UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2006
JACK HENRY & ASSOCIATES, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 0-14112 43-1128385
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
663 Highway 60, P.O. Box 807, Monett, MO 65708
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (417) 235-6652
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a.-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4 (c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On May 8, 2006, Jack Henry & Associates, Inc. issued a press release
announcing 2006 third quarter results, the text of which is attached
hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
99.1 Press release dated May 8, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
(Registrant)
Date: May 8, 2006 By: /s/ Kevin D. Williams
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Kevin D. Williams
Chief Financial Officer
EXHIBIT 99.1
Company: Jack Henry & Associates, Inc. Analyst Contact: Kevin D. Williams
663 Highway 60, P.O. Box 807 Chief Financial Officer
Monett, MO 65708 (417) 235-6652
IR Contact: Jon Seegert
FOR IMMEDIATE RELEASE Director of Investor Relations
--------------------- (417) 235-6652
JACK HENRY & ASSOCIATES FISCAL 2006 THIRD QUARTER
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PROFIT INCREASES 21 PERCENT
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Monett, MO. May 8, 2006 - Jack Henry & Associates, Inc. (Nasdaq: JKHY), a
leading provider of integrated technology solutions and outsourced data
processing for financial institutions, today announced third quarter fiscal
2006 results with an 8 percent increase in revenue, an 11 percent increase
in gross profit, and a 21 percent increase in net income over the third
quarter of fiscal 2005. For the nine months of fiscal 2006, revenue
increased 9 percent, with an increase of 14 percent in gross profit and an
increase of 20 percent in net income over the same nine months in fiscal
2005.
For the quarter ended March 31, 2006, the company generated total revenue of
$145.5 million compared to $134.4 million in the same quarter a year ago.
Gross profit increased to $63.7 million compared to $57.3 million in the
third quarter of last fiscal year. Net income totaled $23.5 million, or
$0.25 per diluted share, compared to $19.4 million, or $0.21 per diluted
share in the same quarter a year ago.
For the first nine months of fiscal 2006, total revenue of $429.9 million
was generated compared to $394.4 million for the first nine months of fiscal
2005. Gross profit increased to $185.7 million compared to $162.6 million
during the same period last fiscal year. Net income for the nine months of
fiscal 2006 was $64.5 million, or $0.69 per diluted share, compared to $53.8
million, or $0.58 per diluted share for the same nine months in fiscal 2005.
According to Jack Prim, CEO, "We are pleased with our overall performance in
the quarter. Our services business continues to show strong growth, with
particularly strong volume growth in all of our electronic transactions
businesses. Our bank segment also experienced the largest software license
fee quarter in the history of the company. However, license fees in our
credit union segment were somewhat lower than expected due a lower than
average transaction size, and a larger than expected percentage of
outsourcing transactions in the quarter and year-to-date compared to last
year. Furthermore, our management team maintained a strong focus on
expenses to deliver solid margins and earnings despite the changes in our
credit union segments sales mix."
Operating Results
"We continue to experience strong demand for of our products and services.
The number of new core customers contracting for our flagship products is
significantly higher than last year, and these contracts typically include a
large number of our complementary products," stated Tony Wormington,
President. "These new customers combined with our ongoing success cross
selling additional complementary products and services to our existing
customers continue to increase all of the components of our recurring
revenue, and ultimately expand our gross margins. We expect to continue our
gross margin improvement as we work to maintain these sales levels, and as
we further leverage our infrastructure to generate operational and cost
efficiencies."
License revenue for the third quarter was $20.6 million, or 14 percent of
third quarter total revenue, compared to $21.0 million, or 16 percent of the
third quarter total revenue a year ago. Support and service revenue
increased to $106.1 million, or 73 percent of total revenue in third quarter
of fiscal 2006 from $92.5 million, or 69 percent of total revenue for the
same period a year ago. The increase in Support and Service revenue was due
to increases in every component of our recurring revenue which includes
electronic transactions processing, outsourcing and our in-house support;
the only component of this line of revenue that had a small decrease this
quarter compared to the prior year was implementation services. Hardware
sales in the third quarter of fiscal 2006 decreased to $18.8 million, or 13
percent of total revenue, from $20.9 million, or 15 percent of total revenue
in the third quarter of last fiscal year.
