Tyler Technologies Annual Report 1999

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FY1999 Annual Report · Tyler Technologies

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T E C H N O L O G I E S , I N C .

E stands for practically everything being

only a mouse click away.

The way local government was meant to work.

Tyler Technologies is revolutionizing the way local government operates.

As one of the leading providers of Internet-enabled information solutions for local government

agencies nationwide, we are making government more accessible to the public,

more responsive to the needs of the citizens and more efficient and cost-effective to manage.

We have established ourselves as a premier provider of information management

solutions in the local government marketplace and we are using our substantial

installed client base, our relationships with government agencies and our reputation

within the marketplace to develop innovative new e-government solutions and services that will

leverage our combined knowledge and expertise to dramatically improve the ways local

governments interact with citizens. And by doing so, we expect to continue to expand our

business and increase shareholder value.

s :

Tyler Technologies continued to report strong

xciting is a good description for 1999 at

year-over-year increases in revenues and operating

Tyler Technologies. We exceeded our

income during 1999. Revenues more than doubled

revenue growth targets, doubling our annual

during the year to $108.4 million from $50.5

revenue run rate to nearly $145 million. We are

million in 1998. Operating income rose 38% to

continuing to follow a multi-phase strategy and

$6.9 million in 1999 from $5.0 million in 1998.

growth plan that uses both internal growth and

EBITDA (as defined elsewhere in this report) for

targeted strategic acquisitions to focus on the

the year increased 46% to $20.0 million ($0.51 per

specialized information management needs of local

diluted share), up from $13.7 million ($0.40 per

government. With the solid base we have built over

diluted share) the previous year. Higher interest

the last two years, we are now focusing on the next

expense and an unusually high effective income tax

phase of our growth strategy by partnering with

rate resulted in near-breakeven results from

clients to implement a new generation of e-govern-

continuing operations ($0.00 per diluted share)

ment solutions that make local government more

for 1999, compared to income from continuing

accessible, responsive and cost-effective for all.

operations of $1.2 million ($0.03 per diluted share)

With the initial phase of our growth plan largely

for 1998.

complete, we have established ourselves as a leading

Looking forward, Tyler Technologies is undertaking

provider of information management solutions in

several signiﬁcant initiatives to expand our e-business

the local government marketplace. We currently

product offerings during the year 2000. We will be

offer a huge variety of products and services,

bringing local government directly to the people

spanning virtually every area of city and county

with a number of new Internet-accessible solutions.

government operations from Law Enforcement, to

Our goal is to provide real-time public access to a

Courts, Financial Systems, Appraisal and Taxation,

variety of widely used public information, including:

Records Management and Utility Billing. Our

installed base for these products now includes over

> Criminal and civil court records

5,000 local government offices in nearly every state

> Jail booking and release information

in the USA, as well as Canada and Puerto Rico.

> Bond and bondsmen information

With our expanded client base and extensive

> Court calendars and dockets

product lines we are on track to meet both our own

> Property appraisal information

growth targets and increasing customer expecta-

> Tax billing and collection information

tions for e-government services in the year ahead.

> Utility billing records and history

Additionally, we have begun to deploy a series of

solidify its leadership position as a provider of

e-commerce and e-government solutions designed

information management, automation and Internet

to improve government efficiency and cost-

access services to our country’s local government

effectiveness by accepting payments for traffic

agencies. We are unique in our ambitions to

and parking tickets, utility bills and current and

automate local government operations and create a

delinquent tax payments directly over the Internet.

comprehensive national data repository for public

Finally, we are planning to offer many of our core

As we come closer and closer to this ambitious

information management solutions in an applica-

goal, we find that the opportunities for the future

records that will be accessible through the Internet.

tions service provider (ASP) environment. The ASP

have never been brighter.

market in general is projected to grow at nearly

100% annually and we are positioning Tyler to be a

There is still much work to be done, but the

leader in offering the ASP model for the local

foundation of the new Tyler we envisioned at the

government sector.

beginning of our 1998 transformation initiative is

already in place. As we enter a new millennium,

We are also excited about the opportunities for our

we would like to thank our shareholders and

national data repository, NationsData.com. We

employees for their continued support. Thanks to

have made a major investment, in terms of both

you, we look forward to productive and exciting

money and effort, in the development of a national

times in the year ahead.

transaction-based business-to-business Internet

portal for public data, leveraging proprietary data-

bases acquired through our land records business.

The portal is operational now and can be accessed

Louis A Waters

at www.NationsData.com. Our data repository

Chairman and Co-Chief Executive Officer

already contains property tax information on over

65,000,000 parcels of real property nationwide

to address the data needs of the mortgage and

financial services markets. Our plans are to continue

John M. Yeaman

to add content to the database, while pursuing

President and Co-Chief Executive Officer

strategic partnerships to further enhance the

value of NationsData.com.

With an experienced management team in place

William D. Oates

and the divestiture of non-core assets complete, we

Chairman of the Executive Committee

feel that Tyler Technologies is well-positioned to

Public Records: ﬁnding a needle in

a bureaucratic haystack.

The market for information management in the pub-

lic sector is much larger than most people imagine.

The Gartner Group has estimated that state and local

Our country’s public records represent one of the

governments are already spending almost $40 billion

last frontiers in an information revolution that is

annually on information technology and that total

already dramatically transforming the way we live

spending could exceed $52 billion by 2003. With

and do business. While many private industries

today’s largely fragmented market, the expenditures

have largely completed initiatives to integrate their

for new and improved software alone could

own database information and make it available to

approach $10 billion by 2003. Spending for external

customers over the Internet, the world of govern-

information technology services could exceed

ment records still remains fragmented and largely

$17 billion during this time period and both of these

paper-based. Most of the processes and transactions

market segments are expected to grow rapidly. It is

that must take place to access these public records

in this environment that Tyler Technologies sees its

still take place the old fashioned way, at county

primary opportunities in the years ahead.

courthouses and government archives scattered

across the country. By helping local government

We see opportunities to make local government

access the e-commerce economy, we can increase

more accessible by using Internet-enabled and

productivity and save millions of dollars for our

Interactive Voice Response systems to provide

clients each year.

quick and easy access to public information. We

see many opportunities to make local government

As local government agencies struggle to cope with

more responsive by using electronic imaging to

the growing need for faster, more accurate access to

improve access to records and documents, by

real estate, transportation, human services and

automating manual operations and functions, by

criminal justice records, we believe there is a huge

creating and hosting local government web sites

emerging opportunity to help them meet those

and by accepting e-commerce payments for

needs through improved information management.

tickets, utility bills, and taxes. We also see ongoing

With increasing transfers of responsibility from fed-

opportunities to make local government more

eral and state governments to the county and

cost-effective and efficient in our role as an

municipal level, everything from revenue collection

outsource partner, providing single source

to a citizen’s ability to make critical business and

responsibility for all information management and

personal decisions depends on access to informa-

e-government needs, leveraging the vast technical

tion. The information is there. It’s just a matter of

resources and the economies of scale we are able to

ﬁnding better ways to access it and put it to good use.

make available through the support of common

software systems across a huge installed base.

By helping local government access the

e-commerce economy,

we can increase

productivity and save

millions of dollars for our clients each year.

Thousands of sources for government

information. One place to ﬁnd it all.

The implications of Internet access to public

base, strong relationships with local governments

information are huge. Today, it can take days or

throughout the country and a reputation for

even weeks to ﬁnd information that could be vital

delivering effective solutions, we are continuing to

to initiate a court proceeding, complete a real estate

develop new products and services that add value

transaction or update an appraisal. The inefficien-

to local government, including:

cies and delays that result from hard-to-access

public records currently cost individuals and

> Nationwide branded application solutions

businesses millions of dollars every year. Because

> Improved state-of-the-art technologies

accurate and valid public records are still required

> Internet accessibility for citizens

to complete a large and growing variety of business

> Electronic commerce solutions

transactions, even industries that have completed

> ASP hosting and data center services

upgrading their own information infrastructures are

> Outsourcing capabilities

penalized by our existing public records system. An

inefficient public records system has become the

Our fundamental commitment to the local govern-

weak link in the chain for many businesses.

ment information management marketplace will

ultimately enable us to provide the public with easy

Tyler Technologies has already begun changing all

Internet access to government and public records,

this. Our efforts to digitize, integrate and aggregate

saving billions of dollars in lost time and signifi-

public records data from hundreds of separate

cantly improving productivity in both the private

sources is creating the country’s most comprehensive

and public sectors.

single source for government and other public

information. We continue to build our national

1999 was an exciting year for Tyler Technologies

data repository through our NationsData.com

and we are very pleased with the progress we have

operating company. With over 65,000,000

made toward realizing our vision of becoming the

property tax records now in our master database,

nations leading provider of e-government systems

we are now marketing an Internet accessible

and solutions. This steady progress will accelerate

business-to-business solution that initially address-

in the year ahead as we continue to develop a new

es the specialized data needs of the financial

generation of Internet-enabled software products.

services marketplace.

This and other recent information management

initiatives leave us poised to become the premier

provider of local e-government solutions in the

country. With a large and growing installed client

Products and services that will revolutionize

how local governments work.

Our philosophy of strong internal growth supple-

mented by targeted strategic acquisitions has provided

Tyler Technologies with a solid base of products

and services designed to improve access to local

government operations. In the year ahead, we will

continue our efforts to integrate and Internet-

enable our many resources to provide even greater

value to our clients. Our growing, browser-based,

Internet/Intranet deployable product line is built to

utilize state-of-the-art “n”-tier architecture, SQL

compliant databases, thin-client workstations

and object-oriented, Microsoft component-based

technology.

Tyler’s proprietary information management

systems are already being used to process tickets for

hundreds of courts, generate utility bills in over a

thousand municipalities and collect taxes for several

thousand different taxing jurisdictions. We believe

we are well-positioned to capture a large share of the

millions of payment transactions which occur in

these local government agencies each month.

Additionally, our ability to integrate Internet payment

systems with existing back office automation systems

allows our e-government solutions to seamlessly post

and update back office systems real time, a real

advantage over most of our competitors in the local

government e-commerce market.

We provide

city and county

governments with

everything they

need to effectively

manage critical

ﬁnancial, judicial,

law enforcement,

utilities, personnel,

tax, clerical, and

administrative

systems.

Our growing list of e-government

fines and fees and generate the specialized

products and services includes:

judgment and sentencing documents, citations,

notices and forms required in a civil proceeding.

Software Systems and Services

Additional judicial applications are available that

Tyler Technologies assists local and county govern-

can automate the management of court calendars,

ments with a wide range of information technology

coordinate judges’ schedules, generate court

and automation needs, including software and

dockets, manage justice of the peace processes and

hardware selection, network design, management,

automate district attorney or prosecutors functions.

installation, training, support and related services.

Related Tyler judicial information products also

We provide a variety of sophisticated integrated

include a jury selection application, “hot” check

information management systems and services to

processing application, and adult and juvenile

county and local governments, integrating our own

probation processing applications.

software products with third-party hardware,

database management applications and other office

Law Enforcement Systems

automation software. Currently available information

Our advanced law enforcement management

management systems and software include:

systems are automating all aspects of local

and county law enforcement, including jail

Judicial Information Management Products

management, inmate medical processing, incident

We offer a complete suite of specialized information

and offense tracking, report and warrant tracking

management products designed to meet a full

and the payment of traffic and parking tickets. Our

spectrum of judicial system needs, including

state-of-the-art dispatch/emergency 911 system

can track both the availability and status of

> Criminal and civil court records

emergency response vehicles responding to calls.

> Jail booking and release information

This sophisticated system has the ability to

> Bond and bondsmen information

interface with local and state searches and assists

> Court calendars and dockets

dispatchers in processing emergency information.

These products may be installed on a stand-alone

Property Appraisal and Tax

basis, or integrated with other Tyler court system

Our powerful, Internet-enabled software systems

products to eliminate duplicate entries and improve

are already automating the assessment and

efficiency.

Court Systems

appraisal of real and personal property nationwide.

Current system capabilities include record keeping,

mass appraisal, inquiry and protest tracking,

Our Internet-enabled court system products are

appraisal and tax roll generation, tax statement

designed to automate the tracking and management

processing, and electronic state level reporting.

of information involved in criminal and civil cases.

Our systems can be image and video-enabled to

These integrated applications track cases, process

facilitate the storage of property related documents

and digital photographs for use in defending values

government needs include cemetery records

in protest situations. Related property and tax appli-

management, ambulance billing and fleet mainte-

cations support the needs of counties, cities, school

nance, citizen complaint tracking, permits and

tax offices, and special collection agencies for billing,

inspections and business licenses.

collections, lock box operations and mortgage com-

pany electronic payments. We are also the nation’s

Specialized County Products

largest provider of mass real property appraisal

As part of our ongoing efforts to add value to

services for local governmnet taxing authorities.

public information, we offer a variety of specialized

Fund Accounting

applications designed to help county governments

enhance and automate courthouse operations.

Our modular accounting packages can be tailored to

Currently our information systems support child

meet the needs of virtually any government agency or

support tracking, voter registration, election result

nonprofit entity. Available modules, including

tabulations, motor vehicle registration, and the

accounts payable, general ledger, payroll/personnel,

indexing of official public records such as deeds,

purchasing, project/grant accounting, fixed assets,

birth and death certiﬁcates.

revenues, bank manager and human resources

conform to generally accepted accounting principles,

Property Records Services

while meeting all government accounting and

Tyler Technologies currently offers a diverse

ﬁnancial reporting requirements.

and growing range of information management

outsourcing services to government and commercial

Utility Customer Information Systems

customers, designed to manage and improve access

As part of our on-going effort to meet the needs

to real property and other records

of municipal and public sector customers, Tyler

Technologies provides a variety of information

Our services include title plant data and update

systems designed to automate the billing and

services, records management, micrographic

collection of both metered and non-metered utilities

reproduction, computerized indexing, and digital

services provided by municipal governments. As

imaging of property records and much more.

part of our initiative to provide more effective

e-government services, we will be offering a variety

National Data Repository

of convenient Internet-enabled utility bill payment

We are constructing a national repository of public

options during 2000.

records data, with an initial target market of the

mortgage and financial services industries. This

Specialized Municipal Information Products

database currently has web-enabled property tax

Tyler Technologies systems are already automating

information for over 65,000,000 parcels of real

a multitude of city hall functions, including

property nationwide. We plan to add a wide range of

municipal court management, equipment and

other public information, including real property

project costing, inventory, special assessments and

assessment data, chain of property records and

tax billing and collection. Other applications

images, and UCC ﬁling data.

designed to meet specific city and municipal

Tyler

Technologies

information systems not only

make government agencies more efficient, they will enable anyone who

needs access to a deed, appraisal, court record or other government

information, or who wants to pay a ticket, utility bill or property taxes,

to complete their task more quickly and efficiently than ever before.

Property Records Software and Services

Re-creation Services

Tyler Technologies’ proprietary indexing and

We provide archival-quality, image-enhanced

retrieval software automates the recording and

reprints of old paper-based records, including

indexing of real property transactions, maintaining

photostatic prints. We can microﬁlm backup copies

archival copies of the ﬁled documents, and making

for additional security in case of ﬁre, water damage,

them accessible for public inspection and copying.

or other catastrophic loss.

