e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended March 31, 2007
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission File Number 1-10485
TYLER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of
incorporation or organization)
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75-2303920
(I.R.S. employer
identification no.) |
5949 SHERRY LANE, SUITE 1400
DALLAS, TEXAS
75225
(Address of principal executive offices)
(Zip code)
(972) 713-3700
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act.) Yes o No þ
Number of shares of common stock of registrant outstanding at April 23, 2007: 38,944,283
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
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Three months ended |
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March 31, |
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2007 |
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2006 |
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Revenues: |
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Software licenses |
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$ |
7,971 |
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$ |
7,571 |
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Software services |
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15,064 |
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13,120 |
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Maintenance |
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19,939 |
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17,657 |
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Appraisal services |
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5,580 |
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4,699 |
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Hardware and other |
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1,778 |
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1,811 |
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Total revenues |
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50,332 |
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44,858 |
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Cost of revenues: |
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Software licenses |
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1,960 |
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2,676 |
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Acquired software |
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394 |
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301 |
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Software services and maintenance |
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24,588 |
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21,745 |
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Appraisal services |
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3,996 |
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3,406 |
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Hardware and other |
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1,372 |
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1,268 |
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Total cost of revenues |
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32,310 |
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29,396 |
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Gross profit |
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18,022 |
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15,462 |
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Selling, general and administrative expenses |
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12,976 |
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10,976 |
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Research and development expense |
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1,223 |
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902 |
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Amortization of customer and trade name intangibles |
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347 |
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322 |
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Operating income |
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3,476 |
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3,262 |
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Other income, net |
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447 |
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97 |
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Income before income taxes |
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3,923 |
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3,359 |
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Income tax provision |
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1,522 |
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1,347 |
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Net income |
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$ |
2,401 |
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$ |
2,012 |
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Earnings per common share: |
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Basic |
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$ |
0.06 |
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$ |
0.05 |
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Diluted |
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$ |
0.06 |
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$ |
0.05 |
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Basic weighted average common shares outstanding |
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38,813 |
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39,114 |
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Diluted weighted average common shares outstanding |
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42,066 |
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41,894 |
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See accompanying notes.
1
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
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March 31, |
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2007 |
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December 31, |
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(Unaudited) |
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2006 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
15,111 |
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$ |
17,212 |
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Restricted cash equivalents |
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4,462 |
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4,962 |
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Short-term investments available-for-sale |
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20,774 |
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19,543 |
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Accounts receivable (less allowance for losses of $1,924 in 2007
and $2,971 in 2006) |
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47,219 |
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58,188 |
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Prepaid expenses |
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7,083 |
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6,864 |
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Other current assets |
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2,360 |
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2,326 |
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Deferred income taxes |
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2,579 |
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2,579 |
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Total current assets |
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99,588 |
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111,674 |
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Accounts receivable, long-term portion |
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1,137 |
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1,675 |
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Property and equipment, net |
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8,506 |
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7,390 |
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Other assets: |
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Goodwill |
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68,357 |
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66,127 |
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Customer related intangibles, net |
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17,821 |
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17,502 |
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Software, net |
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14,767 |
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14,554 |
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Trade name, net |
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1,160 |
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1,188 |
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Sundry |
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155 |
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166 |
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$ |
211,491 |
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$ |
220,276 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
3,121 |
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$ |
5,063 |
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Accrued liabilities |
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14,714 |
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17,735 |
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Deferred revenue |
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57,399 |
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62,387 |
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Income taxes payable |
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1,078 |
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Total current liabilities |
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76,312 |
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85,185 |
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Deferred income taxes |
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8,854 |
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9,216 |
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Commitments and contingencies
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Shareholders equity: |
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Preferred stock, $10.00 par value; 1,000,000 shares authorized,
none issued |
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Common stock, $0.01 par value; 100,000,000 shares authorized;
48,147,969 shares issued in 2007 and 2006 |
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481 |
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481 |
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Additional paid-in capital |
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149,398 |
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151,627 |
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Accumulated other comprehensive loss, net of tax |
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(17 |
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(10 |
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Retained earnings |
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20,532 |
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18,131 |
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Treasury stock, at cost; 9,228,593 and 9,255,783 shares in 2007
and 2006, respectively |
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(44,069 |
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(44,354 |
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Total shareholders equity |
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126,325 |
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125,875 |
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$ |
211,491 |
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$ |
220,276 |
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See accompanying notes.
2
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three months ended March 31, |
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2007 |
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2006 |
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Cash flows from operating activities: |
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Net income |
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$ |
2,401 |
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$ |
2,012 |
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Adjustments to reconcile net income to net cash
provided by operations: |
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Depreciation and amortization |
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2,549 |
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2,647 |
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Share-based compensation expense |
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498 |
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471 |
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Purchased in-process research and development charge |
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140 |
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Non-cash interest and other charges |
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159 |
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Changes in operating assets and liabilities, exclusive of
effects of acquired companies: |
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Accounts receivable |
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11,791 |
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12,352 |
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Income tax payable |
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1,129 |
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191 |
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Prepaid expenses and other current assets |
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(559 |
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(700 |
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Accounts payable |
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(2,075 |
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(736 |
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Accrued liabilities |
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(3,244 |
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(2,655 |
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Deferred revenue |
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(5,618 |
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(3,877 |
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Net cash provided by operating activities |
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6,872 |
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10,004 |
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Cash flows from investing activities: |
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Proceeds from sale of short-term investments |
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2,610 |
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6,330 |
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Purchases of short-term investments |
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(3,850 |
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(4,850 |
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Cost of acquisitions, net of cash acquired |
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(4,963 |
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(11,613 |
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Investment in software development costs |
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(25 |
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(73 |
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Additions to property and equipment |
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(741 |
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(955 |
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Decrease in restricted investments |
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500 |
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Other |
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38 |
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34 |
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Net cash used by investing activities |
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(6,431 |
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(11,127 |
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Cash flows from financing activities: |
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Purchase of treasury shares |
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(3,943 |
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(2,191 |
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Contributions from employee stock purchase plan |
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268 |
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222 |
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Proceeds from exercise of stock options |
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936 |
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859 |
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Excess tax benefits from share-based compensation expense |
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197 |
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95 |
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Net cash used by financing activities |
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(2,542 |
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(1,015 |
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Net decrease in cash and cash equivalents |
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(2,101 |
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(2,138 |
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Cash and cash equivalents at beginning of period |
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17,212 |
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20,733 |
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Cash and cash equivalents at end of period |
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$ |
15,111 |
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$ |
18,595 |
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See accompanying notes.