For the nine months of fiscal 2006, license revenue decreased to $58.3
million, or 13 percent of total revenue, compared to $62.6 million, or
16 percent of total revenue a year ago. Support and service revenue
contributed 73 percent to total revenue, or $312.0 million of the total
revenue for the nine months of the current fiscal year, compared to $263.9
million, or 67 percent of total revenue for the nine months of the prior
fiscal year. The increase in Support and Service revenue is due to solid
increases in every component of this revenue line for the first nine months
compared to the prior year. Hardware sales year-to-date was $59.6 million
compared to $67.9 million for the same period last year. Hardware revenue
was 14 percent of total revenue for fiscal 2006 and 17 percent of revenue
year-to-date in fiscal 2005.
Cost of sales for the third quarter increased to $81.8 million for the three
months ended March 31, 2006 from $77.1 million for the same three months
ended March 31, 2005. Third quarter gross profit increased 11 percent to
$63.7 million with a 44 percent gross margin, compared to $57.3 million and
a 43 percent gross margin for the same period a year ago.
Cost of sales for the nine months ended March 31, 2006 increased 5 percent
to $244.2 million from $231.9 million for the same period ended March 31,
2005. Year-to-date gross profit of fiscal 2006 increased 14 percent to
$185.7 million with a 43 percent gross margin, compared to $162.6 million or
a 41 percent gross margin year-to-date of fiscal 2005.
Gross margin on license revenue for the third quarter of fiscal 2006 was 99
percent compared to 95 percent a year ago for the same period. Gross
margins for the nine months of fiscal 2006 and 2005 were 96 percent and 93
percent, respectively, primarily due to a reduction in license revenue
delivered through reseller agreements.
Support and service gross margin increased to 36 percent in the third
quarter of fiscal 2006 from 34 percent a year ago. Support and service
gross margin increased to 36 percent in the nine months of fiscal 2006 from
32 percent for the nine months in fiscal 2005 mainly due to revenue growth
for the quarter and year-to-date of the current fiscal year increasing at a
much faster rate than costs, as we are able to leverage our resources and
control costs. Hardware gross margins were lower for the third quarter at
28 percent compared to 30 percent for the same quarter last year. Year-to-
date gross margins in the current fiscal year were 27 percent, while last
fiscal year hardware gross margin was 28 percent, primarily due to sales mix
along with reduced vendor rebates received on hardware sold in the current
year.
Operating expenses increased 10 percent for the third quarter of fiscal 2006
compared to the same quarter a year ago primarily due to employee related
expenses from increased headcount and depreciation expense. Selling and
marketing expenses rose 6 percent in the current year third quarter to $12.3
million, or 8 percent of total revenue, from $11.6 million or 9 percent
of total 2005 third quarter revenue. Research and development expenses
increased 9 percent to $8.4 million from $7.7 million, while remaining at 6
percent of total revenue for the third quarters in fiscal 2006 and 2005.
General and administrative costs increased 19 percent to $8.2 million or 6
percent of revenue, in the third quarter of fiscal year 2006, from $6.9
million, or 5 percent of revenue for the same quarter a year ago.
Operating expenses increased 12 percent for fiscal 2006 year-to-date
compared to the same period a year ago primarily due to employee related
expenses from increased headcount, depreciation expense, acquisitions and
increased expenses associated with our banking and credit union annual
National User Group Meetings. Selling and marketing expenses rose 5 percent
in the same period to $36.0 million, or 8 percent of total revenue from
$34.3 million or 9 percent of total revenue. Research and development
expenses increased 12 percent to $23.2 million from $20.6 million, while
remaining at 5 percent of total revenue for nine months in fiscal 2006 and
2005. General and administrative costs increased 21 percent to $27.2
million or 6 percent of revenue for the nine months of fiscal 2006 from
$22.5 million, also 6 percent of revenue for the same nine months a year
ago.
Operating income increased 12 percent to $34.7 million, or 24 percent of
third quarter revenue, compared to $31.0 million, or 23 percent of revenue
in the third quarter of fiscal 2005. Operating income increased 17 percent
to $99.3 million, or 23 percent of year-to-date revenue, compared to $85.2
million, or 22 percent of revenue year-to-date in fiscal 2005.
Provision for income taxes decreased 2 percent in the current third quarter
in fiscal 2006 compared to the third quarter in fiscal 2005. Provision for
income taxes for the nine months ended March 31, 2006 increased 10 percent
and is 35.5 percent of income before income taxes compared to 37.5 percent
of income before income taxes for the same nine month period in fiscal 2005.
