Document OEbmzzE9q6Vq1mbZyoRGQRK7v

SECURITIES AND EXCHANGE COMMISSION Washington, O.C. 20549 94as 4aT" Form 10-K^^ B ANNUAL REPORT PURSUANT TO SECTION 13 or II (d THE SECURITIES EXCHANGE ACT OF 1934 Nr tie BecelreermadDeeanber 31,1M3 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 1S(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ComnMon Be number 1*10485 TYLER CORPORATION (Exact nams of regtatrent as perilled la ttaa ctiartar) (Stela or other juifedtetoa of inoorpcnion or oiQMbdon) tan JacMa Tower 2121 tan < Datable (Addiaaa of prindpai aaacutre cflcaa) Ragtstranfs Idaphone number, including * L ,wm.M P?' "r''"`r.riGY X (f) U4BW94 coda: (214) 7S4-7I0B Clw.- -Oo J irtC. teeurttaa pursuant to Section 12(b) of the Act Nmrfw Caounca Stock, 90.11 par value Pralamid ttoek Fuwhaaa Righto New York New York ttock Securitea rqpstared pursuant to Section 12 (g) of the Act Indicate by check mart whether the registrant (1) has filed all reports reqabnd to betted tactoa 19 or 11(d) a# the SaceiBtee Exchange Act of 1134 during fie piocadteg 12 months (or ter such shorter period that the registrant was required to file sach reports), and (2) has baea subfeet to such HBng laqubvaenta for tM past 90 days. Yes / No___ la t-Kisaot V bento, and wfll not be contained, to the beat of ngtebnatfs tawadadga, la latetnantolncorpoiatod by rafeiaaca In Part Met tote Fawn 19-Ker la tote Fata 1WL Yaa Na___ February 22, 1994, value af tha voting stack bald by 990,433,020. Tha 20,094,IN. moa DOCUMENTS MCORPORATED BY REFERENCE inqubnd by Farts I and M af tote Annual Report to by tttm 1. Butin--. PARTI General Tyler Corporation (Tyler* or the `Company*) provides products and services to customers through too operating subsicSartes: Tyler Ptpe Industries, tec. (Tyler Pipe"), which manufactures and distributes cast iron pipe and fittings; and Forest City Auto Parts Company ^Forest City"), which specializes In mechanical automotive aftermarket parts for do-it-yourself customers. Pursuant to a stock purchase agreement, on January 7, 1904 tee Company completed tee purchase of Institutional Financing Services, Inc. CVS*), a dtoect marketer of products for fund-raising programs. IFS was acquired for approximately $50 mMon end the assumption of seasonal working capital debt Adtfittord payments to the former shareholders ere possible based on operating profit performance. IFS If located in Benicia, CaHfomia and assists schools in fund-raising activties by arranging for students to sel company-cuppfied Sift items to family and friends. Proceeds received by schools ere ueed for designated educational, recreational and extracurricular protects. IFS aril operate as a wholly owned subsidiary of Tyter. For the twelve months ended' December 31.1993, IFS* sales were $632 million, and operating profit, which la before, amortization and interest expense, was $6.4 mifiicn. Industry Segments. For financial information about industry segments of Tyler, reference is made to the "Industry Segments* note to the consolidated financial statements on page 35 of Tyler's 1993 Annual Report to Shareholders which note is incorporated hereto. This information should be reed in conjunction with the conaoOdated financial statements and accompanying notes. EMmI gratott fnd.Sstytea. Roe and Fffltnos. Tyier Pipe manufactures and dtetfbutos cast Iron pipe and fittings used primarily in drain, waste and vent fDWV) applications In commercial industrial end residential construction and cast and ductile Iron waterworks and aewege fittings for use by munidpaUtes. Tyier Pipe, which was founded in 1935 and acqdred by Tyter in 1968* aefis substantially afl of its OWV products as finished products to wholesale plumbing and supply houses and sails water end sewage fittings through apedafty wholesaler* primarily to waterworks contractors. The pipe and fittings business is seasonal to hi extent that tea construction Industry is affected by weather. Tyter Rpe manufeetores a complete Hne of cast iron DWV pipe and fittings In diameters tom 1-1/2 inches to 15 inches. Tyter Rpe also manufactures fittings for uaa In water and sewage treatment systems in both gray and ducffle ton in dameters from 2 Inches to 30 inches. Ductite Iron is specified in certain appleatione bereuse of Me greater strength The company also manufactures a complete fine of couplings and gaskets for Joining pipe and fittings, seif-contained plumbing watie for uee in modifier construction end roof, floor and spedaty drains under the "Wede* name. 9 n Tyler Pipe has developed a number of products and manufacturing processes including sofl pipe in ten-foot lengths, the Ty-Seal gasket (a neoprene compression gasket that replaced the lead and oakum joints used to connect cast Iran pipe and fittings) and completely self-contained plumbing wals used in modular construction. Tyler Pipe also wss file first domestic manufacturer to use the unlned, water-cooled cupola; to employ centrifugal casting machines utilizing one-piece metal molds for casting sod pipe; and to produce cast Iron soil pipe fittings In permanent metal molds. Tyler Pipe has its headquarters and major foundry and manufacturing fecflity in Tyler, Texas. A second foundry is in Macungie, Pennsylvania. Tyler Pipe dso has a plant in Marshfield, Missouri, where it manufactures stainless steel damps and neoprene gaskets used to join sol pipe and fittings. Substantially all sales art handed directly through offices maintained at the Tyler, Texas, plant Tyler Pipe sails its products both through Is sales representatives and through independent manufacturers1 representatives throughout the United Stales and Canada. Transportation costs, pricing, product quality and performance, and file ability to service customers promptly ere material factors affecting salts of Tyler Pipe's products, as are the general level and mte of pending in the construction industry. Tyler Pipe obtains iron, the basic raw material used in its products, by melting and * refining iron and steel scrap to the required specifications. Most of the scrap metal is purchased directly from scrap dealers in areas where Tyler Pipe's trucks make deliveries and is returned to file plants by its trucks as backhaul. Other basic materials used include coke, Imestone, fluorspar, resin, bentonite, silicon, sand and core oils, ail of which have been generally available from multiple sources. Tyler Pipe experienced no problems in obtaining these materials during 1993. No shortages of basic raw materials appear imminent or likely. Tyler Pipe has no material contractual arrangements wfih any of its suppliers of raw materials. in the sale and distribution of DWV pipe and fittings, Tyler Pipe compotes with Charlotte Pipe & Foundry Co., Anaheim Foundry Co., American Brass and Iran Foundry and'several wnafier companies whose sales are generally concentrated doee to their plants n various regions of the Unled States. In water and sewage fittings, Tytar Pipe competes with McWane Inc.; United States Pipe and Foundry Company, a subsktay of Waiter (nduteries, Inc.; American Cast Iren Pipe Company; Griffin Pipe Products Co., e dvMon of Amsted Industries, Incorp.; Sigma Corp.; and others, in addfflon, pipe and fittings products of Tyler Pipe compete with those made of otter materials including vitrified day, plastic, asbestos cement, steel, fiber and copper. Tyler Pipe Is the largest manufacturer of cast iron soft pipe and fittings snd water and sewage fittnga sold In the UnXad States market Automotive Aftermarket Parts. Forest City, headquartered In CtevetanC, Ohio, is a (staler of automotive parts and supplies. The company spedateaa in teting mechanical and tlertricsl hard parts, such as rack-tnd-plnion steering and allamitors to do-fi-yoursat customers. Forest City also stocks a wide variety of maintanancs asms, fcida and accessories. Known for extensive inventories, Forest City*! stores use fire slogan, "Stop toctongl The odds art 100 to 1 we have it* 3 3/ Each Forest City location maintains inventories which average 15,000 parts for both domestic and fbreigncars and light trucks. Company stores cany deeper inventories ftan most competitors and stock items that best suit me vehicto mix in their area. Major Forest City suppliers indude AKied-Signal Inc, Kem Manufacturing Company and TRW Inc Inventories carried by Forest City are generaRy available from multiple sources. Quafty customer service provided by knowledgeable store personnel ie fondamentat to the company's strategy. Through orvthe-jobwd formal training programs, Forest City employees team to assist customers in diagnosing specific problems and selecting the correct parts. The company's use of incentive compensation and opportunities for promotion