These software products also provide multi-

platform access and storage for a wide range of

The knowledge and resources to make

digitized and microfilm documents used by

e-government a reality

governmental agencies and private companies.

Tyler Technologies has a unique opportunity to

redefine and greatly improve the way government

Title Plant Services

works at the local level. Our mission to make local

We offer a wide variety of professional services to

government more accessible, responsive and

title companies, including advanced software

efficient through innovative e-government systems

designed to facilitate and automate the closing

and solutions has implications for virtually every

process. Our proprietary software systems store all

individual and every type of business. Tyler

the necessary information about the real estate

Technologies information systems not only make

transaction, automatically tracking the progress of

government agencies more efficient, they will

the closing, and producing the necessary closing

enable anyone who needs access to a deed, appraisal,

documents and other related services. We also

court record or other government information, or

provide comprehensive title plant data and update

who wants to pay a ticket, utility bill or property

services to title companies and other firms that

taxes, to complete their task more quickly and

need title search or underwriting capabilities.

efficiently than ever before. We now have the

management team and the technological resources

Document Management and Imaging

in place to make our vision of immediate Internet

Solutions Software Products

access to local government a reality. The years

Our sophisticated image storage and retrieval

ahead will be exciting as we deploy our combined

systems allow us to provide a total document

knowledge and technological resources to bring

management solution for many workgroup and

this vision to reality.

document-intensive departmental applications,

particularly where hybrid media support is a

requirement.

FINANCIAL INFORMATION

Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Management’s Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Selected Financial Data

Statement of operations data:(1)
Revenues
Costs and expenses:
Cost of revenues(2)
Selling, general and

administrative expense(2)
Costs of certain acquisition

opportunities

Amortization of intangibles
Interest (income) expense, net

Income (loss) from continuing

operations before taxes

Income tax provision (benefit)
Income (loss) from continuing

operations

Income (loss) from

continuing operations
per common share–diluted

As of or for the Years Ended December 31,
(Dollars And Average Shares In Thousands, Except Per Share Data)

1999

1998

1997

1996

1995

$108,401

$ 50,549

$ —

54,413

24,749

—

37,909

14,461

2,959

6,858(3)

1,851
7,315
4,573

2,340
2,404

3,146
3,173
1,831

3,189
2,033

—
—
(822)

(2,137)
(918)

—
—
(304)

(6,554)
(1,573)

—

4,126

—
—
1,003

(5,129)
(1,753)

$ (64)

$ 1,156

$(1,219)

$ (4,981)

$ (3,376)

$ (0.00)

$ 0.03

$ (0.06)

$ (0.25)

$ (0.17)

Average number of diluted shares

39,105

34,400

20,498

19,876

19,869

Other data:
EBITDA(4)

$ 20,025

$ 13,669

$(2,843)

$ (6,757)

$ (3,864)

Balance sheet data:(1)
Total assets
Long-term obligations, excluding

current portion
Shareholders’ equity

Statement of Cash Flows Data:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

As of December 31,

1999

1998

1997

1996

1995

$272,535

$150,094

$47,150

$52,484

$109,559

67,446
138,904

37,189
76,346

—
31,403

—
32,041

—
93,362

$ 654
(24,743)
24,955

$ 2,088
(36,787)
27,893

$(5,829)
(2,020)
2,515

$ 6,484
6,139
9

$ 13,514
49,187
(62,663)

(1) 1999 and 1998 includes the results of operations from the software systems and services segment and information and property records services
segment from the acquired companies’ respective dates of acquisition and excludes the results of operations from the discontinued automotive
parts and supplies business. Prior years’ selected financial data has been restated to reflect discontinuation of the automotive parts and supply
business in 1998 and discontinuation of the fund-raising segment in 1997 and for years prior to 1998, selling, general and administrative
expense includes only data relating to the holding company. See Notes 2 and 3 in Notes to Consolidated Financial Statements.

(2) Depreciation and amortization included in cost of revenues and selling, general and administrative expenses for 1999, 1998, 1997, 1996 and

1995 was $3,946, $2,330, $116, $101 and $262, respectively.

(3) 1996 selling, general and administrative expenses include pretax restructuring and other charges of $3,616.

(4) EBITDA consists of income from continuing operations before interest, costs of certain acquisition opportunities, income taxes, depreciation and
amortization. Although EBITDA is not calculated in accordance with accounting principles generally accepted in the United States, the Company
believes that EBITDA is widely used as a measure of operating performance. Nevertheless, this measure should not be considered in isolation
or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company’s operating
performance or liquidity that is calculated in accordance with generally accepted accounting principles. EBITDA does not take into account the
Company’s debt service requirements and other commitments and accordingly EBITDA is not necessarily indicative of amounts that may be
available for reinvestment in the Company’s business or other discretionary uses. In addition since all companies do not calculate EBITDA in the
same manner, this measure may not be comparable to similarly titled measures reported by other companies.

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than historical or
current facts, including, without limitation, statements about the business, financial condition, business strategy, plans and objec-
tives of management, and prospects of the Company are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from these expectations. Such risks and uncertainties include,
without limitation, the ability of the Company to successfully integrate the operations of acquired companies, technological risks
associated with the development of new products and the enhancement of existing products, changes in the budgets and regulat-
ing environments of the Company’s government customers, the ability to attract and retain qualified personnel, changes in prod-
uct demand, the availability of products, changes in competition, changes in economic conditions, risks associated with Year 2000
and similar issues, changes in tax risks and other risks indicated in the Company’s filings with the Securities and Exchange
Commission. These risks and uncertainties are beyond the ability of the Company to control, and in many cases, the Company
cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the
forward-looking statements.

When used in this Annual Report, the words “believes,” “plans,” “estimates,” “expects,” “anticipates,” “intends,” “continue,” “may,”
“will,” “should,” “projects,” “forecasts,” “might,” “could,” or the negative of such terms and similar expressions as they relate to the
Company or its management are intended to identify forward-looking statements.

General
In October 1997, the Company sold Institutional Financing Services, Inc. (“IFS”) which provided products for fund-raising pro-
grams. In March 1999, the Company sold Forest City Auto Parts Company (“Forest City”), which was an automotive parts and
supplies business. With the disposal of Forest City, the Company has focused solely on the software systems and services segment
and the information and property records services segment. Therefore, historical financial information attributable to the automo-
tive parts and supply business has been reported as discontinued operations in 1999, 1998 and 1997, together with the results of
operations associated with the products for fund raising business and all prior year financial information included herein has been
restated to reflect these dispositions. In 1997, continuing operations includes only corporate expense and interest income mainly
attributable to proceeds from disposals of prior operating companies. Continuing operations in 1999 and 1998 are comprised of
the results of operations from the information management businesses from their respective dates of acquisition.

As discussed in Note 16 in the Notes to Consolidated Financial Statements, the Company adopted in the fourth quarter of 1999 a
change in its accounting for the sales of copies of title plants which only occurred during the year ended December 31, 1999. The
following discussion takes into consideration the effects of this accounting change.

Results of Operations

1999 Compared to 1998

Following is a summary of significant acquisitions consummated in 1998 and 1999:

On February 19, 1998, the Company acquired The Software Group (“TSG”) and Interactive Computer Designs, Inc. (“INCODE”),
which provide county, local and municipal governments with software, systems and services to serve their information technology
and automation needs. Their customer base is mainly located in Texas, Georgia and Oregon.

On February 19, 1998, the Company also acquired Business Resources Corporation (“Resources”), a major provider of a wide
range of information management outsourcing services, primarily to county governments, as well as to some commercial users.
These outsourcing services currently include records management and micrographic reproduction, computerized indexing, and
imaging of real property records maintained by county clerks and recorders, as well as information management outsourcing and
professional services required by other county government units and agencies. Resources also provides title plant data and proper-
ty records database information and title plant copies and title plant update services.

On June 5, 1998, the Company acquired a line of document management software and related customer installations and service
contracts from the Business Imaging Systems division of Eastman Kodak Company. Kofile, a newly formed subsidiary in the
Company’s Resources unit, provides development, support and marketing of document management software and related cus-
tomer installations and service contracts throughout the United States. Kofile’s customer base includes both commercial and
governmental users.

Effective August 1, 1998, the Company completed the purchase of Computer Management Services (“CMS”). CMS provides inte-
grated information management systems and services to county and municipal governments throughout Iowa, Minnesota,
Missouri, South Dakota, Illinois, Wisconsin and other states, primarily in the upper Midwest.

Effective March 1, 1999, the Company acquired Eagle Computer Systems, Inc. (“Eagle”). Eagle supplies networked computing
solutions and services for county governments, primarily in the western United States.

Effective April 1, 1999, the Company completed its acquisition of Micro Arizala Systems, Inc. d/b/a FundBalance (“FundBalance”),
a company which develops and markets fund accounting software and other applications for state and local governments, not-for-
profit organizations and cemeteries.

On April 21, 1999, the Company acquired Process Incorporated d/b/a Computer Center Software (“MUNIS”), which designs and
develops integrated financial and land management information systems for counties, cities, schools and not-for-profit organiza-
tions primarily located in the northeastern and southeastern United States.

On July 16, 1999, the Company acquired Pacific Data Technologies, Inc. (“Pacific Data”). Pacific Data is the primary developer of
the Company’s database, which consists of software and systems that automate and manage public information records for
Internet delivery.

On November 4, 1999, the Company acquired selected assets and assumed selected liabilities of Cole Layer Trumble Company
(“CLT”), a division of a privately held company. CLT provides appraisal software and services to governments.

During 1998 and 1999, the Company also made other acquisitions, which were immaterial. All of the Company’s acquisitions
have been accounted for using the purchase method for business combinations, and the results of operations of the acquired enti-
ties are included in the Company’s historical consolidated financial statements from their respective dates of acquisition. Because
of the significance of these acquisitions, in the following analysis of results of operations the Company has provided pro forma
amounts as if all of the Company’s acquisitions had occurred as of the beginning of 1998. In comparing 1998 to 1997, the pro
forma amounts include only completed acquisitions as of December 31, 1998 as if they had occurred as of the beginning of 1997.

Revenues

For the year ended December 31, 1999, Tyler had revenues from continuing operations of $108.4 million, $70.0 million of which
were attributable to the software systems and services segment and $38.4 million of which were derived from the information and
property records and services segment. On a pro forma basis, total revenues in 1999 were $144.4 million compared to $114.6
million in 1998.

Software Systems and Services Segment
On a pro forma basis, total revenues from the software systems and services segment increased $23.6 million, or 29% to $106.0
million, for the twelve months ended December 31, 1999 compared to $82.4 million in the comparable prior year period. Pro
forma software license revenue in 1999 increased approximately 31% compared to 1998. Software license revenue benefited from
the installation of several large contracts in 1999 for judicial information management and court systems and property appraisal
and tax systems and increased sales volume from utilities applications. As a percentage of total revenues on a pro forma basis,
software license revenue was approximately 23% in both 1999 and 1998.

Professional service revenue on a pro forma basis increased approximately 37% in 1999 compared to 1998. Approximately two-
thirds of this increase is primarily due to customization and modifications of software products required in several large contracts
installed in 1999. The remaining one-third of the increase is due to increased volume in mass appraisal services. Professional ser-
vice revenue was approximately 40% of total revenues for this segment in 1999 compared to approximately 38% in 1998, on a
pro forma basis.

Pro forma maintenance revenue increased $7.0 million due to an increase in the Company’s base of installed software and systems
products. Maintenance revenue was approximately 26% of total revenue for this segment in 1999 compared to approximately
25% in 1998, on a pro forma basis.

Hardware revenues on a pro forma basis decreased approximately 8% in 1999 compared to 1998 as a result of the Company
focusing its sales effort on higher margin products and services. This decrease was offset slightly by an increase in customer
upgrades due to Year 2000 compliance requirements.

The Company anticipates revenues may be down slightly in 2000 in comparison to 1999 as revenues generated from Year 2000
compliance decline.

Information and Property Records Services Segment
On a pro forma basis, total revenues from the information and property records services segment increased $6.2 million or 19%
to $38.4 million, for the twelve months ended December 31, 1999 compared to $32.2 million in the comparable prior year peri-
od. Sales of document management services contracts and recording and imaging products provided the majority of the increase.
In July 1999, the Company was awarded a $4.5 million contract with the Cook County, Illinois, Recorder of Deeds in Chicago.
Under the contract, Tyler will convert to digitized images documents recorded and stored on microfilm from 1985 to 1997. Those
images will be accessed through Tyler’s automated document management system. In the fourth quarter of 1999, revenues recog-
nized relating to this contract were approximately $1.8 million and the remainder of the contract is expected to be completed by

the third quarter of 2000. The revenue increase relating to this contract was offset by $3.6 million of revenue recorded in 1998
relating to a previous completed contract with Cook County to design and install an electronic document management and imag-
ing system. Other sources of revenue increases were provided by optical imaging services, title company software and title plant
update services.

Cost of Revenues

For the year ended December 31, 1999, the Company had cost of revenues from continuing operations of $54.4 million, $32.7
million of which were attributable to the software systems and services segment and $21.7 million of which were derived from
the information and property records and services segment. On a pro forma basis, cost of revenues were $77.5 million in 1999
compared to $62.2 million in 1998.

Software Systems and Services Segment
On a pro forma basis, total cost of revenues from the software systems and services segment increased $10.8 million, or 24%, for
the twelve months ended December 31, 1999 compared to $45.0 million in the comparable prior year period. The software sys-
tems and services gross margin increased to 47% in 1999 compared to 45% for the same period in the prior year, on a pro forma
basis. The gross margin benefited from a product mix in 1999, which included less hardware and third party software than the
prior year on a pro forma basis. Hardware and third party software have a lower margin than proprietary software license prod-
ucts and services. The gross margin increase was offset slightly by higher costs associated with third party services utilized in con-
nection with the installation of two large mass appraisal contracts in 1999.

Information and Property Records Services Segment
On a pro forma basis, total cost of revenues from the information and property records services segment increased $4.5 million,
or 26%, for the twelve months ended December 31, 1999 compared to $17.2 million in the comparable prior year period. The
gross margin from information and property records services was lower at 44%, compared to the prior year period amount of
47%, on a pro forma basis. This margin decline is mainly attributable to changes in product mix caused by an increase in docu-
ment management services, which have a lower gross margin than other services.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $37.9 million in 1999, compared to $14.5 million in 1998. The current year
includes a full year of selling, general and administrative expenses associated with 1998 acquired companies and partial year
expenses for 1999 acquired companies. On a pro forma basis, selling, general and administrative expenses as a percent of rev-
enues was approximately 32% for both 1999 and 1998.

Costs of Certain Acquisition Opportunities

In March 1999, the Company entered into a merger agreement pursuant to which the Company contemplated the acquisition of
all of the outstanding common stock of CPS Systems, Inc. (“CPS”). In connection with that agreement, the Company provided
CPS with bridge financing in the form of notes secured by a second lien on substantially all of the assets of CPS, including
accounts receivable, inventory, intangibles, equipment and intellectual property.

In January 2000, CPS filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On March 24,
2000, the bankruptcy court conducted a public auction of the assets of CPS. The Company submitted a cash only bid of
$100,000 for the California Visual Basic/Oracle Tax and CAMA software assets of CPS.

The Company closed on the transaction on March 30, 2000, and anticipates minimal to no recovery of amounts due under its
secured notes. Accordingly, the aggregate bridge financings and related accrued interest receivable and other costs amounting to
$1.9 million were expensed in the 1999 consolidated financial statements.

