tyl-8ka_20151117.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K / A

Amendment No. 1

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported)

January 29, 2016 (November 16, 2015)

 

TYLER TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

Delaware

 

1-10485

 

75-2303920

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

5101 TENNYSON PARKWAY

PLANO, TEXAS 75024

(Address of principal executive offices)

(972) 713-3700

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

 

As previously reported under Item 2.01 of the Current Report on Form 8-K of Tyler Technologies, Inc. (‘‘Tyler’’), filed on November 16, 2015 (the ‘‘Original 8-K’’), Tyler completed its acquisition of all the outstanding shares of the New World Systems Corporation. (‘‘NWS’’) on November 16, 2015.  This Form 8-K/A amends and supplements the Form 8-K to provide the required financial statements and pro forma financial information that were not filed with the Form 8-K and that are permitted to be filed by this amendment.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired

The following financial information related to NWS is attached as Exhibit 99.1 and 99.2 to this Form 8-K/A.

 

(i)

Audited financial statements of NWS as of December 31, 2014 and 2013 and for the three years in the period ended December 31, 2014 including the notes to such financial statements and the independent auditors report thereon, are attached as Exhibit  99.1:

 

(ii)

Unaudited condensed financial statements of NWS as of September 30, 2015 and for the nine months ended September 30, 2015 and 2014 including the notes to such financial statements thereon, are attached as Exhibit 99.2;

(b) Pro Forma Financial Information

The required unaudited pro forma condensed combined financial information for the year ended December 31, 2014 and as of and for the nine months ended September 30, 2015 are included in this Form 8-K/A.

(c) Exhibits

  2.1 Agreement and Plan of Merger, dated as of September 30, 2015, by and among Tyler Technologies, Inc., Brinston Acquisition, LLC, New World Systems Corporation, and Larry D. Leinweber, as the Principal Shareholder identified therein and the Shareholders’ Representative identified therein. (filed as Exhibit 2.1 to our Form 8-K, dated October 1, 2015, and incorporated by reference herein).

23.1 Consent of PricewaterhouseCoopers, LLP, Independent Auditors

99.1 Audited financial statements of NWS as of December 2014 and 2013 and for the three years ended December 31, 2014 and the notes related thereto.  

99.2 Unaudited condensed financial statements of NWS as of and for the nine months ended September 30, 2015 and 2014 and the notes related thereto.

99.3  Non-GAAP Measures



 

 

TYLER TECHNOLOGIES, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2015

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

 

 

Tyler

 

 

New World Systems

 

 

Pro Forma

 

 

 

 

Combined

 

 

 

Historical

 

 

Historical

 

 

Adjustments

 

 

 

 

Tyler

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

238,614

 

 

$

65,618

 

 

$

(252,271

)

 

a, c, e

 

$

51,961

 

Accounts receivable, net

 

 

129,228

 

 

 

28,570

 

 

 

 

 

 

 

 

157,798

 

Short-term investments

 

 

9,124

 

 

 

 

 

 

 

 

 

 

 

9,124

 

Prepaid expenses

 

 

18,044

 

 

 

3,249

 

 

 

 

 

 

 

 

21,293

 

Other current assets

 

 

6,821

 

 

 

 

 

 

 

 

 

 

 

6,821

 

Deferred income taxes

 

 

9,674

 

 

 

 

 

 

 

 

 

 

 

9,674

 

Total current assets

 

 

411,505

 

 

 

97,437

 

 

 

(252,271

)

 

 

 

 

256,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, long-term portion

 

 

1,072

 

 

 

 

 

 

 

 

 

 

 

1,072

 

Property and equipment, net

 

 

68,092

 

 

 

21,386

 

 

 

4,820

 

 

j

 

 

94,298

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

125,932

 

 

 

 

 

 

516,057

 

 

a,b,g,h,i,j

 

 

641,989

 

Other intangibles, net

 

 

35,701

 

 

 

 

 

 

264,233

 

 

b

 

 

299,934

 

Cost method investment

 

 

15,000

 

 

 

 

 

 

 

 

 

 

 

15,000

 

Non-current investments and other assets

 

 

21,080

 

 

 

 

 

 

2,174

 

 

a

 

 

23,254

 

 

 

$

678,382

 

 

$

118,823

 

 

$

535,013

 

 

 

 

$

1,332,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,385

 

 

 

4,654

 

 

 

 

 

 

 

 

9,039

 

Accrued liabilities

 

 

37,199

 

 

 

16,870

 

