Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
(X) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
JACK HENRY & ASSOCIATES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11(c)(2): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
JACK HENRY & ASSOCIATES, INC.
663 Highway 60, P. O. Box 807
Monett, Missouri 65708
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF JACK HENRY & ASSOCIATES, INC.:
PLEASE TAKE NOTICE that the 1998 Annual Meeting of Stockholders of Jack Henry &
Associates, Inc., a Delaware corporation, will be held at the Monett City Park
Casino, Monett, Missouri, on Thursday, October 29, 1998, 11:00 a.m., local time,
for the following purposes:
(1) To elect seven (7) directors to serve until the 1999 Annual Meeting
of Stockholders;
(2) To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
The close of business on September 22, 1998, has been fixed as the record date
for the Annual Meeting. Only stockholders of record as of that date will be
entitled to notice of and to vote at said meeting and any adjournment or
postponement thereof.
The accompanying form of Proxy is solicited by the Board of Directors of the
Company. Reference is made to the attached Proxy Statement for further informa-
tion with respect to the business to be transacted at the Annual Meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
EXPECT TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY. IF YOU DECIDE TO
ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
Janet E. Gray
Secretary
Monett, Missouri
September 20, 1998
JACK HENRY & ASSOCIATES, INC.
663 Highway 60
P.O. Box 807
Monett, Missouri 65708
PROXY STATEMENT
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Thursday, October 29, 1998
This Proxy Statement and the enclosed proxy card (the Proxy) are furnished to
the stockholders of Jack Henry & Associates, Inc., a Delaware corporation (the
Company), in connection with the solicitation of Proxies by the Company s Board
of Directors for use at the Company s 1998 Annual Meeting of Stockholders, and
any adjournment or postponement thereof (the Annual Meeting), to be held at the
Monett City Park Casino, Monett, Missouri, at 11:00 a.m., local time, on
Thursday, October 29, 1998. The mailing of this Proxy Statement, the Proxy, the
Notice of Annual Meeting and the accompanying 1998 Annual Report to Stockholders
is expected to commence on or about September 28, 1998.
The Board of Directors does not intend to bring any matters before the Annual
Meeting except those indicated in the Notice and does not know of any matter
which anyone else proposes to present for action at the Annual Meeting. If any
other matters properly come before the Annual Meeting, however, the persons
named in the accompanying form of Proxy, or their duly constituted substitutes,
acting at the Annual Meeting, will be deemed authorized to vote or otherwise to
act thereon in accordance with their judgment on such matters.
If the enclosed Proxy is properly executed and returned prior to voting at the
Annual Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. Each proposal, including the election of
directors, will require the affirmative vote of a majority of the shares of
common stock voting in person or by Proxy at the Annual Meeting.
Any stockholder executing a Proxy retains the power to revoke it at any time
prior to the voting of the Proxy. It may be revoked by a stockholder personally
appearing at the Annual Meeting and casting a contrary vote, by filing an
instrument of revocation with the Secretary of the Company, or by the
presentation at the Annual Meeting of a duly executed later dated Proxy.
VOTING
At the 1998 Annual Meeting, Stockholders will consider and vote upon:
(1) The election of seven (7) directors; and
(2) Such other matters as may properly come before the Annual Meeting.
Only stockholders of record at the close of business on September 22, 1998, the
record date for the Annual Meeting, are entitled to notice of and to vote at
such meeting. Stockholders are entitled to one vote for each share of Common
Stock on each matter to be considered at the Annual Meeting.
The Company s authorized capital stock currently consists of 50,000,000 shares
of common stock, par value $.01 per share (the Common Stock), and 500,000 shares
of preferred stock, par value $1.00 per share (the Preferred Stock). As of
August 14, 1998, there were 18,955,217 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding. At such date, the Company s executive
officers and directors were entitled to vote, or to direct the voting of
6,407,835 shares of Common Stock, representing 33.81% of the shares entitled to
vote at the 1998 Annual Meeting. Unless otherwise specified, all share numbers
and other share data have been adjusted to reflect all prior stock splits.
