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Concerned about how the quarter might look from the macro view and the balance sheet

|Includes: Tyler Technologies, Inc. (TYL)

   This company provides services for local governments.  In a situation where the federal government may be reducing financial support to the states due to declining tax revenues, further exacerbated by the states reducing to the localities due to declining tax revenues, a company that provides services to localities may not be the safest place to place client assets.

   Further looking at their balance sheet for the past five quarters, their total equity has remained in the 122mm to 137mm range (137, 138, 134, 124, 122).  Unfortunately, their goodwill and intangible assets have remained in the 122mm to 129mm range (127, 129, 122, 123, 123).  This means that their tangible equity is currently only 9.62mm.  That's a good improvement over -1.1mm since 6/30/2009, but hardly impressive over at 700mm market cap.  And they don't pay a dividend to siphon off tanglible equity.

   Most disconcerting was the level of short term debt and accounts receivable as of 6/30/2010.  This company does not use debt.... generally.  They did in 6/30/2009, both times about 15mm.  Last year they mostly paid it off by 9/30/2009, and had it completely paid off by 12/30/2009.  Their accounts receivable was at an all time high of 89mm. 

   Adding debt and accounts receivable suggests that their customers arent paying on time and they're taking on debt to hopefully tide them through a temporary blip.  But I'll be looking at their next quarterly results to see where their accounts receivable, short term debt, and tanglible equity are.  I'd like to see less AR, no debt or at least nearly no debt, and more TE.

   Not that it necessarily means anything, but MSD Capital sold back 1mm shares to the company on 9/28/2010 for 20mm USD.   I like share buybacks, but buying back near the 52 week high is worrysome, and double worrysome if they might have a liquidity crunch going on.  Admittedly, letting 3% of your shares hit the open market and take down your stock may be unpalatable for shareholders and management, but temporary blips like that are buying opportunities.  I'm concerned that management is trying to maintain the stock price at the expense of their business.

   I'll come back to this company after the quarterly results come out.  They just seem too expensive to touch right now.