<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
-----------------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-----------------------------
January 18, 2000 (November 4, 1999)
Date of Report (Date of earliest event reported)
TYLER TECHNOLOGIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10485 75-2303920
---------------- --------------- ------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
2800 W. Mockingbird Lane
Dallas, Texas 75235
--------------------------------------
(Address of principal executive offices)
(214) 902-5086
--------------------------------------------------
(Registrant's telephone number, including area code)
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<PAGE> 2
The undersigned hereby amends the following items, financial statements,
exhibits or other portions of its Current Report on Form 8-K filed November 18,
1999, as set forth in the pages attached hereto:
Item 7(a). Amended to include audited financial statements of
Cole-Layer-Trumble Company for the following periods:
Balance Sheets at December 26, 1997, December 25, 1998 and
October 1, 1999
Statements of Income for the years ended December 26, 1997 and
December 25, 1998 and the period ended October 1, 1999
Statements of Shareholders' Net Investment for the years ended
December 26, 1997 and December 25, 1998 and the period
ended October 1, 1999
Statements of Cash Flows for the years ended December 26, 1997
and December 25, 1998 and the period ended
October 1, 1999
Notes to Financial Statements
Item 7(b). Amended to include unaudited pro forma condensed consolidated
financial statements.
Item 7(c). Exhibits
23.1 Consent of Ernst & Young LLP
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TYLER TECHNOLOGIES, INC.
Date: January 18, 2000 By: /s/ Theodore L. Bathurst
----------------------------------------
Theodore L. Bathurst
Vice President and Chief Financial
Officer
(principal financial officer)
Date: January 18, 2000 By: /s/ Terri L. Alford
----------------------------------------
Terri L. Alford
Controller
(principal accounting officer)
<PAGE> 4
ITEM 7(a)
<PAGE> 5
Cole-Layer-Trumble Company
(A Division of Day & Zimmermann LLC)
Financial Statements
For the Years ended December 26, 1997 and December 25, 1998
and for the Period ended October 1, 1999
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...............................................1
Financial Statements
Balance Sheets...............................................................2
Statements of Income.........................................................3
Statements of Shareholders' Net Investment...................................4
Statements of Cash Flows.....................................................5
Notes to Financial Statements................................................6
</TABLE>
<PAGE> 6
Report of Independent Auditors
The Members
Day & Zimmermann LLC
We have audited the accompanying balance sheets of Cole-Layer-Trumble Company
(the Company), a division of Day & Zimmermann LLC, as of December 26, 1997,
December 25, 1998 and October 1, 1999, and the related statements of income,
shareholders' net investment, and cash flows for the years ended December 26,
1997 and December 25, 1998 and for the period ended October 1, 1999. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cole-Layer-Trumble Company as
of December 26, 1997, December 25, 1998 and October 1, 1999, and the results of
its operations and its cash flows for years ended December 26, 1997 and December
25, 1998 and for the period ended October 1, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
- ------------------------
Dallas, Texas
December 17, 1999
1
<PAGE> 7
Cole-Layer-Trumble Company
(a Division of Day & Zimmerman LLC)
Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 1 DECEMBER 25 DECEMBER 26
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1,699 $ 2,861 $ 3,810
Trade accounts receivable, net of allowance for
doubtful accounts of $20,000 in 1997, $30,000 in 1998,
and $89,000 in 1999 4,983,281 4,835,475 3,660,804
Retention earned not billed 1,323,041 2,059,023 1,859,507
Costs and estimated earnings in excess of billings on
uncompleted contracts 2,074,562 1,429,435 1,695,211
Prepaid expenses 100,814 100,131 92,688
------------ ------------ ------------
Total current assets 8,483,397 8,426,925 7,312,020
Property and equipment, at cost:
Land, buildings and improvements 639,553 637,989 646,705
Computer and office equipment 3,735,834 3,414,761 3,295,753
Furniture and fixtures 394,265 392,054 423,129
Automobiles 130,991 167,520 175,995
------------ ------------ ------------
4,900,643 4,612,324 4,541,582
Less accumulated depreciation and amortization 4,095,216 3,844,744 3,977,451
------------ ------------ ------------
Net property and equipment 805,427 767,580 564,131
Capitalized software development costs 4,315,926 2,044,889 550,506
Less accumulated amortization 514,946 408,265 266,024
------------ ------------ ------------
Net capitalized software development costs 3,800,980 1,636,624 284,482
------------ ------------ ------------
Total assets $ 13,089,804 $ 10,831,129 $ 8,160,633
============ ============ ============
LIABILITIES AND SHAREHOLDERS' NET INVESTMENT
Current liabilities:
Accounts payable $ 152,345 $ 73,464 $ 97,199
Accrued compensated absences 536,401 402,531 301,095
Other accrued expenses 2,889,755 2,604,778 2,170,802
Billings in excess of costs and estimated earnings
on uncompleted contracts 4,842,482 5,594,682 4,055,117
Reserve for estimated losses on uncompleted contracts 38,874 97,235 119,301
------------ ------------ ------------
Total current liabilities 8,459,857 8,772,690 6,743,514
Shareholders' net investment 4,629,947 2,058,439 1,417,119
------------ ------------ ------------
Total liabilities and shareholders' net investment $ 13,089,804 $ 10,831,129 $ 8,160,633
============ ============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 8
Cole-Layer-Trumble Company
(a Division of Day & Zimmerman LLC)
Statements of Income
<TABLE>
<CAPTION>
PERIOD ENDED YEARS ENDED
OCTOBER 1 DECEMBER 25 DECEMBER 26
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Software licenses and services $ 4,889,121 $ 4,946,350 $ 1,137,599
Software maintenance 5,937,666 6,838,445 6,044,123
Other services 13,868,460 15,545,719 15,515,536
------------ ------------ ------------
Net revenues 24,695,247 27,330,514 22,697,258
Cost of revenues:
Software licenses and services 3,236,388 3,146,806 1,136,952
Software maintenance 5,011,378 4,987,636 5,123,972
Other services 9,363,390 11,082,039 11,442,561
------------ ------------ ------------
Cost of revenues 17,611,156 19,216,481 17,703,485
------------ ------------ ------------
Gross profit 7,084,091 8,114,033 4,993,773
Selling, general and administrative expenses 4,044,251 4,642,214 4,752,670
------------ ------------ ------------
Income from operations 3,039,840 3,471,819 241,103
Interest expense (158,421) (135,946) (171,030)
------------ ------------ ------------
Net income $ 2,881,419 $ 3,335,873 $ 70,073
============ ============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 9
Cole-Layer-Trumble Company
(a Division of Day & Zimmerman LLC)
Statements of Shareholders' Net Investment
<TABLE>
<S> <C>
Balance at December 27, 1996 $ 3,719,765
Net cash distributed to D&Z (2,372,719)
Net income 70,073
------------
Balance at December 26, 1997 1,417,119
Net cash distributed to D&Z (2,694,553)
Net income 3,335,873
------------
Balance at December 25, 1998 2,058,439
Net cash distributed to D&Z (309,911)
Net income 2,881,419
------------
Balance at October 1, 1999 $ 4,629,947
============
</TABLE>
See accompanying notes.