All shares represented by Proxy and all Proxies solicited hereunder will be
voted in accordance with the specifications made by the stockholders executing
such Proxies. If a stockholder does not specify how a Proxy is to be voted, the
shares represented thereby will be voted: (1) FOR the election as directors of
the seven (7) persons nominated by management; and (2) FOR and in accordance
with the discretion of the persons to whom the Proxy is granted upon other
matters that may properly come before the Annual Meeting.
STOCK OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth information as of August 14, 1998, concerning the
equity ownership of those individuals who are known to be the beneficial owners,
as defined in Rule 13d-3 of the Securities Exchange Act of 1934, of 5% or more
of the Company s Common Stock, and by all of the Company s directors and
executive officers as a group:
Number of Percentage
Shares of Shares
Name and Address of Beneficially Outstanding
Title of Class Beneficial Owner Owned (1)
(1)
$.01 par value John W. Henry, 4,420,031 23.03%
Common Stock Michael E. Henry, (2)
Vicki Jo Henry
and JKHY Partners
663 Highway 60
Monett, MO
Jerry D. Hall 1,720,218 9.08%
663 Highway 60 (3)
Monett, MO
Eddina F. Henry 1,425,000 7.52%
411 Lincoln Road South (4)
Monett, MO
All directors and exec-
utive officers as a 7,089,484 36.18%
group (9 persons) (5)
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
except as noted below. With respect to shares held in the Company s 401(k)
Employee Stock Ownership Plan (the 401(k) ESOP), a participant has the right to
direct the voting and disposition of shares allocated to his account.
(2) Reflects information in filings with the Securities and Exchange
Commission (the SEC) by members of the Henry family reporting for JKHY Partners
(the Partnership), a family partnership of which the listed individuals are
partners. John W. Henry separately may be deemed to beneficially own 1,025,832
shares, including 935,549 shares held individually, 41,544 shares allocated to
his 401(k) ESOP account, and 48,739 shares held by JKHY Partners. Michael E.
Henry separately may be deemed to beneficially own 3,442,938 shares, including
37,209 shares held individually, 15,729 shares allocated to his 401(k) ESOP
account, 240,000 shares currently acquirable by exercise of outstanding stock
options, 1,725,000 shares held by the Partnership, 1,325,000 shares held in a
living trust and 100,000 shares held by the Henry Family Limited Partnership,
both established by his mother, Eddina F. Henry. Michael E. Henry may be deemed
to share beneficial ownership in the shares held by the JKHY Partners, by the
Eddina F. Henry Trust and by the Henry Family Limited Partnership because he has
been granted proxies to vote such shares. Vicki Jo Henry does not beneficially
own any shares of common stock in her individual capacity and her business
address is 6851 South Holly Circle, Suite 270, Englewood, Colorado, 80112. The
business address of John W. Henry, Michael E. Henry and the Partnership is
reflected in the table.
(3) Includes 47,837 shares held in the Company s 401(k) ESOP for Mr. Hall s
account.
(4) Reflects information in filings with the SEC by Eddina F. Henry to report
shares held in a revocable trust for her benefit and shares held by the Henry
Family Limited Partnership. As described above in Footnote (2), beneficial
ownership of these shares is shared with Michael E. Henry.
(5) Includes 639,148 shares which are or will be acquirable within 60 days
under outstanding stock options, and 141,370 shares held in the Company s 401(k)
ESOP for the accounts of all officers and directors as a group.
PROPOSAL 1
ELECTION OF DIRECTORS
Procedure
At the meeting, the stockholders will elect seven (7) directors to hold office
for one-year terms ending at the Company s 1999 Annual Meeting of Stockholders
or until their successors are elected and qualified. The Company s Board of
Directors has nominated the Company s seven (7) current directors for reelection
at the Annual Meeting.
The stockholders are entitled to one vote per share on each matter submitted to
vote at any meeting of the Stockholders. Unless contrary instructions are given,
the persons named in the enclosed Proxy or their substitutes will vote FOR the
election of the nominees named below.
