successfully remedy all Y2K compliance issues
that are discovered. However, the Company, in good faith, is working
to identify all issues. To the extent that the Company is unable to
resolve its Y2K issues prior to January 1, 2000, operating results
could be materially and adversely affected. In addition, the Company
could be adversely affected if other entities (i.e. vendors or
customers) not affiliated with the Company do not appropriately
address their own Y2K compliance issues in advance of their
occurrence.
FINANCIAL CONDITION AND LIQUIDITY
In February 1998, the Company entered into a three-year bank credit
agreement in an amount not to exceed $50 million, including a $5
million sublimit for the issuance of standby and commercial letters of
credit. At September 30, 1998, the Company had outstanding borrowings
of $28.3 million under the bank credit agreement. The effective
interest rate for borrowings under the bank credit agreement for the
three and nine months ended September 30, 1998, was approximately 8%.
The Company's capitalization at September 30, 1998, consisted of $33.8
million in long-term debt (less current portion) and $86.9 million in
stockholders' equity. The total debt-to-equity ratio (which includes
current portion of long-term debt) was 29% at September 30, 1998.
Page 19 of 21
<PAGE> 20
For the nine months ended September 30, 1998, the Company incurred
capital expenditures of $3.6 million. The expenditures included cost
of building expansion and computer equipment required for internal
growth. In addition, Forest City incurred costs associated with
relocating two stores and opening one new store in their new prototype
design and purchased computer equipment to facilitate the receiving
and monitoring of store inventories.
As of September 30, 1998, the Company has incurred legal and
consulting costs of approximately $1.5 million in relation to a
continuing acquisition opportunity. These direct costs will be
included in the cost of the acquired business upon subsequent
successful completion of the transaction. There can be no assurance
that the Company will be able to complete this transaction on terms
acceptable to the Company and the acquisition candidate.
The Company is from time to time engaged in discussions with respect
to selected acquisitions and expects to continue to assess these and
other acquisition opportunities as they arise. The Company may also
require additional financing if it decides to make additional
acquisitions. There can be no assurance, however, that any such
opportunities will arise, any such acquisitions will be consummated or
that any needed additional financing will be available when required
on terms satisfactory to the Company. Absent any acquisitions, the
Company anticipates that cash flows from operations, working capital
and unused borrowing capacity under its existing bank credit agreement
will provide sufficient funds to meet its needs for at least the next
year.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings see Part I, Item 1. "Financial
Statements - Notes to Condensed Consolidated Financial Statements -
Commitments and Contingencies" on page 10 of this document.
Item 5. Other Information
An eligible stockholder of the Company who wishes to submit a proposal
to be included in the Company's proxy materials for the 1999 annual
meeting of stockholders must submit it, in accordance with the SEC's
Rule 14a-8, so that it is received by the Company at its principal
executive offices not later than November 17, 1998.
An eligible stockholder who wishes to make a proposal at the 1999
annual meeting of stockholders without complying with the requirements
of the SEC's Rule 14a-8 (and therefore without including the proposal
in the Company's proxy materials) should notify the Company's
Secretary, at the Company's principal executive offices, of that
proposal by February 10, 1999. If a stockholder fails to give that
notice by that date, then the persons named as proxies in the proxy
cards solicited by the Company's Board of Directors for that meeting
will be entitled to vote the proxy cards held by them regarding that
proposal, if properly raised at the meeting, in their discretion or as
directed by the Company's management.
Page 20 of 21
<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
------- -------
10.18 Employment agreement between the Company and
Theodore L. Bathurst, dated October 7, 1998.
27 Financial Data Schedule (for SEC information only)
(b) There were no reports filed on Form 8-K during the third
quarter of 1998.
Item 3 of Part I and Items 2, 3 and 4 of Part II were not applicable and have
been omitted.
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/ Theodore L. Bathurst
---------------------------------------------------------
Theodore L. Bathurst
Vice President and Chief Financial Officer
(principal financial officer and an authorized signatory)
By: /s/ Brian K. Miller
---------------------------------------------------------
Brian K. Miller
Vice President, Chief Accounting Officer and Treasurer
(principal accounting officer and an authorized signatory)
Date: November 13, 1998
Page 21 of 21
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.18 Employment agreement between the Company and
Theodore L. Bathurst, dated October 7, 1998.
27 Financial Data Schedule (for SEC information only)
</TABLE>
<PAGE> 1
EXHIBIT 10.18
October 7, 1998
Mr. Theodore L. Bathurst
Dear Ted:
I believe, in our discussions regarding your employment, we have agreed on the
following:
TITLE - Vice President and Chief Financial Officer.
SALARY -- $250,000 per annum. Guaranteed for one year.
BONUS -- Target of $150,000 per year based on a to-be-developed plan for 1999.
Guarantee of $150,000 divided by 4 or $37,500 for 1998 to be paid in January of
1999.
OPTIONS -- 250,000 shares at $6-7/16, exercisable in 20% increments over five
years.
START DATE -- October 7, 1998.
REPORT TO -- C. A. Rundell, Jr., but expected to work closely with
Louis A. Waters and William D. Oates (Executive Committee Members).
FRINGE BENEFITS -- Standard Tyler (parking, medical, holidays, etc.).
VACATION -- Up to four weeks as appropriate.
SEVERANCE -- If you are terminated by Tyler for any reason other than fraud,
theft, gross negligence, or personal malfeasance, you will receive a lump sum
cash severance payment equal to one year, then current, base salary in release
of all your claims against the Company. If you were to be terminated as a result
of a change in control, you would receive a lump sum cash severance of one
year's salary. Also in release of all your claims against the Company. In either
event of termination, you would receive medical benefits, paid by the Company,
up to twelve (12) months, or a shorter period should you secure comparable
employment elsewhere.
<PAGE> 2
Mr. Theodore L. Bathurst
October 7, 1998
Page Two
We are excited about having you on board and look forward to your help.
Sincerely,
C. A. Rundell, Jr.
Agreed and Accepted:
- ------------------------
Theodore L. Bathurst
Date:
------------------
cc: Louis A. Waters
William D. Oates
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,079,000
<SECURITIES> 0
<RECEIVABLES> 11,707,000
<ALLOWANCES> 576,000
<INVENTORY> 23,370,000
<CURRENT-ASSETS> 40,224,000
<PP&E> 24,157,000
<DEPRECIATION> 5,925,000
<TOTAL-ASSETS> 161,209,000
<CURRENT-LIABILITIES> 23,697,000
<BONDS> 0
0
0
<COMMON> 359,000
<OTHER-SE> 86,554,000
<TOTAL-LIABILITY-AND-EQUITY> 161,209,000
<SALES> 92,285,000
<TOTAL-REVENUES> 0
<CGS> 51,221,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,628,000
<INCOME-PRETAX> 3,807,000
<INCOME-TAX> 1,827,000
<INCOME-CONTINUING> 1,980,000
<DISCONTINUED> 375,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,355,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