alow Forest Cfty to hire and motivate hlgh-guslty individuate. Albert Bellows founded the company in 1927 and served the Ataon area with one store unfit 1961. Toward fre end of this period, he was Joined by Ns sons Stanley and Arnold efoo began woridng as teenagers and assumed management responafolliee after graduation from coOage. At the end of 1981, the company had 31 focattona In operation. The company had expanded to 59 locaions at the and of 1993. Open seven days a week, each location operates extended hours to provide maximum customer convenience.' Sources estimate that annual sates to the do-it-yourself portion of the auto parts aftermarket are approximately $12 billion. The market la highly fragmented with numerous local, regional and national competitors. Forest City primarily competes against other specialty retailers within the do-tt-yourseif segment Addftfonal competition comes from Jobbers who sell principally to wholesale accounts and, to a teaser extent, from dtecount and general merchanrfise stores. Employees. At December 31,1993, the Company had 3,463 employees, of vrttich 2,569were employed by Tyler Pipe and 871 by Forest Cfty. There were 1,855Tyler Pipe employees covered by colective bargaining agreements. lernl BaMftttf. Tyler occupies offices, production, research, storage, maintenance and ratal focOfias tut contain approximately 23 million square fleet of floor spaa. The principal plants, warehouses and offices, all ofwhich are owned by Tyler or one of its subskfaries, are described at foOowr. Appradmala Innftm 8q.Ftaf Floor Soaca EduaJftt Swan (Tyiar), Tawa 1,529,000 Offcw, faundrtaa, ahopa and aarahaaaa wad in tha pipa and fling* buainaaa Maaagte, Fsnrayivsnls 179,000 Offcaa, foundry and waratouaa wad tafia plpa and fofenga boakwaa ManMaU, Iflaaouri 74,000 Oflfcaa, piartt and wwahoua* uaad In tea pipa and totnqa buainaaa 4 During 1993 Tyler Pipe used approximately 60-85% of capacity of ks production facfriies. As of December 31,1993, Forest City operated 59 stores in Binoto, New York, Ohio ard Pennsylvania, most of which were leased, generally under leases of less than ten-years' duration. Store sizes range from 3,500 to 14,000 square feet wfth the typical store located in a free-standing bedding of approximately 6,000 square feel The machinery, equipment, buildings and facilities owned and teased by Tyler and its subsidiaries are generally wail maintained and suitable for their operations. Tytor Pipe's real properly and other assets have bean used for production and processing for many years. Sudt activities involve the use of metal and chemicals and necasstats tha generation of waste materials, some of which are deemed hazardous substances or toxic chemicals under federal, state or local laws. As a result of such activities, contamination, spis or other releases may have occurred on the real property as wefi as off-site. See Item 3. Compliance with federal,'state and local environmental regulations has not had a significant effect on the competitive position of Tytor Pipe. - Item 3. Leoal Proceedings. In December 1993 Tyler Pipe settled a lawsuit brought by Sigma Corp., in federal district court in Trenton, New Jersey. The settlement did not significantly affect tha Company's oonsoldated financial position or results of operations. In June 1992 Anaheim Foundry Co., a competitor of Tytor Pipe, sued Tyler Pipe in federal dtotrict court in the Central District of California atieging that Tyler Pipe violated various antitrust laws and making other common law claims of anticompettve business practices. Anaheim seeks unspecified actual damages (which may be trebled under antitrust laws), punitive damages, attorneys* fees and injunctive reset Tyler Pipe intends to defend this lawsuit vigorously. Based on discovery to date, the Company has no reason to expect the outcome of this tawsuft to have a material adverse effect on fts consolidated financial position or results of operations. In 1993 the'Environmental Protection Agency (*EPA"} end the Texas Natural Resource Conservation Commission (TNRCC") issued Administrative Orders concluding the manufacturing fadty in Tyler, Texas exceeded pollutant Imitations In Is stormwater Recharge permits. Tyler Pipe wffl pay tinea of $42,500 in 1994 to foe TNRCC relating to stormwater violations aMch occurred in 1693. The company la working wtth both the EPA and the TNRCC to correct the situation permanently, but may be subject to additional penalties tor fafiure to comply with the terms of the Orders before reaching final solution. Tha Company befieves that Tyler Pipe's obKgations under the Orders vrii not have a material adverse effect on its consolidated financial position or results of operations. 5 On January 18,1988, toeEPA notified Tyler Pipe that It is a potentialy responsible party at the Novak Sanitary Landfil Superfund site in Lehigh County, Pennsylvania. A number of other potentially responsible partes have also been identified and notified by the EPA. While Tyler Pipe has participated in the costs of a remedial Investigation and feasibility study, the company is contesting its incursion on the 1st of potanttaly responsible parties based upon the nonhazardous character of the wastes it sent to toe site. The Company expects that the outcome of this proceeding wiB not have a material adverse effect on its consolidated financial position or results of operations. Other than ordtoaty course, routine litigation incidental to the business of toe Company and accept as described herein, there are no material legal proceedings pending to which the Company or its subsidiaries are parties or to which any of its properties are subject Kara 4. Submission of Matters to s Vote of Security Holders. Not applcabie. PART It Item 5. Mamet for Reafetrinfs Common Eouitv and Related Stockholder Mtttora. Tyler's Common Stock is traded on the New York Stock Exchange. At December 31,1993, Tyler had over 9,500 shareholders and approximately 4,100 shareholders of record The toflcwlng information is incorporated by reference from the indtoated pages of Tyler's 1993 Annual Report to Shareholders; (a) stock tradtog price range and dividends paid per share in each quarter for the last Nvo yeers - page 37 and (b) reterictiona on retained earnings available tor dividends page 29. Itenrt. aHrart.RntfH&l gjtp. The information required by this Rem is incorporated by reference from Tyler's 1993 Annual Report to Shareholder*, pages 22*23. item 7. Management's Discussion end Analysis of Financial Condition and qf.QMflfefli. The information required by tois Item is incorporated by wfarenca from toe tatiowing portions of Tyler's 1993 Annual Report to Shareholders: Managements Discussion and Analysis of Operations - pages 19-21 and Financial Comment - pages 13-18. a U! tent FinancialStatementsind SupplementaryData. The Mowing consolidated financial statements and unaudited supplementary quarterly financial data are incorporated by reference from the indicated pages in Tyler's 1909 Annual Report to Shareholders. Annual Report to Sharehotoere Consolidated statements of operations tor each of the three years in the period ended December 31,1993 24 Consoldated balanoe sheets el December 31,1993 and 1992 25 Consoidated statements of shareholders' equity for each of the three years in the period ended December 31,1993 25 Consofldeted statements of cash flows for each of the three years in the period ended December 31,1993 27 Notes to oonsoMated financial statements 28-35 Report of independent auditors 36 Unaudtted supplementary quarterly financial data 37 Ramt. A Changes in and Dfaaqreemtnte wtth Accountants on Accounting tad HMtMffjctoiaa- Not appOcabie. 7 7/ PART 10 The Information required by Items 10 through 13 of Part III is incorporated by reference from the indicated pages of Tyler's definitive proxy statement for Ks annual meeting of shareholders to be held on Apr! 20,1994. Rem 10. Otreetore and Executive Officers ofthe Registrant Ramil. Rem 12. s&iCTttYi-gqmptigttepn- Security Ownership of Certain Beneficial Owners and Uanaoement Rem 13. Certain Relationships and Related Ianncflow- 34 54 1-2 9 PART IV Rem 14. Exhibits. Financial Statement Schedules and Reports on Form fi-K. (a) The fclowtng documents are filed as a part of this report 1. Consolidated financial statements (see Item 8). 2. Consolidated financial statement schedules. Consofidited financial statement schedules for each of the five# years in the period ended December 31,1993; Page Refrmce V Property, plant and equipment VI Afiowance for depredation of property, plant and equipment VIII Afiowancetorlosaes X Supplementary income statement information Report of independent audfiore S-1/S-3 $-4f$4 8-7 84 84 Af other schedules have been omfited since the required information is not present o not present in amounts sufficient to require submission of the schedule or because Hbrmafion required is included In the consoldated financial etatemenla, indudtog Hi V 8 3. Exhibits. 