On July 31, 1998, the Company entered into a letter of intent with a Fortune 500 company to acquire certain businesses of the
company in a transaction to be accounted for as a purchase business combination. These businesses had estimated annual rev-
enues in excess of $500 million and represented a business opportunity which was aligned with the Company’s strategy in the
information management business. Direct and incremental costs totaling $3.1 million associated with the combination, primarily
consisting of fees paid to outside legal and accounting advisors for due diligence, were incurred by the Company and would have
been considered as a cost of the acquisition upon the successful closing of the transaction. Subsequent to September 30, 1998, the
potential seller elected not to sell any of the businesses. Accordingly, all costs associated with this opportunity were expensed in
the 1998 consolidated financial statements.

Amortization of Intangibles

The Company accounted for all 1999 and 1998 acquisitions using the purchase method of accounting for business combinations.
The excess of the purchase price over the net identifiable assets of the acquired companies (“goodwill”) is amortized using the
straight-line method of amortization over their respective estimated useful lives.

At December 31, 1999 and 1998, the Company had $160.7 million and $96.0 million, respectively, of goodwill and other intan-
gible assets, net of accumulated amortization. Such intangibles amounted to 59% and 64% of total assets and 116% and 126% of
shareholders’ equity at December 31, 1999 and 1998, respectively. Goodwill prior to any amortization, at December 31, 1999 and
1998 was $108.0 million and $71.9 million, respectively.

The Company considers a variety of factors in estimating the useful lives of goodwill and other intangible assets to be recorded as
a result of its acquisitions. Determining the appropriate useful life of goodwill and other intangible assets is a matter of judgment.
In making its determination, the Company considered a number of factors, including the following:

• position of the acquired enterprise in the market and the extent of barriers to entry for competitors;

• age, historical operating performance, and quality of earnings of the acquired enterprise, including the extent of operating his-

tory and the presence or lack of stable earnings history;

• experience of the acquired enterprise’s management;

• the future viability of products and services, including the impact of technological changes and advances and the level of con-

tinued investment necessary to maintain the acquired enterprise’s technological position;

• competition; and

• industry practice.

In addition, the Company periodically retains the services of an outside appraisal firm to assist in determining the value assigned
to newly acquired identifiable intangible assets and the estimated useful lives. At December 31, 1999 and 1998, management of
the Company believes such assets are recoverable and the estimated useful lives are reasonable.

Net Interest Expense

As a result of the debt incurred to finance acquisitions and their related transaction costs in 1998 and 1999, the Company record-
ed net interest expense of $4.6 million in 1999 compared to $1.8 million in 1998.

Income Tax Provision

In 1999, the Company had pre-tax income from continuing operations of $2.3 million and an income tax provision of $2.4 mil-
lion, resulting in an effective tax rate of 103%. The comparable 1998 effective income tax rate was 64%. The high effective income
tax rate is due to non-deductible items such as goodwill amortization as compared to the relative amount of pretax earnings.

Discontinued Operations

Forest City Divestiture
In December 1998, the Company entered into a letter of intent to sell its non-core automotive parts and supplies business, Forest
City. Accordingly, this segment has been accounted for as a discontinued operation in compliance with Accounting Principles
Board Opinion No. 30.

On March 26, 1999, the Company sold all of the outstanding common stock of Forest City to HalArt, L.L.C. for $24.5 million.
Proceeds consisted of $12.0 million in cash, $3.8 million in a short-term secured promissory note, $3.2 million in senior secured
subordinated notes and $5.5 million in preferred stock. The short-term secured promissory note was fully paid in July 1999. The
senior secured subordinated notes carry interest rates ranging between 6% to 8%, become due in March 2002, and are secured by
a second lien on Forest City inventory and real estate. The preferred stock will be mandatorily redeemable March 2006. Both the
subordinated notes and the preferred stock will be subject to partial or whole redemption upon the occurrences of specified
events.

In determining the loss on the disposal of the business, the subordinated notes were valued using present value techniques. As
discussed in Note 2 in the Notes to Consolidated Financial Statements, the $3.2 million in senior secured subordinated notes
were subsequently assigned without recourse to another party in connection with an acquisition. Because redemption of the pre-
ferred stock is highly dependent upon future successful operations of the buyer and due to the extended repayment terms, the
Company is unable to estimate the degree of recoverability. Accordingly, the Company will record the value of the preferred stock
as cash is received. The Company originally estimated the loss on the disposal of Forest City to be $8.9 million, which was
recorded in the fourth quarter of 1998. The estimated loss included anticipated operating losses from the measurement date of
December 1998 to the date of disposal and associated transaction costs. In 1999, the Company recorded additional losses of
$907,000 (including taxes of $183,000) to reflect adjusted estimated transaction costs, funded operating losses which were higher
than originally estimated, income tax benefit adjustment and a write down of a receivable in connection with a dispute.

expensed approximately $1.9 million (net of taxes of $877,000) for trial costs and settlements in excess of the amounts accrued
associated with these claims. See Note 17 in Notes to Consolidated Financial Statements.

IFS Divestiture
Effective October 15, 1997, the Company sold all of the capital stock of its subsidiary, IFS, which provided products for fund-
raising programs, to I.F.S. Acquisition Corporation for $8.4 million. This sale resulted in a loss on disposal of $2.5 million. The
estimated loss on disposal included estimates regarding the value of certain assets that were subject to change. In 1998, the
Company made final adjustments to these assets, which resulted in a reduction of the previously estimated loss on disposal by
$801,000. Management does not expect any further adjustments to the loss on disposal. Proceeds consisted of $5.8 million in
cash received at closing and $2.6 million received in January 1998.

Investment Securities Available-For-Sale

Pursuant to an agreement with two major shareholders of H.T.E., Inc. (“HTE”), the Company acquired approximately 32% of
HTE’s common stock in two separate transactions in 1999. On August 17, 1999, the Company exchanged 2.3 million shares of its
common stock for 4.7 million shares of HTE common stock. This initial investment was recorded at $14.0 million. The second
transaction occurred on December 21, 1999, in which the Company exchanged 484,476 shares of its common stock for 968,952
shares of HTE common stock and this investment was recorded at $1.8 million.

Florida state corporation law restricts the voting rights of “control shares”, as defined, acquired by a third party in certain types of
acquisitions, which restrictions may be removed by a vote of the shareholders. The Florida “control share” statute has not been
interpreted by the courts. HTE has taken the position that, under the Florida statute, all of the shares acquired by the Company
constitute “control shares” and therefore do not have voting rights until such time as shareholders of HTE, other than the
Company, restore voting rights to those shares. Management of the Company believes that only the shares acquired in excess of
20% of the outstanding shares of HTE constitute “control shares” and therefore believes it currently has the right to vote all HTE
shares it owns up to at least 20% of the outstanding shares of HTE.

Because the Company currently does not have the ability to exercise significant influence, the Company accounts for its invest-
ment in HTE pursuant to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”. These securities are classified as available-for-sale and are recorded at fair
value as determined by quoted market prices. Unrealized holding gains and losses, net of the related tax effect, on available-for-
sale securities are excluded from earnings and are reported as a separate component of shareholders’ equity until realized.

At December 31, 1999, the cost, fair value and gross unrealized holding gains of the investments available-for-sale amounted to
$15.8 million, $33.7 million and $17.9 million, respectively, based on a quoted market price of $6.00 per share. Because of the
Company’s existing capital loss carryforwards, any tax expense related to the unrealized gain is offset by a reduction in the
Company’s valuation allowance. At March 31, 2000, the fair value was $18.1 million based on a quoted market price of $3.22
per share.

Net Income and Other Measures

Net loss was $2.8 million in 1999 compared to $8.4 million in 1998. Diluted loss per share was $0.07 and $0.24 for 1999 and
1998, respectively. Net loss from continuing operations was $64,000, or $0.00 per diluted share, in 1999 compared to net earn-
ings of $1.2 million, or $0.03 per diluted share in 1998. Excluding the effect of the costs of certain acquisition opportunities in
1999 and 1998, income from continuing operations would have been $1.1 million and $3.2 million, respectively, and diluted
earnings per share would have been $0.03 and $0.09 per dilutive share, respectively.

Earnings before interest, taxes, depreciation, amortization and costs of certain acquisition opportunities (“EBITDA”) for the year
ended December 31, 1999, was $20.0 million compared to $13.7 million in 1998. EBITDA consists of income from continuing
operations before interest, costs of certain acquisition opportunities, income taxes, depreciation and amortization. Although
EBITDA is not calculated in accordance with accounting principles generally accepted in the United States, the Company believes
that EBITDA is widely used as a measure of operating performance. Nevertheless, the measure should not be considered in
isolation or as a substitute for operating income, cash flows from operating activities, or any other measure for determining the
Company’s operating performance or liquidity that is calculated in accordance with generally accepted accounting principles.
EBITDA is not necessarily indicative of amounts that may be available for reinvestment in the Company’s business or other
discretionary uses. In addition, because all companies do not calculate EBITDA in the same manner, this measure may not be
comparable to similarly titled measures reported by other companies.

Because of the recent acquisitions in 1999 and 1998, the Company records a significant level of charges for its amortization of
intangibles, a majority of which are not deductible for income tax purposes. The effect of these amortization charges and the relat-
ed tax effect was to decrease income from continuing operations during the years ended December 31, 1999 and 1998 by $5.8
million and $2.7 million and related diluted earnings per share by $0.15 and $0.08, respectively.

1998 Compared to 1997

Revenues

For the year ended December 31, 1998, Tyler had revenues from continuing operations of $50.5 million, $22.1 million of which
were attributable to the software systems and services segment and $28.4 million of which were derived from the information and
property records and services segment. On a pro forma basis for acquired companies as of December 31, 1998 only, total revenues
were $62.7 million compared to $48.1 million in 1997.

Software Systems and Services Segment
On a pro forma basis, total revenues from the software systems and services segment increased $8.5 million, or 43% to $28.4 mil-
lion, for the twelve months ended December 31, 1998 compared to $19.9 million in the comparable prior year period. Results
benefited from an overall movement by county and local governments to upgrade their current computer systems. The movement
has been driven in part by customers’ need to solve their Year 2000 issues. Maintenance revenue for this segment in 1998 was
approximately 25% of total revenue for this segment. In 1998, the Company was awarded significant contracts with the counties
of El Paso and Gregg, both located in Texas, and Multnomah County (Portland) in Oregon for combined expected revenues of
approximately $8.0 million. Installation of these contracts began in the fall of 1998 and was expected to be significantly complete
by the end of 1999. Revenues in 1998 include approximately $2.5 million associated with these three contracts. Additional rev-
enue growth was derived from product upgrades and expansion into new markets in Georgia, Washington, Minnesota, Wisconsin
and Illinois.

Information and Property Records Services Segment
On a pro forma basis, total revenues from the information and property records services segment increased $6.2 million or 22%
to $34.4 million, for the twelve months ended December 31, 1998 compared to $28.2 million in the comparable prior year peri-
od. A large portion of this increase is the result of revenue earned from a contract for the Cook County Recorder of Deeds in
Chicago, Illinois to design and install an electronic document management and imaging system. Implementation of the system
began in the second quarter and was completed in the fourth quarter of 1998. Although the installation of the Cook County con-
tract was completed in 1998, maintenance and support activities will continue through 2003. Other sources of revenue increases
were optical imaging services, title plant update services, title company software, customized programming associated with docu-
ment management software and royalty income. Royalty income is derived from the sale of property tax information for real estate
transactions. These increases were somewhat offset by lower re-creation revenue compared to last year. Re-creation services pro-
vide image-enhanced, archival-quality reprints of old and deteriorating records, including photostatic prints, with microfilm
backup copies for improved security in case of fire, theft, water damage or other catastrophe. Re-creation revenue is generally
dependent on available county funds, which may result in uneven revenue streams from year to year.

Cost of Revenues

For the year ended December 31, 1998, Tyler had cost of revenues from continuing operations of $24.7 million, $10.2 million of
which were attributable to the software systems and services segment and $14.5 million of which were derived from the informa-
tion and property records services segment. On a pro forma basis, for acquired companies as of December 31, 1998 only, cost of
revenues were $32.1 million compared to $24.6 million in 1997.

Software Systems and Services Segment
On a pro forma basis, total cost of revenues from the software systems and services segment increased $3.9 million, or 38%, for
the twelve months ended December 31, 1998 compared to $10.1 million in the comparable prior year period. The gross margin
for software systems and services in 1998 of 51% was up slightly from 49% for same period in the prior year, on a pro forma
basis, primarily due to increased sales volume related to several large contracts in the fourth quarter of 1998. The gross margin
increase was offset somewhat by a strong competitive market for computer professionals which resulted in increased salaries and
other costs associated with attracting and retaining quality employees.

Information and Property Records Services Segment
On a pro forma basis, total cost of revenues from the information and property records services segment increased $3.6 million,
or 25%, for the twelve months ended December 31, 1998 compared to $14.5 million in the comparable prior year period.
The gross margin from information and property records services was slightly lower at 47%, compared to the prior year period
amount of 49%, on a pro forma basis. This decline in margin is mainly attributable to changes in product mix, primarily
re-creation revenue, which was unusually high in 1997 and has a higher gross margin than other services.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $14.5 million in 1998, compared to $3.0 million in 1997. The increase is due
to acquisition of the information management companies as the prior year consists only of corporate expense relating to the hold-
ing company’s activities. On a pro forma basis, selling, general and administrative expenses as a percent of revenues has declined
from approximately 29% in 1997 to approximately 27% in 1998, mainly due to increased sales volume. This decline was offset
somewhat by increased costs associated with present and planned future growth.

Amortization of Intangibles

The Company accounted for all 1998 acquisitions using the purchase method of accounting for business combinations.
Unallocated purchase price over the net identifiable assets of the acquired companies is amortized using the straight-line method
of amortization over their respective useful lives.

Net Interest Expense

As a result of the debt incurred to finance acquisitions and their related transaction costs in 1998, the Company recorded net
interest expense of $1.8 million compared to net interest income of $822,000 in 1997.

Income Tax Provision

The effective tax rate increased to 64% from a 43% benefit rate in the prior year mainly due to the non-deductibility of goodwill
amortization relating to the 1998 acquisitions.

Net Income and Other Measures

Net loss was $8.4 million in 1998 compared to $3.3 million in 1997. Diluted loss per share was $0.24 and $0.16 for 1998 and
1997, respectively. Net earnings from continuing operations was $1.2 million, or $0.03 per diluted share, in 1998 compared to a
net loss of $1.2 million, or $0.06 per diluted share in 1997. Excluding the effect of the costs of certain acquisition opportunities,
income from continuing operations and diluted earnings per share in 1998 would have been $3.2 million and $0.09, respectively.

Accounting Pronouncements Not Yet Adopted

In June 1999, SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities–Deferral of Effective Date of FASB
Statement No. 133” was issued by the Financial Accounting Standards Board (“FASB”). The Statement defers for one year the
effective date of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”. The rule now will
apply to all fiscal years beginning after June 15, 2000. FASB Statement No. 133 will require the Company to recognize all deriva-
tives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the deriv-
ative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be imme-
diately recognized in earnings. The adoption of SFAS No. 133 is not expected to have a material impact on the Company’s consol-
idated financial statements and related disclosures.

