8-K 1 d83021e8-k.txt FORM 8-K 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20459 ---------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ---------- January 16, 2001 (December 29, 2000) 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 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 16, 2001 By: /s/ Theodore L. Bathurst ------------------------------------------ Theodore L. Bathurst Vice President and Chief Financial Officer (principal financial officer) Date: January 16, 2001 By: /s/ Terri L. Alford ------------------------------------------ Terri L. Alford Controller (principal accounting officer) 3 3 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Effective December 29, 2000, Tyler Technologies Inc. (Company/Tyler) sold for cash its land records business unit, Business Resources Corporation (BRC), including among others, its wholly-owned subsidiaries Government Records Services, Inc. and Title Records Corporation, to an affiliate of Affiliated Computer Services, Inc. (ACS). BRC is a provider of outsourced records management, document workflow, imaging systems and services to state and local governments, as well as being a provider of real estate title plant services to title companies in counties in and around the Dallas/Fort Worth metroplex area. The transaction was valued at approximately $71 million, consisting of approximately $70.0 million in cash and ACS's assumption of approximately $1.0 million of capital lease obligations. ITEM 5. OTHER EVENTS Concurrent with the sale of Business Resources Corporation to ACS, the Board of Directors of the Company authorized management to dispose of the remaining operations of the Information and Property Records Services segment of the Company. These remaining operations consist of NationsData.com, Inc. (NationsData), Capitol Commerce Reporter, Inc. (CCR), Ram Quest Software, Inc. and CompactData Solutions, Inc. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired. Not applicable. (b) Pro forma financial information. Unaudited pro forma condensed consolidated financial statements for the Company are included in this report immediately following the signature page. (c) Exhibits. 10.1 Stock Purchase Agreement, dated as of December 29, 2000, among Affiliated Computer Services, Inc., ACS Enterprise Solutions, Inc., Tyler Technologies, Inc., and Business Resources Corporation. 2 4 Unaudited Pro Forma Condensed Consolidated Financial Statements of Tyler Technologies The unaudited pro forma condensed combined financial statements reflect (i) the combination of consolidated historical financial data of each of the operating companies acquired by Tyler since January 1, 1999 (See Note A) (Completed Acquisition Transactions); (ii) the elimination of the consolidated historical data of the companies sold by the Company in the Completed Kofile Disposition Transaction effective September 29, 2000; (See Note B) (iii) the elimination of the consolidated historical data of the companies sold by the Company in the Completed ACS Disposition Transaction (See Note C) effective December 29, 2000 and (iv) the elimination of the consolidated historical data of the remaining companies in the Information and Property Records Services segment to be sold or abandoned (Pending Disposition Transactions), (See Note D). The unaudited pro forma condensed combined balance sheet data at September 30, 2000 presents adjustments for the Completed ACS Disposition Transaction and the Pending Disposition Transactions as if each such transaction had occurred on September 30, 2000. The unaudited pro forma condensed combined statement of operations data for the twelve months ended December 31, 1999 and the nine months ended September 30, 2000 present adjustments for the following transactions as if each had occurred on January 1, 1999: (i) the Completed Acquisition Transactions, (ii) the Completed Kofile Disposition Transaction; (iii) the Completed ACS Disposition Transaction and (iv) the Pending Disposition Transactions. The purchase method of accounting for acquisitions has been used in the preparation of the unaudited pro forma condensed combined 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. In the opinion of the Company's management, all adjustments have been made that are necessary to present fairly the pro forma data in all material reports. The unaudited pro forma condensed combined financial statements should be read in conjunction with the respective financial statements and related notes thereto of the Company. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial position that would have been achieved had the transactions reflected therein been consummated as of the dates indicated, or of the results of operations or financial positions for any future periods or dates. 4 5 Tyler Technologies, Inc. Unaudited Pro Forma Condensed Combined Statement of Operations Year ended December 31, 1999 (In thousands, except per share data)