 

 

(3,639

)

 

a,f,e

 

 

50,430

 

Current-portion of long-term debt

 

 

 

 

 

318

 

 

 

(318

)

 

c

 

 

 

Deferred revenue

 

 

200,890

 

 

 

52,645

 

 

 

(17,322

)

 

h

 

 

236,213

 

Total current liabilities

 

 

242,474

 

 

 

74,487

 

 

 

(21,279

)

 

 

 

 

295,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving credit line

 

 

 

 

 

 

 

 

145,000

 

 

a

 

 

145,000

 

Other long-term liabilities

 

 

 

 

 

759

 

 

 

(759

)

 

c

 

 

 

Deferred revenues

 

 

 

 

 

5,020

 

 

 

(1,523

)

 

h

 

 

3,497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

4,813

 

 

 

 

 

 

95,218

 

 

i

 

 

100,031

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

431,095

 

 

 

38,557

 

 

 

318,356

 

 

l

 

 

788,008

 

 

 

$

678,382

 

 

$

118,823

 

 

$

535,013

 

 

 

 

$

1,332,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

TYLER TECHNOLOGIES, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

 

 

Historical

 

 

New World Systems

 

 

Pro Forma

 

 

 

 

Combined

 

 

 

Tyler

 

 

Historical

 

 

Adjustments

 

 

 

 

Tyler

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software licenses and royalties

 

$

44,576

 

 

$

14,306

 

 

$

 

 

 

 

$

58,882

 

Subscriptions

 

 

81,273

 

 

 

3,603

 

 

 

 

 

 

 

 

84,876

 

Software services

 

 

101,765

 

 

 

20,879

 

 

 

 

 

 

 

 

122,644

 

Maintenance

 

 

177,829

 

 

 

48,123

 

 

 

(579

)

 

h

 

 

225,373

 

Appraisal services

 

 

19,337

 

 

 

 

 

 

 

 

 

 

 

19,337

 

Hardware and other

 

 

7,326

 

 

 

1,582

 

 

 

 

 

 

 

 

8,908

 

Total revenues

 

 

432,106

 

 

 

88,493

 

 

 

(579

)

 

 

 

 

520,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software licenses

 

 

1,183

 

 

 

553

 

 

 

 

 

 

 

 

1,736

 

Acquired software

 

 

1,464

 

 

 

 

 

 

14,757

 

 

b

 

 

16,221

 

Software services, maintenance and subscriptions

 

 

207,819

 

 

 

15,855

 

 

 

104

 

 

j

 

 

223,778

 

Appraisal services

 

 

12,397

 

 

 

 

 

 

 

 

 

 

 

12,397

 

Hardware and other

 

 

5,278

 

 

 

1,256

 

 

 

 

 

 

 

 

6,534

 

Total cost of revenues

 

 

228,141

 

 

 

17,664

 

 

 

14,861

 

 

 

 

 

260,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

203,965

 

 

 

70,829

 

 

 

(15,440

)

 

 

 

 

259,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

90,810

 

 

 

32,796

 

 

 

(254

)

 

b,f

 

 

123,352

 

Research and development expense

 

 

21,307

 

 

 

19,337

 

 

 

 

 

 

 

 

40,644

 

Amortization of customer and trade name intangibles

 

 

3,585

 

 

 

 

 

 

6,316

 

 

b

 

 

9,901

 

Operating income

 

 

88,263

 

 

 

18,696

 

 

 

(21,502

)

 

 

 

 

85,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

621

 

 

 

(19

)

 

 

(3,011

)

 

d

 

 

(2,409

)

Income before income taxes

 

 

88,884

 

 

 

18,677

 

 

 

(24,513

)

 

 

 

 

83,048

 

Income tax provision

 

 

32,633

 

 

 

135

 

 

 

(2,289

)

 

k

 

 

30,479

 

Net income

 

$

56,251

 

 

$

18,542

 

 

$

(22,224

)

 

 

 

$

52,569

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.66

 

 

 

 

 

 

 

 

 

 

 

 

$

1.46

 

Diluted

 

$

1.56

 

 

 

 

 

 

 

 

 

 

 

 

$

1.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

33,787

 

 

 

 

 

 

 

2,136

 

 

g

 

 

35,923

 

Diluted weighted average common shares outstanding

 

 

36,163

 

 

 

 

 

 

 

2,136

 

 

g

 

 

38,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

56,251

 

 

$

18,542

 

 

$

(22,224

)

 

 

 