The effective tax rate change is due to the manufacturing deduction and the
reevaluation of effective state tax rates. The third quarter tax rate is
lower due to the year to date adjustment made during the quarter. Third
quarter net income totaled $23.5 million, or $0.25 per diluted share,
compared to $19.4 million, or $0.21 per diluted share in the third quarter
of fiscal 2005. Year-to-date net income totaled $64.5 million, or $0.69
per diluted share, compared to $53.8 million, or $0.58 per diluted share in
the prior year.
According to Kevin Williams, CFO, "The net results of the quarter were in-
line with our expectations, with the only shortfall being in license revenue
in the credit union segment. The Company did get a positive impact from the
change in the effective tax rate for the quarter and year-to-date, which
this should be the approximate effective tax rate going forward. Also,
during the quarter we completed the initial implementation of our new
internal accounting system, which has gone very well and is on schedule."
For the third quarter of 2006, the bank systems and services segment
revenue increased 15 percent to $120.1 million, with a gross margin of 45
percent from $104.2 million and a gross margin of 42 percent in the same
quarter a year ago. The credit union systems and services segment revenue
decreased 16 percent to $25.4 million with a gross margin of 37 percent for
the third quarter of 2006 from $30.1 million and a gross margin of 44
percent in the same period a year ago.
For the nine months ended March 31, 2006, the bank systems and services
segment revenue increased 11 percent to $349.3 million, with a gross margin
of 44 percent from $315.4 million and a gross margin of 42 percent a year
ago. The credit union systems and services segment revenue increased 2
percent to $80.6 million for the nine months of fiscal 2006, with a gross
margin of 39 percent from $79.1 million and gross margin of 37 percent in
the same period a year ago.
Balance Sheet, Cash Flow, and Backlog Review
At March 31, 2006, cash and cash equivalents increased to $38.8 million at
March 31, 2006, from $15.9 million at March 31, 2005. Trade receivables
increased 25 percent, or $19.7 million, to $99.7 million compared to a year
ago. The increase is primarily due to the increase in annual maintenance
billings for newly installed core and complementary customers, increased
customers and volume of transactions processed. Note payable increased from
$14.0 million a year ago to $25.0 million at March 31, 2006. Deferred
revenue increased $9.3 million or 11 percent to $91.7 million at March 31,
2006, compared to a year ago. Stockholders' equity grew 15 percent to
$579.5 million at March 31, 2006, from $502.9 million a year ago.
Backlog increased 8 percent at March 31, 2006 to $213.3 million ($62.8
million in-house and $150.5 million outsourcing) from $198.2 million ($67.1
million in-house and $131.1 million outsourcing) at March 31, 2005. The
current quarter backlog remained nearly flat compared to December 31, 2005,
when backlog was $213.8 million ($63.8 million in-house and $150.0 million
outsourcing).
Cash provided by operations totaled $113.4 million in the current year
compared to $101.7 million last year. Cash provided by operations consisted
of $64.5 million net income, depreciation and amortization expense of $32.5
million plus the combined increase of $5.9 million in deferred income taxes
and the loss on disposal of property. Stock-based compensation was $0.4
million in expense, less the excess tax benefit from stock based payments of
$6.5 million. The balance consists of the change in receivables of $110.9
million less the change of $14.7 million for prepaid and accrued expenses,
and accounts payable, less $83.2 million for the change in deferred
revenues, plus the change in income taxes of $3.6 million. For fiscal year
2005, cash flow from operations consisted of $53.8 million in net income,
depreciation and amortization expense of $28.4 million, plus a combined
increase of $6.1 million in deferred income taxes and the loss on disposal
of property and equipment, less the excess tax benefit from stock
based payments of $3.4 million. The balance consisted of the change in
receivables of $94.9 million, less the change of $6.4 million for prepaid
and accrued expenses, accounts payable, and income taxes, minus $71.7
million change in deferred revenues.
Net cash used in investing activities for the current year was $64.0 million
and included payment for the Profitstar acquisition of $19.2 million, plus
$1.5 million paid on earn-outs and other acquisitions adjustments, capital
expenditures of $32.2 million, and capitalized software development of $11.9
million. In the first nine months of fiscal 2005, net cash used in investing
activities of $157.4 million and consisted mainly of $119.6 million in
payment for acquisitions, $33.4 million in capital expenditures and $4.6
million for capitalized software development.