4
<PAGE> 10
Cole-Layer-Trumble Company
(a Division of Day & Zimmerman LLC)
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD ENDED YEARS ENDED
OCTOBER 1 DECEMBER 25 DECEMBER 26
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net income $ 2,881,419 $ 3,335,873 $ 70,073
Adjustments to reconcile net income to net cash
provided by activities:
Depreciation and amortization expense 410,779 435,691 431,720
Loss on dispositions of property and equipment 1,000 63,751 5,154
Changes in operating assets and liabilities:
Trade accounts receivable (147,806) (1,174,671) 1,334,659
Retention earned not billed 735,982 (199,516) 543,625
Costs and estimated earnings in excess of billings on
uncompleted contracts (645,127) 265,776 (1,695,211)
Prepaid expenses (683) (7,443) (3,588)
Accounts payable 78,881 (23,735) (19,235)
Accrued compensated absences 133,870 101,436 37,535
Other accrued expenses 284,977 433,976 813,400
Billings in excess of costs and estimated earnings
on uncompleted contracts (752,200) 1,539,565 1,292,922
Reserve for estimated losses on uncompleted contracts (58,361) (22,066) 18,825
------------ ------------ ------------
Net cash provided by operating activities 2,922,731 4,748,637 2,829,879
Investing activities:
Purchase of property and equipment (342,945) (587,884) (402,137)
Payments for capitalized development costs (2,271,037) (1,494,383) (55,373)
Proceeds from sale of property and equipment -- 27,234 --
------------ ------------ ------------
Net cash used in investing activities (2,613,982) (2,055,033) (457,510)
Financing activities:
Net cash distributed to D&Z (309,911) (2,694,553) (2,372,719)
------------ ------------ ------------
Net decrease in cash (1,162) (949) (350)
Cash at beginning of period 2,861 3,810 4,160
------------ ------------ ------------
Cash at end of period $ 1,699 $ 2,861 $ 3,810
============ ============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 11
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements
October 1, 1999
1. BUSINESS DESCRIPTION
Prior to the October 29, 1999 acquisition by Tyler Technologies, Inc. (Note 10),
the Cole-Layer-Trumble Company ("the Company") was a division of Day &
Zimmermann LLC ("D&Z"), a limited liability company. The Company provides real
estate appraisal services, substantially all to governmental entities throughout
the United States, and designs, installs, and services software products used to
track real estate and related taxes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared using D&Z's historical
basis in the assets and liabilities of the Company. The financial statements
reflect the results of operations, financial condition and cash flows of the
Company as a component of D&Z prior to the acquisition and may not be indicative
of the actual results of operations and financial position of the Company under
other ownership.
The accompanying financial statements reflect the results of operations,
financial position, changes in shareholders' net investment, and cash flows as
if the Company was a separate stand alone entity for the periods presented.
Certain overhead expenses and common support expenses provided by D&Z have been
allocated to the Company as described in Notes 5 and 8. Management believes
these allocations are reasonable. However, the costs of those services charged
to the Company are not necessarily indicative of the costs that would have been
incurred if the Company had performed these functions as a stand alone entity
during the periods presented. For financial reporting purposes, the equity
accounts of the Company have been accumulated into a single disclosure caption
entitled Shareholders' Net Investment.
6
<PAGE> 12
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
OPERATING CYCLE
The Company has an operating cycle that exceeds one year. Contracts typically
range from less than one year to three years in duration, with larger contracts
exceeding one year. Retentions included in current assets that are expected to
be collected in excess of one year amounted to approximately $444,000 as of
October 1, 1999.
FISCAL YEAR
The Company has adopted the fiscal year of D&Z which consists of 13 periods of a
28 day cycle.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents (none outstanding at
each balance sheet date). In addition, the Company paid no income taxes nor
interest amounts during each of the periods reported. Interest expense
represents an allocation charged by D&Z each period based on operating assets.
7
<PAGE> 13
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECOGNITION OF REVENUE
Real Estate Appraisal Services
The Company recognizes revenue as services are performed using the percentage of
completion contract accounting method for the majority of its real estate
appraisal services contracts. The percentage of completion is based primarily of
estimates as to the number of households appraised in relation to the total
estimated number of households to be appraised in accordance with the contract.
Estimated losses on uncompleted contracts are recognized as they become known.