3.1 Certificate of Incorporation of Tyter Three, as amended through May 14, I960, and Certificate of Designation of Series A Junior Participating Preferred Stock (filed as Exhibit 3.1 to the Company's Form 10-0 for the quarter ended June 30, 1990, and incorporated herein). 3.2 Amended and Restated By-Laws of Tyter Three as amended through March 31,1990 (filed as Ertofett 3.2 to the Company's registration statement no. 33 -33505 and incorporated herein). 4.1 Credft Agreement of $110,000,000 among Tyter Corporation and Socteta Generate, Southwest; NationsBank of Texas, NA; and Continental Bank, NA dated February 1,1994. 42 Rights Agreement, dated as of March 14, 1993, by* and between Tyter Corporation and The First National Bank of Boston, as Rights Agent, which indudes ths form of Rights Certificate as Exhibit B thereto (filed as Exhfett 4 to toe Company's Form 8-K, dated January 29,1993, and incorporated herein). 4.3 Specimen of Common Stock Certificate (filed as Exhibit 4.1 to toe Company's registration statement no. 33-33505 and incorporated herein). 10.1 Form of Indemnification Agreement for directors and officers (fled as Exhfett 10.1 to the Company's Form 10-Q for the quarter ended March 31,1992, and Incorporated herein). * 102 Stock Option Pten (including forms of option agreementeXfited at Exhfett 102 to tha Company's registration statement no. 33-33505 and Incorporated herein). * 10.3 Salary Continuation Agreement (filed as Exhibit 10.3 to toe Company's registration statement no. 33-33505 and incorporated herein). * 10.4 Management Security Agreement (filed as Exhibit 10.4 to tha Company's registration statement no. 33-33505 and incorporated herein). * 10.fi Sptt-dolar US insurance agreement with Joseph F. McNrtney (fitod as Eitofett 10.5 to toe Company's registration statement no. 33-33506 aid incorporated herein). *10.6 Supplemental Retirement Pten (filed as Exhibit 10.6 to the Company's registration statement no. 33-33505 and incorporated herein). 10.7 Indamnification Agreement, dated December 20,1989 (filed as Btoibft 2.3 to toe Company's regiskafion statement no. 33-33505 and Incorporated herein). 9 3/ 10.6 Slock Purchase Agreement among Tyler Corporation and the Sharahoidera of Foreat CXy Auto Parts Company, South Main Auto Parts, Inc, and General Distributors, Inc, dated December 12, 1990 (filed as Exhttt 2.1 to the Company's Form 8-K, dated March 5,1991, and as amended under cover of Form 8 lied March 12,1991, and incorporated herein). 10.9 Amendment dated December 31,1991, to five Stock Puchase Agreement, dated December 12,1990, among Tytar Corporation and the Shareholders at Foreat City Auto Parts Company (filed as Exhibit 10.16 to the Company's Form 10-K for the year ended December 31,1991, and incorporated herein). * 10.10 Employment Agreement between the Company and Stanley Belowe, dated December 12,1990 (fled as Exhibit 28.1 to the Company's Form 8-K, dated March 6,1991, and Incorporated herein). * 10.11 Employment Agreement between the Company and Arnold Belowe, dated December 12, 1990 (filed as Exhibit 28.2 to the-Company's Form 8-K, dated March 5,1991, and Incorporated herein). * 10.12 Employment Agreement between the Company'and James E. RussaO, dated January 1,1992 (fled as Exhibit 10.15 to the Company's Form 10-K for the year ended December 31,1991, and incorporated herein). * 10.13 Employment, Confidentiality and Noncompetition Agreement dated September 1,1992, between Tyler Pipe Industries, Inc. and Richard C. Barnett (fled at Exhfcit 10.1 to the Company's Form 10-0 tor the quarter ended September 31,1992, end incorporated herein). 10.14 * Agreement between Tyler Pipe Industries, Inc, Tyler, Texas and (he United Rubber, Cork, Linoleum and Plastic Workers of America, Local No. 1157, dried October 11,1993. 10.15 Stock Purchase Agreement among Tyler Corporation, tostthHonal Financing Services, Inc and Ihri Shareholders of Institutional Financing Services, Inc datod December 16,1993 (filed as Exhibit 2.1 to the Company's Form 8-K, datod January 20,1994, end incorporated herein). * 10.16 Employment and Noncompetition Agreement datod January 7,1994, between Institutional Financing Services, Inc and & Peter Raisbeck (filed at Exhibit 99.1 to the Company's Form 8-K, dated January 20,1994, and Incorporated herein). * 10.17 Amended and Restated Slock Option Agreement, dated March 18,1993, between Institutional Financing Services, Inc, and Petar Rafebeck. 10 \o/ * 10.18 First Amendment to Amended and Restated Stock Option Agreement, dated January 7,1994, among Tyier Corporation, Institutional Fnandng Sarvicea, Inc. and E Peter Rteabeck (filed as Exhibit 99.2 to the Company's Form 8-K, dated January 20,1994, and incorporated herein). 12 Statement reganflng computation of ratios. 13 1993 Annual Report to Shareholders. With the excepfen of toe Information incorporated by reference into items 1,5,6, 7 end 8 of this Form 10-K, tot 1993 Annual Report to Shareholders is not to be deemed fitod at part of thte Form 10-K. 22 Subaidiartee of Tyler. 23 Content of Ernst & Young (sea page 14). Tyler will furnish copies of these exhibits to shareholders upon written request, and payment of $0.15 per page. (b) Reports on Form 8-K. Tyier did not file any Current Reports on Form 8-K during toe fourth quarter of 1993. * Management contract or compensatory plan or arrangement 11 SIGNATURES Pursuant to the requirements of Section 13 or IS (d) of the Securities Exchange Act of 1934, tie registrant has duly caused this report to be signed on its behatf by the undersigned, thereunto duly authorized. Date: Pursuant to the requirements of the Securities Exchange Ad of 1934, Ms report has been signed below by the following persons on behalf of the^gistrant and in the capacities and on the dates indicated. Dale: J. Ch&nman of the Bovd, President and Chief Executive Officer (principal executive officer) Date: Richard WJ argertson Executive President Director (a principal executive officer) Date: Date: By: Vioe President and Controfiar (a principal financial officer and principal accounting officer) 12 Date: Date: Date: Data: Date: Date: Date: Date: BvW. Michaai Mpphul' Vico President and Treoauar (a principal financial ofBeer) By: Richard C. Bamatt Director By: Staniay D. Beflowe Director Br Perry J. Lewie Director By: Ernest H. Loren Director By: F. R. Mayer Director Bv: /ficJt NeilJ. O'Brien Director By: C. A. RundeO, Jr. Director Date: 0gtr Date Date Data: Data: Data: By: W. Mfchael Kjpphut Vice President and Traaaurar (a principal financial officer) r ZldctiLjbi Richard C. Barnett Director By: Stanley D. Beflowe Director By: Perry J. Lewie Director By: Ernest H. torch Director By: Ci T 0 Maimbf Director Bv: Nel J. O'Brien Director By: C. A. Rundel, Jr. Director 13 Data: Date: Data: Z-lMi Date Dale: Data: Data: Data: By: w. Michael Kipphut Vice President and Treasurer (a principal financial officer) By*. Richard C. Barnett Director By: -MrfL Dt 'folQlLtr Stanley D. fieflcwe Director Bv: Perry J. Lewis Director Bv: Ernest H. Lorch Director By: F. R. Meyer Director Bv: Nel l O'Brien Director Br C. A. Rundei, Jr. Director 13 W Date: Dalt: Data: Data: Data: Data: Data: Data: Br W. Michael Kpphut Vica PreaUant and Traaaurar (a principal financial officer) Bv: Richard C. Barnett Director By: Stantay D. Befcwe Director 0' By: J Parry J. {.ewtf Director ' _ By: Emaat H. Lorch Director By: F. R. Meyar Director By NaUJ. O'Brien Director By: C. A. Rundel, Jr. Director 13 L/ Date: Date: Date: Data: Date: Date: Date: pity W. Michael Mpphut Vica Praaident and Traasurar (a principal financial offloar) Richard C. Barnett Diracter By Stanley D. Befiowe Oirector By______________ Pany J. Lewis Director F. R. Mayer Director NeiJ. O'Brien Director By. C. A. Rundei, Jr. Director Data: Data: Data: Data: Data: Data: Data: Data* W. Michael Kpphut Vice President and Treaaurer (a principal financial offioar) Richard C. Bamatt Director Stanley D. Bellowe Director By: Perry J. lewis Director Ernest H. Lorch Director NaH J. O'Brien Director C. A. RurxM, Jr. Director 13 Date: Date Data: Data: Data: Data: Data: DWaAiVa*i By: W. Michael Mpphut Vice President and Traaaurar (a principal financial officer) By Richard C. Barnett Director By: Stanley D. BeUcrwe Director Bv: Perry J. Lewis Director Bv: Ernest H. Lorch Director Bv: F. R. Meyer Director By: Neil J. O'Brien Director Bv. C. A. Rundel. Jr/ Director 13 CONSENT OF INDEPENDENT AUDITORS We consent to toe incorporation by reference in this Annual Report (Form 10-K) of Tyter Corporation of our report dated January 28,1994, included in the 1993 Annual Report to Shareholders of Tyler Corporaflon. We consent to toe incorporation by reference in (I) the Registration Statement (Form S-3 No. 33*65602) of Tyler Corporation and toe related Prospectus and (I) the Registration Statements (Form S*8 No. 33*34544 and Form S-8 No. 33-41324) pertaining to the Tyler Corporation Stock Option Plan and the Tyter Corporation Savings and investment Plan, respectively, of our reports dated January 28,1994, with rasped to the consolidated flnandal statements Incorporated by reference in the Annual Report (Form 10-K) for the year ended December 31, 1993 and toe financial statement schedules of Tyler Corporation included In toe Annual Report (Form 10-K) for toe year ended December 31,1993. Dales, Texas March 10,1994 ERNST 6 YOUNG 14 2n/ |ui 1I i s 0. 