The Board of Directors believes that all of the nominees are willing to serve as
directors. However, if any nominee at the time of election is unable to serve
or is otherwise unavailable for election, and as a result other nominees are
designated by the Board of Directors, the persons named in the enclosed Proxy or
their substitutes intend to vote for the election of such designated nominees.
Nominees For Election
The directors and nominees for election as directors of the Company, as well as
certain information about them, are as follows:
Number of Percentage of
Position Shares Bene- Shares Out-
Name with Company Director ficially standing (1)
Since Owned (1)
Michael E. Chairman, 1986 3,442,938 17.94%
Henry Chief Execu- (2)
tive Officer
and Director
Michael R. Wallace President, 1991 306,385 1.6%
Chief Oper- (3)
ating Offi-
cer
and Director
John W. Henry Vice Chair- 1977 1,025,832 5.35%
man, Senior (2)
Vice Presi-
dent and
Director
Jerry D. Hall Executive 1977 1,720,218 9.08%
Vice (4)
President
and Director
James J. Ellis Director 1985 131,320 *
(5)
Burton O. George Director 1987 84,499 *
(5)
George R. Curry Director 1989 165,028 *
(6)
_____________________
* Less than 1%
(1) Information is set forth as of August 14, 1998. The persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, except as noted below. With respect
to shares held in the Company s 401(k) Employee Stock Ownership Plan (the 401(k)
ESOP), a participant has the right to direct the voting and disposition of
shares allocated to his account.
(2) See Stock Ownership of Certain Stockholders - Footnote (2), above. The
number of shares beneficially owned by John W. Henry and Michael E. Henry are
separately listed in the table.
(3) Includes 237,500 shares currently acquirable by exercise of an outstanding
option and 21,448 shares held in the Company s 401(k) ESOP for Mr. Wallace s
account.
(4) Includes 47,837 shares held in the Company s 401(k) ESOP for Mr. Hall s
account.
(5) Includes 42,499 shares that are currently acquirable.
(6) Includes 128,529 shares held as trustee for self, shares held as trustee
for family members, shares held in trust with spouse as co-trustee for her
benefit, and 36,499 shares that are currently acquirable.
The following information relating to the Company s directors and nominees for
director, all of whom are United States citizens, is with respect to their
principal occupations and positions during the past five years:
Michael E. Henry, age 37, Chairman of the Board, Chief Executive Officer and
Director. Mr. Henry, the son of John W. Henry and a director of the Company
since 1986, has served as the Company s Chairman of the Board and Chief
Executive Officer since October, 1994. He previously served as Vice Chairman and
Senior Vice President since 1993. Previous to that he served as Manager of
Research and Development since 1983. He joined the Company in 1979.
Michael R. Wallace, age 36, President, Chief Operating Officer and Director. Mr.
Wallace, a director of the Company since 1991, has served as President since
1993 and as the Chief Operating Officer since October, 1994. He previously
served as Manager of Installation Services since 1986. He joined the Company in
1981.
John W. Henry, age 63, Vice Chairman, Senior Vice President and Director. Mr.
Henry, a founder and principal stockholder of the Company, has served as Vice
Chairman since October, 1994. He previously served as Chairman of the Board from
1977 through 1994. He also has been a director since the Company s inception in
1977. He previously served as Chief Executive Officer from 1977 through 1988 and
as President until 1989.
Jerry D. Hall, age 55, Executive Vice President and Director. Mr. Hall, a
principal stockholder of the Company, has served as Executive Vice President
since October, 1994. He previously served as Chief Executive Officer from 1990
through 1994. He also has been a director since the Company s inception in 1977.
He previously served as President from 1989 through 1993 and as Vice President-
Operations from 1977 through 1988.
James J. Ellis, age 64, Director. Mr. Ellis, a director of the Company since
1985, has been Managing Partner of Ellis/Rosier Financial Services since 1992.
Mr. Ellis served as general manager of MONY Financial Services, Dallas, Texas,
from 1979 until his retirement in 1992. Mr. Ellis also serves as a director of
Merit Medical Systems, Inc.
Burton O. George, age 71, Director. Mr. George, a director of the Company since
1987, is retired. He previously had been in the banking business since 1958, and
most recently served as Chairman of the Board and Chief Executive Officer of
First National Bank of Berryville, Berryville, Arkansas from 1985 through 1989.