3
Tyler Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Tables in thousands, except per share data)
(1) |
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Basis of Presentation |
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We prepared the accompanying condensed consolidated financial statements following the
requirements of the Securities and Exchange Commission (SEC) and accounting principles
generally accepted in the United States, or GAAP, for interim reporting. As permitted under
those rules, certain footnotes or other financial information that are normally required by GAAP
can be condensed or omitted for interim periods. Balance sheet amounts are as of March 31, 2007
and December 31, 2006 and operating result amounts are for the three months ended March 31, 2007
and 2006, and include all normal and recurring adjustments that we considered necessary for the
fair summarized presentation of our financial position and operating results. As these are
condensed financial statements, one should also read the financial statements and notes included
in our latest Form 10-K for the year ended December 31, 2006. Revenues, expenses, assets and
liabilities can vary during each quarter of the year. Therefore, the results and trends in these
interim financial statements may not be the same as those for the full year. |
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Although we have a number of operating divisions, separate segment data has not been presented as
they meet the criteria set forth in Statement of Financial Accounting Standards (SFAS) No. 131,
Disclosures About Segments of an Enterprise and Related Information to be presented as one
segment. |
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Certain other amounts for the previous period have been reclassified to conform to the current
period presentation. |
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(2) |
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Revenue Recognition |
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We recognize revenue related to our software arrangements pursuant to the provisions of Statement
of Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9,
and related interpretations, as well as the Securities and Exchange Commission (SEC) Staff
Accounting Bulletin No. 104, Revenue Recognition. We recognize revenue on our appraisal
services contracts using the proportionate performance method of accounting, with considerations
for the provisions of Emerging Issues Task Force (EITF) No. 00-21, Revenue Arrangements with
Multiple Deliverables. |
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Software Arrangements: |
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We earn revenue from software licenses, post-contract customer support (PCS or maintenance),
software related services and hardware. PCS includes telephone support, bug fixes, and rights to
upgrades on a when-and-if available basis. We provide services that 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, we allocate the total arrangement fee among each
deliverable based on the relative fair value of each. |
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We typically enter into multiple element arrangements, which include software licenses, software
services, PCS and occasionally hardware. The majority of our software arrangements are multiple
element arrangements, but for those arrangements that involve significant production,
modification or customization of the software, or where software services are otherwise
considered essential to the functionality of the software in the customers environment, we use
contract accounting and apply the provisions of SOP 81-1 Accounting for Performance of
Construction Type and Certain Production Type Contracts. |
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If the arrangement does not require significant production, modification or customization or
where the software services are not considered essential to the functionality of the software,
revenue is recognized when all of the following conditions are met: |
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persuasive evidence of an arrangement exists; |
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ii. |
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delivery has occurred; |
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iii. |
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our fee is fixed or determinable; and |
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iv. |
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collectibility is probable. |
For multiple element arrangements, each element of the arrangement is analyzed and we allocate a
portion of the total arrangement fee to the elements based on the fair value of the element using
vendor-specific objective evidence of fair value (VSOE), regardless of any separate prices
stated within the contract for each element. Fair value is considered the price a customer would
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be required to pay if the element was sold separately based on our historical experience of
stand-alone sales of these elements to third parties. For PCS, we use renewal rates for
continued support arrangements to determine fair value. For software services, we use the fair
value we charge our customers when those services are sold separately. We monitor our
transactions to insure we maintain and periodically revise VSOE to reflect fair value. In
software arrangements in which we have the fair value of all undelivered elements but not of a
delivered element, we apply the residual method as allowed under SOP 98-9 in accounting for any
element of a multiple element arrangement involving software that remains undelivered such that
any discount inherent in a contract is allocated to the delivered element. Under the residual
method, if the fair value of all undelivered elements is determinable, the fair value of the
undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to
the delivered element(s) and is recognized as revenue assuming the other revenue recognition
criteria are met. In software arrangements in which we do not have VSOE for all undelivered
elements, revenue is deferred until fair value is determined or all elements for which we do not
have VSOE have been delivered. Alternatively, if sufficient VSOE does not exist and the only
undelivered element is services that do not involve significant modification or customization of
the software, the entire fee is recognized over the period during which the services are expected
to be performed.
Software Licenses
We recognize the revenue allocable to software licenses and specified upgrades upon delivery of
the software product or upgrade to the customer, unless the fee is not fixed or determinable or
collectibility is not probable. If the fee is not fixed or determinable, including new customers
whose payment terms are three months or more from shipment, revenue is generally 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
products functionality.