Changes in job performance, job conditions, job costs and estimated
profitability may result in revisions to costs and income and are recognized in
the period in which such revisions are determined. The effect of changes to
total estimated contract costs is recognized in the period such changes are
determined. It is reasonably possible that these estimates could change in the
near term.
Software and Related Services
The Company also derives revenue from software licenses, postcontract customer
support ("PCS"), and services. PCS includes telephone support, bug fixes, and
rights to upgrade on a when-and-if available basis. Services range from
installation, training, and basic consulting to software modification and
customization to meet specific customer needs. In software arrangements that
include rights to multiple software products, specified upgrades, PCS, and/or
other services, the Company allocates the total arrangement fee among each
deliverable based on the relative fair value of each of the deliverables,
determined based on vendor-specific objective evidence.
The Company accounts for its software transactions in accordance with the
American Institute of Certified Public Accountants ("AICPA") Statement of
Position ("SOP") 97-2, Software Revenue Recognition, as amended, as follows:
Software Licenses - The Company recognizes the revenue allocable to software
licenses and specified upgrades upon delivery and installation of the software
product or upgrade to the end user, unless the fee is not fixed or determinable
or collectibility is not probable. If the fee is not fixed or determinable,
revenue is recognized as payments become due from the customer. If
collectibility is not considered probable, revenue is recognized when the fee is
collected. Arrangements that include software services, such as training or
installation, are evaluated to determine whether those services are essential to
the functionality of other elements of the arrangement.
8
<PAGE> 14
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Software Services - A majority of the Company's software arrangements involve
other services that are considered essential to the functionality of the
software. When software services are considered essential, the software license
and service revenue under the entire arrangement is recognized as the services
are performed using the percentage of completion contract accounting method.
When software services are not considered essential, the fee allocable to the
service element is recognized as revenue as the services are performed.
Postcontract Customer Support - PCS agreements are generally entered into in
connection with initial license sales and subsequent renewals. Revenue allocated
to PCS is recognized on a straight-line basis over the period the PCS is
provided. All significant costs and expenses associated with PCS are expensed as
incurred.
Contract Accounting - For arrangements that include customization or
modification of the software, or where software services are otherwise
considered essential, revenue is recognized using contract accounting. Revenue
from these software arrangements is recognized on a percentage of completion
method with progress-to-completion measured based primarily upon labor hours
incurred.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over the
estimated useful lives of the assets, ranging from three to five years, using
the straight-line method. Repairs that do not extend the useful life of the
asset are expensed as incurred. When assets are retired or otherwise disposed
of, the cost of the asset and the related accumulated depreciation are removed
from their respective accounts and any resulting gain or loss is recognized.
9
<PAGE> 15
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for its long-lived assets in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
SFAS 121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets.
Assets to be disposed of are reported at the lower of carrying amount or fair
value less costs to sell.
RESEARCH AND DEVELOPMENT COSTS
The Company expenses all research and development costs as incurred which
amounted to approximately $2,700,000, $2,478,000, and $567,000 for the periods
ended October 1, 1999, December 25, 1998 and December 26, 1997, respectively.
These costs are included in selling, general and administrative expenses in the
accompanying statements of income.
10
<PAGE> 16
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes software development costs in accordance with Statement
of Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed." Capitalization of
software development costs begins upon the establishment of technological
feasibility of the product. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs requires
considerable judgment by management with respect to certain external forces
including, but not limited to, anticipated future gross product revenue,
estimated economic life and changes in software and hardware technology.
Amortization of capitalized software development costs begins when the products
are available for release to customers and is generally computed on a
straight-line basis over 4 years or, if less, the remaining estimated economic
life of the product.
In the accompanying statements of income, amortization is included in costs of
revenue for capitalized software development costs. Amortization of capitalized
software costs totaled approximately $107,000, $142,000, and $142,000 for the
periods ended October 1, 1999, December 25, 1998 and December 26, 1997,
respectively.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising expense was
approximately $71,000, $54,000, and $68,000 for the periods ended October 1,
1999, December 25, 1998 and December 26, 1997, respectively.
INCOME TAXES
No provision for federal or state income taxes is included in the historical
financial statements because any liability is the responsibility of the owners
of D&Z, a limited liability company.
EARNINGS PER SHARE
Earnings per share has not been presented since the Company was a division of
D&Z for all periods presented and accordingly, there was no outstanding common
stock.
11
<PAGE> 17
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME
The Company has adopted the provisions of SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components. The statement also requires the
accumulated balance of other comprehensive income to be displayed separately
from retained earnings and additional paid-in capital in the equity section of
the statement of financial position. Comprehensive income for each of the
accounting periods reported is the same as the Company's reported net income for
such periods and there is no other accumulated balance of other comprehensive
income as of the respective balance sheet dates.
CONTRACT CONTINGENCIES
During the ordinary course of business, the Company enters into contracts which
contain various provisions regarding certain contingencies such as liquidated
damages and subcontractor performance provisions. Expenses associated with
these contingencies are recorded in the period they become known. Additionally,
the Company has provided letters of credit to customers, with amounts
outstanding of approximately $114,000 as of October 1, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments such as accounts receivable,
accounts payable and accrued expenses approximate their fair value because of
the short maturity of these instruments.