George R. Curry, age 73, Director. Mr. Curry, a director of the Company since
1989, is Chairman of Central Bank, Lebanon, Missouri, with which he has been
affiliated since 1949, as well as President of Central Shares, Inc., a bank
holding company.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Company s Board of Directors held four (4) meetings during the last fiscal
year. The Company maintains an Audit Committee and a Compensation Committee of
which Messrs. Curry, George and Ellis are members. The Company does not maintain
a standing Nominating Committee. The functions of the Audit Committee are to
provide direct communication between the Board of Directors and the Company s
auditors and to recommend the selection of the Company s auditors to the Board
of Directors. The functions of the Compensation Committee are to recommend
salaries for executives and key employees to the Board of Directors for approval
and to review and make recommendations to the Board of Directors on compensation
plans for the other employees. The Compensation Committee also administers the
Company s 1996 Stock Option Plan. The Audit Committee met once and the
Compensation Committee met twice during the last fiscal year and each director
attended at least 75% of the total of all meetings of the Board of Directors and
all committees on which they served.
Directors Compensation
The Company s Directors who are employed by the Company do not receive any
separate compensation for service on the Board of Directors. Each non-employee
Director receives $1,200 for each meeting attended and is reimbursed for out-of-
pocket expenses incurred in attending such meetings. Under the 1995 Non-
Qualified Stock Option Plan, each non-employee Director is also compensated by
the annual grant of non-statutory stock options to purchase 7,500 shares of
common stock of the Company, subject to an overall grant limitation under the
plan of 75,000 shares to each individual Director.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The executive officers and significant employees of the Company, as well as
certain biographical information about them, are as follows:
Officer/
Significant
Name Position with Company Employee Since
Michael E. Henry Chairman of the Board and 1983
Chief Executive Officer
Michael R. Wallace President and 1991
Chief Operating Officer
John W. Henry Vice Chairman and Senior 1977
Vice President
Jerry D. Hall Executive Vice President 1977
Terry W. Thompson Vice President, 1990
Chief Financial Officer
and Treasurer
Marguerite P. Butterworth Vice President 1993
The following information relating to the Company s executive officers and
significant employees, all of whom are United States citizens, not already
described herein, is with respect to their principal occupations and positions
during the past five years:
Terry W. Thompson, Age 48, Vice President, Chief Financial Officer and
Treasurer. Mr. Thompson has served as Vice President, Chief Financial Officer
and Treasurer of the Company since 1990.
Marguerite P. Butterworth, Age 50, Vice President. Ms. Butterworth has served as
Vice President since February of 1993. Ms. Butterworth joined the Company in
1983 and has been Hardware Manager since 1984.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is required to identify any director or officer who failed to timely
file with the Securities and Exchange Commission a report required under Section
16(a) of the Securities Exchange Act of 1934 relating to ownership and changes
in ownership of the Company s common stock. The required reports consist of
initial statements on Form 3, statements of changes on Form 4 and annual
statements on Form 5. During the fiscal year ended June 30, 1998, there were no
delinquent filings, except for a filing with respect to a disposition of 11,000
shares by Marguerite Butterworth which was inadvertently filed five months late
on August 5, 1998, and a filing with respect to a gift of 1,100 shares by Terry
Thompson which was inadvertently filed nine days late on May 19, 1998.
EXECUTIVE COMPENSATION
The following table sets forth certain information with regard to the
compensation paid by the Company to the Chief Executive Officer and to the
Company's other four most highly compensated executive officers for the year
ended June 30, 1998.