0 1 UJ I> I-Ui 's 5 (0 1 8. i i. 5 N <N r I! I I 1 Mi ! *I * |3 I 1 1 8 5. 5 55 as TYLER CORPORATION ?t / TYLER CORPORATION S-2 2/2 S -3 8CHEOULE VI - ALLOWANCE FOR DEPRECIATION OF PROPERTY. PLANT & EQUIPMENT I - a38 s s' i 3 I1 5 * ! Ii SS S -4 1 a c 1 c0" zm/ SCHEDULE VI - ALLOWANCE FOR DEPRECIATION OF PROPERTY, PLANT & EQUIPMENT SCHEDULE VI - ALLOWANCE FOR DEPRECIATION OF PROPERTY. PLANT EQUIPMENT 8 hi 5 8 1s Ii 11 1 II 8s9 l jj il l 1 iI 1 ill 1 8". N\ mM ill it 9 e i. S-6 s I s n TYLER CORPORATION SCHEDULE VIII - ALLOWANCE FOR LOSSES Years Ended December 31,1991,1992 and 1993 Year ended December 31,1991: Balanoe at beginning of year........................................................... Additions charged to costs and expenses...................................... Deductions tor accounts charged off............................................... $ 433,000 129,000 (402.0001 Balance at end of year............................................................. t 160.000 Year ended December 31,1992: Balanoe at beginning of year........................................................... Addttons charged to costs and expenses...................................... Deductions tor accounts charged off............................................... $ 160,000 54,000 (60.0001 Balance at end of year............................................................. 154.000 Year ended December 31,1993: Balance at beginning of year........................................................... Additions charged to costs and expenses...................................... Deductions for accounts charged off............................................... $ 154,000 151,000 (106.0001 Balance at end of year............................................................. > 200.000 z~i/ S-7 TYLER CORPORATION SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION Years Ended December 31,1991,1992 and 1993 __________m_________ Maintenance and repairs . 19M sre M?QQfl --1992 xr> non 123.967.000 S -9 z%/ REPORT OF INDEPENDENT AUDITORS We have audited the consolidated financial statements of Tytar Corporation as of December 31,1993 and 1992, and for each of the three yean in toe period ended December 31,1993, and have Issued our report thereon dated January 28,1994. Our audtts also Included the financial statement schedules Isted in Item 14(a). These schedules are tie responsfcOty of the Company's management Our responsibUy is to express an opinion based on our audts. In our opinion, the financial statement schedules referred to above, when considered In relation to the basic financial statements taken as a whole, present fairly in M material respects the Mormation set forth therein. ERNST & YOUNG Dafias, Texas January 28,1994 zv S-0 Exhibit Number 4.1 10.14 * 10.17 12 13 22 EXHIBIT INDEX Exhibit Credit Agreement of $110,000,000 among Tyler Corporation and Sodete Generate, Southwest; NationsBank of Texas, NA; and Continental Bank, NA dated February 1,1994. Agreement between Tyler Pipe Industries, Inc., Tyler, Texas and the United Rubber, Cork, Linoleum and Plastic Workers of America, Local No. 1157, dated October 11.1993. Amended and Restated Stock Option Agreement, dated March 18,1993, between Institutional Financing Services, Inc., and Peter Raisbeck. Statement regarding computation of ratios. 1993 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 1,5, 8, 7 and 8 of this Form 10-K, the 1993 Annual Report to Shareholders is not to be deemed fled as part of this Form 10-K. Subsidiaries of Tyler Corporation. Sequentially Numbered Peoe 5\ 'b4 ZS<-\ 26L 3oi * Management contract or compensatory plan or arrangement 30/ * t- K. a TEN-YEAR FINANCIAL SUMMARY TABLE COW onmttedfrom eii Code} tmonnts, aapt per Atrr doit, andfrm overage shuts} 1993 1992 Net sales Forest City............................................................. 1- 8% Tyler Pipe.................. .......................................... - 5 Total .................................................................. - 1 Operating profits Forest City............................................................. ^ 16 Tyler Pipe............................................................... - 58 Total .................................................................. - 20 Other expenses Subsidiaries nonoperating expenses .................... + 3 Interest expense (income), net.............................. - 20 Corporate expense................................................ + 3 Savings and investment and related expenses___ + 4 Restructuring charge............................................. Income (loss) from continuing operations before income tax (benefit) ................................... - 52 Income tax (benefit).................................................. - 45 Income (loss) from continuing operations............... - 59 Income from discontinued operations...................... Income before extraordinary items and cumulative effect of accounting changes................................. - 59 Tbx rate -- continuing operations............................ Earnings (loss) per common share from continuing operations........................................... - 56 Net earnings (loss) pa common share.................... Average shares.......................................................... " 1 Total assets................................................................. Shareholders' equity.................................................. - 4 Debt associated with discontinued operations o .... Debt/equity ratio..................................................... Capital expenditures (net)........................................ - 33 Depredation and amortization ................................ - 3 Cash dividend per share............................................ Stock trading price range......................................... Pnce/earnings ratio range........................................ Book value per share.............................................. - 2 IMS $ 84,464 197,999 $ 282,403 $ 8,808 3,136 11,944 2501 487 . 4,728 1208 1992 $ 78,453 207.753 $ 286206 $ 7*17 7291 15508 2A32 608 4,601 1262 1991 $ 62,622 203752 i 266274 $ 6323 4JH1 10564 1397 769 4,174 1200 2,920 U82 U38 6,105 2870 3235 * 2624 1277 1247 $ M38TM 542% $ 3235 470% S .07TM S (.11) 20,556 $173,923 117,964 $0/100 $ 9508 10,634 $5*-4fc 75-61 $ 5J1 S 26 $ .16 20,779 $ 174/487 122243 $0/100 $ 7,175 114)05 $-- 5%-2A 37-17 $ 590 $ 1247 525% $ j06 $ 26 20206 $171233 119,427 $0/100 $ 4202 10274 $3*-2Vi 60-42 $ 576 BtpnaaKd^^cfmat^dvt^rtsU^mtntdn^eaf$XiCl.ar%J8pershaK(xt"bKmeTa'md^MwamtrtBa^V' mNataloCaaaUH^FmacU SktmoGt Tkbtmmriohd whitdmaUwntd rrwrfmipaean cftomumgs unde Tftr's rartpwg bit ioesafcredit.ahordoutedtUSm^ othei .war itt P<^<^hMudeiinlheCampm/sm^hmnaiispvdmseanMnury3).1391 v In May 1590 herrhohtm ncaoti securities cfKU tahied otttMper tquttMknt Tyla share end a oenungeni mterwet m eddHmoi 1C1 shines in connection ttalli the mergercde predecessor company and ICH 'Attss Merger'). Theseshortsweredistributedin 1991 endhodeoeimaff3 for apavalralTyicr short oi year-nut 1991. *7. Afltrgumtejfect lo the Aik* Merger In hte* 1990 Tte Imfrom continuing operations in 19(9 Indudes en efre-tcx imncturing charge of51,452, or $j07 per shore. -M 1990 $217.642 $ 217,642 $11,325 11425 19B9 5189375 $ 189375 $7,630 7430 1966 $179434 $ 179434 $7496 7496 1967 $188.166 $188,166 $18.794 18.794 1966 $189.143 S189443 $21.466 21/466 1965 S196.909 $190,909 $25390 25390 1964 $209389 $209389 $34383 34383 (449) 5,137 1453 320 7314 1326 2400 283 7.447 1,153 412 7,958 910 141 .6,942 885 335 6316 873 222 4375 1246 5384 1,934 3450 123 (3430) (941) 0289) 3.727 (1387) (317) (1470) 22458 9314 3.949 5365 11,284 13,498 5.994 7,501 4.441 17366 6.905 10361 4.902 28240 11381 16399 21200 $ 3373 35.99b $ 