12
<PAGE> 18
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
3. CONCENTRATIONS AND CREDIT RISKS
During the normal course of business, the Company extends credit to various
governmental agencies throughout the United States. There were no customers that
individually accounted for greater than 5% of the overall billed accounts
receivable as of the end of each period presented. The following customer
related information is provided:
<TABLE>
<CAPTION>
PERCENT OF NET REVENUES
---------------------------------------------------------------------
PERIOD ENDED YEARS ENDED
OCTOBER 1, 1999 DECEMBER 25, 1998 DECEMBER 26, 1997
--------------- ----------------- -----------------
<S> <C> <C> <C>
Customer A 9.9% 8.2% 0.7%
Customer B 13.0% 11.2% 14.2%
Customer C 6.7% 1.5% 0.0%
</TABLE>
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to uncompleted contracts accounted for under the
percentage of completion method is as follows:
<TABLE>
<CAPTION>
OCTOBER 1, 1999 DECEMBER 25, 1998 DECEMBER 26, 1997
--------------- ----------------- -----------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts $ 52,676,474 $ 45,893,529 $ 40,830,033
Estimated earnings 24,064,478 14,400,148 11,692,690
------------ ------------ ------------
76,740,952 60,293,677 52,522,723
Less applicable billings 78,185,831 62,399,901 53,023,122
------------ ------------ ------------
$ (1,444,879) $ (2,106,224) $ (500,399)
============ ============ ============
</TABLE>
13
<PAGE> 19
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (CONTINUED)
These amounts are included in the accompanying balance sheets under the
following captions:
<TABLE>
<CAPTION>
OCTOBER 1, 1999 DECEMBER 25, 1998 DECEMBER 26, 1997
--------------- ----------------- -----------------
<S> <C> <C> <C>
Costs and estimated earnings in
excess of billings on
uncompleted contracts $ 2,074,562 $ 1,429,435 $ 1,695,211
Retention earned not billed 1,323,041 2,059,023 1,859,507
Billings in excess of costs and
estimated earnings on
uncompleted contracts (4,842,482) (5,594,682) (4,055,117)
-------------- -------------- --------------
$ (1,444,879) $ (2,106,224) $ (500,399)
============== ============== ==============
</TABLE>
5. 401(k) PLAN
D&Z sponsors a retirement savings plan, the Day & Zimmermann, Inc. Retirement
Plan (the "401(k) Plan"), covering substantially all employees who are at least
twenty-one years old and have completed six months of continuous service. The
Company's employees may participate in this 401(k) Plan. Participants may
contribute 2% to 15% of their compensation, unless highly compensated, as
defined in the Plan, in which case they may only contribute 2% to 8%. In no
event may a participant's total yearly contributions exceed Internal Revenue
Code limitations. Each year, D&Z, at its absolute discretion, determines the
employer's matching contribution. Participants become vested in employer
contributions after 5 years of service. The 401(k) Plan expense charged to the
Company by D&Z was approximately $297,000, $383,000, and $360,000 for the
periods ended October 1, 1999, December 25, 1998 and December 26, 1997,
respectively.
14
<PAGE> 20
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
6. EMPLOYEE INCENTIVE PLAN
The Company has implemented an incentive plan, the Operations Incentive Plan
(the "Incentive Plan"), for its employees. The Incentive Plan includes three
groups: project teams, regional pools, and regional management. Participation in
one group does not preclude participation in another group. Incentive payments
are calculated by applying various formulas to the various groups' performance.
Amounts charged to expense related to the Incentive Plan were approximately
$378,000, $790,000, and $488,000 for the periods ended October 1, 1999, December
25, 1998 and December 26, 1997, respectively.
7. OPERATING LEASES
The Company leases office space under non-cancelable lease agreements that
expire at various times through 2001. Minimum future lease payments at October
1, 1999 are as follows:
<TABLE>
<S> <C>
1999 $242,777
2000 112,170
2001 49,712
--------
$404,659
========
</TABLE>
Rent expenses under these leases were approximately $182,000, $248,000, and
$269,000 for the periods ended October 1, 1999, December 25, 1998 and December
26, 1997, respectively.
8. RELATED PARTY TRANSACTIONS
The financial statements include significant transactions with D&Z, the
Company's parent company, as well as certain transactions with other divisions
of D&Z. All of these inter-company transactions, as summarized below, are
settled through the centralized cash management system provided by D&Z. Such
transactions are not necessarily indicative of the costs that would have been
incurred if the Company had been a separate entity.
15
<PAGE> 21
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
CORPORATE SERVICES
D&Z provides payroll and benefits administration, centralized legal services,
and other miscellaneous administrative services to the Company. Also, the
Company participates in D&Z developed and administered company insurance
programs, including general liability, worker's compensation, and product
liability and other standard liability coverage. For certain of these programs,
D&Z allocated to the Company a total of approximately $366,000, $154,000, and
$143,000 during the periods ended October 1, 1999, December 25, 1998 and
December 26, 1997, respectively, the majority of which related to insurance
coverages. The amounts allocated were based on actual historical experience for
the Company or based on percentages of total costs for the services provided
using methods that D&Z management believes are reasonable.
EMPLOYEE HEALTH INSURANCE COSTS
D&Z administers the employee health insurance programs. D&Z calculates the
employer's portion of employee insurance costs for the Company's employees and
charges the Company accordingly. Costs related to these insurance programs
allocated to the Company by D&Z were approximately $393,000, $521,000, and
$586,000 during the periods ended October 1, 1999, December 25, 1998 and
December 26, 1997, respectively.
CASH MANAGEMENT
The Company's customers are asked to remit payments to a D&Z lockbox account.
Any payments remitted to the Company are deposited into a deposit account from
which only D&Z can transfer cash. Cash required for accounts payable, payroll,
and other accrued expenses are funded to the Company's checking accounts by D&Z,
or the payments are made directly by D&Z on the Company's behalf. Accordingly,
the Company maintains a limited amount of cash on hand.
16
<PAGE> 22
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
INTEREST
D&Z allocates interest costs to the Company through an operating asset charge,
based on the Company's net operating asset balance. Interest charged to the
Company during 1997 was approximately $158,000, $136,000, and $171,000 during
the periods ended October 1, 1999, December 25, 1998 and December 26, 1997,
respectively.
TRANSACTIONS WITH RELATED COMPANIES
The Company provides certain office space to a division of D&Z and uses certain
services of another division. These transactions, which resulted in a net
expense of approximately $441,000, $292,000, and $418,000 during the periods
ended October 1, 1999, December 25, 1998 and December 26, 1997, respectively,
were settled through the D&Z inter-company account.