A majority of our software arrangements involve off-the-shelf software. We consider software
to be off-the-shelf software if it can be added to an arrangement with minor changes in the
underlying code and it can be used by the customer for the customers purpose upon installation.
For off-the-shelf software arrangements, we recognize the software license fee as revenue after
delivery has occurred, customer acceptance is reasonably assured, that portion of the fee
represents a non-refundable enforceable claim and is probable of collection, and the remaining
services such as training are not considered essential to the products functionality.
For arrangements that involve significant production, modification or customization of the
software, or where software services are otherwise considered essential, we recognize revenue
using contract accounting. We generally use the percentage-of-completion method to recognize
revenue from these arrangements. We measure progress-to-completion primarily using labor hours
incurred, or value added. The percentage-of-completion method generally results in the
recognition of reasonably consistent profit margins over the life of a contract since we have the
ability to produce reasonably dependable estimates of contract billings and contract costs. We
use the level of profit margin that is most likely to occur on a contract. If the most likely
profit margin cannot be precisely determined, the lowest probable level of profit in the range of
estimates is used until the results can be estimated more precisely. These arrangements are
often implemented over an extended time period and occasionally require us to revise total cost
estimates. Amounts recognized in revenue are calculated using the progress-to-completion
measurement after giving effect to any changes in our cost estimates. Changes to total estimated
contract costs, if any, are recorded in the period they are determined. Estimated losses on
uncompleted contracts are recorded in the period in which we first determine that a loss is
apparent.
For arrangements that include new product releases for which it is difficult to estimate final
profitability except to assume that no loss will ultimately be incurred, we recognize revenue
under the completed contract method. Under the completed contract method, revenue is recognized
only when a contract is completed or substantially complete. Historically these amounts have
been immaterial.
Software Services
Some of our software arrangements include services considered essential for the customer to use
the software for the customers purposes. For these software arrangements, both the software
license revenue and the services revenue are 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 we perform the
services.
Computer Hardware Equipment
Revenue allocable to computer hardware equipment, which is based on VSOE, is recognized when we
deliver the equipment and collection is probable.
5
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Postcontract Customer Support |
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Our customers generally enter into PCS agreements when they purchase our software licenses. Our
PCS agreements are typically renewable annually. 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. Fair value for the maintenance and support
obligations for software licenses is based upon the specific sale renewals to customers. |
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Appraisal Services: |
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For our property appraisal projects, we recognize revenue using the proportionate performance
method of revenue recognition since many of these projects are implemented over one to three year
periods and consist of various unique activities. Under this method of revenue recognition, we
identify each activity for the appraisal project, with a typical project generally calling for
bonding, office set up, training, routing of map information, data entry, data collection, data
verification, informal hearings, appeals and project management. Each activity or act is
specifically identified and assigned an estimated cost. Costs which are considered to be
associated with indirect activities, such as bonding costs and office set up, are expensed as
incurred. These costs are typically billed as incurred and are recognized as revenue equal to
cost. Direct contract fulfillment activities and related supervisory costs such as data
collection, data entry and verification are expensed as incurred. The direct costs for these
activities are determined and the total contract value is then allocated to each activity based
on a consistent profit margin. Each activity is assigned a consistent unit of measure to
determine progress towards completion and revenue is recognized for each activity based upon the
percentage complete as applied to the estimated revenue for that activity. Progress for the
fulfillment activities is typically based on labor hours or an output measure such as the number
of parcel counts completed for that activity. Estimated losses on uncompleted contracts are
recorded in the period in which we first determine that a loss is apparent. |
|
|
|
Other: |
|
|
|
The majority of deferred revenue consists of unearned support and maintenance revenue that has
been billed based on contractual terms in the underlying arrangement with the remaining balance
consisting of payments received in advance of revenue being earned under software licensing,
software and appraisal services and hardware installation. Unbilled revenue is not billable at
the balance sheet date but is recoverable over the remaining life of the contract through
billings made in accordance with contractual agreements. The termination clauses in most of our
contracts provide for the payment for the fair value of products delivered and services performed
in the event of an early termination. |
|
|
|
Prepaid expenses and other current assets include direct and incremental costs, consisting
primarily of commissions associated with arrangements for which revenue recognition has been
deferred and third party subcontractor payments. Such costs are expensed at the time the related
revenue is recognized. |
|
(3) |
|
Acquisitions |
|
|
|
In February 2007 we completed the acquisition of all of the capital stock of Advanced Data
Systems, Inc. (ADS), which develops and sells fund accounting solutions, primarily in New
England. The total purchase price, including transaction costs along with an office building
used in the business, was approximately $4.2 million in cash. In January 2007 we also purchased
certain software assets to enhance our courts and justice product line for approximately $756,000
in cash, including transaction costs. The operating results of these acquisitions are included in
our results of operations since their respective dates of acquisition. |
|
|
|
We believe these acquisitions will complement our business model by broadening our customer base
and will give us additional opportunities to provide our customers with solutions tailored