Liquidity

In October 1999, the Company entered into a three-year $80 million revolving credit agreement (“Senior Credit Facility”) with a
group of banks. Borrowings under the Senior Credit Facility, as amended, bear interest at either the lead bank’s prime rate plus a
margin of .25% to 1.50% or the London Interbank Offered Rate plus a margin of 2.25% to 3.50%, depending on the Company’s
ratio of indebtedness to earnings before interest, taxes, depreciation and amortization. The Senior Credit Facility replaced the
Company’s previous $50 million revolving credit facility. At December 31, 1999, the Company had outstanding borrowings and
letters of credit of $61.0 million and available borrowing capacity of $19.0 million under the Senior Credit Facility. The effective
average interest rate for the borrowings was approximately 7.7% and 7.5% in 1999 and 1998, respectively. The Senior Credit
Facility is secured by substantially all of the Company’s real and personal property and a pledge of the common stock of present
and future significant operating subsidiaries. The Senior Credit Facility is also guaranteed by such subsidiaries. Under the terms of
the Senior Credit Facility, the Company is required to maintain certain financial ratios and other financial conditions. The Senior
Credit Facility also prohibits the Company from making certain investments, advances or loans and restricts substantial asset
sales, capital expenditures and cash dividends. Under the terms of the Senior Credit Facility the Company has the ability to
increase the facility to $100 million subject to the participation of additional new lenders.

In addition, at December 31, 1999, the Company had several promissory notes payable, capital lease obligations and other install-
ment notes totaling $6.5 million (excluding current portion of $3.7 million). Fixed interest rates on the promissory and install-
ment notes ranged from 6% to 10%. The Company made principal payments of $3.2 million on these notes and $668,000 on
capital lease obligations in 1999.

In 1999, the Company made capital expenditures of $15.2 million for continuing operations, of which approximately $2.5 mil-
lion were financed through capital lease obligations and a note payable. These expenditures included $6.7 million relating to the
construction of the national data repository and development of software. The remaining expenditures were primarily for comput-
er equipment and building expansions.

The Company entered into a tax-benefit transfer lease in 1983 pursuant to which it is obligated to make income tax payments
totaling $2.2 million over the next two years beginning in 2000. This obligation is included in deferred taxes at December 31,
1999.

In 1999, the Company paid, in the aggregate, $25.6 million in cash and issued 6.0 million shares of Tyler common stock for
acquisitions accounted for as purchases. Cash paid for acquisitions does not include transaction costs related to the execution of
the acquisitions, such as legal, accounting and consulting fees, or acquired cash balances.

Excluding acquisitions, Tyler anticipates that 2000 capital spending will be approximately $10.0 million, which is expected to be
funded from internal operations and/or bank financing. Included in these expenditures is approximately $4.0 million relating to
construction of the Database. Such costs include certain payroll related programming costs as well as the costs to purchase data
from external sources to initially populate the Database. Upon completion, the Database will include, among other items, a wide
range of public information such as real property tax and assessment data, chain of title property records and images. The
Company does not anticipate Database revenues to be significant in 2000. Additionally, further expenditures will be necessary
subsequent to 2000 to update and expand the Database.

The Company is from time to time engaged in discussions with respect to selected acquisitions and expects to continue to assess
these and other acquisition opportunities as they arise. The Company may also require additional financing if it decides to make
additional acquisitions. There can be no assurance, however, that any such opportunities will arise, that any such acquisitions will
be consummated or that any needed additional financing will be available when required on terms satisfactory to the Company.
Absent any acquisitions, the Company anticipates that cash flows from operations, working capital and unused borrowing capaci-
ty under its Senior Credit Facility will provide sufficient funds to meet its needs for at least the next year.

The Company was a defendant in a lawsuit in which a favorable ruling was rendered in the first quarter of 2000. From late 1999
through the first quarter of 2000, the Company incurred legal fees in connection with the defense of this matter estimated to
range from $800,000 to $1.0 million, a majority of which will be paid in the second quarter of 2000.

On January 3, 2000, the Company acquired the stock of Capital Commerce Reporter, Inc. (“CCR”) for approximately $3.0 million
in cash, $1.2 million in assumed debt and a $2.8 million five-year 10% subordinated note in a business combination accounted
for as a purchase. CCR is based in Austin, Texas and provides public records research, document retrieval, filing and information
services. CCR has an active client base of approximately 1,800 financial institutions, legal firms and title companies.

Capitalization

The Company’s capitalization at December 31, 1999, consisted of $71.2 million in long-term obligations (including current por-
tion) and $138.9 million in shareholders’ equity. The total debt-to-capital ratio was 34% at December 31, 1999.

Year 2000

In the prior years, the Company discussed the nature and progress of its plans to become Year 2000 compliant. In late 1999, the
Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the
Company experienced no significant disruptions in mission critical information technology and non-information technology sys-
tems and believes those systems successfully responded to the Year 2000 date change. The Company is not aware of any signifi-
cant Year 2000 issues that have affected its business. The number of Year 2000-related inquiries from customers into the
Company’s customer-care centers has been minimal. While the Company does not anticipate any future problems, it is possible
that the Company’s systems could be affected in the future by the Year 2000 issue. The Company’s systems interface with many
third parties, which, if they have not adequately addressed their Year 2000 issues, might result in system failures that could cause
a significant disruption to the Company’s operations.

Consolidated Statements of Operations
Consolidated Statements of Operations
For the years ended December 31
For the years ended December 31
In thousands, except per share amounts
In thousands, except per share amounts

Revenues:
Revenues:

Software licenses
Software licenses
Professional services
Professional services
Maintenance
Maintenance
Hardware and other
Hardware and other
Total revenues
Total revenues

Cost of revenues:
Cost of revenues:

Software licenses
Software licenses
Professional services and maintenance
Professional services and maintenance
Hardware and other
Hardware and other

Total cost of revenues
Total cost of revenues

Gross margin
Gross margin

Selling, general and administrative expense
Selling, general and administrative expense
Costs of certain acquisition opportunities
Costs of certain acquisition opportunities
Amortization of intangibles
Amortization of intangibles

1999
1999

1998
1998

1997
1997

$ 23,576
$ 23,576
46,629
46,629
25,579
25,579
12,617
12,617
108,401
108,401

3,227
3,227
42,505
42,505
8,681
8,681
54,413
54,413

$10,761
$10,761
24,311
24,311
6,139
6,139
9,338
9,338
50,549
50,549

1,041
1,041
17,710
17,710
5,998
5,998
24,749
24,749

53,988
53,988

25,800
25,800

37,909
37,909
1,851
1,851
7,315
7,315

14,461
14,461
3,146
3,146
3,173
3,173

$ —
$ —
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—

—
—

2,959
2,959
—
—
—
—

Operating income (loss)
Operating income (loss)

6,913
6,913

5,020
5,020

(2,959)
(2,959)

Interest expense
Interest expense
Interest income
Interest income
Income (loss) from continuing operations before
Income (loss) from continuing operations before

income taxes
income taxes

Income tax provision (benefit)
Income tax provision (benefit)
Income (loss) from continuing operations
Income (loss) from continuing operations

Discontinued operations:
Discontinued operations:

Income (loss) from operations, after income tax
Income (loss) from operations, after income tax
Loss on disposal, after income taxes
Loss on disposal, after income taxes
Loss from discontinued operations
Loss from discontinued operations

Net loss
Net loss
Basic earnings (loss) per common share:
Basic earnings (loss) per common share:

Continuing operations
Continuing operations
Discontinued operations
Discontinued operations

Net loss per common share
Net loss per common share

Diluted earnings (loss) per common share:
Diluted earnings (loss) per common share:

Continuing operations
Continuing operations
Discontinued operations
Discontinued operations

Net loss per common share
Net loss per common share

Weighted average common shares outstanding:
Weighted average common shares outstanding:

Basic
Basic
Diluted
Diluted

See accompanying notes.
See accompanying notes.

(4,893)
(4,893)
320
320

2,340
2,340
2,404
2,404
(64)
(64)

—
—
(2,760)
(2,760)
(2,760)
(2,760)
$ (2,824)
$ (2,824)

$ (0.00)
$ (0.00)
(0.07)
(0.07)
$ (0.07)
$ (0.07)

39,105
39,105
39,105
39,105

(2,009)
(2,009)
178
178

3,189
3,189
2,033
2,033
1,156
1,156

(1,378)
(1,378)
(8,138)
(8,138)
(9,516)
(9,516)
$ (8,360)
$ (8,360)

$0.04
$0.04
(0.30)
(0.30)
$ (0.26)
$ (0.26)

$ 0.03
$ 0.03
(0.27)
(0.27)
$ (0.24)
$ (0.24)

32,612
32,612
34,400
34,400

(85)
(85)
907
907

(2,137)
(2,137)
(918)
(918)
(1,219)
(1,219)

339
339
(2,468)
(2,468)
(2,129)
(2,129)
$(3,348)
$(3,348)

$ (0.06)
$ (0.06)
(0.10)
(0.10)
$ (0.16)
$ (0.16)

20,498
20,498
20,498
20,498

Consolidated Balance Sheets
December 31
In thousands, except par value and number of shares

Assets
Current assets:

Cash and cash equivalents
Accounts receivable (less allowance for losses of $1,257 in 1999

and $531 in 1998)
Income tax receivable
Prepaid expenses and other current assets
Deferred income taxes
Net current assets of discontinued operations

Total current assets

Net assets of discontinued operations

Property and equipment, net

Other assets:

Investment securities available-for-sale
Goodwill and other intangibles, net
Sundry
Other receivables

Liabilities and Shareholders’ Equity
Current liabilities:

Accounts payable
Accrued wages and commissions
Other accrued liabilities
Current portion of long-term obligations
Deferred revenue

Total current liabilities

Long-term obligations, less current portion
Deferred income taxes
Other liabilities

Commitments and contingencies

Shareholders’ equity:

Preferred stock, $10.00 par value; 1,000,000 shares authorized,

none issued

Common stock, $0.01 par value; 100,000,000 shares authorized;

44,709,169 and 35,913,313 shares issued in 1999 and
1998, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Treasury stock, at cost; 1,418,482 shares in 1999 and 1,423,482

shares in 1998

Total shareholders’ equity

See accompanying notes.

1999

1998

$ 2,424

$ 1,558

39,464
3,392
3,301
2,438
—
51,019

14,429
1,308
1,445
1,061
12,752
32,553

—

2,848

21,789

14,147

33,713
160,665
1,991
3,358
$272,535

—
95,996
938
3,612
$150,094

$ 5,163
7,262
6,524
3,747
24,303
46,999

67,446
13,869
5,317

$ 1,190
1,903
3,249
1,876
10,148
18,366

37,189
10,920
7,273

—

447
151,298
(24,615)
17,931

359
103,985
(21,791)
—

(6,157)
138,904
$272,535

(6,207)
76,346
$150,094

Consolidated Statements of Shareholders’ Equity
For the years ended December 31, 1999, 1998 and 1997
In thousands

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Comprehensive

Accumulated

Treasury Stock

Shareholders’

Amount

Capital

Income

Deficit

Amount

Equity

21,309
—

$213
—

$ 48,520
—

$ —
—

$(10,083)
(3,348)

(1,429)
—

$(6,609)
—

$ 32,041
(3,348)

—

2,000
—
—

—
23,309
—

—
12,604

—
35,913

—

2,810
5,986

—

20
—
—

—
233
—

—
126

—
359

—

28
60

(309)

(442)

3,480
(220)
—

187
51,216
—

(259)
52,880

148
103,985

—

(31)

15,754
31,728

—

—
—
—

—
—

—

17,931

—

—
—

—

—
—
—

198

150

—
—
(472)

—
(13,431)
(8,360)

—
(1,553)
—

682

942

—
—
(1,630)

—
(6,615)
—

—
—

136
(6)

468
(60)

—
(21,791)

—
(1,423)

—
(6,207)

(2,824)

—

—
—

—

—
—

—

—
—

373

500

3,500
(220)
(1,630)

187
31,403
(8,360)

209
52,946

148
76,346

(2,824)

17,931
15,107

15,782
31,788

—
44,709

—
$447

(138)
$151,298

—
$17,931

—
$(24,615)

—
(1,418)

—
$(6,157)

(138)
$138,904

Balance at December 31, 1996

Net loss/Total comprehensive loss
Issuance of treasury shares upon

exercise of stock options
Issuance of treasury shares for

employee stock grants

Sale of common stock

and warrant

Redemption of rights
Purchase of treasury shares
Federal income tax benefit related

to exercise of stock options
Balance at December 31, 1997

Net loss/Total comprehensive loss
Issuance of treasury shares upon

exercise of stock options
Shares issued for acquisitions
Federal income tax benefit related

to exercise of stock options
Balance at December 31, 1998

Comprehensive income:

Net loss
Unrealized gain on securities

classified as available-for-sale,
net of tax

Total comprehensive income
Issuance of treasury shares upon

exercise of stock options

Investment securities
available-for-sale

Shares issued for acquisitions
Revision of federal income tax
benefit related to exercise of
stock options

Balance at December 31, 1999

See accompanying notes.

Consolidated Statements of Cash Flows
For the years ended December 31
In thousands

Cash flows from operating activities:

Net loss
Adjustments to reconcile net loss from operations

to net cash provided (used) by operations:

Depreciation and amortization
Impairment of notes receivable
Provision for doubtful accounts
Deferred income tax (benefit)
Discontinued operations–noncash charges and
changes in operating assets and liabilities

Changes in operating assets and liabilities, exclusive of

effects of acquired companies and discontinued operations:

Accounts receivable
Income tax receivable
Prepaid expenses and other current assets
Other receivables
Accounts payable
Accrued liabilities
Deferred revenue
Other liabilities

Net cash provided (used) by operating activities

Cash flows from investing activities:

Additions to property and equipment
Investment in database and other software development costs
Cost of acquisitions, net of cash acquired
Capital expenditures of discontinued operations
Proceeds from disposal of discontinued operations,

net of transaction costs
Issuance of notes receivable
Proceeds from disposal of property and equipment
Other

Net cash used by investing activities

Cash flows from financing activities:

Net borrowings on revolving credit facility
Payments on notes payable
Issuance of common stock
Net sale of treasury shares to employee benefit plans
Purchase of treasury shares
Payments of principal on capital lease obligations
Redemption of rights
Debt issuance costs

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

1999

1998

1997

$ (2,824)

$ (8,360)

$ (3,348)

11,261
1,851
702
546

(1,543)

(13,674)
(2,214)
257
594
1,097
2,817
1,784
—
654

(6,011)
(6,680)
(25,949)
(534)

15,114
(1,335)
144
508
(24,743)

30,190
(3,248)
—
19
—
(668)
—
(1,338)
24,955

866
1,558

5,503
—
179
242

9,266

(7,683)
231
(189)
882
(533)
(463)
4,316
(1,303)
2,088

(2,391)
(267)
(34,741)
(2,070)

2,628
—
21
33
(36,787)

30,810
(2,042)
—
209
—
(551)
(220)
(313)
27,893

(6,806)
8,364

116
—
—
(2,477)

2,794

(15)
510
(150)
—
(135)
(3,071)
—
(53)
(5,829)

(139)
—
—
(1,290)

5,847
(5,700)
—
(738)
(2,020)

—
—
3,500
645
(1,630)
—
—
—
2,515

(5,334)
13,698

Cash and cash equivalents at end of year

$ 2,424

$ 1,558

$ 8,364

See accompanying notes.