SUMMARY COMPENSATION TABLE
Name and Year Salary Bonus Ot Long-Term All Other
Principal $ $ her Compensa- Compensa-
Position An- tion tion
nu- Shares
al underly-
Co ing Op-
m- tions (2)
pe
n-
sa-
tio
n
($)
(1)
Michael E. 1998 $205,000 $ - - - -
Henry 1997 $190,417 $ - - - -
Chairman 1996 $175,000 $ 700 - 100,000 -
and Chief
Executive
Officer
Michael R. 1998 $205,000 $ - - - -
Wallace 1997 $190,417 $ - - - -
President 1996 $175,000 $ 700 - 100,000 -
and Chief
Operating
Officer
John W. 1998 $102,400 $ - - - -
Henry 1997 $125,217 $ - - - -
Vice Chair- 1996 $152,400 $ 700 - - -
man and Se-
nior Vice
President
Jerry D. 1998 $135,733 $ - - - -
Hall 1997 $152,400 $ - - - -
Executive 1996 $152,400 $ 700 - - -
Vice
President
Terry W. 1998 $104,166 $10,000 - 10,000 -
Thompson 1997 $ 95,000 $ - - - -
Vice 1996 $ 90,000 $ 700 - 15,000 -
President,
Chief
Financial
Officer,
Treasurer
(1) For each listed officer, less than amount required to be reported.
(2) Adjusted for subsequent splits.
The following tables set forth information with respect to stock options granted
to and exercised by the executive officers named in the Summary Compensation
Table during the fiscal year ended June 30, 1998, together with the number of
options outstanding as of such date. Data, as appropriate, have been adjusted
for stock splits.
Option Grants in Last Fiscal Year
Number of Percent Potential
Shares of To- Realizable
under- tal Op- Value at
lying tions Assumed
Name Options Granted Annual
Granted to Em- Exer- Rates of
(#) ployees cise or Stock
in Fis- base Expira- price Ap-
cal Price tion preciation
Year ($/Sh) Date for Option
Term (1)
5% ($)
10% ($)
Terry W. 10,000 1.3% $24.13 10/30/0 $241,250 $482,500
Thompson 7
_____________________________
(1) The amounts in these columns are required to be disclosed by the SEC at
rates set by regulation and are not intended to forecast possible future
appreciation of Company stock or amounts that may ultimately be realized upon
exercise. The Company chose not to use an alternative formula for grant date
valuation.
Aggregated Option Exercises in Last Fiscal Year and June 30, 1998, Option Values
Number of Shares Value of
Underlying Unexer- Unexercised In-
Shares cised the-Money
Acquired Options at 6/30/98 Options at
on 6/30/98
Value
Name Exercise Realized ($) Exercis- Unexerci Exercisable Un
able sable ex
er
ci
sa
bl
e
Jerry D. Hall - -- -- -- -- --
John W. Henry -- -- -- -- -- --
Michael E. Henry 15,000 477,450 240,000 -- $5,857,500 --
Michael R. Wallace 10,000 291,250 237,500 -- $5,780,313 --
Terry W. Thompson -- -- 19,650 8,000 $ 349,194 82
,0
00
COMPENSATION COMMITTEE REPORT
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee. The Compensation Committee consists of
three independent, non-employee Directors of the Company. There was no insider
participation on the Compensation Committee.
The objectives of the Company's executive officer compensation program are to:
Encourage continuation of JHA's entrepreneurial spirit;
Attract and retain highly qualified and motivated executives; and
Encourage esprit de corps and reward outstanding performance.
In meeting the foregoing objectives, the Compensation Committee strives for the
interests of management and shareholders to be the same - the maximumization of
shareholder values. The components of the executive compensation program which
are employed by the Committee to meet these goals include base salary,
discretionary bonuses, and stock options.
Salaries and bonuses are established at levels to compensate for the position
held and contributions made by each executive. Recommendations regarding
bonuses and increases in salary are based upon subjective evaluations of each
individual's performance and contribution.
Longer term incentives are provided by the award of stock options because the
ultimate value of options granted will be determined by long-term growth in the
Company stock price. Awards of options are believed to help focus executives
attention on managing the Company from the perspective of an owner with an
equity stake in the business. This component of executive compensation is
provided through the Company's 1996 Stock Option Plan (the "Plan"), under which
the executive officers, and all other employees of the Company and its
subsidiaries, are eligible to receive options. The Committee has discretion to
designate optionees and to determine the terms of the options granted. However,
option prices shall be fixed and not less than 100% of fair market value of the
stock at the date of grant, and options may not be exercisable more than ten
years after the date of grant. In light of the substantial option grants in
fiscal year 1996, stock options were only granted to Mr. Thompson of the senior
management team during the current fiscal year 1998.