specifically for local governments. |
|
|
|
In connection with these two transactions we acquired total assets of approximately $1.4 million
and assumed total liabilities of approximately $1.0 million. We recorded goodwill of $2.2
million, all of which is expected to be deductible for tax purposes, and other intangible assets
of $2.4 million. The $2.4 million of intangible assets is attributable to acquired software and
customer relationships that will be amortized over a weighted average period of approximately 7
years. Our consolidated balance sheet as of March 31, 2007 reflects the preliminary allocation
of the purchase price to the assets acquired and liabilities assumed based on their estimated
fair values at the dates of acquisition. |
6
(4) |
|
Shareholders Equity |
|
|
|
The following table details activity in our common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2007 |
|
2006 |
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
Purchases of common stock |
|
|
(290 |
) |
|
$ |
(3,943 |
) |
|
|
(250 |
) |
|
$ |
(2,191 |
) |
Stock option exercises |
|
|
293 |
|
|
|
936 |
|
|
|
249 |
|
|
|
859 |
|
Employee stock plan purchases |
|
|
24 |
|
|
|
282 |
|
|
|
30 |
|
|
|
222 |
|
Shares issued for acquisitions |
|
|
|
|
|
|
|
|
|
|
325 |
|
|
|
2,891 |
|
|
|
As of March 31, 2007 we have authorization from our board of directors to repurchase up to
741,000 additional shares of Tyler common stock. |
|
(5) |
|
Income Tax Provision |
|
|
|
For the three months ended March 31, 2007, we had an effective income tax rate of 38.8%,
compared to 40.1% for the three months ended March 31, 2006. The effective income tax rates
for the periods presented were different from the statutory United States federal income tax
rate of 35% primarily due to state income taxes, non-deductible share-based compensation
expense, the qualified manufacturing activities deduction and non-deductible meals and
entertainment costs. The qualified manufacturing activities deduction rate doubled in 2007
resulting in a lower effective tax rate. |
|
|
|
We made federal and state income tax payments, net of refunds, of $228,000 in the three months
ended March 31, 2007, compared to $1.1 million in net payments for the same period of the prior
year. |
|
|
|
We adopted the provisions of Financial Standards Accounting Board Interpretation (FIN) No. 48,
Accounting for Uncertainty in Income Taxes on January 1, 2007. As a result of the
implementation of FIN 48, we recognized no material adjustments in the liability for unrecognized
income tax benefits. At the adoption date we did not have any unrecognized tax benefits and did
not have any interest or penalties accrued. |
|
|
|
We are subject to U.S. federal tax as well as income tax of multiple state and local
jurisdictions. We are no longer subject to U. S. Federal income tax examinations for years
before 2004 and are no longer subject to state and local income tax examinations by tax
authorities for the years before 2002. The Internal Revenue Service commenced examination of
our U. S. Federal tax return for 2005 in the first quarter of 2007. To date, there are no
proposed adjustments that will have a material impact on our financial position or results of
operations. |
7
(6) |
|
Earnings Per Share |
|
|
|
The following table details the reconciliation of basic earnings per share to diluted earnings
per share: |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2007 |
|
|
2006 |
|
Numerator for basic and diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,401 |
|
|
$ |
2,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average basic common shares outstanding |
|
|
38,813 |
|
|
|
39,114 |
|
Assumed conversion of dilutive securities: |
|
|
|
|
|
|
|
|
Stock options |
|
|
1,943 |
|
|
|
1,591 |
|
Warrants |
|
|
1,310 |
|
|
|
1,189 |
|
|
|
|
|
|
|
|
Potentially dilutive common shares |
|
|
3,253 |
|
|
|
2,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings
per share Adjusted weighted average shares |
|
|
42,066 |
|
|
|
41,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.06 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.06 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
(7) |
|
Share-Based Compensation |
|
|
|
Share-based compensation plan |
|
|
|
We have a stock option plan that provides for the grant of stock options to key employees,
directors and non-employee consultants. Stock options vest after three to five years of
continuous service from the date of grant and have a contractual term of ten years. Once options
become exercisable, the employee can purchase shares of our common stock at the market price on
the date we granted the option. Effective January 1, 2006, we adopted the provisions of SFAS
No. 123R, Share-Based Payment, which establishes accounting for share-based awards exchanged
for employee services, using the modified prospective application transition method. Under this
transition method, compensation cost recognized in 2006 and 2007 includes the applicable amounts
of: (a) compensation cost of all share-based payments granted prior to, but not yet vested as of,
January 1, 2006 (based on the grant-date fair value estimated in accordance with the original
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and previously presented
in the pro forma footnote disclosures), and (b) compensation cost for all share-based payments
granted subsequent to January 1, 2006 (based on the grant-date fair value estimated in accordance
with the new provisions of SFAS No. 123R). |
|
|
|
Determining Fair Value Under SFAS No. 123R |
|
|
|
Valuation and Amortization Method. We estimate the fair value of share-based awards granted using
the Black-Scholes option valuation model. We amortize the fair value of all awards on a
straight-line basis over the requisite service periods, which are generally the vesting periods. |
|
|
|
Expected Life. The expected life of awards granted represents the period of time that they are
expected to be outstanding. We determine the expected life using the simplified method in
accordance with Staff Accounting Bulletin No. 107. |
|
|
|
Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility
of our common stock at the date of grant based on the historical volatility of our common stock. |
8
Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option
valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with
an equivalent remaining term equal to the expected life of the award.
Expected Dividend Yield. We have not paid any cash dividends on our common stock in the last ten
years and we do not anticipate paying any cash dividends in the foreseeable future. Consequently,
we use an expected dividend yield of zero in the Black-Scholes option valuation model.
Expected Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We
record stock-based compensation only for those awards that are expected to vest.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model. We granted options for 250,000 shares and 20,000 shares for the three
months ended March 31, 2007 and 2006, respectively.