Completed Acquisition Pro forma Historical Transactions(A) as adjusted ------------ --------------- ------------ Revenues $ 108,401 $ 38,989 $ 147,390 Cost of revenues 54,413 25,848 80,261 ------------ ------------ ------------ Gross profit 53,988 13,141 67,129 Selling, general and administrative expenses 37,909 8,018 45,927 Costs of certain acquisition opportunities 1,851 -- 1,851 Amortization of intangibles 7,315 2,794 10,109 ------------ ------------ ------------ Operating income (loss) 6,913 2,329 9,242 Interest expense 4,893 1,602 6,495 Interest income (320) -- (320) ------------ ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) 2,340 727 3,067 Income tax provision (benefit) 2,404 632 3,036 ------------ ------------ ------------ Income (loss) from continuing operations $ (64) $ 95 $ 31 ============ ============ ============ Earnings per common share from continuing operations: Basic $ (0.00) $ 0.00 Diluted $ (0.00) $ 0.00 Weighted average common shares outstanding: Basic 39,105 2,207 (E4) 41,312 Diluted 39,105 3,480 (E4) 42,585 Disposition of Information & Property Records Segment ----------------------------------------------------------- Completed Kofile Completed ACS Pending Disposition Disposition Disposition Transaction(B) Transaction(C) Transactions(D) ---------------- --------------- --------------- Revenues $ 10,296 $ 23,801 $ 5,844 Cost of revenues 3,637 12,222 4,412 --------------- --------------- --------------- Gross profit 6,659 11,579 1,432 Selling, general and administrative expenses 3,273 4,329 2,010 Costs of certain acquisition opportunities -- -- -- Amortization of intangibles 350 1,612 1,065 --------------- --------------- --------------- Operating income (loss) 3,036 5,638 (1,643) Interest expense 11 593 52 Interest income -- -- -- --------------- --------------- --------------- Income (loss) from continuing operations before income tax provision (benefit) 3,025 5,045 (1,695) Income tax provision (benefit) 1,382 2,415 (254) --------------- --------------- --------------- Income (loss) from continuing operations $ 1,643 $ 2,630 $ (1,441) =============== =============== =============== Earnings per common share from continuing operations: Basic Diluted Weighted average common shares outstanding: Basic Diluted Pro forma Pro forma adjustments(E) Tyler -------------- ------------ Revenues $ -- $ 107,449 Cost of revenues -- 59,990 ------------ ------------ Gross profit -- 47,459 Selling, general and administrative expenses -- 36,315 Costs of certain acquisition opportunities -- 1,851 Amortization of intangibles -- 7,082 ------------ ------------ Operating income (loss) -- 2,211 Interest expense (5,839)(E2) -- Interest income -- (320) ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) 5,839 2,531 Income tax provision (benefit) 2,160 (E3) 1,653 ------------ ------------ Income (loss) from continuing operations $ 3,679 $ 878 ============ ============ Earnings per common share from continuing operations: Basic $ 0.02 Diluted $ 0.02 Weighted average common shares outstanding: Basic 500 (E4) 41,812 Diluted 500 (E4) 43,085
See accompanying notes to unaudited pro forma condensed combined financial statements. 5 6 Tyler Technologies, Inc. Unaudited Pro Forma Condensed Combined Statement of Operations Nine months ended September 30, 2000 (In thousands, except per share data)
Disposition of Information & Property Records Segment -------------------------------------------------------- Completed Kofile Completed ACS Pending Disposition Disposition Disposition Historical Transaction(B) Transaction(C) Transactions(D) --------------- ---------------- --------------- --------------- Revenues $ 99,008 $ 6,682 $ 21,758 $ 3,668 Cost of revenues 59,907 3,255 11,222 3,370 --------------- --------------- --------------- --------------- Gross profit 39,101 3,427 10,536 298 Selling, general and administrative expenses 34,944 2,565 2,336 5,460 Litigation defense costs 1,264 -- -- 1,264 Amortization of intangibles 7,550 263 1,192 919 --------------- --------------- --------------- --------------- Operating income (loss) (4,657) 599 7,008 (7,345) Other income 251 -- -- -- Interest expense, net 7,442 33 350 167 --------------- --------------- --------------- --------------- Income (loss) from continuing operations before income tax provision (benefit) (11,848) 566 6,658 (7,512) Income tax provision (benefit) (2,161) 365 2,883 (2,360) --------------- --------------- --------------- --------------- Income (loss) from continuing operations $ (9,687) $ 201 $ 3,775 $ (5,152) =============== =============== =============== =============== Earnings per common share from continuing operations: Basic $ (0.22) Diluted $ (0.22) Weighted average common shares outstanding: Basic 44,953 Diluted 44,953 Pro forma Pro forma adjustments(E) Tyler --------------- --------------- Revenues $ -- $ 66,900 Cost of revenues -- 42,060 --------------- --------------- Gross profit -- 24,840 Selling, general and administrative expenses -- 24,583 Litigation defense costs -- -- Amortization of intangibles -- 5,176 --------------- --------------- Operating income (loss) -- (4,919) Other income (251)(E1) -- Interest expense, net (6,892)(E2) -- --------------- --------------- Income (loss) from continuing operations before income tax provision (benefit) 6,641 (4,919) Income tax provision (benefit) 2,457 (E3) (592) --------------- --------------- Income (loss) from continuing operations $ 4,184 $ (4,327) =============== =============== Earnings per common share from continuing operations: Basic $ (0.10) Diluted $ (0.10) Weighted average common shares outstanding: Basic 500 (E4) 45,453 Diluted 500 (E4) 45,453