Notes to Consolidated Financial Statements
(Tables in thousands, except per share data)
December 31, 1999 and 1998

(1) Summary of Significant Accounting Policies

Description of Business
Tyler Technologies, Inc. (the “Company”) provides information management services and products through two business seg-
ments: the software systems and services segment and the information and property records services segment.

The software systems and services segment provides county, local and municipal governments with software, systems and services
to serve their information technology and automation needs, as well as real estate appraisal services. This segment integrates its
software products with computer equipment from hardware vendors, third-party database management applications and office
automation software. In addition, this segment also assists local and county governments with all aspects of software and hard-
ware selection, network design and management, installation and training and on-going support and related services. This seg-
ment also provides mass appraisal services to taxing jurisdictions, including physical inspection of all properties in the assessing
jurisdiction, data collection and processing, computer analysis for property valuation and preparation of tax rolls.

The information services and property records segment provides a wide range of information management outsourcing services,
primarily to county governments as well as to some commercial users. These services currently include records management and
micrographic reproduction, data warehousing, computerized indexing, and imaging of real property records maintained by county
clerks and recorders, as well as information management outsourcing and professional services required by other county govern-
ment units and agencies. This segment also provides title plant copies and title plant update services as well as property records
database information.

The Company discontinued operations of Institutional Financing Services, Inc. (“IFS”) and Forest City Auto Parts Company
(“Forest City”). See Note 3 for discussion of discontinued businesses.

Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All signifi-
cant intercompany balances and transactions have been eliminated in consolidation. Prior years’ financial statements have been
restated to reflect discontinued businesses.

Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with original maturities of three months or less, which
includes overnight repurchase agreements, to be cash equivalents.

Revenue Recognition
The Company’s software systems and services segment derives revenue from software licenses, postcontract customer support
(“PCS”) and services. PCS includes telephone support, bug fixes and rights to upgrade on a when-and-if available basis. Services
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, the
Company allocates the total arrangement fee among each deliverable based on the relative fair value of each of the deliverables,
determined based on vendor-specific objective evidence.

In October 1997, the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position (“SOP”) 97-2,
“Software Revenue Recognition” which supersedes SOP 91-1. The Company was required to adopt SOP 97-2 for software transac-
tions entered into beginning January 1, 1998.

The Company recognizes revenue in accordance with SOP 97-2 as amended, as follows:

Software Licenses - The Company recognizes the revenue allocable to software licenses and specified upgrades upon delivery and
installation of the software product or upgrade to the end user, unless the fee is not fixed or determinable or collectibility is not
probable. If the fee is not fixed or determinable, revenue is 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 functionality of other elements of the
arrangement.

A majority of the Company’s software arrangements involve “off-the-shelf” software and the other elements are not considered
essential to the functionality of the software. For those software arrangements in which services are not considered essential, the
software license fee is recognized as revenue after delivery and installation have occurred, training has commenced, customer
acceptance is reasonably assured, the fee is billable and probable of collection and the remaining services other than training are
considered nominal.

Software Services - When software services are considered essential, revenue under the entire arrangement is recognized as the
services are performed using the percentage-of-completion contract accounting method. When software services are not consid-
ered essential, the fee allocable to the service element is recognized as revenue as the services are performed.

Computer Hardware Equipment - Revenue allocable to equipment based on vendor specific evidence of fair value is recognized
when the equipment is delivered and collection is probable.

Postcontract Customer Support - PCS agreements are generally entered into in connection with initial license sales and subse-
quent renewals. 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.

Contract Accounting - For arrangements that include customization or modification of the software, or where software services are
otherwise considered essential, or for real estate mass appraisal projects, revenue is recognized using contract accounting. Revenue
from these arrangements is recognized on a percentage-of-completion method with progress-to-completion measured based pri-
marily upon labor hours incurred or units completed.

Deferred revenue consists primarily of payments received in advance of revenue being earned under software licensing, software
and hardware installation, support and maintenance contracts.

Through its information and property records services segment, the Company provides computerized indexing and imaging of
real property records, records management and micrographic reproduction, as well as information management outsourcing and
professional services required by county and local government units and agencies. The Company also provides title plant update
services to title companies and sales of copies of title plants. The Company recognizes service revenue when services are per-
formed and equipment sales when the products are shipped.

Title Plants - Sales of copies of title plants are usually made under long-term installment contracts. The contract with the customer
is generally bundled with a long-term title plant update service arrangement. The bundled fees are payable on a monthly basis
over the respective contract period and revenue is recognized on an as-billable basis over the terms of the arrangement.

The Company also receives royalty revenue relating to the current activities of two operating companies. Royalty revenue is recog-
nized as earned upon receipt of royalty payments.

Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contin-
gent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Property and Equipment
Property, equipment and purchased software are recorded at cost. Depreciation and amortization are computed for financial
reporting purposes primarily utilizing the straight-line method over the estimated useful lives of the related assets, or for leasehold
improvements and capital leases, the shorter of the base lease term or estimated useful life. For income tax purposes accelerated
depreciation methods are primarily used with the establishment of deferred income tax liabilities for the resulting temporary
differences.

Maintenance and repairs are charged to expense as incurred. Costs of renewals and betterments are capitalized. The cost and
accumulated depreciation and amortization applicable to assets sold or otherwise disposed of are removed from the asset
accounts, and any net gain or loss is included in the statement of operations.

Impairment of Long-Lived Assets
The Company accounts for its long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of”. SFAS No.
121 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets, including goodwill,
to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be gen-
erated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the assets.

Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Research and Development Costs
The Company expenses all research and development costs as incurred. In 1999, the Company expensed $1,765,000 of research
and development costs. Research and development costs in 1998 and 1997 were insignificant.

Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Stock Compensation
The Company has adopted the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, which permits entities
to recognize as expense over the vesting period the fair value of all stock-based awards as of the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25, “Accounting for Stock Issued to
Employees”, and related interpretations and provide pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. Under APB Opinion No. 25, compensation expense would be recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price.

The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provi-
sions of SFAS No. 123. See Note 12 for additional information.

Comprehensive Income (Loss)
SFAS No. 130, “Reporting Comprehensive Income”, requires reporting and displaying comprehensive income and its components,
the accumulated balance of other comprehensive income displayed separately from retained earnings and capital surplus in the
equity section of the statement of financial position.

As of and for the year ended December 31, 1999, the Company had other comprehensive income and accumulated comprehen-
sive income of $17,931,000 (no tax effect due to the change in the valuation allowance related to the existing capital loss carryfor-
wards) associated with unrealized gains on securities classified as available-for-sale. Total comprehensive income (loss) for 1998
and 1997 was the same as the Company’s reported net income (loss) for those periods and there was no accumulated balance of
comprehensive income as of December 31, 1998 or 1997.

Goodwill and Other Intangible Assets
The cost of acquired companies is allocated first to identifiable assets based on estimated fair values. Costs allocated to identifiable
intangible assets are amortized on a straight-line basis over the remaining estimated useful lives of the assets, as determined prin-
cipally by underlying contract terms or independent appraisals. The excess of the purchase price over the fair value of identifiable
assets acquired, net of liabilities assumed, is recorded as goodwill and amortized on a straight-line basis over the estimated useful
life. The useful life is determined based on the individual characteristics of the acquired entity and ranges from five to forty years.

The Company periodically evaluates the carrying amounts of goodwill, as well as the related amortization periods, to determine
whether adjustments to these amounts or useful lives are required based on current events and circumstances. The evaluation is
based on the Company’s projection of the undiscounted future operating cash flows of the acquired operation over the remaining
useful lives of the related goodwill. To the extent such projections indicate that future undiscounted cash flows are not sufficient
to recover the carrying amounts of related goodwill, the underlying assets are written down by charges to expense so that the car-
rying amount is equal to fair value, primarily determined based on future discounted cash flows. The assessment of recoverability
of goodwill will be affected if estimated future operating cash flows are not achieved.

Title plants consist of title records relating to a particular region and are generally stated at cost. Expenses associated with current
maintenance, such as salaries and supplies, are charged to expense in the year incurred. The costs of acquired title plants and
costs of building new title plants, prior to the time that a plant is put into operation, are capitalized. In accordance with SFAS No.
61, “Accounting for Title Plant,” properly maintained title plants are not amortized because there is no indication of diminution in
their value.

Costs incurred after a title plant is operational to convert the information from one storage and retrieval system to another have
not been capitalized as title plant. Those costs have been capitalized separately and are being amortized over an estimated useful
life of twenty years.

Costs of Computer Software
SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”, requires capitalization
of software development costs incurred subsequent to establishment of technological feasibility and prior to the availability of the
product for general release to customers. In 1999, the Company capitalized approximately $2,312,000 of software development
costs, which primarily include personnel costs. No such costs were capitalized in 1998. Systematic amortization of capitalized
costs begins when a product is available for general release to customers and is computed on a product-by-product basis at a rate
not less than straight-line basis over the product’s remaining estimated economic life. Amortization of software development costs
in 1999 was approximately $122,000.

In accordance with the AICPA SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use”, certain external direct costs of materials and services, internal payroll and payroll related costs and other qualifying costs
incurred in connection with developing or obtaining internal use software are capitalized. The Company capitalizes qualifying
costs to internally construct a national data repository (“Database”). Such capitalized costs include certain payroll-related and con-
tracted programming costs as well as the costs to purchase data from external sources to initially populate the Database. Costs to
subsequently update the Database are expensed as incurred. Upon its completion, the Database will include, among other items, a
wide range of public information for delivery via the Internet, such as real property tax and assessment data, and a chain of title
property records and images. During 1999 and 1998, $4,368,000 and $266,000, respectively, of such costs were capitalized as
Database software and related costs. As of December 31, 1999, there has been no amortization of these costs since the Database is
not yet ready for its intended use. Additionally at December 31, 1999, $3,426,000 of related equipment has been capitalized in
connection with construction of the Database. To date, there have been no significant customer contracts signed since the
Database is not yet ready for its intended use. Although management currently believes these costs are fully recoverable based on
its projections of future sales, it is reasonably possible that those estimates of anticipated future gross revenues could be reduced
in the near term due to the uncertainty inherent in such an investment, and the carrying amount may be correspondingly reduced
in the near term.

Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, trade accounts receivables, other current assets, other assets, notes payable to banks, trade accounts
payables, and accrued expenses (nonderivatives): The carrying amounts approximate fair value because of the short maturity of
these instruments. The Company’s available-for-sale investments are carried at fair value.

Long-term obligations: The fair value of the Company’s long-term obligations is estimated by discounting the future cash flows of
each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the
Company’s banks. Based upon the borrowing rates available to the Company for bank loans with similar terms and average matu-
rities, the estimated fair value of the notes payable approximates carrying value at December 31, 1999 and 1998.

The Company has no involvement with derivative financial instruments, including those for speculative or trading purposes.

Concentrations of Credit Risk and Unbilled Receivables
Concentrations of credit risk with respect to receivables are limited due to the wide variety of customers and markets into which
the Company’s products and services are provided, as well as their dispersion across many different geographic areas. As a result,
as of December 31, 1999, the Company does not consider itself to have any significant concentrations of credit risk.

The Company’s real estate mass appraisal service contracts can range up to three years in duration. In connection with these per-
centage of completion contracts and for certain software service contracts, the Company may perform the work prior to when the
services are billable pursuant to the contract. The Company has recorded unbilled receivables (costs and estimated profit in excess
of billings) which amounted to approximately $6,931,000 at December 31, 1999 in connection with such contracts. Retentions
included in trade accounts receivable and current assets that are expected to be collected in excess of one year amounted to
approximately $669,000 at December 31, 1999.

Commitments and Contingencies
The Company accounts for certain environmental matters in accordance with SOP 96-1, “Environment Remediation Liabilities”.
The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reason-
ably estimatable.

Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the
remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Such costs include
the incremental direct costs of the remediation effort, including fees estimated to be paid to outside law firms and certain internal
employee compensation and benefits directly related to the remediation effort. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other par-
ties are recorded as assets when their receipt is deemed probable and have been included in noncurrent other receivables at
December 31, 1999 and 1998.

Legal costs to defend nonenvironmental litigation matters are expensed as incurred.

Reclassifications
Certain amounts for previous years have been reclassified to conform to the 1999 presentation.

(2) Acquisitions

On February 19, 1998, the Company completed the purchases of Business Resources Corporation (“Resources”), The Software
Group, Inc. (“TSG”) and Interactive Computer Designs, Inc. (“INCODE”). Resources provides a wide range of information man-
agement outsourcing services, primarily to county governments as well as to some commercial users. TSG and INCODE provide

county, local and municipal governments with software, systems and services to serve their information technology and automa-
tion needs.

On June 5, 1998, the Company acquired a line of document management software and related customer installations and service
contracts from the Business Imaging Systems division of Eastman Kodak Company. Kofile, Inc. (“Kofile”), a newly formed sub-
sidiary in the Company’s Resources unit, consists of the development, support and marketing of the document management soft-
ware and related maintenance and support services to governmental and commercial users.

Effective August 1, 1998, the Company completed the purchase of Computer Management Services, Inc. (“CMS”). CMS provides
integrated information management systems and services to county and municipal governmental agencies throughout Iowa,
Minnesota, Missouri, South Dakota, Illinois, Wisconsin and other states, primarily in the upper Midwest.

Effective March 1, 1999, the Company acquired Eagle Computer Systems, Inc. (“Eagle”). Eagle is a leading supplier of networked
computing solutions for county governments, primarily in the western United States. In addition, Eagle provides hardware, data
conversion, site planning, training and ongoing support to its customers.

On April 21, 1999, the Company acquired Process Incorporated d/b/a Computer Center Software (“MUNIS”) which designs and
develops integrated financial and land management information systems for counties, cities, schools and not-for-profit organiza-
tions. MUNIS provides software solutions to customers primarily located throughout the northeastern and southeastern United
States.

Effective May 1, 1999, the Company acquired Gemini Systems, Inc. (“Gemini”). Gemini develops and markets software products
for municipal governments and utilities which are primarily installed in the New England area.

On July 16, 1999, the Company acquired Pacific Data Technologies, Inc. (“Pacific Data”). Pacific Data is the primary developer of
the Company’s Database which consists of software and systems that automate and manage public information records for Internet
delivery.

On November 4, 1999, the Company acquired selected assets and assumed selected liabilities of Cole Layer Trumble Company
(“CLT”), a division of a privately held company (“Seller”), in an asset purchase agreement with an effective date of October 29,
1999. CLT provides appraisal software and services to governments. At closing, consideration consisted of cash, restricted shares
of Tyler common stock, and certain senior subordinated secured promissory notes due March 26, 2002 of Forest City Auto Parts
Company with an aggregate face amount of $3,155,000, assigned without recourse, and included a price protection on the sale of
the Company’s common stock which expires no later than November 4, 2001. The price protection is equal to the difference
between the actual sale proceeds of the Tyler common stock and $6.25 on a per share basis, but is limited to $2,750,000. The
subsequent payment, if any, of the contingent consideration will not change the recorded cost of the acquisition. In addition, at
December 31, 1999, the Company has recorded a receivable from the Seller of approximately $1,200,000, resulting from post
closing adjustments primarily related to the balance of net assets at closing. Also, the Company is obligated to purchase any billed
receivables not collected within 90 days of closing.