Net cash from financing activities for the current year used cash of $22.1
million and included a net repayment of the revolving bank credit facility
of $20.0 million, payment of dividends of $13.3 million, the purchase of
treasury stock of $12.6 million, and the excess tax benefit from stock based
payments of $6.5 million. Cash used was offset by proceeds of $17.3 million
from the exercise of stock options and sale of common stock. For the first
nine months of fiscal 2005, cash provided by financing activities was $17.9
million and included $14.0 million for a note payable and the proceeds from
the exercise of stock options and sale of common stock of $11.8 million,
offset by $11.3 million for dividends paid, plus the excess tax benefit from
stock based payments of $3.4 million.
About Jack Henry & Associates
Jack Henry & Associates, Inc. is a leading provider of integrated computer
systems and processor of ATM/debit card/ACH transactions for banks and
credit unions. Jack Henry markets and supports its systems throughout
the United States, and has more than 8,700 customers nationwide. For
additional information on Jack Henry, visit the company's Web site
at www.jackhenry.com. The company will hold a conference call on May 9th
at 7:45 a.m. Central Time and investors are invited to listen at
www.jackhenry.com.
Statements made in this news release that are not historical facts are
forward-looking information. Actual results may differ materially from
those projected in any forward-looking information. Specifically, there are
a number of important factors that could cause actual results to differ
materially from those anticipated by any forward-looking information.
Additional information on these and other factors, which could affect the
Company's financial results, are included in its Securities and Exchange
Commission (SEC) filings on Form 10-K, and potential investors should review
these statements. Finally, there may be other factors not mentioned above
or included in the Company's SEC filings that may cause actual results to
differ materially from any forward-looking information.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Data - unaudited)
Three Months Ended Nine Months Ended
March 31, % Change March 31, % Change
-------------------- -------- -------------------- --------
2006 2005 2006 2005
-------- -------- -------- --------
REVENUE
License $ 20,566 $ 20,943 -2% $ 58,310 $ 62,642 -7%
Support and service 106,083 92,509 15% 312,008 263,883 18%
Hardware 18,846 20,930 -10% 59,577 67,913 -12%
-------- -------- -------- --------
Total 145,495 134,382 8% 429,895 394,438 9%
COST OF SALES
Cost of license 222 1,085 -80% 2,134 4,428 -52%
Cost of support and service 67,962 61,436 11% 198,555 178,412 11%
Cost of hardware 13,629 14,584 -7% 43,486 49,010 -11%
-------- -------- -------- --------
Total 81,813 77,105 6% 244,175 231,850 5%
-------- -------- -------- --------
GROSS PROFIT 63,682 57,277 11% 185,720 162,588 14%
Gross Profit Margin 44% 43% 43% 41%
OPERATING EXPENSES
Selling and marketing 12,292 11,598 6% 36,032 34,250 5%
Research and development 8,435 7,738 9% 23,187 20,621 12%
General and administrative 8,239 6,915 19% 27,174 22,507 21%
-------- -------- -------- --------
Total 28,966 26,251 10% 86,393 77,378 12%
-------- -------- -------- --------
OPERATING INCOME 34,716 31,026 12% 99,327 85,210 17%
INTEREST INCOME (EXPENSE)
Interest income 731 171 327% 1,599 989 62%
Interest expense (590) (110) >100% (897) (127) >100%
-------- -------- -------- --------
Total 141 61 131% 702 862 -19%
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 34,857 31,087 12% 100,029 86,072 16%
PROVISION FOR INCOME TAXES 11,397 11,658 -2% 35,511 32,277 10%
-------- -------- -------- --------
NET INCOME $ 23,460 $ 19,429 21% $ 64,518 $ 53,795 20%
======== ======== ======== ========
Diluted net income per share $ 0.25 $ 0.21 $ 0.69 $ 0.58
======== ======== ======== ========
Diluted weighted avg shares
outstanding 94,390 93,421 94,008 92,954
======== ======== ======== ========
Consolidated Balance Sheet Highlights
(In Thousands-unaudited) March 31, % Change
---------------------- --------
2006 2005
-------- --------
Cash, cash equivalents and investments $ 40,914 $ 16,945 141%
Receivables 99,717 80,026 25%
TOTAL ASSETS 769,010 660,100 16%
Accounts payable and accrued expenses $ 28,072 $ 28,280 -1%
Note Payable 25,000 14,000 79%
Deferred revenue 91,679 82,371 11%
STOCKHOLDERS' EQUITY 579,534 502,874 15%
(THIRTY)