The following weighted average assumptions were used for options granted:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31 |
|
|
2007 |
|
2006 |
Expected life (in years) |
|
|
6.5 |
|
|
|
6.5 |
|
Expected volatility |
|
|
43.1 |
% |
|
|
46.0 |
% |
Risk-free interest rate |
|
|
4.5 |
% |
|
|
4.7 |
% |
Expected forfeiture rate |
|
|
3 |
% |
|
|
3 |
% |
Share-Based Compensation Under SFAS No. 123R
The following table summarizes share-based compensation expense related to share-based awards
under SFAS No. 123R recorded in the statements of operations:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31 |
|
|
|
2007 |
|
|
2006 |
|
Cost of software services and maintenance |
|
$ |
43 |
|
|
$ |
31 |
|
Selling, general and administrative expense |
|
|
455 |
|
|
|
440 |
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
498 |
|
|
$ |
471 |
|
|
|
|
|
|
|
|
(8) |
|
Commitments and Contingencies |
|
|
|
Other than routine litigation incidental to our business, there are no material legal proceedings
pending to which we are a party or to which any of our properties are subject. |
|
(9) |
|
Recent Accounting Pronouncements |
|
|
|
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in accordance with accounting
principles generally accepted in the United States, and expands disclosures about fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with
earlier application encouraged. Any amounts recognized upon adoption as a cumulative effect
adjustment will be recorded to the opening balance of retained earnings in the year of adoption.
We have not yet determined the impact of SFAS No. 157 on our financial condition and results of
operations. |
9
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
The statements in this discussion that are not historical statements are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include statements about our business, financial condition, business
strategy, plans and the objectives of our management, and future prospects. In addition, we have
made in the past and may make in the future other written or oral forward-looking statements,
including statements regarding future operating performance, short- and long-term revenue and
earnings growth, the timing of the revenue and earnings impact for new contracts, backlog, the
value of new contract signings, business pipeline, and industry growth rates and our performance
relative thereto. Any forward-looking statements may rely on a number of assumptions concerning
future events and be subject to a number of uncertainties and other factors, many of which are
outside our control, which could cause actual results to differ materially from such statements.
These include, but are not limited to: our ability to improve productivity and achieve synergies
from acquired businesses; technological risks associated with the development of new products and
the enhancement of existing products; changes in the budgets and regulating environments of our
government customers; competition in the industry in which we conduct business and the impact of
competition on pricing, revenues and margins; with respect to customer contracts accounted for
under the percentage-of-completion method of accounting, the performance of such contracts in
accordance with our cost and revenue estimates; our ability to maintain health and other
insurance coverage and capacity due to changes in the insurance market and the impact of
increasing insurance costs on the results of operations; the costs to attract and retain
qualified personnel, changes in product demand, the availability of products, economic
conditions, costs of compliance with corporate governance and public disclosure requirements as
issued by the Sarbanes-Oxley Act of 2002 and New York Stock Exchange rules, changes in tax risks
and other risks indicated in our filings with the Securities and Exchange Commission. The
factors described in this paragraph and other factors that may affect Tyler, its management or
future financial results, as and when applicable, are discussed in Tylers filings with the
Securities and Exchange Commission, on its Form 10-K for the year ended December 31, 2006.
Except to the extent required by law, we are not obligated to update or revise any
forward-looking statements whether as a result of new information, future events or otherwise.
When used in this Quarterly Report, the words believes, plans, estimates, expects,
anticipates, intends, continue, may, will, should, projects, forecast, might,
could or the negative of such terms and similar expressions as they relate to Tyler or our
management are intended to identify forward-looking statements.
GENERAL
We provide integrated information management solutions and services for local governments. We
develop and market a broad line of software products and services to address the information
technology (IT) needs of cities, counties, schools and other local government entities. In
addition, we provide professional IT services to our customers, including software and hardware
installation, data conversion, training and for certain customers, product modifications, along
with continuing maintenance and support for customers using our systems. We also provide
property appraisal outsourcing services for taxing jurisdictions.
In the first quarter of 2007, we acquired one company, Advanced Data Systems, Inc.
(ADS), as well as certain software assets to enhance our courts and justice product line. The
combined purchase price for ADS and the software assets was approximately $5.0 million in cash
and we assumed liabilities of approximately $1.0 million. See Note 3 in the Notes to the
Unaudited Condensed Consolidated Financial Statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon
our condensed consolidated financial statements. These condensed consolidated financial
statements have been prepared following the requirements of accounting principles generally
accepted in the United States (GAAP) for interim periods and require us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to revenue recognition and amortization and potential
impairment of intangible assets and goodwill. As these are condensed financial statements, one
should also read expanded information about our critical accounting policies and estimates
provided in Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations, included in our Form 10-K for the year ended December 31, 2006. There have been no
material changes to our critical accounting policies and estimates from the information provided
in our 10-K for the year ended December 31, 2006, except as follows:
10
We account for uncertain tax positions in accordance with Financial Accounting Standards Board
(FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation
of FASB Statement No. 109. The application of income tax law is inherently complex. Laws and
regulations in this area are voluminous and are often ambiguous. As such, we are required to
make many subjective assumptions and judgments regarding our income tax exposures.
Interpretations of and guidance surrounding income tax laws and regulations change over time.
Changes in our subjective assumptions and judgments can materially affect amounts recognized in
the consolidated balance sheets and statements of income. See Note 5 in the Notes to the
Unaudited Condensed Consolidated Financial Statements for additional detail.