During 1999 and 1998, the Company also made other acquisitions which were immaterial.

The Company accounted for all of the aforementioned acquisitions using the purchase method of accounting for business combi-
nations. Results of operations of the acquired entities are included in the Company’s consolidated financial statements from their
respective dates of acquisition. The excess purchase price over the fair value of the net identifiable assets of the acquired compa-
nies (goodwill) is amortized using the straight-line method of amortization over their respective estimated useful lives.

Following is a summary of the Company’s 1999 and 1998 acquisitions:

Company

1999
Eagle
MUNIS
CLT
Pacific Data
Other
TOTAL

1998
Resources
TSG
INCODE
Kofile
CMS
Other
TOTAL

Cash

Shares of
Common Stock

Value of
Common Stock

Assumed
Non-Current
Debt

$ 5,000
16,250
3,000
—
1,364
$25,614

$15,250
12,000
1,250
3,600
1,205
1,526
$34,831

1,053
2,703
1,000
175
1,055
5,986

10,000
2,000
225
—
228
145
12,598

$ 6,211
14,561
4,275
1,034
5,707
$31,788

$40,125
8,025
1,220
—
2,099
1,477
$52,946

$ —
—
—
—
—
$ —

$12,790
—
—
1,900
—
240
$14,930

Goodwill
Useful Life
(Years)

20
20
20
5
20

40
20
20
20
20
10-20

Goodwill

$ 8,150
17,623
9,185
521
4,617
$40,096

$45,921
14,066
2,509
5,550
1,059
2,843
$71,948

In addition to consideration paid in cash and common stock for the 1999 acquisitions, the Company provided other considera-
tion which totaled approximately $3,900,000. The other consideration consisted of the issuance of a series of notes to the sellers
and the assignment of notes obtained in conjunction with the Forest City disposition (see Note 3).

Cash paid for acquisitions does not reflect cash paid for transaction costs related to the execution of the acquisitions, such as
legal, accounting and consulting fees, of approximately $673,000 and $2,488,000 in 1999 and 1998, respectively and excludes
acquired cash balances of approximately $338,000 and $2,578,000 in 1999 and 1998, respectively.

The following unaudited pro forma information presents the consolidated results of operations as if all of the Company’s acquisi-
tions and dispositions of Forest City and IFS (Note 3) occurred as of the beginning of 1999 and 1998, after giving effect to certain
adjustments, including amortization of intangibles, interest and income tax effects and reflecting only the loss on the respective
disposals of the discontinued operations in the year reflected in the historical consolidated financial statements. The pro forma
information does not purport to represent what the Company’s results of operations actually would have been had such transac-
tions or events occurred on the dates specified, or to project the Company’s results of operations for any future period.

Revenues
Income from continuing operations, net
Net income (loss)
Net income (loss) per diluted share

(3) Discontinued Operations

Years ended December 31,

1999

1998

Unaudited

$144,381
3,397
637
$ 0.02

$114,611
1,377
(8,139)
$ (0.19)

In December 1998, the Company entered into a letter of intent to sell its non-core automotive parts retailer, Forest City.
Accordingly, this segment has been accounted for as a discontinued operation with prior years’ financial statements restated to
report separately their operations in compliance with APB Opinion No. 30.

On March 26, 1999, the Company sold all of the outstanding common stock of Forest City to HalArt, L.L.C. (“HalArt”) for
approximately $24,500,000. Proceeds consisted of $12,020,000 in cash, $3,825,000 in a short-term secured promissory note,
$3,155,000 in senior secured subordinated notes and $5,500,000 in preferred stock. The short-term secured promissory note was
fully paid in July 1999. The senior secured subordinated notes carry interest rates ranging between 6% to 8%, become due in
March 2002 and are secured by a second lien on Forest City inventory and real estate. The preferred stock will be mandatorily
redeemable in March 2006. Both the subordinated notes and the preferred stock are subject to partial or whole redemption upon
the occurrences of specified events.

In determining the loss on the disposal of the business, the subordinated notes were valued using present value techniques. As
discussed in Note 2, the $3,155,000 in senior secured subordinated notes were subsequently assigned without recourse to the
seller on November 4, 1999 in connection with an acquisition.

Because the redemption of the preferred stock is highly dependent upon future operations of the buyer and due to its extended
repayment terms, the Company is unable to estimate the degree of recoverability. Accordingly, the Company will record the value
of the preferred stock as cash is received. The Company originally estimated the loss on the disposal of Forest City to be
$8,939,000, which was recorded in the fourth quarter of 1998. The estimated loss included anticipated operating losses from the
measurement date of December 1998 to the date of disposal and associated transaction costs. In 1999, the Company recorded
additional losses of $907,000 (including taxes of $183,000) to reflect adjusted estimated transaction costs, funded operating loss-
es which were higher than originally estimated, and adjustments to amounts previously provided for income taxes in connection
with the sale and to write down to estimated net realizable value a post-closing receivable in connection with a dispute with the
purchaser.

The net assets of discontinued operations at December 31, 1998 consisted principally of working capital (including accounts
receivable, inventories, accounts payable and accrued liabilities), property and equipment of Forest City.

The Company has determined a capital loss of $12,720,000 for tax purposes on the sale of Forest City. No tax benefit has been
recorded for this capital loss since realization of the capital loss is not assured.

The condensed components of net assets of discontinued Forest City operations included in the consolidated balance sheets as of
December 31, 1998 are as follows:

Merchandise inventory
Other assets
Liabilities

Less reserve for estimated loss on disposition,

including post balance sheet operating losses
and transaction costs, net of income taxes

Net assets
Reclassification of long-term assets on disposition

Net current assets

$24,289
7,657
(7,866)
24,080

(8,480)
15,600
(2,848)
$12,752

Two of the Company’s non-operating subsidiaries are involved in various claims for work related injuries and physical conditions
and for environmental claims relating to a formerly owned subsidiary that was sold in 1995. During 1999, the Company
expensed approximately $1,853,000 (net of taxes of $877,000) for trial costs and settlements in excess of the amounts accrued
associated with these claims (see Note 17).

Effective October 15, 1997, the Company sold all of the capital stock of its subsidiary IFS, which provided products for fund-
raising programs, to I.F.S. Acquisition Corporation for approximately $8,400,000, resulting in a loss on disposal of approximately
$2,500,000. Proceeds consisted of approximately $5,800,000 in cash received at closing and $2,628,000 received in January
1998. This estimated loss on disposal included estimates regarding the value of certain assets that were subject to change. In
1998, the Company made final adjustments to those assets, which resulted in a reduction of the previously estimated loss on
disposal of $801,000.

Operating results of all discontinued operations are as follows for the years ended December 31, prior to their disposition:

Revenues

Income (loss) before income tax (benefit)
Income tax (benefit) provision
Net income (loss) from discontinued operations

1998

$76,484

(2,231)
(853)
$ (1,378)

1997

$98,342

374
35
$ 339

Interest has been charged to discontinued operations based on the net assets of Forest City. External interest expense of $374,000
was allocated to discontinued operations in 1998 only. Income tax (benefit) has been charged (credited) to discontinued opera-
tions based on the income tax (benefit) resulting from inclusion of the discontinued segments in the Company’s consolidated
federal income tax return.

The income tax provision (benefit) differs from the amount which would be provided by applying the statutory income tax rate to
income (loss) before income tax (benefit) due to permanent difference items consisting primarily of non-deductible goodwill and
state income taxes.

(4) Related Party Transactions

From time to time, the Company charters aircraft from businesses in which either a director and/or member of management of the
Company is an owner or part owner. For the year ended December 31, 1999, the Company recorded charter rental expense of
approximately $249,000, in connection with this activity.

The Company has several notes receivable from employees totaling $443,000 and $335,000 at December 31, 1999 and 1998,
respectively. All of the notes are non-interest bearing and are due between 2000 and 2004. There is no significant difference
between the face value and the present value of the notes.

On October 8, 1997, the Company entered into an agreement to acquire Resources and received shareholder approval for the
transaction on February 19, 1998 (see Note 2). In connection with this transaction, the Company loaned Resources $5,700,000
on December 29, 1997 for working capital purposes. The unsecured loan bore interest at a rate of 8.5% and had an original
maturity date of September 30, 1999. Subsequent to the acquisition, the loan is eliminated in consolidation.

The Company has five office building lease agreements with various shareholders of the Company. Total rental expense related to
such leases for the years ended December 31, 1999 and 1998 was $525,000 and $83,000, respectively.

Total future minimum rental under noncancelable related party operating leases as of December 31, 1999, are as follows:

2000
2001
2002
2003
2004
Thereafter

$ 831
1,025
1,091
1,065
1,084
6,038

(5) Property and Equipment

Property and equipment consists of the following at December 31:

Useful
Lives
(years)

Land
Transportation equipment
Computer equipment and purchased software
Furniture and fixtures
Building and leasehold improvements
Computer equipment under capital lease

—
5
3-7
3-10
3-35
3

Accumulated depreciation and amortization

Property and equipment, net

1999

1998

$ 2,556
484
11,433
4,198
4,518
4,622
27,811
(6,022)
$21,789

$ 2,450
334
5,650
2,842
3,529
1,874
16,679
(2,532)
$14,147

Depreciation expense and capital lease related amortization expense totaled $3,820,000, $2,146,000 and $29,000 during the
years ended December 31, 1999, 1998 and 1997, respectively. The Company entered into capital leases for equipment of approxi-
mately $2,040,000 and $338,000 during 1999 and 1998, respectively. Additionally the Company acquired a building for
$652,000, of which $476,000 was financed through a term note with a bank.

(6) Investment Securities Available-For-Sale

Pursuant to an agreement with two major shareholders of H.T.E., Inc. (“HTE”), the Company acquired approximately 32% of
HTE’s common stock in two separate transactions in 1999. On August 17, 1999, the Company exchanged 2,325,000 shares of its
common stock for 4,650,000 shares of HTE common stock. This initial investment was recorded at $14,008,000. The second
transaction occurred on December 21, 1999, in which the Company exchanged 484,476 shares of its common stock for 968,952
shares of HTE common stock and this investment was recorded at $1,774,000. This investment is classified as a non-current asset
since it was made for a continuing business purpose.

Under generally accepted accounting principles, an investment of 20% or more of the voting stock of an investee should lead to
presumption that in absence of evidence to the contrary, an investor has the ability to exercise significant influence over the
operating and financial policies of an investee. Management of the Company has concluded that it currently does not have such

influence as evidenced by the following key factors:
• Inability to resolve the different interpretations regarding the ability to vote the shares
• Inability to obtain additional financial information not otherwise available to other shareholders
• Inability to obtain certain confirmations and consents from the investee’s independent auditors

Accordingly, the Company accounts for its investment in HTE pursuant to the provisions of SFAS No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”. These securities are classified as available-for-sale and are recorded at fair
value as determined by quoted market prices. Unrealized holding gains and losses, net of the related tax effect, on available-for-
sale securities are excluded from earnings and are reported as a separate component of shareholders’ equity until realized. Realized
gains and losses from the sale of available-for-sale securities (none in each of the three years ended December 31, 1999) are deter-
mined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is deemed
to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a
new cost basis for the security is established.

At December 31, 1999, the cost, fair value and gross unrealized holding gains of the investment securities available-for-sale
amounted to $15,782,000, $33,713,000 and $17,931,000, respectively, based on a quoted market price of $6.00 per share.
Because of the Company’s existing capital loss carryforwards (see Note 10), any tax expense related to the unrealized gain is offset
by a reduction in the Company’s valuation allowance. At March 31, 2000, the fair value of the investment securities available-for-
sale was $18,093,000 based on a quoted market price of $3.22 per share.

If the uncertainty regarding the voting shares is resolved in the Company’s favor, the Company will retroactively adopt the equity
method of accounting for this investment. Therefore, the Company’s results of operations and retained earnings for periods begin-
ning with the 1999 acquisition will be retroactively restated to reflect the Company’s investment in HTE for all periods in which it
held an investment in the voting stock of HTE. Under the equity method, the original investment is recorded at cost and is adjust-
ed periodically to recognize the investor’s share of earnings or losses after the respective dates of acquisition. The Company’s
investment in HTE would include the unamortized excess of the Company’s investment over its equity in the net assets of HTE.
This excess would be amortized on a straight-line basis over the estimated economic useful life of ten years. In addition, any loss
in value of an investment which is other than a temporary decline would also be charged to earnings.

Because of the effects of such a future change, the following information has been provided or derived from publicly filed financial
information which has not been independently confirmed to the Company and is considered unaudited. HTE reported a net loss
of $14,866,000 for the year ended December 31, 1999. Subsequent to the Company’s initial acquisition of HTE’s shares in August
1999, HTE recorded charges of approximately $7,900,000, net of tax, related to write-offs of software development costs, certain
accounts receivables and employee-termination benefits that were recorded by HTE as a result of changes in management and
charges for litigation settlements. These costs would be considered pre-acquisition costs by the Company in determining its share
of HTE’s loss from the respective dates of acquisition. Had the Company’s investment in HTE been accounted for under the equity
method, the Company would have recorded equity in losses of HTE of $1,352,000 for the year ended December 31, 1999. Also,
during the three months ended September 30, 1999, the Company recorded equity in loss of HTE of $378,000 ($0.01 per diluted
share). This charge has been retroactively restated and eliminated in the accompanying consolidated financial statements for the
year ended December 31, 1999 to reflect the aforementioned factors.

(7) Costs of Certain Acquisition Opportunities

CPS Systems Notes Receivable
In March 1999, the Company entered into a merger agreement pursuant to which the Company contemplated the acquisition of
all of the outstanding common stock of CPS Systems, Inc. (“CPS”). In connection with that agreement, the Company provided
CPS with bridge financing of $1,000,000 in the form of a note secured by a second lien on substantially all of the assets of CPS,
including accounts receivable, inventory, intangibles, equipment and intellectual property. The note bears interest at 2% over the
prime rate and was initially due on October 30, 1999. In June 1999, Tyler provided notice to CPS that it was exercising its right
to terminate the merger agreement. Although the original agreement was terminated, the Company and CPS continued to negoti-
ate to find an alternative structure for the transaction. In August 1999, Tyler provided an additional $200,000 of bridge financing,
on terms similar to the original note and continued to provide additional bridge financings on terms similar to the other notes.

In January 2000, CPS filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On March 24,
2000, the bankruptcy court conducted a public auction of the assets and the Company submitted a cash only bid of $100,000 for
the California Visual Basic/Oracle Tax and CAMA software assets of CPS.

Other
On July 31, 1998, the Company entered into a letter of intent with a Fortune 500 company to acquire certain businesses of the
company in a transaction to be accounted for as a purchase business combination. These businesses had estimated annual

revenues of over $500 million and represented a business opportunity which was aligned with the Company’s strategy in the
information management business. Direct and incremental costs associated with the proposed combination, primarily consisting
of fees paid to outside legal and accounting advisors for due diligence, were incurred by the Company and would have been con-
sidered as a cost of the acquisition upon the successful closing of the transaction. Subsequent to September 30, 1998, the poten-
tial seller elected not to sell any of the businesses. Accordingly, all costs associated with this opportunity have been expensed in
the accompanying 1998 consolidated financial statements and included in “costs of certain acquisition opportunities.”