$

52,569

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

TYLER TECHNOLOGIES, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

(Unaudited)

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

 

 

Historical

 

 

New World Systems

 

 

Pro Forma

 

 

 

 

Combined

 

 

 

Tyler

 

 

Historical

 

 

Adjustments

 

 

 

 

Tyler

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software licenses and royalties

 

$

49,065

 

 

$

22,159

 

 

$

 

 

 

 

$

71,224

 

Subscriptions

 

 

87,848

 

 

 

3,854

 

 

 

 

 

 

 

 

91,702

 

Software services

 

 

113,821

 

 

 

28,143

 

 

 

(6,452

)

 

h

 

 

135,512

 

Maintenance

 

 

212,696

 

 

 

60,313

 

 

 

(12,960

)

 

h

 

 

260,049

 

Appraisal services

 

 

21,802

 

 

 

 

 

 

 

 

 

 

 

21,802

 

Hardware and other

 

 

7,869

 

 

 

1,913

 

 

 

 

 

 

 

 

9,782

 

Total revenues

 

 

493,101

 

 

 

116,382

 

 

 

(19,412

)

 

 

 

 

590,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software licenses and royalties

 

 

1,900

 

 

 

826

 

 

 

 

 

 

 

 

2,726

 

Acquired software

 

 

1,858

 

 

 

 

 

 

19,676

 

 

b

 

 

21,534

 

Software services, maintenance and subscriptions

 

 

236,363

 

 

 

22,823

 

 

 

138

 

 

j

 

 

259,324

 

Appraisal services

 

 

14,284

 

 

 

 

 

 

 

 

 

 

 

14,284

 

Hardware and other

 

 

5,325

 

 

 

1,552

 

 

 

 

 

 

 

 

6,877

 

Total cost of revenues

 

 

259,730

 

 

 

25,201

 

 

 

19,814

 

 

 

 

 

304,745

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

233,371

 

 

 

91,181

 

 

 

(39,226

)

 

 

 

 

285,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

108,260

 

 

 

42,776

 

 

 

165

 

 

b

 

 

151,201

 

Research and development expense

 

 

25,743

 

 

 

19,779

 

 

 

 

 

 

 

 

45,522

 

Amortization of customer and trade name intangibles

 

 

4,546

 

 

 

 

 

 

8,421

 

 

b

 

 

12,967

 

Operating income

 

 

94,822

 

 

 

28,626

 

 

 

(47,812

)

 

 

 

 

75,636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

 

355

 

 

 

50

 

 

 

4,019

 

 

d

 

 

4,424

 

Income before income taxes

 

 

94,467

 

 

 

28,576

 

 

 

(51,831

)

 

 

 

 

71,212

 

Income tax provision

 

 

35,527

 

 

 

180

 

 

 

(8,931

)

 

k

 

 

26,776

 

Net income

 

$

58,940

 

 

$

28,396

 

 

$

(42,900

)

 

 

 

$

44,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.79

 

 

 

 

 

 

 

 

 

 

 

 

$

1.26

 

Diluted

 

$

1.66

 

 

 

 

 

 

 

 

 

 

 

 

$

1.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

33,011

 

 

 

 

 

 

 

2,136

 

 

g

 

 

35,147

 

Diluted weighted average common shares outstanding

 

 

35,401

 

 

 

 

 

 

 

2,136

 

 

g

 

 

37,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

58,940

 

 

$

28,396

 

 

$

(42,900

)

 

 

 

$

44,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

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.

 

Date:  January  29, 2016

 

TYLER TECHNOLOGIES, INC.

 

 

 

 

By:

/s/ Brian K. Miller

 

 

Brian K. Miller

 

 

Executive Vice President and Chief Financial Officer

 

 

principal financial officer)

 



 

 

Tyler Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Tables in thousands)

 

(1)  Basis of Pro Forma Presentation

On November 16, 2015, Tyler Technologies, Inc. (“Tyler”) acquired New World Systems Corporation (“NWS”).  The acquisition has been accounted for using the purchase method of accounting, which requires the total purchase price to be allocated to the assets acquired based on their estimated fair values.  The excess purchase price over the amounts assigned to tangible and intangible assets acquired and liabilities assumed is recognized as goodwill.   The actual purchase price allocation will be subject to the completion of a valuation of the assets and the liabilities as of the date the acquisition.  Therefore, such allocation and the resulting effect on our consolidated financial statements may differ from the pro forma accounts included herein, and such differences may be material.