ANALYSIS OF RESULTS OF OPERATIONS
Revenues
The following table sets forth the key components of our revenues for the periods presented
as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Change |
|
($ in thousands) |
|
2007 |
|
|
Total |
|
|
2006 |
|
|
Total |
|
|
$ |
|
|
% |
|
Software licenses |
|
$ |
7,971 |
|
|
|
16 |
% |
|
$ |
7,571 |
|
|
|
17 |
% |
|
$ |
400 |
|
|
|
5 |
% |
Software services |
|
|
15,064 |
|
|
|
30 |
|
|
|
13,120 |
|
|
|
29 |
|
|
|
1,944 |
|
|
|
15 |
|
Maintenance |
|
|
19,939 |
|
|
|
40 |
|
|
|
17,657 |
|
|
|
39 |
|
|
|
2,282 |
|
|
|
13 |
|
Appraisal services |
|
|
5,580 |
|
|
|
11 |
|
|
|
4,699 |
|
|
|
11 |
|
|
|
881 |
|
|
|
19 |
|
Hardware and other |
|
|
1,778 |
|
|
|
3 |
|
|
|
1,811 |
|
|
|
4 |
|
|
|
(33 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
50,332 |
|
|
|
100 |
% |
|
$ |
44,858 |
|
|
|
100 |
% |
|
$ |
5,474 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses. Changes in software license revenues consist of the following components:
|
|
|
Software license revenue related to financial products, which comprise over 65% of our
software license revenues in the periods presented, declined moderately compared to the
three months ended March 31, 2006. Most of the decline was a result of a product mix that
required less third party software than in the prior year period. For the remainder of the
year we anticipate software license revenue related to financial products to be slightly
higher than 2006. |
|
|
|
|
Software license revenues related to our other products in the aggregate experienced
strong increases compared to the three months ended March 31, 2006. Our Odyssey courts and
justice products provided the majority of the increase as a result of the products maturing
following successful early implementations and leveraging our existing customer base. The
remaining increases were related to a Java-based document management product released in
mid-2005, as well as slightly higher appraisal software revenue. |
Software services. Changes in software services revenues consist of the following components:
|
|
|
Software services revenue related to financial products, which comprise more than half of
our software services revenue in the periods presented, increased strongly compared to the
three months ended March 31, 2006. This increase was driven in part by historically high
software license sales in the last half of 2006 and by additions to our implementation staff
over the last twelve months, which has enabled us to deliver our backlog at a faster rate.
Typical contracts for software licenses include services such as installation of the
software, converting the customers data to be compatible with the software and training
customer personnel to use the software. Our application service provider hosting and
disaster recovery services also contributed to the increase as a result of geographic
expansion, primarily in the South in the aftermath of hurricane Katrina. |
|
|
|
|
Software services revenue related to Odyssey courts and
justice products experienced
strong increases compared to the three months ended March 31, 2006, reflecting increased
contract volume. We had 24 active Odyssey contracts in the first quarter of 2007 compared to
14 active Odyssey contracts in the first quarter of 2006. |
Maintenance. We provide maintenance and support services for our software products and third
party software. Maintenance revenues increased 13% due to growth in our installed customer
base and slightly higher maintenance rates on most of our product lines.
11
Appraisal services. The appraisal services business is driven in part by revaluation cycles in
various states. Appraisal services increased over the prior year due to activity related to
Ohios revaluation cycle, which occurs every six years, and a $4.0 million contract with
Fulton County, Georgia which began late in 2006. The Ohio revaluation projects began with
smaller counties late in the first quarter of 2006 and expanded to larger counties by the
third quarter of 2006. We currently expect the Ohio revaluation projects to be
substantially complete by the end of 2007. The level of appraisal services revenues for
2008 will depend on our ability to replace the appraisal services revenues associated with
the Ohio revaluation.
Cost of Revenues and Gross Margins
The following table sets forth a comparison of the key components of our cost of revenues,
and those components stated as a percentage of related revenues for the periods presented as
of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
|
|
|
related |
|
|
|
|
|
|
related |
|
|
Change |
|
($ in thousands) |
|
2007 |
|
|
revenues |
|
|
2006 |
|
|
revenues |
|
|
$ |
|
|
% |
|
Software licenses |
|
$ |
1,960 |
|
|
|
25 |
% |
|
$ |
2,676 |
|
|
|
35 |
% |
|
$ |
(716 |
) |
|
|
(27 |
)% |
Acquired software |
|
|
394 |
|
|
|
5 |
|
|
|
301 |
|
|
|
4 |
|
|
|
93 |
|
|
|
31 |
|
Software services and maintenance |
|
|
24,588 |
|
|
|
70 |
|
|
|
21,745 |
|
|
|
71 |
|
|
|
2,843 |
|
|
|
13 |
|
Appraisal services |
|
|
3,996 |
|
|
|
72 |
|
|
|
3,406 |
|
|
|
72 |
|
|
|
590 |
|
|
|
17 |
|
Hardware and other |
|
|
1,372 |
|
|
|
77 |
|
|
|
1,268 |
|
|
|
70 |
|
|
|
104 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues |
|
$ |
32,310 |
|
|
|
64 |
% |
|
$ |
29,396 |
|
|
|
65 |
% |
|
$ |
2,914 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth a comparison of gross margin percentage by revenue type for
the periods presented as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
Gross margin percentage |
|
2007 |
|
2006 |
|
Change |
Software licenses and acquired software |
|
|
70.5 |
% |
|
|
60.7 |
% |
|
|
9.8 |
% |
Software services and maintenance |
|
|
29.8 |
|
|
|
29.3 |
|
|
|
0.5 |
|
Appraisal services |
|
|
28.4 |
|
|
|
27.5 |
|
|
|
0.9 |
|
Hardware and other |
|
|
22.8 |
|
|
|
30.0 |
|
|
|
(7.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall gross margin |
|
|
35.8 |
% |
|
|
34.5 |
% |
|
|
1.3 |
% |
Software license revenues. The main component of our cost of software license revenues is
amortization expense for capitalized development costs on certain software products, with third
party software costs making up the balance. Once a product is released, we begin to amortize the
costs associated with its development over the estimated useful life of the product.