(8) Goodwill and Other Intangible Assets

Goodwill, other intangible assets and related accumulated amortization are as follows:

Goodwill
Title plants
Title plant modification
Customer lists
Software acquired
Software development costs
Workforce
Database under development

Accumulated amortization

Goodwill and other intangibles, net

Useful
Lives
(years)

5-40
—
20
20-35
5
3
5-10
10

1999

1998

$108,009
13,100
547
16,832
14,715
6,995
6,970
4,634
171,802
(11,137)
$160,665

$71,948
13,100
357
5,035
5,020
142
3,301
266
99,169
(3,173)
$95,996

(9) Long-Term Obligations

Long-term obligations consist of the following as of December 31:

1999

1998

Revolving senior credit facility
8.75% promissory note payable, payable in quarterly installments

through October 2004, collateralized by a building

8% promissory note payable, payable in quarterly installments through

September 2005, collateralized by certain assets

7% promissory notes payable due May 2000
6.1% unsecured installment notes payable, payable in annual

installments through August 2002

10% unsecured installment notes payable, payable in monthly

installments through May 2004

9% promissory note payable, payable in monthly installments through

February 2001, collateralized by certain assets and the capital stock of
Title Records Corporation and Government Records Services, Inc.,
wholly-owned subsidiaries of Resources

Long-term obligations under various capital leases
Other

Total obligations
Less current portion

Total long-term obligations

$61,000

$30,810

476

885
500

134

214

—

1,002
—

173

250

3,649
3,730
605
71,193
3,747
$67,446

4,632
1,826
372
39,065
1,876
$37,189

The aggregate maturities of long-term obligations for each of the years subsequent to December 31, 1999, assuming the revolving
credit facility is not renewed, are as follows: 2000 - $3,747,000; 2001 - $4,049,000; 2002 - $62,410,000; 2003 - $247,000; 2004
- $600,000; thereafter - $140,000.

Interest paid in 1999, 1998 and 1997 was $4,053,000, $1,818,000 and $5,000, respectively.

In October 1999, the Company entered into a three-year revolving credit agreement with a group of banks (“Senior Credit
Facility”) in an amount not to exceed $80,000,000. Borrowings under the Senior Credit Facility, as amended, bear interest at
either the lead bank’s prime rate plus a margin of .25% to 1.50% or the London Interbank Offered Rate plus a margin of 2.25% to
3.50%, depending on the Company’s ratio of indebtedness to earnings before interest, taxes, depreciation and amortization. The
Senior Credit Facility replaced the Company’s previous $50,000,000 revolving credit facility. At December 31, 1999, the Company
had outstanding borrowings and letters of credit of $61,000,000 and available borrowing capacity of $19,000,000 under the
Senior Credit Facility. The interest rate at December 31, 1999 was 8.2%.

The effective average interest rates for borrowings during 1999 and 1998 were 7.7% and 7.5%, respectively. The Senior Credit
Facility is secured by substantially all of the Company’s real and personal property and a pledge of the common stock of present
and future significant operating subsidiaries. The Senior Credit Facility is also guaranteed by such subsidiaries. Under the terms of
the Senior Credit Facility, the Company is required to maintain certain financial ratios and other financial conditions. The Senior
Credit Facility also prohibits the Company from making certain investments, advances or loans and restricts substantial asset
sales, capital expenditures and cash dividends. The Company is in compliance with its various covenants under the Senior Credit
Facility, as amended. Under the terms of the Senior Credit Facility, the Company has the ability to increase the facility to
$100,000,000 subject to the participation of additional new lenders.

(10) Income Tax

The provision (benefit) included in continuing operations for income tax consists of the following:

Years ended December 31,
1998

1997

1999

Current:

Federal
State

Deferred

$1,775
742
2,517

(113)
$2,404

$1,483
354
1,837

196
$2,033

$ 1,280
—
1,280

(2,198)
$ (918)

The income tax provision (benefit) differs from amounts computed by applying the federal statutory tax rate of 35% to income
(loss) from continuing operations as follows:

Years ended December 31,
1998

1997

1999

Income tax (benefit) at statutory rate
State income tax, net of federal income tax benefit
Non-deductible amortization
Utilization of capital loss
Other, net

$ 819
483
1,054
—
48
$2,404

$1,116
230
652
—
35
$2,033

$ (748)
—
13
(188)
5
$ (918)

Significant components of deferred tax assets and liabilities as of December 31 are as follows:

Deferred income tax assets:

Insurance reserves
Operating expenses not currently deductible
Employee benefit plans
Net operating loss
Capital loss carryforward
Research tax credits
Other

Total deferred income tax assets

Deferred income tax liabilities:

Basis difference on investments available-for-sale
Tax-benefit transfer lease
Property and equipment
Intangible assets
Other

Total deferred income tax liabilities

Net deferred income tax assets before valuation allowance
Less valuation allowance

Net deferred income tax liabilities

1999

1998

98
1,582
260
34
17,139
78
1,166
$ 20,357

$ (6,276)
(2,224)
(719)
(11,689)
(17)
(20,925)
(568)
10,863
$(11,431)

$ 98
1,611
149
—
12,514
—
408
$ 14,780

$ —
(3,475)
(2,174)
(6,346)
(130)
(12,125)
2,655
12,514
$ (9,859)

The Company has research tax credit carryforwards of $78,000 at December 31, 1999. The Company has net operating loss car-
ryforwards of $98,000 which are subject to an annual IRC Section 382 limitation. The research tax credit and net operating carry-
forwards will expire between 2016 and 2017.

Income taxes paid, net of refunds received, in 1999 and 1998 were $2,841,000 and $1,478,000, respectively. In 1997, the
Company received a refund of prior year income taxes of $95,000.

Although realization is not assured, management believes it is more likely than not that all the deferred tax assets will be realized
except for those relating to the capital loss carryforwards other than those offset by the basis difference on investments available-
for-sale. Accordingly, the Company believes that no valuation allowance is required for the remaining deferred tax assets. The
Company’s capital loss carryforwards expire beginning in 2003.

(11) Shareholders’ Equity

The Company has authorized 1,000,000 shares of $10 par value voting preferred stock. The board of directors had designated
250,000 shares as Series A Junior Participating Preferred Stock which were reserved for issuance upon exercise of the Company’s
stock purchase rights. In December 1997, the board of directors authorized the redemption of the preferred stock purchase rights
in connection with the contemplated acquisitions of Resources, TSG and INCODE. The rights were redeemed in January 1998 at
$.01 per share. Prior to this redemption, each share of the Company’s common stock included a stock purchase right. These
rights, which did not have voting rights, could be exercised only after public announcement that a person or group had acquired
20% or more of the Company’s common stock or public announcement of an offer for 30% or more of the Company’s common
stock. The Company had the right to redeem the rights at a price of $.01 per right at any time prior to 15 days (or such longer
period as the board of directors may have determined) after the acquisition of 20% of the Company’s common stock. Upon exer-
cise each right could have been used to purchase 1/100 of a share of Series A Junior Participating Preferred Stock for $21. Each
share of Series A Junior Participating Preferred Stock would have had a minimum preferential quarterly dividend of 100 times the
dividend declared on common stock, minimum liquidation preference of $100 per share and other preferential common stock
conversion features in connection with mergers or other business combinations.

As of December 31, 1999, the Company had a warrant outstanding to purchase 2,000,000 shares of the Company’s common
stock at $2.50 per share. The warrant expires in September 2007.

(12) Stock Option Plan

The Company’s stock option plan provides for the granting of non-qualified and incentive stock options, as defined by the
Internal Revenue Code, to key employees of the Company and its subsidiaries of up to 4,300,000 shares of the Company’s com-
mon stock at prices which represent fair market value at dates of grant. All options granted have ten year terms and generally vest
over, and become fully exercisable at the end of, three to five years of continued employment.

The following table summarizes the transactions of the Company’s stock option plan for the three-year period ended December
31, 1999:

Number of
Shares

Weighted-Average
Exercise Prices

Options outstanding at December 31, 1996

Granted
Canceled
Exercised

Options outstanding at December 31, 1997

Granted
Canceled
Exercised

Options outstanding at December 31, 1998

Granted
Canceled
Exercised

Options outstanding at December 31, 1999

Reserved for future options at December 31, 1999

Exercisable options:

December 31, 1997
December 31, 1998
December 31, 1999

330

1,517
(953)
(198)
696

1,371
(14)
(135)
1,918

1,583
(78)
(5)
3,418

340

145
239
706

$1.88

2.36
1.80
1.87
3.04

7.10
5.92
1.53
6.03

4.87
3.67
4.29
$5.55

$2.71
$3.03
$4.94

The following table summarizes information concerning outstanding and exercisable options at December 31, 1999:

Range of Exercise
Prices

$ 0.00 - $ 2.13
$ 2.75 - $ 4.38
$ 5.00 - $ 7.88
$ 9.62 - $10.94

Weighted
Average
Remaining
Contractual
Life

7.0 years
8.9 years
8.8 years
8.4 years

Number of
Outstanding
Options

100
1,052
2,156
110

Weighted
Average
Price of
Outstanding
Options

$ 2.12
$ 3.87
$ 6.27
$10.42

Number of
Exercisable
Options

100
281
303
22

Weighted
Average
Price of
Exercisable
Options

$ 2.12
$ 3.74
$ 6.58
$10.42

SFAS No. 123, “Accounting for Stock-Based Compensation,” became effective for the Company in 1996. As allowed by SFAS No.
123, the Company has elected to continue to follow APB Opinion No. 25, Accounting for Stock Issued to Employees, which does
not recognize compensation expense on the issuance of its stock options because the option terms are fixed and the exercise price
equals the market price of the underlying stock on the grant date.

As required by SFAS No. 123, the Company has determined the pro forma information as if the Company had accounted for
stock options granted since January 1, 1995, under the fair value method of SFAS No. 123. The Black-Scholes option pricing
model was used with the following weighted-average assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates
of 5.56%, 5.16% and 6.49%; dividend yield of 0%; expected common stock market price volatility factor of .70, .68 and .39; and
a weighted-average expected life of the options of seven years. The weighted-average fair value of options granted in 1999, 1998
and 1997 was $3.47, $4.93 and $1.24 per share, respectively.

Had compensation expense been recorded based on the fair values of the stock option grants, the Company’s 1999, 1998 and
1997 pro forma income (loss) from continuing operations would have been $(1,868,000), $162,000 and $(1,639,000), or
$(0.05), $0.00, and $(0.08) per diluted share, respectively. These pro forma calculations only include the effects of grants since
1995. Accordingly, the impacts are not necessarily indicative of the effects on reported net income of future years.

(13) Earnings (Loss) Per Common Share - Basic and Diluted

In accordance with SFAS No. 128, “Earnings per Share”, the Company has presented basic income (loss) per share, computed on
the basis of the weighted average number of common shares outstanding during the year, and diluted income (loss) per share,
computed on the basis of the weighted average number of common shares and all dilutive potential common shares outstanding
during the year.

The Company incurred a loss from continuing operations in 1999 and 1997. As a result, the denominator was not adjusted for
dilutive securities in 1999 or 1997 as the effect would have been antidilutive.

For the years ended December 31, the following options were not included in the computation of diluted earnings per share
because the effect would have been antidilutive:

1999
1998
1997

Options

Price Range

3,418
110
696

$2.13 - $10.94
$9.63 - $10.94
$1.50 - $ 5.25

Additionally, the warrant to purchase 2,000,000 shares of the Company’s common stock was not included in the computation of
diluted earnings per share for the years ended December 31, 1999 and 1997 because the effect would have been antidilutive.

The following table sets forth the computation of basic and diluted earnings per share:

Years ended December 31,
1998

1997

1999

Numerator for basic and diluted earnings per share

Income (loss) from continuing operations

$ (64)

$ 1,156

$(1,219)

Denominator:

Denominator for basic earnings per share–
Weighted average shares

Effect of dilutive securities:
Employee stock options
Employee stock grant
Warrant

Dilutive potential common shares
Denominator for diluted earnings per share–
Adjusted weighted-average shares and

39,105

32,612

20,498

—
—
—
—

340
67
1,381
1,788

—
—
—
—

assumed conversion

39,105

34,400

20,498

Basic earnings (loss) per share from

continuing operations

Diluted earnings (loss) per share from

continuing operations

$ (0.00)

$ 0.04

$ (0.06)

$ (0.00)

$ 0.03

$ (0.06)

(14) Leases

The Company leases certain offices, transportation, computer and other equipment used in its operations under noncancellable
operating lease agreements expiring at various dates through 2010. Most leases contain renewal options and some contain pur-
chase options. The leases generally provide that the Company pay taxes, maintenance, insurance and certain other operating
expenses.

Rent expense was approximately $1,515,000 in 1999, $903,000 in 1998 and $191,000 in 1997.

The Company has capital leases for certain equipment, which is included in “Property and equipment, net.” The present value of
future minimum lease payments relating to these assets is capitalized based on contract provisions. Capitalized amounts are
depreciated over the lesser of the term of the lease or the normal depreciable lives of the assets.

Future minimum lease payments under noncancellable leases at December 31, 1999 are as follows:

Fiscal Year

2000
2001
2002
2003
2004
2005 and thereafter
Total future minimum lease payments
Less interest
Present value of future minimum lease payments
Current portion of obligations under capital leases
Long-term obligations under capital leases

Operating
Leases

Capital
Leases

$ 2,146
2,087
1,977
1,663
1,483
6,425
$15,781

$1,628
1,482
1,184
—
—
—
4,294
564
3,730
(1,302)
$2,428

(15) Employee Benefit Plans

The Company maintains various defined contribution profit sharing plans, primarily 401(k) retirement plans (the “Plans”), at each
of its operating subsidiaries. The Plans cover substantially all eligible employees of the Company that meet age and length of ser-
vice requirements. Employee contributions are by salary reduction and are at the employees’ discretion within the limits imposed
by the Plans’ provisions and the Internal Revenue Code. Employer contributions are determined by each operating company’s
board of directors. In 1999 and 1998, total employer contributions to the Plans were approximately $400,000 and $106,000,
respectively.

(16) Fourth Quarter Changes

During the nine months ended September 30, 1999, the Company previously reported and recognized $5,723,000 of revenue
and $180,000 of interest income in connection with its sales of copies of title plants. In connection with each sale, the Company
contractually agreed to provide maintenance services for periods ranging from 5 to 10 years to update the title plants on a month-
ly basis with the same customers. The bundled fees are payable on a monthly basis over the respective contract period pursuant to
a non-cancellable agreement, and the contract contains significant financial and legal exposure for either party who terminates the
arrangement prior to its early buy out expiration date. The Company priced the arrangements based upon respective published
price lists for the sale of the copies of the title plants and the monthly updates. Prior to ownership privileges being transferred, the
Company sold the monthly updates to these same customers, but at the request of certain of its customers and due to competitive
conditions, the Company elected to also sell ownership privileges. Also, the Company continues to sell the updates separately to
customers who have not purchased the copies of the title plants. Therefore, the Company concluded that it had vendor specific
objective evidence of fair value and that the incremental billing amount could be ascribed to the sale of the ownership privilege.
The title plants were fully functional upon delivery at which time the fee allocated to the sale of the delivered title plant copies
was recognized in accordance with FASB No. 61 “Accounting for Title Plants”. Such accounting is permitted for certain software
licenses arrangements which contain a bundled post-contract customer support maintenance arrangement if the maintenance is
sold separately even though the vendor does not sell the software licenses separately.