See accompanying notes to unaudited pro forma condensed combined financial statements. 6 7 Tyler Technologies, Inc. Unaudited Pro Forma Condensed Combined Balance Sheet September 30, 2000 (In thousands)
Completed ACS Disposition Transaction(C) ---------------------------------- ACS Pro Forma Adjusted Historical Disposition(C) Adjustments Pro Forma ------------ -------------- ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 555 $ -- $ -- $ 555 Accounts receivable, net 41,571 (6,648) -- 34,923 Income taxes receivable 1,912 -- (1,396)(C8) 516 Prepaid expenses and other current assets 2,806 (760) -- 2,046 Net assets of discontinued operations held for sale -- -- -- -- Deferred income taxes 2,402 -- -- 2,402 ------------ ------------ ------------ ------------ Total current assets 49,246 (7,408) (1,396) 40,442 Property and equipment, net 13,250 (5,232) -- 8,018 Investment securities available-for-sale 7,375 -- -- 7,375 Goodwill and other intangibles, net 160,352 (58,902) -- 101,450 Other receivables 3,960 (565) -- 3,395 Sundry 1,647 (5) -- 1,642 ------------ ------------ ------------ ------------ $ 235,830 $ (72,112) $ (1,396) $ 162,322 ============ ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,998 $ (447) $ -- $ 3,551 Accrued liabilities 10,486 (119) -- 10,367 Current portion of long-term obligations 22,615 -- (21,922)(C7) 693 Deferred revenue 21,808 (1,619) -- 20,189 ------------ ------------ ------------ ------------ Total current liabilities 58,907 (2,185) (21,922) 34,800 Long-term obligations, less current portion 47,313 (1,045) (45,027)(C7) 1,241 Deferred income taxes 12,734 (3,210) -- 9,524 Other liabilities 4,974 -- -- 4,974 Shareholders' equity 111,902 (65,672) 66,949 (C7) 111,783 -- -- (1,396)(C8) -- ------------ ------------ ------------ ------------ $ 235,830 $ (72,112) $ (1,396) $ 162,322 ============ ============ ============ ============ Pending Disposition Transactions(D) ------------------------------ Pending Pro Forma Pro Forma Dispositions(D) Adjustments Tyler --------------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 234 $ -- $ 789 Accounts receivable, net (654) -- 34,269 Income taxes receivable (2) -- 514 Prepaid expenses and other current assets (180) -- 1,866 Net assets of discontinued operations held for sale -- 1,033 (D4) 1,033 Deferred income taxes -- -- 2,402 ------------ ------------ ------------ Total current assets (602) 1,033 40,873 Property and equipment, net (3,171) -- 4,847 Investment securities available-for-sale -- -- 7,375 Goodwill and other intangibles, net (15,937) -- 85,513 Other receivables -- -- 3,395 Sundry (9) -- 1,633 ------------ ------------ ------------ $ (19,719) $ 1,033 $ 143,636 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ (57) $ -- $ 3,494 Accrued liabilities (94) -- 10,273 Current portion of long-term obligations (693) -- -- Deferred revenue (265) -- 19,924 ------------ ------------ ------------ Total current liabilities (1,109) -- 33,691 Long-term obligations, less current portion (912) -- 329 Deferred income taxes (2,013) -- 7,511 Other liabilities -- -- 4,974 Shareholders' equity (15,685) 1,033 (D4) 97,131 -- -- -- ------------ ------------ ------------ $ (19,719) $ 1,033 $ 143,636 ============ ============ ============
See accompanying notes to unaudited pro forma condensed combined financial statements. 7 8 TYLER TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (IN THOUSANDS) A. COMPLETED ACQUISITION TRANSACTIONS During 1999 and through January 3, 2000, the Company completed the acquisitions of certain companies, as follows: On April 21, 1999, the Company acquired Process Incorporated d/b/a Computer Center Software (MUNIS) which designs and develops integrated financial and land management information systems for counties, cities, schools and not-for-profit organizations. MUNIS provides software solutions to customers primarily located throughout the northeastern and southeastern United States. On November 4, 1999, the Company acquired selected assets and assumed selected liabilities of Cole Layer Trumble Company, (CLT) a division of a privately held company, in an asset purchase agreement with an effective date of October 29, 1999. CLT provides appraisal software and services to governments. On January 3, 2000, the Company acquired the stock of Capitol Commerce Reporter, Inc. (CCR) of Austin, Texas. CCR provides public records research, primarily UCC's in Texas. During 1999 and through January 3, 2000, the Company also made other acquisitions which were immaterial. The Company accounted for all of the aforementioned acquisitions using the purchase method of accounting for business combinations. Results of operations of the acquired entities are included in the Company's consolidated historical financial statements from their respective dates of acquisition. The excess purchase price over the fair value of the net identifiable assets of the acquired companies (goodwill) is amortized using the straight-line method of amortization over their respective estimated useful lives. 8 9 (1) The detail of the historical financial data of the companies acquired for periods prior to the respective acquisitions has been obtained from the historical financial statements of the respective acquired companies and represents pro forma adjustments related to the Completed Acquisition Transactions for the year ended December 31, 1999 and is summarized below:
Pro Forma Adjustments: MUNIS CLT CCR ------------ ------------ ------------ Revenues $ 6,648 $ 27,248 $ 3,011 Cost of revenues 3,182 19,729 2,108 ------------ ------------ ------------ Gross profit 3,466 7,519 903 Selling, general and administrative expenses 1,699 4,379 322 Amortization of intangibles -- -- -- ------------ ------------ ------------ Operating income (loss) 1,767 3,140 581 Interest expense, net -- -- -- ------------ ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) 1,767 3,140 581 Income tax provision (benefit) 654 1,162 215 ------------ ------------ ------------ Income (loss) from continuing operations $ 1,113 $ 1,978 $ 366 ============ ============ ============ Pro Forma Adjustments: Other Pro Forma As acquisitions Adjustments Adjusted ------------ ------------ ------------ Revenues $ 2,082 $ -- $ 38,989 Cost of revenues 829 -- 25,848 ------------ ------------ ------------ Gross profit 1,253 -- 13,141 Selling, general and administrative expenses 1,618 -- 8,018 Amortization of intangibles -- 2,794 (A2) 2,794 ------------ ------------ ------------ Operating income (loss) (365) (2,794) 2,329 Interest expense, net -- 1,602 (A3) 1,602 ------------ ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) (365) (4,396) 727 Income tax provision (benefit) (135) (1,264)(A4) 632 ------------ ------------ ------------ Income (loss) from continuing operations $ (230) $ (3,132) $ 95 ============ ============ ============
(2) Reflects incremental goodwill and related intangible asset amortization related to the Completed Acquisition Transactions from January 1, 1999 to the date of each companies respective acquisition:
Net tangible Goodwill and Total Assets Other Identifiable Incremental Purchase (Liabilities) Intangibles Intangible Company acquired Price Acquired Acquired Amortization ---------------- --------------- --------------- ------------------ --------------- MUNIS 30,970 949 30,021 762 CLT 10,278 441 9,837 735 CCR 7,019 246 6,773 677 Other 20,636 (2,329) 22,965 620 --------------- --------------- --------------- --------------- $ 68,903 $ (693) $ 69,596 $ 2,794 =============== =============== =============== ===============
(3) Reflects incremental interest expense at an effective annual interest rate of 8.7% related to the Completed Acquisition Transactions from January 1, 1999 to the date of each companies respective acquisitions:
Common Value of Total Incremental Date Stock Common Cash Other Total Purchase Interest Company acquired Acquired Issued Stock Paid Indebtedness Debt Price Expense ---------------- ------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------- Munis April 1999 2,703 $ 14,561 $ 16,250 $ 159 $ 16,409 $ 30,970 $ 416 CLT November 1999 1,000 4,275 3,000 3,003 6,003 10,278 435 CCR January 2000 -- -- 3,000 4,019 7,019 7,019 611 Other Various 2,283 12,954 5,500 2,182 7,682 20,636 140 ---------- ---------- ---------- ---------- ---------- ---------- ---------- 5,986 $ 31,790 $ 27,750 $ 9,363 $ 37,113 $ 68,903 $ 1,602 ========== ========== ========== ========== ========== ========== ==========
9 10 (4) Reflects the income tax provision related to pro forma adjustments at an effective combined statutory federal and state income tax rate of 37% and adjusted, if necessary, for non-deductible goodwill amortization. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. B. COMPLETED KOFILE DISPOSITION TRANSACTION On September 29, 2000, the Company sold for cash certain non-core assets for an aggregate cash sale price of $14,350, which is prior to estimated transaction costs of $483. The assets sold consisted of certain net assets of Kofile, Inc. and another subsidiary, the Company's interest in a certain intangible work product, and the sale and leaseback of a building and related building improvements. The building was sold for $5,500 (net carrying value of $5,800), the intangible work product was assigned a value of $350 and the remainder of the net proceeds was assigned to the sold subsidiaries. The net proceeds of the sale were used to repay a $472 existing obligation of one of the companies sold, and to reduce the Company's borrowings under its senior credit facility. The building that was sold is the headquarters for the Company's subsidiaries that were sold to ACS and ACS assumed the lease (see Note C). The assets were sold to investment entities beneficially owned by Mr. William D. Oates, a principal shareholder, Director and Chairman of the Executive Committee of the Company. In connection with the sale, the Company recorded an aggregate gain of $251, after estimating the effects of the post closing adjustments and estimated transaction costs. (1) The detail of the historical financial data of the companies sold in the Completed Kofile Disposition Transaction for the year ended December 31, 1999 and the nine months ended September 30, 2000 has been obtained from the historical financial statements of the respective companies sold and are summarized as follows:
Year ended December 31, 1999 Other Pro Forma As Kofile Dispositions Adjustments Adjusted ------------ ------------ ------------ ------------ Revenues $ 8,181 $ 2,115 $ -- $ 10,296 Cost of revenues 2,160 1,477 -- 3,637 ------------ ------------ ------------ ------------ Gross profit 6,021 638 -- 6,659 Selling, general and administrative expenses 2,319 254 700 (B2) 3,273 Amortization of intangibles 350 -- -- 350 ------------ ------------ ------------ ------------ Operating income 3,352 384 (700) 3,036 Intercompany interest expense 1,682 287 (1,969)(B3) -- Interest expense, net 4 7 -- 11 ------------ ------------ ------------ ------------ Income from continuing operations before income tax provision 1,666 90 1,269 3,025 Income tax provision 879 33 470 (B4) 1,382 ------------ ------------ ------------ ------------ Income from continuing operations $ 787 $ 57 $ 799 $ 1,643 ============ ============ ============ ============
10 11
Nine months ended September 30, 2000 Other Pro Forma As Kofile Dispositions Adjustments Adjusted ------------ ------------ ------------ ------------ Revenues $ 4,700 $ 1,982 $ -- $ 6,682 Cost of revenues 1,728 1,527 -- 3,255 ------------ ------------ ------------ ------------ Gross profit 2,972 455 -- 3,427 Selling, general and administrative expenses 1,660 380 525 (B2) 2,565 Amortization of intangibles 263 -- -- 263 ------------ ------------ ------------ ------------ Operating income 1,049 75 (525) 599 Intercompany interest expense 994 285 (1,279)(B3) -- Interest expense, net 2 31 -- 33 ------------ ------------ ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) 53 (241) 754 566 Income tax provision (benefit) 175 (89) 279 (B4) 365 ------------ ------------ ------------ ------------ Income (loss) from continuing operations $ (122) $ (152) $ 475 $ 201 ============ ============ ============ ============
(2) Represents the elimination of corporate expenses for specifically identifiable employee salaries and related benefits which will no longer be incurred subsequent to the Completed Kofile Disposition Transaction and the Completed ACS Disposition Transaction. Such costs aggregated $1,400 for the year ended December 31, 1999 and $1,050 for the nine months ended September 30, 2000. Of the aggregated costs, 50% or $700 in 1999 and $525 in 2000 were allocated to the Completed ACS Disposition. (3) The historical financial statements of companies included in the Information and Property Records Services segment primarily include only expenses clearly and directly applicable to the individual subsidiaries. Tyler, the parent company and Business Resources Corporation (the holding company for the Information and Property Records Services segment, (BRC)), provide certain services to each subsidiary of Tyler. Accordingly, the historical financial statements of each subsidiary do not reflect the results of operations as if the subsidiary was a separate, stand alone entity for the periods presented since certain overhead expenses and common support expenses provided by Tyler and BRC have not been allocated. Tyler and BRC provide corporate officer support, payroll and benefits administration, centralized legal and insurance services, information technology support and all of the accounting, payable and billing support. In determining the pro forma adjustment to reduce historical consolidated Tyler selling, general and administrative expenses, only those incremental, specifically identifiable costs which will be eliminated have been presented as discussed in Note B (2). Intercompany interest expense has been allocated to each of the operating companies and eliminated in the pro forma adjustment column. (4) Reflects the income tax provision related to pro forma adjustments at an effective combined statutory federal and state income tax rate of 37% and adjusted, if necessary, for non-deductible goodwill amortization. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. 11 12 C. COMPLETED ACS DISPOSITION On December 29, 2000, the Company sold for cash its land records business unit, Business Resources Corporation (BRC), including, among others, BRC's wholly-owned subsidiaries Government Records Services, Inc. (GRS) and Title Records Corporation (TRC), to an affiliate of Affiliated Computer Services, Inc. (ACS). The sale price was valued at $71,000 and consisted of $69,955 in cash and ACS assumed certain capital lease obligations amounting to $1,045. The net proceeds of the sale were used to repay an existing obligation of one of the companies sold amounting to $3,027, and to reduce the Company's borrowings under its senior credit facility. Transaction costs and certain costs directly related to the sale are estimated to be $3,850 for investment, legal, tax and accounting advisory services, severance payments, bonus payments directly related to the Completed ACS Transaction and the issuance of 500 shares of restricted Tyler common stock. (1) The detail of the historical financial data of the companies sold in the Completed ACS Disposition Transaction for the year ended December 31, 1999 and the nine months ended September 30, 2000 has been obtained from the historical financial statements of the respective companies sold and is summarized as follows:
Year ended December 31, 1999 Other Pro Forma As BRC GRS TRC dispositions Adjustments Adjusted ------- ------- ------- ------------ ----------- -------- Revenues $ -- $15,156 $ 6,625 $ 2,020 $ -- $23,801 Cost of revenues -- 8,003 3,551 668 -- 12,222 ------- ------- ------- ------- ------- ------- Gross profit -- 7,153 3,074 1,352 -- 11,579 Selling, general and administrative expenses 1,281 1,706 742 -- (100)(C2) 4,329 700(C3) -- Amortization of intangibles 1,605 -- 7 -- -- 1,612 ------- ------- ------- ------- ------- ------- Operating income (loss) (2,886) 5,447 2,325 1,352 (600) 5,638 Intercompany interest expense (598) 2,098 2,581 136 (4,217)(C4) -- Interest expense, net -- 216 377 -- -- 593 ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations before income tax provision (benefit) (2,288) 3,133 (633) 1,216 3,617 5,045 Income tax provision (benefit) (398) 1,214 (219) 480 1,338 (C5) 2,415 ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations $(1,890) $ 1,919 $ (414) $ 736 $ 2,279 $ 2,630 ======= ======= ======= ======= ======= =======
Nine months ended September 30, 2000 Other Pro Forma As BRC GRS TRC dispositions Adjustments Adjusted ------- ------- ------- ------------ ----------- -------- Revenues $ -- $14,402 $ 5,816 $ 1,540 $ -- $21,758 Cost of revenues -- 7,928 2,805 489 -- 11,222 ------- ------- ------- ------- ------- ------- Gross profit -- 6,474 3,011 1,051 -- 10,536 Selling, general and administrative expenses 55 1,122 709 -- (75)(C2) 2,336 525(C3) -- Amortization of intangibles 1,186 -- 6 -- -- 1,192 ------- ------- ------- ------- ------- ------- Operating income (loss) (1,241) 5,352 2,296 1,051 (450) 7,008 Intercompany interest expense (54) 1,918 1,489 93 (3,446)(C4) -- Interest expense, net -- 135 215 -- -- 350 ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations before income tax provision (benefit) (1,187) 3,299 592 958 2,996 6,658 Income tax provision (benefit) (118) 1,305 209 378 1,109 (C5) 2,883 ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations $(1,069) $ 1,994 $ 383 $ 580 $ 1,887 $ 3,775 ======= ======= ======= ======= ======= =======
12 13
September 30, 2000 Other BRC GRS TRC Dispositions --------------- --------------- --------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 5 $ (185) $ (289) $ 2 Accounts receivable, net -- 5,323 1,222 103 Income taxes receivable -- 29 -- -- Prepaid expenses and other current assets -- 705 -- -- Deferred income taxes -- -- -- -- --------------- --------------- --------------- --------------- Total current assets 5 5,872 933 105 Property and equipment, net -- 4,082 1,182 -- Investment securities available-for-sale -- -- -- -- Goodwill and other intangibles, net 44,522 702 13,678 -- Other receivables -- -- 565 -- Sundry -- 5 -- -- --------------- --------------- --------------- --------------- $ 44,527 $ 10,661 $ 16,358 $ 105 =============== =============== =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ -- $ 419 $ 28 $ -- Accrued liabilities 37 286 143 -- Current portion of long-term obligations -- 706 2,601 -- Deferred revenue -- 478 1,141 -- --------------- --------------- --------------- --------------- Total current liabilities 37 1,889 3,913 -- Long-term obligations -- 1,332 -- -- Deferred income taxes 833 (655) 3,032 -- Other liabilities -- -- -- -- Shareholders' equity 43,657 8,095 9,413 105 --------------- --------------- --------------- --------------- $ 44,527 $ 10,661 $ 16,358 $ 105 =============== =============== =============== =============== Adjustments for Tyler As Adjusted Total Assumed Sold Historical Activity(C6) Balance Sheet --------------- --------------- --------------- ASSETS Current assets: Cash and cash equivalents $ (467) $ 467 $ -- Accounts receivable, net 6,648 -- 6,648 Income taxes receivable 29 (29) -- Prepaid expenses and other current assets 705 55 760 Deferred income taxes -- -- --------------- --------------- --------------- Total current assets 6,915 493 7,408 Property and equipment, net 5,264 (32) 5,232 Investment securities available-for-sale -- -- -- Goodwill and other intangibles, net 58,902 -- 58,902 Other receivables 565 -- 565 Sundry 5 -- 5 --------------- --------------- --------------- $ 71,651 $ 461 $ 72,112 =============== =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 447 $ -- $ 447 Accrued liabilities 466 (347) 119 Current portion of long-term obligations 3,307 (3,307) -- Deferred revenue 1,619 -- 1,619 --------------- --------------- --------------- Total current liabilities 5,839 (3,654) 2,185 Long-term obligations 1,332 (287) 1,045 Deferred income taxes 3,210 -- 3,210 Other liabilities -- -- -- Shareholders' equity 61,270 4,402 65,672 --------------- --------------- --------------- $ 71,651 $ 461 $ 72,112 =============== =============== ===============
(2) Represents the incremental rental expense to the continuing historical financial statements of Tyler in connection with the sale and leaseback of a building and the subsequent assumption of the lease by ACS (see Note B). Such incremental rent represents the facility cost for the Tyler corporate headquarters. (3) Reflects the elimination of corporate expenses for specifically identifiable employee salaries and related benefits which will no longer be incurred subsequent to the Completed Kofile Disposition Transaction and the Completed ACS Disposition Transaction. Such costs aggregated $1,400 for the year ended December 31, 1999 and $1,050 for the nine months ended September 30, 2000. Of the aggregated costs, 50% or $700 in 1999 and $525 in 2000 were allocated to the Completed Kofile Disposition. (4) Reflects the elimination of intercompany interest expense. (5) Reflects the income tax provision related to pro forma adjustments at an effective combined statutory federal and state income tax rate of 37% and adjusted, if necessary, for non-deductible goodwill amortization. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (6) Reflects the assumption of certain liabilities of the sold companies by Tyler and other excluded assets or liabilities pursuant to the Stock Purchase Agreement. Tyler remains obligated for the income tax effects of the sale transaction. 13 14 (7) Reflects the sale of BRC and related subsidiaries to ACS by reducing the Company's indebtedness and to calculate the loss on the transaction: Sale value 71,000 Less capital lease obligations assumed by Buyer 1,045 ------- Net cash proceeds 69,955(a) Less estimated transaction costs and certain costs directly related to the sale: Cash 3,006(a) Non-cash stock issuance 844 ------- (3,850) ------- 66,105 Net assets of companies sold, after adjustments for certain liabilities assumed by Tyler 65,672 ------- Gain on sale 433 =======
(a) Represents the adjustment to pro forma shareholders equity and the reduction in current and non-current long term obligations (8) Reflects the current income tax due on the sale, after consideration of the utilization of existing capital loss carryforwards and before consideration of operating losses incurred during the nine months ended September 30, 2000. D. PENDING DISPOSITION TRANSACTIONS Concurrent with the sale of Business Resources Corporation to ACS and on December 29, 2000, the Board of Directors of the Company authorized management to dispose of the remaining operations of the Information and Property Records Services segment of the Company by December 31, 2001. These remaining operations consist of NationsData.com, Inc. (NationsData), Capitol Commerce Reporter, Inc. (CCR), Ram Quest Software, Inc. and CompactData Solutions, Inc. NationsData is a start-up company which was in the process of constructing a national repository of public records data, and this database has web-enabled property tax information for thousands of parcels of real property nationwide. CCR was purchased on January 3, 2000 and provides public records research, principally UCC's in Texas. The interdependency of these operations with those of Business Resources Corporation (BRC) resulted in the Company's decision to discontinue the development of the database and other related products and exit the land records business when the Company elected to sell BRC. The sale of CCR and the orderly liquidation of the remaining assets are considered by management to realize aggregate net estimated proceeds of $4,750. (1) The detail of the historical financial data of the companies to be sold in the Pending Disposition Transaction for the year ended December 31, 1999 and the nine months ended September 30, 2000 has been obtained from the historical financial statements of the respective companies to be sold and is summarized as follows: 14 15
Year ended December 31, 1999 Other Pro Forma As CCR NationsData dispositions Adjustments Adjusted ------------ ------------ ------------ ------------ ------------ Revenues $ 3,011 $ 18 $ 2,815 $ -- $ 5,844 Cost of revenues 2,108 115 2,189 -- 4,412 ------------ ------------ ------------ ------------ ------------ Gross profit 903 (97) 626 -- 1,432 Selling, general and administrative expenses 322 841 847 -- 2,010 Litigation defense costs -- -- -- -- -- Amortization of intangibles 677 89 299 -- 1,065 ------------ ------------ ------------ ------------ ------------ Operating income (loss) (96) (1,027) (520) -- (1,643) Intercompany interest expense -- 240 523 (763)(D2) -- Interest expense, net -- 52 -- -- 52 ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) (96) (1,319) (1,043) 763 (1,695) Income tax provision (benefit) 215 (446) (290) 267 (D3) (254) ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations $ (311) $ (873) $ (753) $ 496 $ (1,441) ============ ============ ============ ============ ============
Nine months ended September 30, 2000 Other Pro Forma As CCR NationsData dispositions Adjustments Adjusted ------------ ------------ ------------ ------------ ------------ Revenues $ 2,394 $ 61 $ 1,213 $ -- $ 3,668 Cost of revenues 1,968 256 1,146 -- 3,370 ------------ ------------ ------------ ------------ ------------ Gross profit 426 (195) 67 -- 298 Selling, general and administrative expenses 150 4,420 890 -- 5,460 Litigation defense costs -- 1,264 -- -- 1,264 Amortization of intangibles 507 189 223 -- 919 ------------ ------------ ------------ ------------ ------------ Operating income (loss) (231) (6,068) (1,046) -- (7,345) Intercompany interest expense 628 389 293 (1,310)(D2) -- Interest expense, net (1) 168 -- -- 167 ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations before income tax provision (benefit) (858) (6,625) (1,339) 1,310 (7,512) Income tax provision (benefit) (123) (2,283) (413) 459 (D3) (2,360) ------------ ------------ ------------ ------------ ------------ Income (loss) from continuing operations $ (735) $ (4,342) $ (926) $ 851 $ (5,152) ============ ============ ============ ============ ============
15 16