9. ROYALTY AGREEMENT
The Company had an agreement with a third-party to perform various computer
systems maintenance services for the third party's customers. The Company remits
a royalty to the third party based on revenues earned on this business. Royalty
expenses related to this agreement were approximately $45,000, $134,000, and
$308,000 during the periods ended October 1, 1999, December 25, 1998 and
December 26, 1997, respectively.
10. SUBSEQUENT EVENT
On November 4, 1999, Tyler Technologies, Inc. (Tyler) acquired selected assets
and assumed selected liabilities of the Company, in an asset purchase agreement
with an effective date of October 29, 1999. Tyler paid $3.0 million in cash,
issued one million restricted shares of Tyler common stock with a price
protection guarantee and limited up to $3 million, assigned without recourse
certain senior subordinated secured promissory notes due March 26, 2002 of a
previously sold Tyler subsidiary with an aggregate face amount of $3.2 million.
This purchase price is subject to certain adjustments as defined by the asset
purchase agreement.
17
<PAGE> 23
Cole-Layer-Trumble Company
(a Division of Day & Zimmermann LLC)
Notes to Financial Statements (continued)
11. YEAR 2000 ISSUE (UNAUDITED)
The Company, along with most other companies, has determined that it will be
required to modify or replace certain portions of its hardware and software so
that its automated systems, including its information systems and devices, will
function properly with respect to dates in the Year 2000 and thereafter. The
Company is currently utilizing both internal and external resources to
reprogram, or replace, and test the hardware and software for Year 2000
modifications. The Company believes it has substantially completed its year 2000
project. The remaining costs associated with the project are not expected to
have a material effect on the Company's results of operations. In the event that
the Company does not complete any additional phases, it has established
contingency plans, such as manual workarounds, for certain critical applications
and is working on such plans for others. To date, management of the Company is
not aware of any significant third party agents (i.e., suppliers) with a Year
2000 issue that would materially impact the Company's results of operations,
liquidity, or capital resources. However, the Company has no means of ensuring
that its suppliers will be Year 2000 ready.
18
<PAGE> 24
ITEM 7(b)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following sets forth unaudited pro forma condensed consolidated
financial information for Tyler Technologies, Inc. (the "Company") in connection
with the Company's acquisition on November 4, 1999 of certain of the assets and
properties and assumption of certain liabilities of Cole-Layer-Trumble Company,
a division of Day & Zimmermann LLC (hereafter referred to as "CLT"). In
addition, the Company acquired Process, Incorporated d/b/a MUNIS on April 20,
1999, and this significant acquisition has been previously reported on Form
8-K/A dated June 30, 1999. For periods subsequent to April 20, 1999, the
operating results of MUNIS have been included with Tyler's historical results.
The unaudited pro forma condensed consolidated income statements for the year
ended December 31, 1998 and the nine months ended September 30, 1999, gives
effect to the acquisitions of CLT and MUNIS as if they had occurred on January
1, 1998. The unaudited pro forma condensed consolidated balance sheet as of
September 30, 1999 has been prepared as if the acquisition of CLT had occurred
on September 30, 1999.
The purchase method of accounting has been used in the preparation of
the unaudited pro forma condensed consolidated financial statements. Under this
method of accounting, the aggregate purchase price is allocated to assets
acquired and liabilities assumed based on their estimated fair values. For
purposes of the unaudited pro forma condensed consolidated financial statements,
the preliminary purchase prices of the companies acquired have been allocated
based primarily on information furnished by management of the acquired
companies. The final allocation of the purchase prices of the companies acquired
will be determined in a reasonable time after consummation and will be based on
a complete evaluation of the assets acquired and liabilities assumed, including
the amounts allocable to identifiable intangible assets and goodwill.
Accordingly, the information presented herein may differ from the final purchase
price allocation.
In the opinion of the Company's management, all adjustments have been
made that are necessary to present fairly the pro forma data.
The unaudited pro forma condensed consolidated financial information
does not purport to present the actual results of operations or financial
position of the Company had the transactions and events assumed therein in fact
occurred on the dates indicated, nor is it necessarily indicative of the results
of operations that may be achieved in the future. The unaudited pro forma
condensed consolidated financial information is based on certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
therewith. The unaudited pro forma condensed consolidated financial information
should also be read in conjunction with the historical consolidated financial
statements, including the notes thereto, of the Company, CLT and MUNIS.
