-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AY1k/R1dbnTHigBbsdP/7tmJIx0glUbClSqsYDLTBCxllH1r4z5ZLbOwiof8wTp+ MrIrjXnEjsNUBY6orJ9C5w== 0000950134-00-000406.txt : 20000202 0000950134-00-000406.hdr.sgml : 20000202 ACCESSION NUMBER: 0000950134-00-000406 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991104 ITEM INFORMATION: FILED AS OF DATE: 20000118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYLER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000860731 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 752303920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-10485 FILM NUMBER: 508355 BUSINESS ADDRESS: STREET 1: 2800 W MOCKINGBIRD LANE STREET 2: STE 3200 SAN JACINTO TOWER CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2147547800 MAIL ADDRESS: STREET 1: 2121 SAN JACINTO STREET STREET 2: SUITE 3200 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: TYLER CORP /NEW/ DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: TYLER THREE INC DATE OF NAME CHANGE: 19600201 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K 1 ================================================================================ 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) ================================================================================ 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 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) 4 ITEM 7(a) 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 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
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 7 Cole-Layer-Trumble Company (a Division of Day & Zimmerman LLC) Balance Sheets
OCTOBER 1 DECEMBER 25 DECEMBER 26 1999 1998 1997 ------------ ------------ ------------ 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 ============ ============ ============
See accompanying notes. 2 8 Cole-Layer-Trumble Company (a Division of Day & Zimmerman LLC) Statements of Income
PERIOD ENDED YEARS ENDED OCTOBER 1 DECEMBER 25 DECEMBER 26 1999 1998 1997 ------------ ------------ ------------ 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 ============ ============ ============
See accompanying notes. 3 9 Cole-Layer-Trumble Company (a Division of Day & Zimmerman LLC) Statements of Shareholders' Net Investment 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 ============
See accompanying notes. 4 10 Cole-Layer-Trumble Company (a Division of Day & Zimmerman LLC) Statements of Cash Flows
PERIOD ENDED YEARS ENDED OCTOBER 1 DECEMBER 25 DECEMBER 26 1999 1998 1997 ------------ ------------ ------------ 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 ============ ============ ============
See accompanying notes. 5 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 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 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 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 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 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 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 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:
PERCENT OF NET REVENUES --------------------------------------------------------------------- PERIOD ENDED YEARS ENDED OCTOBER 1, 1999 DECEMBER 25, 1998 DECEMBER 26, 1997 --------------- ----------------- ----------------- Customer A 9.9% 8.2% 0.7% Customer B 13.0% 11.2% 14.2% Customer C 6.7% 1.5% 0.0%
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:
OCTOBER 1, 1999 DECEMBER 25, 1998 DECEMBER 26, 1997 --------------- ----------------- ----------------- 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) ============ ============ ============
13 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:
OCTOBER 1, 1999 DECEMBER 25, 1998 DECEMBER 26, 1997 --------------- ----------------- ----------------- 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) ============== ============== ==============
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 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: 1999 $242,777 2000 112,170 2001 49,712 -------- $404,659 ========
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 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 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 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 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. 25 TYLER TECHNOLOGIES, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 (IN THOUSANDS) (UNAUDITED)
CLT ---------------------------------------- LESS ASSETS NOT ACQUIRED & PRO FORMA HISTORICAL LIABILITIES PRO FORMA COMBINED COMPANY HISTORICAL NOT ASSUMED AS ADJUSTED ADJUSTMENTS COMPANY ---------- ---------- --------------- ----------- ----------- --------- 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 ======== ======== ======== ======== ======== ========
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 26 TYLER TECHNOLOGIES, INC. PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
PRO FORMA COMPANY HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL COMPANY MUNIS (8) FOR MUNIS AS ADJUSTED CLT ----------- ----------- ----------- ----------- ---------- 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 ======== ======== PRO FORMA PRO FORMA ADJUSTMENTS COMBINED FOR CLT COMPANY ----------- --------- 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 ========
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 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)
PRO FORMA COMPANY HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL COMPANY MUNIS FOR MUNIS AS ADJUSTED CLT ----------- ----------- ----------- ----------- ----------- 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 ======== ======== PRO FORMA PRO FORMA ADJUSTMENTS COMBINED FOR CLT COMPANY ------------- --------- 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 ========
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 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. 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: 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 ========
(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. 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.
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 ----------------- ------------------ ------------------ 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
Year ended Nine months ended December 31, 1998 September 30, 1999 ----------------- ------------------ 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 ======== =======
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 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: 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 ========
(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. 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:
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 ---------- --------- --------- --------- 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 ======= ======= ======= =======
(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:
YEAR ENDED PRE-ACQUISITION DECEMBER 31, 1998 PERIOD IN 1999 ----------------- --------------- 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 ========== =========
(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. 33 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 23.1 Consent of Independent Auditors
EX-23.1 2 CONSENT OF INDEPENDENT AUDITORS 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 -----END PRIVACY-ENHANCED MESSAGE-----