-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mn8z6YqzABhBZDYBVE5SzuHf7HvkDvosVJqL+Zna4lH23dAJxeNIHu6/r1Y5fCUp RF4VGmTEAzveNwpogRmT6g== 0000950134-97-003666.txt : 19970513 0000950134-97-003666.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950134-97-003666 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYLER CORP /NEW/ CENTRAL INDEX KEY: 0000860731 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 752303920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10485 FILM NUMBER: 97601023 BUSINESS ADDRESS: STREET 1: 2121 SAN JACINTO ST STREET 2: STE 3200 SAN JACINTO TOWER CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2147547800 MAIL ADDRESS: STREET 1: 2121 SAN JACINTO STREET STREET 2: SUITE 3200 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: TYLER THREE INC DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q FOR QUARTER ENDING MARCH 31, 1997 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 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements TYLER CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31 December 31 March 31 1997 1996 1996 ------------ ------------ ------------ 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 ============ ============ ============
See accompanying notes. - 2 - 3 TYLER CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
March 31 December 31 March 31 1997 1996 1996 ------------ ------------ ------------ 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 ============ ============ ============
See accompanying notes. - 3 - 4 TYLER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31 ---------------------------- 1997 1996 ------------ ------------ 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
See accompanying notes. - 4 - 5 TYLER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31 --------------------------- 1997 1996 ------------ ------------ 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)
See accompanying notes. - 5 - 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 - 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 - 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 - 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 - 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- 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- 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- 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- 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- 15 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.21 Employment agreement between the Company and Bruce W. Wilkinson, dated March 28, 1997. 27 Financial Data Schedule
EX-10.21 2 EMPLOYMENT AGREEMENT 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. 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 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 19,140,000 0 5,945,000 1,371,000 20,465,000 50,462,000 14,962,000 6,882,000 60,450,000 18,223,000 0 0 0 213,000 31,969,000 60,450,000 26,497,000 0 12,216,000 0 0 67,000 26,000 218,000 79,000 139,000 0 0 0 139,000 .01 0
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