<PAGE> 25
TYLER TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CLT
----------------------------------------
LESS ASSETS NOT
ACQUIRED & PRO FORMA
HISTORICAL LIABILITIES PRO FORMA COMBINED
COMPANY HISTORICAL NOT ASSUMED AS ADJUSTED ADJUSTMENTS COMPANY
---------- ---------- --------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,678 $ 2 $ -- $ 2 $ -- $ 1,680
Accounts receivable, net:
Billed 27,762 4,983 4,977 6 558(2) 28,326
Unbilled - costs and estimated earnings
in excess of billings 2,753 2,075 -- 2,075 -- 4,828
Retention earned not billed -- 1,323 -- 1,323 -- 1,323
Prepaids and other current assets 3,976 101 -- 101 -- 4,077
Current notes receivable 1,377 -- -- -- -- 1,377
Deferred income taxes 1,434 -- -- -- -- 1,434
-------- -------- -------- -------- -------- --------
Total current assets 38,980 8,484 4,977 3,507 558 43,045
Property and equipment, net 17,485 805 -- 805 -- 18,290
Goodwill and other intangibles, net 145,948 3,801 -- 3,801 9,189(2) 158,938
Investment in affiliate, at equity 13,630 -- -- -- -- 13,630
Non-current notes receivable 9,808 -- -- -- (3,155)(2) 6,653
Other receivables 2,844 -- -- -- -- 2,844
Sundry assets 950 -- -- -- -- 950
-------- -------- -------- -------- -------- --------
Total assets $229,645 $ 13,090 $ 4,977 $ 8,113 $ 6,592 $244,350
======== ======== ======== ======== ======== ========
Current liabilities:
Accounts payable $ 3,562 $ 152 $ 152 $ -- $ -- $ 3,562
Accrued expenses 9,431 3,427 1,203 2,224 -- 11,655
Current portion of long-term debt 3,551 -- -- -- -- 3,551
Deferred revenue 19,941 -- -- -- -- 19,941
Billings in excess of costs and estimated
earnings -- 4,881 -- 4,881 -- 4,881
Income taxes payable 1,262 -- -- -- -- 1,262
-------- -------- -------- -------- -------- --------
Total current liabilities 37,747 8,460 1,355 7,105 44,852
Long-term debt, less current portion 54,381 -- -- -- 3,325(2) 57,706
Other liabilities 5,392 -- -- -- -- 5,392
Deferred income taxes 11,467 -- -- -- -- 11,467
(1,008)(2)
Shareholders' equity 120,658 4,630 3,622 1,008 4,275(2) 124,933
-------- -------- -------- -------- -------- --------
Total liabilities and shareholders' equity $229,645 $ 13,090 $ 4,977 $ 8,113 $ 6,592 $244,350
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
<PAGE> 26
TYLER TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA COMPANY
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL
COMPANY MUNIS (8) FOR MUNIS AS ADJUSTED CLT
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues $ 50,549 $ 15,907 $ - $ 66,456 $ 27,331
Costs and expenses:
Cost of revenue 24,749 7,708 - 32,457 19,217
Selling, general and administrative expense 14,461 6,377 - 20,838 4,642
Costs of a certain acquisition opportunity 3,146 - - 3,146 -
Amortization of intangibles 3,173 - 1,422(7) 4,595 -
Interest expense, net 1,831 66 1,188(9) 3,085 136
-------- -------- -------- -------- --------
Income before income taxes 3,189 1,756 (2,610) 2,335 3,336
Provision for income taxes 2,033 62 (361)(10) 1,734 -
-------- -------- -------- -------- --------
Income from continuing operations $ 1,156 $ 1,694 $ (2,249) $ 601 $ 3,336
======== ========
Income per diluted share from continuing operations $ 0.03 $ 0.02
======== ========
Weighted average number of diluted common
shares outstanding 34,400 2,703(7) 37,103
======== ========
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS COMBINED
FOR CLT COMPANY
----------- ---------
<S> <C> <C>
Net revenues $ - $ 93,787
Costs and expenses:
Cost of revenue - 51,674
Selling, general and administrative expense - 25,480
Costs of a certain acquisition opportunity - 3,146
Amortization of intangibles 459(2) 5,054
Interest expense, net 395(4) 3,616
-------- --------
Income before income taxes (854) 4,817
Provision for income taxes 943(5) 2,677
-------- --------
Income from continuing operations $ (1,797) $ 2,140
========
Income per diluted share from continuing operations $ 0.06
========
Weighted average number of diluted common
shares outstanding 1,000(2) 38,103
========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
<PAGE> 27
TYLER TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA COMPANY
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL
COMPANY MUNIS FOR MUNIS AS ADJUSTED CLT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Revenues $ 78,609 $ 5,442 $ - $ 84,051 $ 24,695
Costs and expenses:
Cost of revenue 36,092 1,975 - 38,067 17,611
Selling, general and administrative expense 24,941 2,001 - 26,942 4,044
Amortization of intangibles 5,067 - 355(7) 5,422 -
Interest expense, net 2,614 16 298(9) 2,928 159
Equity in net loss of affiliate 378 - - 378 -
-------- ------- -------- -------- --------
Income before income taxes 9,517 1,450 (653) 10,314 2,881
Provision for income taxes 4,798 3 300(10) 5,101 -
-------- -------- -------- -------- --------
Income from continuing operations $ 4,719 $ 1,447 $ (953) $ 5,213 $ 2,881
======== ========
Income per diluted share from continuing operations $ 0.12 $ 0.13
======== ========
Weighted average number of diluted common
shares outstanding 39,336 1,081(7) 40,417
======== ========
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS COMBINED
FOR CLT COMPANY
------------- ---------
<S> <C> <C>
Net Revenues $ - 108,746
Costs and expenses:
Cost of revenue - 55,678
Selling, general and administrative expense - 30,986
Amortization of intangibles 345(2) 5,767
Interest expense, net 271(4) 3,358
Equity in net loss of affiliate - 378
-------- --------
Income before income taxes (616) 12,579
Provision for income taxes 861(5) 5,962
-------- --------
Income from continuing operations $ (1,477) $ 6,617
========
Income per diluted share from continuing operations $ 0.16
========
Weighted average number of diluted common
shares outstanding 1,000(2) 41,417
========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
<PAGE> 28
TYLER TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands)
(Unaudited)
(1) On November 4, 1999, Tyler Technologies, Inc. (the "Company", "Tyler" or
"Parent") acquired certain of the assets and properties and assumed
certain liabilities of Cole-Layer-Trumble Company (hereafter referred to
as "CLT"). The acquisition was consummated pursuant to the terms and
conditions of an Asset Purchase Agreement ("Agreement"), dated November 3,
1999 to be effective as of October 29, 1999. The Agreement was by and
among the Company, CLT Company, a Delaware corporation and wholly-owned
subsidiary of Parent ("Buyer"), and Day & Zimmermann, L.L.C., a Delaware
limited liability company ("Seller" or "D&Z"). D&Z received at the date of
closing of the Agreement aggregate consideration of $3.0 million in cash
(to be adjusted on a post-closing basis as described below); was assigned
without recourse certain senior subordinated secured promissory notes due
March 26, 2002, of Forest City Auto Parts Company (a former wholly-owned
subsidiary of Tyler sold on March 26, 1999) with an aggregate face amount
of $3.2 million; and was issued 1,000,000 shares of unregistered Tyler
Common Stock which is subject to a price protection in certain
circumstances.