Amortization expense is determined on a product-by-product basis at an annual rate not less than
straight-line basis over the products estimated life, which is generally five years.
Development costs consist mainly of personnel costs, such as salary and benefits paid to our
developers, and rent for related office space.
For the three months ended March 31, 2007, our software license gross margin percentage
increased compared to the prior year period due to a product mix that included less third
party software, which has higher associated costs than proprietary software. Additionally,
amortization expense of software development costs declined because some products became
fully amortized during the first quarter of 2006.
Software services and maintenance revenues. For the three months ended March 31, 2007, the
software services and maintenance gross margin was unchanged from the prior year period
because software services and maintenance revenues grew at the same rate as the related
costs. Cost of software services and maintenance primarily consists of personnel costs
related to installation of our software, conversion of customer data, training customer
personnel and support activities. Maintenance costs typically grow at a slower rate than
related revenues due to leverage in the utilization of our support and maintenance staff and
economies of scale. In the three months ended March 31, 2007, this impact was offset
because we added to our implementation and development staff in the fourth quarter of 2006 and the first quarter of 2007 to increase our capacity to deliver our
Odyssey contract backlog. These additions had a negative effect on the gross margin percentage
because of lower utilization and higher costs while we train and orient new personnel before they
can be efficiently utilized to generate revenue.
12
Appraisal
services revenues. Higher revenues associated with increased activity on the Ohio
revaluation projects contributed to the slight appraisal services gross margin percentage
increase.
Our blended gross margin for the three months ended March 31, 2007 was slightly higher than the
prior year period primarily due to the higher software license gross margin described above.
Selling, General and Administrative Expenses
The following table sets forth a comparison of our selling, general and administrative (SG&A)
expenses for the periods presented as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Change |
($ in thousands) |
|
2007 |
|
revenues |
|
2006 |
|
revenues |
|
$ |
|
% |
Selling, general and
administrative expenses |
|
$ |
12,976 |
|
|
|
26 |
% |
|
$ |
10,976 |
|
|
|
24 |
% |
|
$ |
2,000 |
|
|
|
18 |
% |
For the three months ending March 31, 2007, health care costs rose by approximately $700,000
due to higher claims in our self-insured employee health plan. Excluding this increase, SG&A as
a percentage of revenues for the three months ended March 31, 2007 is consistent with the prior
year period.
Research and Development Expense
The following table sets forth a comparison of our research and development expense for the
periods presented as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Change |
($ in thousands) |
|
2007 |
|
revenues |
|
2006 |
|
revenues |
|
$ |
|
% |
Research and development expense |
|
$ |
1,223 |
|
|
|
2 |
% |
|
$ |
902 |
|
|
|
2 |
% |
|
$ |
321 |
|
|
|
36 |
% |
For the three months ended March 31, 2007, research and development expense included
approximately $500,000 associated with the Microsoft Dynamics AX project in addition to costs
associated with other new product development efforts. In January 2007 we entered into a
strategic alliance with Microsoft Corporation to jointly develop core public sector functionality
for Microsoft Dynamics AX to address the accounting needs of public sector organizations
worldwide. We anticipate these costs will continue into 2009 however, the actual amount and
timing of those costs, and whether they are capitalized or expensed may vary.
Amortization of Customer and Trade Name Intangibles
Acquisition intangibles are composed of the excess of the purchase price over the fair value of
net tangible assets acquired that is allocated to acquired software and customer and trade
name intangibles. The remaining excess purchase price is allocated to goodwill that is not
subject to amortization. Amortization expense related to acquired software is included with
cost of revenues while amortization expense of customer and trade name intangibles is
recorded as a non-operating expense. The following table sets forth a comparison of
amortization of customer and trade name intangibles for the periods presented as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
Change |
($ in thousands) |
|
2007 |
|
2006 |
|
$ |
|
% |
Amortization of customer and trade name intangibles |
|
$ |
347 |
|
|
$ |
322 |
|
|
$ |
25 |
|
|
|
8 |
% |
In the first quarter of 2007 we completed two acquisitions which increased amortizable
customer intangibles by $638,000. This amount will be amortized over 7 years.
13
Income Tax Provision
The following table sets forth comparison of our income tax provision for the periods
presented as of March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
Change |
($ in thousands) |
|
2007 |
|
2006 |
|
$ |
|
% |
Income tax provision |
|
$ |
1,522 |
|
|
$ |
1,347 |
|
|
$ |
175 |
|
|
|
13 |
% |
Effective income tax rate |
|
|
38.8 |
% |
|
|
40.1 |
% |
|
|
|
|
|
|
|
|
The effective income tax rates for the three months ended March 31, 2007 and 2006 were
different from the statutory United States federal income tax rate of 35% primarily due to
state income taxes, non-deductible share-based compensation expense, the qualified
manufacturing activities deduction, and non-deductible meals and entertainment costs. The
qualified manufacturing activities deduction rate doubled in 2007, resulting in a lower
effective tax rate.
14
FINANCIAL CONDITION AND LIQUIDITY
As of March 31, 2007, we had cash and cash equivalents (including restricted cash
equivalents) of $19.6 million and we had short-term investments of $20.8 million, compared
to cash and cash equivalents (including restricted cash equivalents) of $22.2 million and
short-term investments of $19.5 million at December 31, 2006. Cash provided by operating
activities was $6.9 million in the first three months of 2007 compared to $10.0 million for
the same period in 2006.