Balance Sheet at September 30, 2000 As Adjusted to Other be Sold Balance NationsData CCR Dispositions Sheet ------------ ------------ ------------ --------------- ASSETS Current assets: Cash and cash equivalents $ (128) $ (87) $ (19) $ (234) Accounts receivable, net 10 379 265 654 Income taxes receivable 2 -- -- 2 Prepaid expenses and other current assets 163 15 2 180 Deferred income taxes -- -- -- -- ------------ ------------ ------------ ------------ Total current assets 47 307 248 602 Property and equipment, net 2,901 37 233 3,171 Investment securities held-for-sale -- -- -- -- Goodwill and other intangibles, net 7,415 6,267 2,255 15,937 Sundry 9 -- -- 9 ------------ ------------ ------------ ------------ $ 10,372 $ 6,611 $ 2,736 $ 19,719 ============ ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 42 $ 19 (4) 57 Accrued liabilities 44 20 30 94 Current portion of long-term obligations 693 -- -- 693 Deferred revenue -- -- 265 265 ------------ ------------ ------------ ------------ Total current liabilities 779 39 291 1,109 Long-term obligations, less current portion 882 -- 30 912 Deferred income taxes 1,807 -- 206 2,013 Other liabilities -- -- -- -- Shareholders' equity 6,904 6,572 2,209 15,685 ------------ ------------ ------------ ------------ $ 10,372 $ 6,611 $ 2,736 $ 19,719 ============ ============ ============ ============
(2) Reflects the elimination of intercompany interest expense. (3) Reflects the income tax provision related to pro forma adjustments at an effective combined statutory federal and state income tax rate of 35% and adjusted, if necessary, for non-deductible goodwill amortization. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. 16 17 (4) Reflects the estimated net loss of the dispositions of the remaining operations of the Information and Property Records Services segment: Estimated net proceeds (net of costs to dispose) $ 4,750(a) Net assets of companies to be disposed: Total allocated net assets 15,685 Add allocated debt of the sold companies 1,605 (a) ----------- Net assets including debt 17,290 Estimated operating losses from the measurement date of December 29, 2000 to the expected disposition date, primarily as a result of the effects of settlement of certain employment contracts, losses on real property leases, severance costs and similar closing related costs 3,250 (a) Income tax benefit on future operating losses (1,138)(a) 19,402 ----------- ----------- Loss on disposition 14,652 ===========
(a) Represents net assets of discontinued operations held for sale. In determining the ranges of amounts of estimated net proceeds and the estimated operating losses during the disposition period management used estimates, which it considered reasonable. Because of the uncertainty regarding dispositions of this nature, it is reasonably possible that the amounts recorded could change upon the ultimate dispositions of these companies. E. OTHER PRO FORMA ADJUSTMENTS (1) Reflects the elimination of other income from continuing operations in connection with the Completed Kofile Disposition Transaction. (2) Reflects the reduction to interest expense in connection with the consummation of the Completed Kofile Disposition and the Completed ACS Disposition:
Year Ended Nine Months Ended December 31, 1999 September 30, 2000 ----------------- ------------------ Estimated net proceeds after cash transaction costs and certain other costs directly related to the sale: Completed Kofile Disposition (Note B) $ 13,867 $ 13,867 Completed ACS Disposition (Note C) 66,949 66,949 --------------- --------------- 80,816 80,816 =============== =============== Reduction in interest expense on external indebtedness based on average effective interest rate (after consideration of amortization of debt issue costs) of 8.7% for the year ended December 31, 1999 and 12.4% for the nine months ended September 30, 2000 $ 7,031 $ 7,516 =============== =============== Limitation on reduction of interest expense to the historical amount reported, adjusted for incremental interest expense in connection with companies acquired 5,839 6,892 --------------- --------------- Pro forma reduction in interest expense $ 5,839 $ 6,892 =============== ===============
17 18 (3) Reflects the income tax provision related to pro forma adjustments at an effective combined statutory federal and state income tax rate of 37% and adjusted, if necessary, for non-deductible goodwill amortization. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (4) Reflects the incremental number of shares of common stock issued as if all the acquisitions and dispositions occurred on January 1, 1999 as follows:
Nine Months Year Ended Ended December 31, 1999 September 30, 2000 -------------------- -------------------- Historical basic weighted average shares outstanding 39,105 44,953 Incremental weighted average shares relating to acquisitions and dispositions: Issuance of shares of common stocks in conjunction with acquisitions consummated throughout 1999 weighted for the period prior to the acquisition 2,207 -- Issuance of 500 shares of common stock in connection with the Completed ACS Transaction 500 500 -------------------- -------------------- Basic weighted average common shares outstanding 41,812 45,453 Effect of dilutive securities: Employee stock options and warrants 1,273 -- -------------------- -------------------- Diluted weighted average common shares outstanding 43,085 45,453 ==================== ====================
18 19 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.1 Stock Purchase Agreement, dated as of December 29, 2000, among Affiliated Computer Services, Inc., ASC Enterprise Solutions, Inc., Tyler Technologies, Inc., and Business Resource Corporation