In accordance with the Agreement, a post-closing cash settlement is to
occur approximately 100 days after closing for the following items:
[ ] To the extent outstanding billed accounts receivable at the
date of closing (asset retained by the Seller) is less than a
prescribed level, Tyler is to receive cash. Based on
information available at the time of this report, the amount
of cash due Tyler is estimated to be approximately $558,000.
This amount has been considered in the purchase price and the
allocation thereof and reflected as a receivable in the
accompanying condensed consolidated unaudited pro forma
balance sheet at September 30, 1999.
[ ] To the extent outstanding billed accounts receivable remain
unpaid after 90 days from closing, Tyler is to purchase such
assets at face value. The estimated purchase price and the
allocation thereof has not been adjusted since management of
CLT and Tyler believes any adjustments to the purchase price
will approximate the fair value of such unpaid receivables
acquired.
[ ] To the extent the selected assets acquired less selected
liabilities assumed are different than a prescribed net asset
value, one party is to pay the other party. The estimated
purchase price and the allocation thereof has not been
adjusted in the accompanying pro forma financial statements
since management of CLT and Tyler believes any adjustment to
the purchase price will approximate the fair value of such
incremental net assets acquired or net liabilities assumed.
In accordance with the Agreement, Tyler provided the seller certain price
protection on the future sale of the Company's Common Stock, which expires
no later than November 4, 2001. As adjusted for post-closing information,
the price protection is equal to the difference between the actual sales
proceeds of the Tyler Common Stock, if such stock is sold by the seller by
November 4, 2001, and $6.25 on a per-share basis, but is limited to a
total of $2.75 million. The Company financed the cash portion of the
consideration with borrowings under its three-year revolving credit
agreement with a group of banks. In addition, the Buyer and Seller are to
agree upon a schedule allocating the Purchase Price and agree to file IRS
Form 8594.
<PAGE> 29
(2) The acquisition of CLT has been accounted for using the purchase method of
accounting. The components of the preliminary purchase price and the
preliminary allocation of the purchase price to the selected assets
acquired and selected liabilities assumed are summarized below:
<TABLE>
<S> <C>
Components of preliminary purchase price:
Cash paid from borrowings under the Company's credit facility $ 3,000
Receivable resulting from the billed accounts receivable adjustment (558)
Fair value of common stock issued (a) 4,275
Carrying value of senior subordinated secured promissory
notes of Forest City Auto Parts Company assigned
without recourse 3,155
Estimated transaction costs 325
--------
Total preliminary purchase price $ 10,197
Allocation of preliminary purchase price:
Historical carrying values of net assets acquired by Tyler (1,008)
--------
Cost in excess of estimated net assets acquired (b) $ 9,189
========
</TABLE>
(a) Represents the issuance of 1,000,000 shares of unregistered common
stock of Tyler at an average price of $4.275 per share. The
agreement was announced and consummated on November 4, 1999, and
the average price was calculated using the average of the closing
prices of the Company's Common Stock for the five consecutive
trading days beginning two trading days prior to the public
announcement by the Company of this acquisition.
(b) Represents the excess purchase price over the estimated fair value
of the net assets acquired. Goodwill is expected to be amortized
over 20 years, amounting to approximately $459,000 annually and the
accompanying unaudited pro forma condensed consolidated income
statement for the nine months ended September 30, 1999 reflects
approximately $345,000 of such amortization. For purposes of the
preliminary allocation of the purchase price, the Company assumed
that the historical balances of net property and equipment to be
acquired approximates fair value, as well as the remaining
historical net assets acquired of CLT.
(3) CLT has adopted the fiscal year of D&Z, which consists of 13 periods of a
28-day cycle. For purposes of the pro forma condensed consolidated balance
sheet, the historical balances represent the October 1, 1999 balance sheet
of CLT. For purposes of the pro forma income statement for the year ended
December 31, 1998 the historical balances represent CLT's statement of
income for the fiscal period ended December 25, 1998. For purposes of the
pro forma income statement for the nine months ended September 30, 1999,
the historical balances represent CLT's statement of income for the period
ended October 1, 1999.
<PAGE> 30
(4) To record interest expense at approximately 8.2% on average long-term debt
after giving effect to the acquisition of CLT. As the Forest City Auto
Parts promissory notes were not available to the Company to provide to the
Seller until March 26, 1999, the following pro forma computations of
interest expense assume that this portion of the purchase price, prior to
March 26, 1999, would have been required to be funded by additional bank
borrowings.
<TABLE>
<CAPTION>
Nine months ended September 30, 1999
------------------------------------------------
Year ended January 1, 1999 to March 27, 1999 to
December 31, 1998 March 26, 1999 September 30, 1999
----------------- ------------------ ------------------
<S> <C> <C> <C>
Additional bank borrowings, reduced on
March 26, 1999 for Forest City Auto
Parts promissory notes $ 6,480 $ 6,480 $ 3,325
Interest expense at 8.2% 531 124 140
</TABLE>
<TABLE>
<CAPTION>
Year ended Nine months ended
December 31, 1998 September 30, 1999
----------------- ------------------
<S> <C> <C>
Interest expense on additional borrowings $ 531 $ 264
Add historical interest income on the
Forest City Auto Parts promissory notes - 166
Less CLT historical interest expense (136) (159)
----------- -------
Net adjustment for net increase in interest
expense $ 395 $ 271
======== =======
</TABLE>
A 1/8% change in interest rates would cause interest expense related to
the acquisition of CLT to increase or decrease by approximately $5,000 per
year.
