Room 4561
August 16, 2005
Mr. John S. Marr
President and Chief Executive Officer
Tyler Technologies, Inc.
5949 Sherry Lane
Suite 1400
Dallas, Texas 75225
Re: Tyler Technologies, Inc.
Form 10-K for the Year Ended December 31, 2004
Filed March 10, 2005
Form 10-Q for the Quarter Ended June 30, 2005
Filed July 28, 2005
Form 8-K
Filed July 28, 2005
File No. 1-10485
Dear Mr. Marr,
We have reviewed the above referenced filing and have the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. After reviewing this information, we may or may
not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comment or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Year Ended December 31, 2004
Item 6. Selected Financial Data
1. We note that you present a non-GAAP measure (i.e. EBITDA) under
this item. Please note that the "Other Data" information should
be
presented after your "Balance Sheet Data" information to avoid
giving
that disclosure prominence over GAAP information. Additionally
tell
us how you have considered the requirement of Item 10(e)(i)(C) of
Regulation S-X in disclosing the reasons why you believe that
presentation of such non-GAAP financial measure provides useful
information to investors regarding your financial condition and
results of operations.
Item 7. MD&A and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies and Estimates, page 16
2. We note that your capitalized software development costs
represent
approximately 12% of your total 2004 assets. Please explain to us
how you have considered SEC Release No. 33-8350 Section V in
determining whether you have made any accounting estimates or
assumptions related to your software capitalization policy where:
* The nature of the estimates or assumptions is material due to
the
levels of subjectivity and judgment necessary to account for
highly
uncertain matters or the susceptibility of such matters to change;
and
* The impact of the estimates and assumptions on financial
condition
or operating performance is material.
Analysis of Results of Operations and Other
Revenues, page 18
3. We note that appraisal services revenue consistently and
significantly declined over the three reported periods but it
appears
that you do not address this trend in your results of operations
section. Please tell us how you have considered Item 303 (a) (3)
of
Regulation S-K and SEC Release No. 33-6835 Section III.B in
disclosing the trend of declining appraisal service revenues and
all
other material trends known to you that may affect your liquidity
and
the results of your future operations.
Item 8. Financial Statements and Supplementary Data
Consolidated Statement of Operations, page F-3
4. We note that you exclude acquisitions intangibles expense from
your cost of sales. Considering that such amortization expense is
primarily due to acquired software and customer related intangible
assets that appear to be closely related with the generation of
revenue, explain why you believe that excluding such amortization
expenses from cost of sales results in a proper gross profit
presentation. Please tell us how you considered paragraph 8 (i)
of
SFAS 142 and Question 17 of Staff Implementation Guidance on
applying
SFAS 86.
Notes to consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Revenue Recognition, page F-8
5. We note from your disclosures on page 16 that you derive
revenue
from multiple element arrangements but it is unclear to us how you
establish fair value for each of the elements of such
arrangements.
To the extent the revenue generated from multiple element
arrangements is material please provide the following:
* Identify the elements included in each material type of multiple
element transaction;
* Indicate how you determined that each element is a separate unit
of
accounting (refer to EITF 00-21); and
* Explain how the timing and amount of revenue attributable to
individual elements is determined.
6. You disclose on pages 16 and 17 that you occasionally reduce
your
contract price and you perform additional non-contractual services
for little or no incremental fee if the customer is dissatisfied
with
your products or services. Please tell us the nature of the
products/services, the amounts recorded and the timing related to
such price concessions. Additionally describe how price
concessions
affect your revenue recognition policy.
7. You disclose on page 16 that you record product warranty
provisions. If such amounts are material, please explain the
material terms of such provisions, provide us with an analysis of
the
amounts accrued as compared to the amounts incurred for the period
reported and describe how these contingencies affect your revenue
recognition. Additionally, tell us how you considered the
disclosure
requirements under paragraph 14 of FIN 45.
8. Please provide us with the following information for the
services
you recognize revenue based on the proportional performance
method:
* The nature and terms of the service;
* Any acceptance criteria and customer recourse if such criteria
are
not met;
* All deliverables and milestones;
* The timing of payment and whether such timing is associated with
deliverables or milestones; and
* A detailed description of input measures (i.e. hours worked and
materials consumed) you use to track progress and output measures
you
use to track deliverables.
Segment and Related Information, page F-12
9. It appears that you disclose more than one operating segment
under
your MD&A section on page 18. You also state that there are a
number of operating subsidiaries and that separate segment data
has
not been presented as they meet the aggregation "criteria" as
permitted by SFAS 131. Identify each operating
subsidiaries/segments
and provide financial information for each of these segments
(e.g.,
revenue, gross profit, and net income/loss). Describe in detail
the
type of information included in reports reviewed by your CODM to
evaluate your business performance and to allocate resources among
operating subsidiaries/business units/operating segments. Explain
how you have concluded that the aggregation criteria of SFAS 131
are
applicable (e.g. similar gross margin results by segment). See
paragraph 17 of SFAS 131.
Concentrations of Credit Risk and Unbilled Receivables, page F-13
10. You disclose on page 16 that, occasionally, you give price
concessions to customers. Also, as of December 31, 2004, you
disclose unbilled receivables of $11.7 million, which appear to be
material as compared to your total receivables. Please tell us
how
you considered Rule 5-02 (3)(c)(3) of Regulations S-X in
disclosing
whether a portion of your unbilled amounts represent claims
subject
to uncertainty of their ultimate realization. Additionally please
tell us how you considered disclosing the unbilled amounts that
are
expected to be collected after one year. See Rule 5-02 (3)(c)(4)
of
Regulation S-X.
Note 7. Goodwill and Other Intangibles, page F-17
11. We note that you amortize customer related intangibles over a
period of 22 years. Please discuss all the factors you considered
in
concluding that you will be able to derive benefit from the use of
such customer intangibles over, what appears an unusually long
period, of 22 years.
Form 10-Q for the Quarter Ended June 30, 2005
Item 4. Evaluation of Disclosure Controls and Procedures, page 14
12. Please confirm to us that you did not have any changes in your
internal controls over financial reporting that occurred during
the
second quarter of 2005 that have materially affected, or are
reasonably likely to materially affect, your internal control over
financial reporting. Refer to Item 308(c) of Regulation S-K and
the
related Exchange Act Rule 13a-15(d).
Report on Form 8-K filed July 28, 2005
13. Disclosures within the press release should not make
references
to "pro forma" net income, "pro forma" earnings and "pro forma"
earnings per share and per diluted share. The information you
have
presented throughout the press release should be referred to as
"non-
GAAP" and not "pro forma." Pro forma has a different meaning as
defined by generally accepted accounting principles and SEC rules
that is significantly different than your presentation. Refer to
Item 10(e)(ii)(E) of Regulation S-K.
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please submit all correspondence and supplemental materials on
EDGAR
as required by Rule 101 of Regulation S-T. Please furnish a cover
letter that keys your responses to our comments and provides any
requested information. Detailed cover letters greatly facilitate
our
review.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Stathis Kouninis, Staff Accountant, at (202)
551-3476, Marc Thomas, Senior Staff Accountant, at (202) 551-3452
or
me at (202) 551-3226 if you have any questions regarding these
comments.
Very truly yours,
Craig Wilson
Senior Assistant Chief Accountant
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John S. Marr
Tyler Technologies, Inc.
August 16, 2005
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