On December 3, 1999, Staff Accounting Bulletin No. 101 entitled “Revenue Recognition in Financial Statements” (“SAB 101”)
was issued by the Securities and Exchange Commission (“SEC”). Such bulletins represent interpretations and practices followed
by certain offices and divisions of the SEC. Pursuant to the interpretations, the SEC staff believes that the terms, conditions and
amounts of certain arrangements are typically negotiated in conjunction with the pricing of all of the elements. The bulletin contin-
ues by stating that the customer would ascribe a significantly lower, and perhaps no, value to elements ostensibly associated with
the initial product delivery in the absence of the registrant’s performance of the other contract elements, especially in those situa-
tions in which the initial product delivery is not sold separately without the registrant’s continuing involvement. The bulletin con-
cludes that those arrangements that contain product delivery and continuing performance obligations related to future services to
be provided be assessed as an integrated package and for the bundled revenue to be recognized over the term of the arrangement.

In the fourth quarter of 1999, the Company elected to adopt the provisions of SAB 101 and to change its accounting principles to
more closely conform to the SEC interpretation. The election was made since the Company historically has not separately entered
into arrangements to sell copies of the title plants without future monthly update services. Accordingly, the Company has changed
its accounting such that sales of the copies of the title plants are no longer recognized upon delivery but are bundled with the
update fee and recognized ratably over the service period. The implementation of this change was accounted for as a change in
accounting principle which is applied cumulatively as if the change occurred at the beginning of this fiscal year and as if it was
recorded in the first quarter of 1999. The implementation of SAB 101 had no effect on 1998 and prior periods as no sales of
copies of title plants occurred in those periods. However, the Company will restate its previously reported 1999 quarterly results
as required for such changes. The approximate effect of the accounting change for each quarter of 1999 was to reduce net income
and diluted earnings per share as follows:

Effect on Net Income

Total

$1,061
1,191
1,333

Per Share

$0.03
0.03
0.03

First Quarter
Second Quarter
Third Quarter

A summary of the impact of these changes and the change in accounting for the Company’s investment in HTE in the third quar-
ter (see Note 6) is as follows.

Quarter Ended
March 31, 1999

Quarter Ended
June 30, 1999

Previously
Reported

As
Restated

Previously
Reported

As
Restated

Quarter Ended
September 30, 1999
Previously
Reported

As
Restated

$20,433

$18,813

$28,674

$26,927

$29,502

$27,533

1,674
1,109

0.03

613
48

0.00

1,893
1,113

0.03

702
(78)

1,152
550

197
(405)

0.00

0.01

(0.01)

Revenue
Income (loss)

from continuing
operations
Net income (loss)
Diluted earnings

(loss) per share

(17) Commitments and Contingencies

Between 1968 and 1995, TPI of Texas, Inc. (“TPI”) owned and operated a foundry in Swan, Texas. Since 1997, more than 300
former employees of TPI have filed a series of lawsuits against TPI, Swan Transportation Company, the parent corporation of TPI
(“Swan”) and in some instances, the Company, alleging various personal injuries resulting from exposure to silica, asbestos and/or
other related industrial dusts during their employment at TPI. As non-operating subsidiaries, Swan and TPI’s assets consist pri-
marily of various insurance policies issued during the relevant time periods. In December 1999, the Company instituted litigation
against Swan and TPI’s former insurance carriers in Harris County, Texas, demanding that such carriers undertake the defense of
these claims, fulfill all indemnity obligations with respect to these claims and reimburse the Company for past defense and settle-
ment costs paid by the Company.

In March 2000, the Company entered into a Standstill Agreement with all known plaintiffs asserting injuries described above,
including all known plaintiffs who have alleged injury but have not yet filed suit against Swan and/or TPI (collectively, the
“Plaintiffs”). Under the Standstill Agreement, the Plaintiffs agreed to dismiss all pending claims against the Company and agreed to
not sue the Company for a minimum period of at least two years and thereafter only in certain circumstances. Under the
Standstill Agreement, the Company agreed to seek to withdraw its outside counsel as counsel of record in the pending lawsuits,
re-tender the defense and indemnity obligations related to these claims to the insurance carriers of Swan and TPI and continue to
prosecute its insurance coverage suit in Harris County, Texas, in which the plaintiffs if and when they receive a judgment may
intervene in such litigation and prosecute their claims directly against the insurance carriers. Further, the Standstill Agreement
provides that any Plaintiff that settles or receives a judgment on any of its claims, and such settlement or judgment is fully paid or
compromised by the insurance carriers, then such Plaintiff will execute a release in favor of the Company, its subsidiaries and affil-
iates from such claims. In March 2000, The Hartford, one of Swan and TPI’s primary and excess coverage insurance carriers, has
agreed to assume the ongoing and future defense of these claims, subject to a reservation of rights.

The Company initially provides for estimated claim settlement costs when minimum levels can be reasonably estimated. If the best
estimate of claim costs can only be identified within a range and no specific amount within that range can be determined more likely
than any other amount within the range, the minimum of the range is accrued. Based on an initial assessment of claims and contin-
gent claims that may result in future litigation involving TPI, a reserve for the minimum amount of $2,000,000 for claim settlements
was recorded in 1996. Legal and related professional services costs to defend litigation of this nature have been expensed as incurred.
During 1999, the Company has paid a total of approximately $2,500,000 in claim settlements and in legal and related defense costs
on these cases. The remaining liability was approximately $1,000,000 at December 31, 1999. Because of the inherent uncertainty
regarding litigation of this nature, it is reasonably possible that the amounts recorded as liabilities for TPI related matters could
change in the near term by amounts that would be material to the consolidated financial statements.

The New Jersey Department of Environmental Protection and Energy (“NJDEPE”) has alleged that a site where a former affiliate of
TPI, Jersey-Tyler Foundry Company (“Jersey-Tyler”), once operated a foundry contains lead and possible other priority pollutant
metals and may need on-site and off-site remediation. The site was used for foundry operations from the early part of this century
to 1969 when it was acquired by Jersey-Tyler. Jersey-Tyler operated the foundry from 1969 to 1976, at which time the foundry
was closed. In 1976, Jersey-Tyler sold the property to other persons who have operated a salvage yard on the site. In 1995,
NJDEPE and TPI agreed for TPI to conduct a feasibility study to assess remediation options and propose a remedy for the site and
the impacted areas. This study was completed and submitted to the NJDEPE in the first quarter of 1999. TPI continues to negoti-
ate with the NJDEPE regarding the results of this study. TPI has not agreed to commit to further action at this time. TPI never
held title to the site and denies liability.

In connection with the sale of the assets of TPI to Ransom Industries, Inc. (formerly known as Union Acquisition Corporation)
(the “Buyer”), an affiliate of McWane, Inc., on December 1, 1995, pursuant to an acquisition agreement among the Company, TPI

and the Buyer (the “Acquisition Agreement”), the Buyer agreed to manage and direct the prosecution or defense of these environ-
mental related matters on behalf of TPI. In addition, the Buyer agreed to reimburse TPI the first $3,000,000 of certain costs and
expenses incurred in connection with the investigation or remediation of the site, and one-half of such expenses in excess of
$3,000,000 with a maximum reimbursement to TPI of $6,500,000. As of December 31, 1996, management estimated total cost to
investigate or remediate the New Jersey site to be $7,000,000. In accordance with the above-mentioned provisions of the
Acquisition Agreement, the Company recorded a $5,000,000 receivable due from the Buyer for its portion of the estimated costs
as of December 31, 1996. As of December 31, 1999, approximately $2,500,000 of expenses in connection with the investigation
of the New Jersey site have been paid by TPI and as provided for in the Acquisition Agreement, the Buyer has reimbursed this
amount to TPI. Accordingly, management currently estimates the cost remaining in connection with the investigation or remedia-
tion of the New Jersey site to be approximately $4,300,000 and the related receivable from the Buyer to be approximately
$2,500,000 which is included as other receivables in the accompanying December 31, 1999 consolidated balance sheet. The
Buyer, on behalf of TPI, is proceeding against predecessor owners and operators of the site, as well as others, to bear their share of
the cost of the investigation and any other costs, including any remediation costs incurred by TPI. Some costs may also be cov-
ered by insurance. TPI is currently in negotiations with the major insurance carrier and predecessor owners and operators of the
site. Recoveries from predecessor companies and insurance companies are shared by TPI and the Buyer. Although it is impossible
to predict the outcome of legal or regulatory proceedings, the Company believes that substantially all of the costs, expenses and
damages, if any, resulting from the legal proceedings and environmental matters described above will be reimbursed by the Buyer
pursuant to the Acquisition Agreement or have been adequately provided for in the financial statements.

Other than ordinary course, routine litigation incidental to the business of the Company and except as described herein, there are
no material legal proceedings pending to which the Company or its subsidiaries are parties or to which any of its properties are
subject.

(18) Segment and Related Information

As of January 1, 1998, the Company has adopted SFAS No. 131, “Disclosures About Segments of an Enterprise and Related
Information”, which requires segment information to be reported using a management approach. This management approach is
based on reporting segment information the way management organizes segments within the enterprise for making operating
decisions and assessing performance.

The Company has two reportable segments: software systems and services segment and information and property records services
segment. The software systems and services segment provides municipal and county governments with software systems and ser-
vices to meet their information technology and automation needs including real estate appraisal services. The largest component
of the information and property records services business is the computerized indexing and imaging of real property records
maintained by county clerks and recorders, in addition to providing other information management outsourcing services, records
management, micrographic reproduction and title plant update services and sales of copies of title plants to title companies.

Divested activities include the historical operating results and assets of the automotive parts and supplies segment, which was dis-
continued in 1998 and the products for fund raising segment, which was discontinued in 1997. See Note 3 for further discussion.
In addition, corporate activities are included as “Other”.

The Company evaluates performance based on several factors, of which the primary financial measure is business segment operat-
ing profit. The Company defines segment operating income as income before noncash amortization of intangible assets associated
with their acquisition by the Company, interest expense, non-recurring items and income taxes. The accounting policies of the
reportable segments are the same as those described in Note 1.

There were no intersegment transactions, thus no eliminations are necessary.

The Company’s reportable segments are strategic business units that offer different products and services. They are separately
managed as each business requires different marketing and distribution strategies.

The Company derives a majority of its revenue from external domestic customers. The information and property records services
segment conducts minor operations in Germany, which are not significant and are not disclosed.

Summarized financial information concerning the Company’s reportable segments is set forth below based on the nature of the
products and services offered:

As of and year ended December 31, 1999

Software
Systems &
Services

Information &
Property
Records
Services

Other

Continuing
Operations

Divested
Activities

Totals

Revenues

$ 69,991

$ 38,410

$ —

$108,401

$ —

$108,401

808

2,826

—

186

126

3,820

—

178

126

3,998

13,545

10,191

(7,657)

16,079

—

16,079

Other amortization

expense

Depreciation expense

Segment operating profit

(loss)

Capital expenditures,
including software
development costs

Segment assets

122,065

103,376

47,094

272,535

2,597

12,030

581

15,208

534

—

15,742

272,535

As of and year ended December 31, 1998

Software
Systems &
Services

Information &
Property
Records
Services

Other

Continuing
Operations

Divested
Activities

Totals

Revenues

$ 22,108

$ 28,441

$ —

$50,549

$76,484

$127,033

Other amortization

expense

Depreciation expense

Segment operating
profit (loss)

Capital expenditures,
including software
development costs

—

217

—

1,880

184

822

2,146

1,066

1,006

3,212

4,863

9,249

(2,773)

11,339

(845)

10,494

432

2,076

150

2,658

2,070

4,728

Segment assets

33,432

93,698

7,364

134,494

15,600

150,094

As of and year ended December 31, 1997

Software
Systems &
Services

Information &
Property
Records
Services

Other

Continuing
Operations

Divested
Activities

Totals

Revenues

$—

$ —

$—

$98,342

Other amortization

expense

Depreciation expense

Segment operating
profit (loss)

Capital expenditures

Segment assets

—

749

836

1,817

1,846

(2,959)

139

1,106

1,290

(1,853)

1,429

24,354

22,796

47,150

Reconciliation of reportable segment operating profit
(loss) to the Company’s consolidated totals:

Total profit or loss for continuing reportable segments
Interest expense
Interest income
Costs of certain acquisition opportunities
Goodwill and intangibles amortization associated with

acquisitions

Income (loss) from continuing operations before income tax

Years ended December 31,
1997
1998
1999

$16,079
(4,893)
320
(1,851)

$11,339
(2,009)
178
(3,146)

(7,315)
$ 2,340

(3,173)
$ 3,189

$(2,959)
(85)
907
—

—
$(2,137)

(19) Subsequent Event

On January 3, 2000, the Company acquired the stock of Capitol Commerce Reporter, Inc. (“CCR”) of Austin, Texas for approxi-
mately $3,000,000 in cash, $1,200,000 in assumed debt and a $2,800,000 five-year, 10% subordinated note. CCR provides pub-
lic records research, document retrieval, filing and information services.

Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Shareholders
Tyler Technologies, Inc.

We have audited the accompanying consolidated balance sheets of Tyler Technologies, Inc. and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three
years in the period ended December 31, 1999. These statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-
statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state-
ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Tyler Technologies, Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.

Dallas, Texas
March 30, 2000

Corporate Information

Executive Officers
Louis A. Waters
Chairman and Co-Chief Executive Officer

John M. Yeaman
President and Co-Chief Executive Officer

William D. Oates
Chairman of the Executive Committee

John D. Woolf
Senior Vice President - Administration

Theodore L. Bathurst
Vice President and Chief Financial Officer

Brian B. Berry
Vice President - Corporate Development

Brian K. Miller
Vice President - Finance & Treasurer

Board of Directors
Louis A. Waters

William D. Oates

John M. Yeaman

Ernest H. Lorch
Of Counsel
Whitman Breed Abbott & Morgan LLP

Frederick R. Meyer
Chairman, President and Chief Executive Officer
Aladdin Industries, Inc.

C.A. Rundell, Jr.
Chairman of the Board
NCI Building Systems, Inc.

Corporate Headquarters
2800 West Mockingbird Lane
Dallas, Texas 75235
(214) 902-5086
www.tylertechnologies.com

Transfer Agent and Registrar
Fleet National Bank
c/o EquiServe, Limited Partnership
P.O. Box 8040
Boston, Massachusetts 02266-8040
(781) 575-3120
www.equiserve.com

Independent Auditors
Ernst & Young LLP
Dallas, Texas

Legal Counsel
Gardere & Wynne, L.L.P.
Dallas, Texas

Common Stock
Listed on the New York Stock Exchange under the symbol
“TYL”.

Form 10-K
Copies of the Company’s Annual Report on Form 10-K
or other shareholder communications may be obtained from
the Company’s website at www.tylertechnologies.com or by
contacting:

Investor Relations
Tyler Technologies, Inc.
2800 West Mockingbird Lane
Dallas, Texas 75235
(888) 777-0817
Email: info@tylertechnologies.com

T E C H N O L O G I E S , I N C .

2800 West Mockingbird Lane
Dallas, Texas 75235
www.tylertechnologies.com

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