(5) To adjust the Tyler's historical and CLT's pro forma income taxes using an
incremental effective income tax rate of 38%. The adjustment also takes
into consideration federal and state income taxes related to the
additional interest expense and deductible goodwill amortization.
In Form 8-K/A Amendment No. 1 dated June 30, 1999, Tyler Technologies, Inc.
presented the pro forma effects and audited financial statements of the
"significant" acquisition of MUNIS. The following are the relevant footnotes in
connection with that acquisition.
(6) On April 20, 1999, Tyler Technologies, Inc. (the "Company," "Tyler" or
"Parent") acquired Process, Incorporated d/b/a Computer Center Software
and MUNIS (hereafter referred to as "MUNIS"), a Maine Corporation. The
acquisition was consummated pursuant to the terms and conditions of an
Agreement and Plan of Merger, dated April 20, 1999, by and among the
Company, Computer Center Software, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), MUNIS, and the
stockholders of MUNIS in which, among other things, Merger Sub was merged
with and into MUNIS. The stockholders of MUNIS received in the merger
aggregate consideration of $16,250,000 in cash (reduced for the then
outstanding balances of the term debt of MUNIS) and 2,702,703 shares of
unregistered Tyler Common Stock. The Company financed the cash portion of
<PAGE> 31
the consideration with borrowings under its senior credit facility with
Bank of America. MUNIS was a Subchapter S Corporation and an election will
be made under Section 338 for income tax purposes.
(7) The acquisition of MUNIS has been accounted for using the purchase method
of accounting. The components of the purchase price and the preliminary
allocation of purchase price to the assets acquired and liabilities
assumed are summarized below:
<TABLE>
<S> <C>
Components of purchase price:
Cash paid from borrowings under the Company's credit facility $ 16,250
Fair value of common stock issued (a) 14,561
Estimated transaction costs 100
--------
Total purchase price 30,911
Allocation of purchase price:
MUNIS shareholders' equity (2,116)
MUNIS debt paid at closing by the seller (364)
--------
Cost in excess of estimated net assets acquired (b) $ 28,431
========
</TABLE>
(a) Represents the issuance of 2,702,703 shares of common stock at an
average price of $5.3875 per share. The agreement was announced and
consummated on April 20, 1999, and the average price was calculated
using the average of the closing prices of the Company's Common Stock
for the five consecutive trading days beginning two trading days prior
to the public announcement by the Company of this acquisition. For
purposes of pro forma earnings per share for the nine months ended
September 30, 1999, the shares issued on April 19, 1999 have been
weighted for the pre-acquisition period.
(b) Represents the excess purchase price over the estimated fair value of
the assets acquired. Goodwill is expected to be amortized over 20
years, amounting to $1,422,000 annually and the accompanying unaudited
pro forma condensed consolidated income statement for the
pre-acquisition period in 1999 reflects $355,000 of such amortization.
For purposes of the preliminary allocation of the purchase price, the
Company assumed that the historical balances of net property and
equipment to be acquired approximates fair value, as well as the
remaining historical net assets acquired of MUNIS.
<PAGE> 32
(8) MUNIS's fiscal year-end is September 30. Accordingly, MUNIS's audited
statement of operations for the year ended September 30, 1998 has been
adjusted to conform to the Company's calendar year financial statements as
follows:
<TABLE>
<CAPTION>
AUDITED
12 MONTHS LESS ADD 12 MONTHS
ENDED 3 MONTHS 3 MONTHS ENDED
30-SEP-98 31-DEC-97 31-DEC-98 31-DEC-98
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $14,008 $ 2,403 $ 4,302 $15,907
Costs and expenses:
Cost of revenues 7,283 1,636 2,061 7,708
Selling, general and administrative expense 5,773 1,170 1,774 6,377
Interest expense, net 68 12 10 66
------- ------- ------- -------
Income (loss) before income taxes 884 (415) 457 1,756
Income tax provision (benefit) 42 15 35 62
------- ------- ------- -------
Net income (loss) $ 842 $ (430) $ 422 $ 1,694
======= ======= ======= =======
</TABLE>
(9) To record interest expense at approximately 7.5% on average long-term debt
after giving effect to the acquisition and reduced for interest expense
recorded by MUNIS as follows:
<TABLE>
<CAPTION>
YEAR ENDED PRE-ACQUISITION
DECEMBER 31, 1998 PERIOD IN 1999
----------------- ---------------
<S> <C> <C>
Additional bank borrowings $ 16,350 $ 16,350
========== =========
Interest expense at 7.5% $ 1,226 $ 307
Less historical interest expense (66) (16)
Add historical interest expense on demand
notes payable 28 7
---------- ---------
Net adjustment for net increase in interest
expense $ 1,188 $ 298
========== =========
</TABLE>
(10) To adjust the portion of MUNIS's historical income taxes, which were
calculated on a basis applicable to a Subchapter S Corporation, to
taxes calculated on a basis applicable to a C Corporation using an
incremental effective income tax rate of 38% in taxable periods and 35%
in taxable loss periods. The adjustment also takes into consideration
federal and state income taxes related to the additional interest and
deductible goodwill amortization.
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.1 Consent of Independent Auditors
</TABLE>
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-34809) pertaining to the Tyler Corporation Stock Option Plan of our
report dated December 17, 1999, with respect to the balance sheets of
Cole-Layer-Trumble Company as of December 26, 1997, December 25, 1998 and
October 1, 1999, and the related statements of income, shareholders' net
investment, and cash flows for the years ended December 26, 1997 and December
25, 1998 and for the period ended October 1, 1999, included in the Form 8-K of
Tyler Technologies, Inc. dated January 18, 2000.
/s/ Ernst & Young LLP
------------------------
Dallas, Texas
January 18, 2000