At March 31, 2007, our days sales outstanding (DSO) was 84 days compared to DSO of 102
days at December 31, 2006. Our maintenance billing cycle is at one of its highest points in
December and the majority of the related cash payments are received in the first quarter of
each year. As a result our DSO decreased in the first quarter compared to the fourth
quarter. DSO is calculated based on accounts receivable divided by the quotient of
annualized quarterly revenues divided by 360 days.
Investing activities used cash of $6.4 million in the first three months of 2007 compared to
$11.1 million cash used for the same period in 2006. In February 2007, we acquired all of
the capital stock of Advanced Data Systems, Inc. (ADS), along with an office building used
in its business for approximately $4.2 million in cash. In January 2007, we also purchased
certain software assets to enhance our courts and justice product line for approximately
$756,000 in cash. Other investing activities in the first quarter of 2007 were primarily
comprised of a net investment of $1.2 million in short term investments and investments of
$741,000 in property and equipment. In the comparable prior year period, investing
activities included the acquisitions of MazikUSA, Inc. and TACS, Inc. The combined purchase
price, including transaction costs, for the two companies was approximately $14.5 million,
comprised of approximately $11.6 million in cash and 325,000 shares of Tyler common stock.
In addition, first quarter 2006 investing activities also included a liquidation of $1.5
million of short term investments and investments in software development and property and
equipment. Capital expenditures and acquisitions were funded from cash generated from
operations.
We maintain a $10.0 million Letter of Credit facility under which the bank issues cash
collateralized letters of credit. As of March 31, 2007 we had outstanding letters of credit
totaling $4.5 million to secure surety bonds required by some of our customer contracts.
Financing activities used cash of $2.5 million in the first three months of 2007 compared to $1.0
million in the same period for 2006. Cash used in financing activities was primarily
comprised of purchases of treasury shares, net of proceeds from stock option exercises and
employee stock purchase plan activity.
During the three months ended March 31, 2007, we purchased 290,000 shares of our common stock for
an aggregate purchase price of $3.9 million. At March 31, 2007, we had authorization to
repurchase up to 741,000 additional shares of Tyler common stock. A summary of the
repurchase activity during the first quarter of 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum number of |
|
|
|
Total number of |
|
|
|
|
|
|
shares that may be |
|
|
|
shares |
|
|
Average price paid |
|
|
repurchased under |
|
Period |
|
repurchased |
|
|
per share |
|
|
current authorization |
|
January 1 through January 31 |
|
|
131 |
|
|
$ |
13.92 |
|
|
|
900 |
|
February 1 through February 28 |
|
|
92 |
|
|
|
13.63 |
|
|
|
808 |
|
March 1 through March 31 |
|
|
67 |
|
|
|
13.05 |
|
|
|
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total first quarter |
|
|
290 |
|
|
$ |
13.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The repurchase program, which was approved by our board of directors, was announced in
October 2002, and was amended in April and July 2003, October 2004 and October 2005. There
is no expiration date specified for the authorization and we intend to repurchase stock
under the plan from time to time in the future.
We made federal and state income tax payments, net of refunds of $228,000 in the three months
ended March 31, 2007 compared to $1.1 million in the comparable prior year.
From time to time we engage in discussions with potential acquisition candidates. In order to
consummate any such opportunities, which could require significant commitments of capital, we may
be required to incur debt or to issue additional potentially dilutive
15
securities in the future.
No assurance can be given as to our future acquisitions and how such acquisitions may be
financed. In the absence of future acquisitions, we believe our current cash balances and
expected future cash flows from operations will be sufficient to meet our anticipated cash needs
for working capital, capital expenditures and other activities through the next twelve months.
If operating cash flows are not sufficient to meet our needs, we believe that credit would be
available to us.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may affect us due to adverse changes in
financial market prices and interest rates. As of March 31, 2007, we had funds invested in
auction rate municipal securities and state and municipal bonds, which were accounted for in
accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities.
These investments were treated as available-for-sale under SFAS No. 115. The carrying value of
these investments approximates fair market value. Due to the nature of this investment, we are
not subject to significant market rate risk.
We have no outstanding debt at March 31, 2007, and are therefore not subject to any interest
rate risk.
ITEM 4. Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that we are able to collect the
information we are required to disclose in the reports we file with the Securities and Exchange
Commission (SEC), and to process, summarize and disclose this information within the time
periods specified in the rules of the SEC. Based on an evaluation of our disclosure controls and
procedures as of the end of the period covered by this report conducted by our management, with
the participation of the Chief Executive and the Chief Financial Officer, the Chief Executive and
Chief Financial Officer believe that these controls and procedures are effective to ensure that
we are able to collect, process and disclose the information we are required to disclose in the
reports we file with the SEC within the required time periods.
16
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Other than routine litigation incidental to our business, there are no material legal proceedings
pending to which we are a party or to which any of our properties are subject.
ITEM 1A. Risk Factors
No material changes.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits
|
|
|
|
|
|
|
Exhibit 31.1
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
Exhibit 31.2
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
Exhibit 32.1
|
|
Certifications Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
17
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 thereunto duly authorized.
|
|
|
|
|
|
|
TYLER TECHNOLOGIES, INC.
|
|
|
By: |
/s/ Brian K. Miller
|
|
|
|
Brian K. Miller |
|
Date: April 24, 2007 |
|
Senior Vice President and Chief Financial Officer (principal financial
officer and an authorized signatory)
|
|
18