 

The unaudited pro forma condensed combined balance sheet is presented as if the acquisition had occurred as of September 30, 2015.  The unaudited pro forma condensed combined income statements are presented as if the acquisition had occurred on January 1, 2014.

 

The historical condensed consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination.  The unaudited pro forma condensed combined financial statements are based on the historical financial statements of Tyler and NWS after giving effect to the merger, as well as the assumptions and adjustments described in the accompany notes to the unaudited pro forma condensed combined financial statements.  The unaudited pro forma condensed consolidated balance sheet and the condensed consolidated statements of operations are provided for informational purposes only and are not indicative of Tyler’s financial position or results of operations had the transaction been consummated on January 1, 2014 or the financial position or results of operations for any future date or period.  This information should be read in conjunction with Tyler’s historical financial statements and related notes included in the Tyler’s Annual Report on Form 10-K for the year ended December 31, 2014 and its Quarterly Report on Form 10-Q for the nine months ended September 30, 2015 and the audited financial statements of NWS as of December 31, 2014 and 2013 and for the three years in the period ended December 31, 2014 and the unaudited condensed financial statements of NWS as of September 30, 2015 and for the nine months ended September 30, 2015, filed as exhibits 99.1 and 99.2, respectively.

 

The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of NWS as a result of restructuring activities and other planned cost savings initiatives following the completion of the business combination.

(2)

Financing transactions

Total merger consideration consisted of (1) $360.0 million in cash, subject to post-closing working capital adjustments, and (2) 2,136,207 shares of Tyler Common Stock valued at $362.8 million.  Tyler financed the cash portion of the merger with approximately $215.0 million from cash on hand and borrowings of $145.0 million under a $300.0 million revolving credit facility.  

(3)

  Purchase Price Allocation  

Tyler has performed a preliminary valuation analysis of the fair value of NWS’s assets and liabilities.  The fair value of identifiable assets was determined primarily using the “income approach,” which requires a forecast of all the expected future cash flows. The following table summarizes the allocation of the preliminary purchase price as of the merger date.

 

Cash

$

26,521

 

Accounts receivable

 

28,570

 

Prepaid and other

 

3,249

 

Property, plant and equipment

 

26,207

 

Identifiable intangible assets

 

264,233

 

Goodwill

 

516,057

 

Accounts payable

 

(4,654

)

Accrued expenses

 

(3,331

)

Deferred revenue

 

(38,820

)

Deferred tax liabilities, net

 

(95,218

)

Total consideration

$

722,814

 


 

 

 

 

The goodwill to be recognized is primarily attributable to the assembled workforce, a reduction in costs and other synergies, an increase in product development capabilities, and enhanced opportunities for growth and innovation.  The goodwill resulting from the acquisition is not expected to be deductible for tax purposes.

  

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and income statement.  The final purchase price allocation will be determined when Tyler has completed the detailed valuations and necessary calculations.  The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.  The final allocation may include (1) changes in fair values of property and equipment; (2) changes in allocations to intangible assets such as software, customer relationships, trademark, as well as goodwill; and (3) other changes to assets and liabilities, including deferred revenues for maintenance and professional services.

(4)

Pro Forma Adjustments

 

a)

Adjustment represents cash paid of $360.0 million (including accrued working capital holdbacks of $4.0 million) that would have been paid had closing occurred on September 30, 2015.  Cash paid was comprised of $213.2 million cash on hand and borrowings of $145.0 million under a $300.0 million revolving credit line facility.   Cash paid also includes $2.2 million for debt issuance costs related to the credit facility.

 

b)

The assets acquired and liabilities assumed of NWS have been adjusted to their estimated fair values as of the acquisition date, as reflected in the preliminary purchase price allocation in Note 2.  The following table summarizes the estimated fair values of NWS identifiable intangible assets and their estimated useful lives:

 

 

 

 

 

 

 

 

 

Amortization Expense

 

 

Estimated

 

 

Estimated

 

 

Year ended

 

 

Nine months ended

 

 

fair value

 

 

useful life

 

 

December 31, 2014

 

 

September 30, 2015

 

Software

$

137,730

 

 

 

7

 

 

$

19,676

 

 

$

14,757

 

Customer relationships

 

115,810

 

 

 

15

 

 

$

7,721

 

 

$

5,791

 

Trademark

 

7,000

 

 

 

10

 

 

$

700

 

 

$

525

 

Less:  NWS ' historical amortization expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma adjustment

 

 

 

 

 

 

 

 

$