1438 29.1% S 20.988 20.0% $ 16349TM 41.5% $ 11,945 44.4% $ 15363 39.8% $ 37359 42.1% S .17 $ .17 20386 S157343 117327 $- 0/100 $ 13350 8465 $ 32 9V*23/i10 54-16 $ 5.72 $ cur $ .07 21468 S188485 117328 S 33300 22/78 $ 8386 8482 $ .05 WVUft 145-70 $ 543" $ (37) $ 1.11 19309 $ 277,132 51362 $ 188466 79/21 $ 9,142 8,706 $ 10435 18tt-5/ 23-7" $ 2.40<m $ 32 $ .96TM 17,642 $441,609 179301 $ 226,133 56/44 $ 8,090 8,422 $ 41 15#-9tt 16-10TM $^ 1034 $ .41 $ .66 18308 $ 410,087 181,989 $ 191,740 52/48 $ 8,766 8.943 $ .40 17#-1M 27-17 ^$ 1w0.15^ $ 36 $ 32 18310 $384,133 200,135 $1601275 46/54 $ 13338 7395 $ .394 17#-12* 22-15 $f 1IW0879 $ JS $ 1.95 19222 $401323 197,991 $ 174,970 48/52 S 11293 7282 S 35 15MVj 11-8* #$ 1057 (J` In Aiigut 1X9 stonholdm rtcavtd seatntiesof AkanmbudottiM per equivalent Tyler there m amnectxm tffOk the merger sf a pnieceaiurcompowqtniAkzo(mMiena Merger"X ' Aftergoing effect to the SAianct Merger m August 1989 Iwcbmtpm ifS6J34, or $-33 per short, on tilt ofelectronic components distrintim optrstm in IMS mi $9J5S,orSJSpit short, on mle of trotting apmtiont bn IMS ^stiuiesgain mtikafdiscontinued operation After theSlOper stmt specialdividend poii in August 1968 Btfon ntnorimory dmgtfrom etrfy extmgusionent cfIke 12 ?9% subordinated notes afM221,org28ptr short 24 y* CONSOLIDATED STATEMENTS OF OPERATIONS \etn rnM Dtcmker 31 1993 ____ 1992 1991 Net sales.................................................................................... $282,403,000 $286306300 $266374300 Costs and expenses Cost of sales........................................................................... Selling, general and administrative expenses....................... Interest expense, net............................................................. Income before income tax........................................................ 221*024,000 57,972000 487,000 279/483300 . 2.920000 223326300 55,667300 608300 280,101300 6,105300 215,499300 47,482300 769300 263350300 2324300 Income tax (benefit) Current................................................................................... Deferred................................................................................. Income before cumulative effect of accounting changes.......... 2349300 (1,067,000) 1*582000 1338,000 4351300 (1,181300) 2370300 3335300 3,475300 (2398300) 1377300 1347300 Cumulative effect of changes in accounting principles for Income tax ............................................................................ Retiree health care and life insurance benefits, net of income tax benefit.................... 2492300 (5,693300) -- -- -- -- Net income (lott)........................... ........................................ $ 0263300) $ 3335300 $ 1347300 Earnings does) per common share Earnings before cumulative effect of accounting changes............................................................. Cumulative effect of changes in accounting principles for: Income tax....................................................................... Retiree health care and life insurance benefits, oetof income tax benefit............... $ 37 $ .10 128) .16 $ -- -- 36 -- -- Net earnings Ooaa)............................................................... $ (.11) $ .16 $ 36 Average shares.................................................................... 39j5%300 20,779300 20306300 See accompanying notes. CONSOLIDATED BALANCE SHEETS Dramber 31 ASSETS Current assets Cash and cash equivalents ............................................................ Accounts receivable (less allowance for losses of 5200,000 in 1993 and S15L000 uj 1992).......... ...................................................... Inventories..................................................................................... Prepaid expense............................................................................ Deferred tax benefit....................................................................... Total current assets .................................................................... Property, plant and equipment, at cost............................................. Less allowance for depreciation .................................................. Other assets Goodwill and other intangibles.................................................... Sundry......................................................................................... LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable ......................................... Accrued customer discounts ......................... Accrued insurance.......................................... Income tax ..................................................... Other accrued liabilities................................. Total current liabilities.............................. . Deferred income tax Other liabilities .... Commitments and contingencies Shareholders' equity Common stock, 101 par value, 50,000,000 shares authorized, 21,309,277 shares issued....................................................... Capital surplus....................................................................... Retained earnings.................................................................... Less 1,011,046 treasury shares in 1993 and 588,324 treasury shares in 1992, at cost.................................................... Total shareholders' equity................................................ See accompanying notes. ms 1992 $ U401400 $ 12465400 17470400 32354400 1308400 5352400 75355400 17,907400 38361400 1,491400 4*78400 74302400 160446400 113,951400 46495400 47,139400 5494400 52433400 $173,923400 159343400 114,173400 45370400 48470400 6345400 54*15400 $174,487400 S 11,673,000 4455,000 4,780400 1250400 14,144400 35.904400 $ 12,914,000 4315400 4321400 312,000 12,793,000 35355400 8,151400 13.904400 13369400 2,920400 213400 49,109400 72,9214>0 122443400 213400 49,196400 75,184400 124393400 4479400 117,964400 >173,923400 2450400 122343400 $174,487400 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Yean ended December 31,1993,1993 and 1991 Common Stock Sham Amount Capital Surplus Retained Earnings Treasury Stock Sham Amount Balance at December 31,1990......... Net sale of treasury abates to employee bewfit plan............ Purchase of treasury shares from benefit plans of former subsidiaries............................. Net income................................ 21,309,277 -- _ -- 5 213,01] -- _ -- $49,310,000 $70702300 (34300) -- -- 1747300 (747,653) $(23*8300) 327717 1329300 (153316) -- (442300) -- Balance et December 31,1991.......... buiance of treasury shares upon exercise of stock options......... Net sale of treasury shares to employee benefit plan............ Purchase of treasury shares......... Purchase of treasury shares from benefit plans of former subsidiaries........................... Federal inoome tear benefit from exeidsc of nonqualified stock options...... Net income............................... 21,309,277 -- -- -- 213,000 -- -- "" 49776300 71.949300 (40,000) -- (54300) -- -- (574752) (2311.000) 15723 64300 239723 (100300) 889300 .(425300) (168318) (767300) 14300 - -- -- -- 3735300 -- -- Balance at December 31,1992......... Issuance of treasury shares upon exercise of stork options........... Net purchase of treasury shares from employee benefit plan__ Purchase of treasury shares from benefit plans of former subsidiaries ........................... Federal income tax benefit bom exerdse of nonqualified stock options...... Net km...................................... 21309277 -- -- -- 213300 -- 49,196300 75,184300 (9*300) -- (19300) (588724) (2750300) 32329 (1633M1 153300 (7523001 -- -- -- (291371) (1330300) 30300 -- -- -- CL263300) -- -- Balance at December 31,1993......... 213*9377 S 213300 $49,109300 $72,921300 03113*6) $(4379301) See accompanying notes. V CONSOLIDATED STATEMENTS OF CASII FLOWS Years rmUd Daconorr 31 Cash Cows fruon operating activities Net income (loss)............................................................................ . . Adjustments tn reconcile net income (loss) to rtec cash provided by operations Depredation and amortization..... ............................................ Cumulative effect of accounting changes ................................. Provision tor losses on account* receivable.............................. Deferred income tax benefit....................................................... (Increase) decrease in accounts reunvablc ............................... (increase) decrease in inventories ............................................. (Increase) decrease in prepaid expenses ................................. Increase (decrease) in account^ payable ................................. Increase in accrued liabilities................................................... Increase (decrease) in income tax............................................. Increase mother liabilities ....................................................... Net cash provided by operating activity's .......................... ms $(2763400) 10AH000 3,601,000 151,000 (1,0674)00) (2144)001 541774)00 1034)00 02394)00) U104HO 9364)00 *3584)00 18,2994)00 1992 $ 3,235,0*1 114)054**) -- S44ID0 (1.1814100) 2324100 (331S4100) (2704)00) 234*1) 3,4254*10 (1 754)00) 296,0011 11419,0*1 1991 $ 17474)00 10774700 -- 1294)00 (24)984100) 1 764)00 2,4294**) 5044)00 2084* 2,9184**) 6844XX) 1,1744)00 21^645,000 Cash flows from investing activities Additions to property, plant and equipment.................. ................ Cost of acquisition, net of cash acquired...................................... Proceeds from disposal of property, plant and equipment------Other......................................................................... .................. Net cash used bv investing activities ................................. ....... (109934)00) (14)60000) 1,3854)00 3314)00 (107374)00) (87394**)) (14*04)00) U5844X*) (17674**)) (93024W0) (5,1394**)) (257714X) 6374*10 5484)00 (297254)00) Cash flows from financing activities Issuance of common stock.......................................................... Purchase of treasury shares ....................................................... ....... Net sale (purchase) of treasury shares to (from) employee benefit plan............................................................ Purchase ot treasury shares from benefit plans of former subsidiaries................................................................ ........ Net cash provided (used) by financing activities.............. ........ 854)00 -- (7714)00) 0430010) (2,1164)00) Net increase (decrease) in cash and cash equivalents.................. ____ Cash and cash equivalents at beginning of year........................... ........ Cash and cash equivalents at end of year..................................... ........ 5,930000 124*5,100 $184)014)00 384**) (4254*10) 8354**) (767,000) (319,(100) 17984**) 107674**) 5124*54**) -- 9954)00 1442,000) 5534)00 (74)27,000) 177944)00 $107674**) See accompanying notes. 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summary of Significant Accounting Poik its The consolidated financial statements indude the accounts of Tyler Corporation (the "Company") and its subsidiaries, all of which are wholly owned. Inventories are valued at the lower of coat or market. Costs of automotive aftermarket parts inventories arc determined by the first-in, first-out ("FIFO") method while costs of pipe and fittings inventories are determined by the last-in, first-out ("LIFO") method. Depreciation fur financial statement purposes is provided principally by the straight-line method over the estimated useful lives of the various assets. For income tax purposes, accelerated depreciation is used with recognition of deferred income tax for the resulting temporary differences. Goodwill and noncompetition agreements attributable to the automotive aftermarket parts business are being amortized over 40 years and 10 years, respectively. Beginning in the fourth quarter of 1991, goodwill attributable to the pipe and fittings business purchased prior to October 'll, 1970, is also being amortized over 40 years. Accumulated amortization was $4,782,000 at December .11,1993, and 52,911,000 at December 31,1992. A pension plan is in effect which provides income and death benefits for certain employees of the Company and the pipe and fittings business. The benefits arc generally based on final average salary and years of service. The Company's policy is to fund net pension cost accrued. However, the Company will not contribute an amount less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974 or more than the maximum tax deductible amount. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with maturities of three months or less to be cash equivalents. ExccsBcash during the year was invested at an average rate of approximately 3%. Interest paid in 1993,1992 and 1991 was $838,000, $716,000 and $1,011,000, respectively. 29 Acquisition Property, Plant and Equipment On February 20,1991, the Company completed the purchase of Forest City Auto Parts Company, a privately held retailer of automotive parts and supplies. Forest City was acquired for approximately $26 million with additional payments of up to $6,600,000 through 1996 if certain profit objectives are achieved. The Company paid $6604100 of this amount in the first quarter of 1994 tor 1993 performance, $660,000 in 1993 for 1992 performance and $6604)00 in 1992 for 1991 performance. Depredation Live* (myrorel Und................... Buildings and leasehold improvements.... Machinery and equipment ......... Transportation equipment .... 7 to30 3 to 15 3 to 7 1993 WB $ Vtnm S 1*83,000 TiflHJM 29*01*00 114*0*00 115*19*00 ia*n*oo i2*67*oo The acquisition has been accounted for as a purchase, and die net assets and results of operations Rrrofotng Beni: lanes of Credit are included in die Company's Consolidated Financial Statements beginning February 20,1991. The purchase price has been allocated to the assets and liabilities of Forest Gty based on their estimated respective fair values. The purchase price and expenses associated with the acquisition exceeded the fair value of Forest City's net assets by approximately $21,546,000, of which $13,9464)00 has been assigned to goodwill and S7,600,000 to employment and noncompetition agreements. The Company has agreements with certain banks for revolving lines of credit totaling $45,000,000, none of which was outstanding at December 31,1993. The Company has the option to fix the interest rate at '/2 of t% over the London Interbank Offered Rate (TJBOR'), the certificate of deposit rate, or such other rate agreed to by the Company and any of its banks, or to allow it to fluctuate at the prime rate. Unless extended by the Inventories Company with the consent of the banks, the lines of credit are reduced at a rate of 5% per quarter. During finished goods...................... ... Work in proem* .................... Raw material* and supplies... Lem allowance to tote inventories at UFO one........ 1913 tmjnjm 1,933*00 2*99*00 33,972*00 n setium in*i)i, non 1992 453^90,000 2*76*00 2*45*00 58*11*00 20*50*00 338*61*00 1993 borrowings under the lines of credit were at an average rate of approximately 35%. The agreements limited retained earnings available for dividends to $39,8804)00 at December 31,1993. The Company had outstanding letters of credit arising out of normal business operations aggregating approximately $18,977,000 at December 31,1993. Current replacement cost approximates the amounts shown before the allowance to state these inventories at LIFO cost Reductions in UFO inventories had the effect of increasing income before income tax in 1993,1992 and 1991 by $4,389,000, $6514)00 and $1,1024)00. respectively. JO In January 1994 the Company entered into a new agreement with certain banks for revolving lines of credit totaling $60,000,000 and a term loan of $25,000,000. Under the new agreement, the Company has the ability to fix the interest rate in a manner similar to that described above. The term loan requires quarterly repayments through January 2000. The revolving lines of credit are outstanding through January 2,1997. Income Tax Effective January 1,1993. the Company adopted Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes ("FAS No. 109"), which requires the use of the liability method of accounting for deferred income tax. The cumulative effect of this change was to decrease the Company's recorded net deferred tax liability and to increase net income by $2,092,000. As permitted under FAS No. 109, prior-year financials have not been restated. Provision for income tax consists of the following: Current: Federal ............ ...... State................ 1995 $2327,000 vn 2*49,000 1992 $3345*00 1,006300 4351300 1991 53,006300 46930U 3*75,000 ruvc-'i-c---m--i u..................... ...... (1*67300) (1.181,000) <23983001 0*82*00 $2370,000 $1377300 Provision for income tax differs from amounts computed by applying the statutory tax rate to income torn operations as follows: Income tax at statutory rate................ State mtume tax, net of federal tax butedl......... Life insurance................ Excess book amortization Effect of increase in statutory tax cate on deferred tax assets and liabilitna................ Other, net...................... 1999 1992 1991 $1*22300 $2375300 1 092300 209*00 (92*00) 401*00 nb4*00 <86*00) 384*00 310*00 (99*00) 171*00 114*01 (72*00) (167*0(0 103*00 51*02*00 $2*70*00 $1*77*00 Significant components of deferred tax assets and liabilities as of December 31,1993, are as foDows: Deterred tax assets: Inventories.................................. ................. ) r.ntjooo huuraace reserves........................................... 1*36*00 Operating expenses not currently deductible..................................................... I'ostretinement health benefits................... ....... Employee benefit plans................................... Other............................... .............................. 2,262300 3,134,000 625.000 73,000 Total deterred Ux assets................................. 9*Si*00 Deferred tax liabilities Tax bendit transfer lense.................................. Property, plant and equipment......................... Pension plan................................................... Other............................................................... Total deferred tax liabilities........................... Net deferred tax liabilities................... . 7,156*00 4,069,000 291,000 1,151*00 1Z6S7JW I 2.799,000 31 V The tax effects of timing differences that exceed 5% of the amount resulting from multiplying consolidated income before income tax by the statutory income tax rate for the years ended December 31,1992 and 1991 are as follows: Bacas book depredation and Amortization ......................... S Inventory baam difference ............. Employee benefit plane _____ ........ Insurance reserves......... ....... ....... Opeedog expenses not namely deductible ............ ........ lex benefit Master lease........ ........ Rraenjcturing charge.............. ........ Allowance for leasee oe accounle receivable...................... Otto, net....................................... 1992 (292000) % 61,000 53,000 (307,000) (272,000) (3254)0) -- 24)0 (81430) 1991 (374,000) (2054X3) (2704X3) (3754X8 (7994)0) (2894303 554X3 934)0 364)0 $(1,1814X31 $<24984301 Rent expense was approximately $3,493,000 in 1993, S3,452,OOC in 1992 and $3,669,000 in 1991. Minimum rental payments under the leases described above are as follows: 1994 ......... 1995 ......... 199b......... 1997........ 1998 ....... Uter yean f2J6U 1,993,000 lJVjDOO U21JOOO 621,900 8304)0 SB439430 Employee Benefit PUms Certain employees of the Company and the pipe and fittings business are participants in a noncontributcry pension plan. The components of net pension cost were: Income tax paid, net of refunds received, was $1711 Win 1993,$5,706,000in 1992andS25H.00Q in,OQ, Iveses The Company leases certain offices, retail stores, transportation, computer and other equipment used in its operations under noncancellaMe operating lease agreements expiring at various dates through 2003. Most leases contain renewal options and some contain purchase options. The leases generally provide that the Company pay taxes, maintenance, insurance and certain other operating expenses. WM _*iwi _ Serviced*..................... I1.19U00 $1,010,000 $1,0434X3 interest a*..................... *70*000 3.2994)0 3.225430 Actual man on phn .................. iSArrjm is?njm <94n4x Net amortization and deferral........................ 91*000 3.375,1)00 83084)0 itepwtawmr............ LjgMB Q|gg> Mggg wy j3 The following table sets forth the funded Forest City maintains a profit-sharing plan for status of the plan and amounts recognized in the the benefit of eligible employes of Forest Chy. balance sheets at the respective dates: Forest City's contribution to the profit-sharing plan was $90300 in each of 1993,1992 and 1991. The Actuarial promt vteue of benefit UB 1991 obligation Vested bmefits ...................... .. . SC2JSM00 $36446,000 mrvvMQ OBnnui.................... $411000 3,969,000 Accumulated benefit obligation----- iytnwf 40315400 Effect of prodded future mm|MuNm i^wm.1 .............. 3,171000 Projected benefit obligation.......... .. 513UHM0 43475400 Han assets at lair value, primarily US Government securities aad pufaUdy faded teocks and bonds........................ . 57410400 54,746,000 amount of Forest Gt/s contribution to the profitsharing plan is determined by its board of directors but may not exceed 15% of the aggregate compensation paid by Forest City to eligible employees for any plan year. Postretnement Benefits The Company provides medical coverage for cunem and future eligible retirees of its pipe and fittings business and their eligible dependents. Plaa meets tn excess of projected bewfit obligation. ..................... Unrecognized net gain frees put experiencedifferent from that assumed and dungs in plan assumptions................................. Effect of change in discount nfe...... Prior service ooet not yd recognized in net pension coat........................ Unrecognized net asset at date of initial application of FAS No. 87 .... $950400 11471400 (73734001 110,206400) 34C7400 -- 474,000 735,000 0045400) 12,211,300) Accrued pension coat...................... $ (297,000) $ (10,000) Additionally, the Company provides life insurance coverage for current and future eligible retirees. Employees generally become eligible for retiree medical and life coverage after attaining age 55 with 10 years of service or after attaining age 65 with five years of service. The Company contributes a fixed-dcllar amount toward the cost of the medical plan for all eligible retirees. Any future cost increases for the retiree medical program are charged to the retirees. The Company contributes the full coat of the retiree life plan. The pension plan held approximately 251,200 shares of the Company's common stock on December 31,1993. The weighted average discount rate used in determining the actuarial present value of the projected benefit obfigation was approximately 75% and 8% in 1993 and 1992, respectively. The assumed rate of increase in compensation was approximately 4%. The expected long-term rate of return on assets was approximately 8%. The Company has union and nonunion savings and investment plans in which eligible employees of the Company and the pipe and fittings Effective January 1,1993, the Company adopted Statement of Financial Accounting Standards No. 106 - Employer's Accounting for Postretirement Benefits Other Than Pensions ("FAS No. 106"). FAS No. 106 requires the cost of postretirement health care and life insurance benefits to be accrued during the service lives of employees. Prior to FAS No. 106, costs were chaiged to expense as incurred. The Company elected to recognize immediately the accumulated postretirement benefit obligation on January 1,1993, of $8326300 ($5393,000 net of deferred income tax benefit). The business may elect to participate. Employer contributions to the savings and investment plans including related expenses were $1,308,000 in 1993, $1,262,000 in 1992 and $1300,000 in 1991. The plans provide that the Company will contribute not less than 50% of the eligible amount of employee contributions. ^<\o( S3 Company continues to fund the benefit cost principally on a pay-as-you-go basis. Postretirement benefit cost was $757,000 in 1993, S475,000 in 1992 and $521,000 in 1991. Net periodic postretinanent benefit cost for 1993 included the following components: Serviceraet..................... ................................. 3 91000 fotootcoet....... ............................................... . 665,000 t 7574)00 The accumulated portretirement benefit obligation included in the Company's balance sheet at December 31,1993, is as foilmwK Retire**............................................................. $6,019,00 FuUyeUgta active plea pvtidpeots................... 1,735,0)0 Other active partaputt..................................... ! 6380)0 9J91000 Umcopueed lose from change* in aaMsnptanft......... ........................................ *38,000 AocfuedpoaoettnanerebraefitcoBt................... . <8,95*4)00 The assumed discount rate used in determining the accumulated postretirement benefit obligation waa 73% at December 31,1993, and 8% at the date of initial adoption of FAS No. 106. Because the Company contributes a fixed-dollar amount to the plan, the medical trend rate and employee compensation increases do not affect the calculation of the accumulated postretirement benefit obligation or net periodic postretirement benefit cost. Qonandmenta and Contingenria The Company is subject to various environmental laws and regulations and, as such, is involved in environmental matters related to its manufacturing operations. The Company is also involved in legal actions, including allegations of anticompetitive business practices, and claims arising in the ordinary course of busmesB. Management of the Company does not expect the outcome of these tana to have a material adverse effect on its consolidated financial position. Shareholders' Equity In 1993,1992 and 1991, the Company bought shares of its common stock from benefit plans of former subsidiaries of the Company at market prices. At December 31,1993, the Company had authorized 1,000,000 shares of $10 par value voting preferred stock. The board of directors designated 250,000 shares as Series A Junior Participating Preferred Stock which are reserved for issuance upon exercise of the Company's stock purchase rights. In 1993 the Company declared a dividend of one stock purchase right for each outstanding share of common stock. Each right may be exercised to purchase Vioo of a share of Series A Preferred Stock for $21. Each share of Series A Preferred Stock will have a minimum preferential quarterly dividend of 100 times the dividend declared on common stock and a minimum liquidation preference of $100 per share. Upon liquidation ur any merger or other business combination in which common stock is exchanged, the holders of the Series A Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. The stock purchase rights may be exerdsed only after public announcement that a person or group has acquired 20% or more of the Company's common stock or public announcement of an offer for 30% or more of the Company's common stock. The rights, which do not have voting rights, will expire on Maidt 14,2003. The rights may be redeemed by the Company at a price of531 per right at any time prior to 15 days (or such longer period as the board of directors may determine) after the acquisition of 20% of the Company's common stock. If the Company i6 acquired in a merger or other business combination after the rights become activated, each right will entitle its holder to purchase, at the exercise price of $21, shores of common stock in the acquiring company having a market value of $42. If the Company is the surviving 34 y* corporation, each right will entitle the holder to Subsequent Event purchase, at the exercise price of $21, shares of common stock of the Company having a market On January 7,1994, the Company completed value of $42. the acquisition of Institutional Rnanring Services, Inc. The Tyler Corporation Stock Option Plan for approximately $50 million and the assumption of provides for the granting of nonqualified and seasonal working capital debt of $128 million. incentive stock options, as defined by the Internal Additional payments to the former shareholders of Revenue Code, to key employees of the Company EFS are possible based on operating profit and its subsidiaries at prices which represent fair performance IPS is a direct marketer which assists market value st dates of grant Following is a schools in fund raising by arranging for students to summary of option transaction during 1993,1992 sell company-supplied gift Hems to family and and 1991: friends. The company had sales of S6&2 million and operating profit, which is before amortization and Opta outstanding at January 1.1991......................... . Gcamed............ ......................... Option outstanding at December 31,1991....................... Created.................................... Canceled.................................. Exeeriied.................................. Numbered Option Sham Price# 271312 % .17 to $3.50 30,000 330 301312 50,000 (2250) (15223) 17 to 350 450 3.00 1 37 to 3.00 interest expense, of $6.4 million for the twelve months ended December 31,1991 The acquisition, which will be accounted for under the purchase method, was financed with existing cadi and borrowings under the Company's revolving lines of credit. Options outstandkig at December 31,1992 ...... ................ Granted.................................... Canceled.................................. Exercised.................................. 331339 37200 am 02229) .17 to 4 50 43710 530 L37 157 to 33S OptionsouUtanding at December 31,1993 ...................... 335310 $ J7 to $530 ExerciuMe at December 31,1993 ... Weeerved toe future option......... 2BU31 71330 35 Industry Segments The Company sells products and services to industrial and retail customers through two principal operating units. Selected financial information is presented below for 1993,1992 and 1991 (000 omitted). Automotive aftennaifcet parts............ ........ ...... Pipe and fitting*....................................... ...... ...... fatmmmmi eepwa ywt .............................. 1 fnellnrttarl mrpnreii npniM ............... . Income before inaum tax........................ Segment Nat Salas_______ 1993 1992 1991 S SUM $ 78,453 3 62422 197,939 207,753 203752 latio > 286,206 5 266374 Segment Operating Proflu 1991 1992 1991 $ 7466 $ 5444 $ 5416 14M 3437 2499 8470 11381 7,915 608 769 5463 4JB68 4332 f V* $ 6.1Q5 1 2424 Automotive aftennaifcet parts____ ______ ....... Bpeand fitting....................................... ........ Otfas....................................................... fnninlhlrtril........................................ ........ Capital Expenditures 1993 1992 1991 S 913 5 1,929 S 296 9,314 M04 4433 26 10 $ 10493 $ 8799 $ 5,139 Depredation and Aanortmtioo 1993 1992 1991 f U60 $ 1337 $ 1.154 772 9393 - 9,124 222 75 96 HUM S 11403 S 10374 Automotive aftermarket pule.................. ......... Pipe and fitting..................................... ......... Other........................................... .......... ......... romflMdetrd....................................... ......... 1rangibie Assets 1999 1992 1991 S 22415 $ 17.930 $ 14350 82,127 93,400 97439 21442 14487 10462 *6'7*4 < 126717 $121,951 Intangible Assets 19)9 1992 1991 1M73 $ 18445 1 19,198 26466 2942$ 30,184 ---- -- 1 47.139 > Automotive aftermarket pole................. ........... Pipe and fittings ....................... ........ Otbm.................................................... .......... PnninlMilfl ....... Identifiable Assets IMS 1992 1991 S 4U0 S 36,775 $ 33448 122425 127323 .aa 14487 10462 5174487 $171333 UmUoattut aarporut txpeur iritta prmeydf to mkria and rdatcd tmpbyee benefit oats tni space ftfurentutt. OUm idottifitbit out* commt iwtwmiij tfmktxi aafr tfwraekrar 2*3/ REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Tyler Corporation We have audited the accompanying consolidated balance sheets of Tyler Corporation as of December 31,1993 and 1992, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31,1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the finuidal statements ate free of material misstatement An audit indudes examining, on a lest basis, evidence supporting the amounts and disclosures in the financial statements. An audit also indudes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Incur opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of lyier Corporation <u December 31,1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,1993, in conformity with generally accepted accounting principles. Dallas, Texas January 28,199* 37 V SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED) Net vales 1999............................................. 1992 .................................................. Gross profit 1993 ............................................. 1992 ................................................. Income Goes) before cumulative effect of accounting changes 1993 ........................................... 1992 ................................................ Net income (loss) 1993............................................ 1992 ................................................ Earning} Goss) per common share before cumulative effect of accounting changes 1993 .......................................... 1992 ............................................... Net earnings (loss) per common share . 1993 ...... ................................... 1992 ............................................... Stock trading price range 1993 .......................................... 1992 .............................................. Fttji Quarter Second Quarter Third Quarter rasnn Quarter Ym $60,773,000 $76,7634X0 $77,9464X0 $66,9214X0 $282/463400 66,519,000 76.9404X0 76,9544X0 65,793400 286706400 lZOSt^OO 13,001,000 17314400 16,9884)00 16379400 15,7324X0 17314400 147774X0 61379,000 62360400 (923,000) 1,4444X0 110,000 1,482,000 (<529,000) 110,000 1/4444X0 1,482.000 41B40O 1333400 4184X0 1333400 4044X0 10400 1330300 37354X0 404400 104X0 (2363400) 3735400 (.04) .07 .01 .07 Jtt .02 36 -- (72) .07 .01 .07 m 32 JOB -- 5 V - 4 V* 5tt-2V* 5 V - 4 Ve 5'/z-4'/, 5 Ve 4 V* 5'A-4'/k 1V* 4 Vi 5-3Ve 37 .16 (.11) .16 S V* - 4 Ve 5 7/a-2 Va NoemhMUmb am pad kl9S3 or im