In employing the foregoing three elements of compensation, the Compensation
Committee considers the experience, prior compensation levels, personal
performance, number and value of previously granted options, and other
subjective factors relating to each individual and seeks to optimize the balance
between base salary, short-term and long-term incentives. Compensation is
generally weighted in favor of base salary.
The salary of Chief Executive Officer, Michael E. Henry, increased this year by
approximately 8% due to his exemplary performance.
The Compensation Committee notes that there is a $1,000,000 cap on the income
tax deduction which may be taken with respect to any individual officer's
compensation. While current cash compensation paid to the Company's executive
officers is substantially less than the cap, the ultimate value of stock options
is not now known, and thus the cap may be important in some future year. The
cap has been considered by the Committee and we intend to take the steps
necessary to conform the Company's compensation structure to comply with the cap
if the issue arises in a future period.
George R. Curry
Burton O. George
James J. Ellis
Members of the Compensation Committee
COMPANY PERFORMANCE
The following graph presents a comparison for the five-year period ended June
30, 1998, of the market performance of the Company's common stock with the S&P
500 Index and an index of peer companies selected by the Company:
The following information depicts a line graph with the following values:
Description 1994 1995 1996 1997 1998
Jack Henry &
Associates,
Inc. $ 82.70 $154.43 $362.81 $ 391.63 $ 559.68
Peer Group
Only $101.03 $145.42 $192.82 $ 210.49 $ 220.07
S & P Only $101.41 $127.84 $161.08 $ 216.98 $ 282.42
*This comparison assumes $100 was invested on July 1, 1993, and assumes
reinvestment of dividends. Total returns are calculated according to market
capitalization of peer group members at the beginning of each period. Peer
companies selected are in the business of providing specialized computer
software, hardware and related services to financial institutions and other
businesses. Companies in the peer group are Banctec, Bisys Group, Broadway &
Seymour, Cerner Corp., Crawford & Co., Electronic Arts, First Data, Fiserv,
Keane, National Data, PC Quote, Primark, Rainbow Technology, SEI Investments and
Sterling Software.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals at the Company s 1999 Annual
Meeting of Stockholders must submit their proposals to the Company s Secretary
on or before June 2, 1999.
COST OF SOLICITATION AND PROXIES
Proxy solicitation is being made by mail, although it may also be made by
telephone, telegraph or in person by officers, directors and employees of the
Company not specifically engaged or compensated for that purpose. The Company
will bear the entire cost of the Annual Meeting, including the cost of
preparing, assembling, printing and mailing the Proxy Statement, the Proxy and
any additional materials furnished to stockholders. Copies of the solicitation
materials will be furnished to brokerage houses, fiduciaries and custodians for
forwarding to the beneficial owners of shares held of record by them and, upon
their request, such persons will be reimbursed for their reasonable expenses
incurred in completing the mailing to such beneficial owners.
FINANCIAL STATEMENTS
Financial statements of the Company are contained in the 1998 Annual Report on
Form 10-K which accompanies this Proxy Statement. Incorporated herein by
reference are the financial statements contained in such Form 10-K.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be presented for
consideration at the 1998 Annual Meeting which are not described herein.
However, if other matters properly come before the meeting, it is intended that
the persons named in the accompanying Proxy will vote thereon in accordance with
their best judgment.
By Order of the Board of Directors
/s/ Michael E. Henry
Michael E. Henry
Chairman of the Board
Monett, Missouri
September 23, 1998
A copy of the Company s Annual Report on Form 10-K is included herewith.
Exhibits to Form 10-K, listed on pages 27 and 28 thereof, have been omitted. The
Company will furnish a copy of any exhibit subject to charge upon written
request directed to Terry W. Thompson, Chief Financial Officer, Jack Henry &
Associates, Inc., 663 Highway 60, Post Office Box 807, Monett, Missouri, 65708.
PROXY CARD
JACK HENRY & ASSOCIATES, INC. THIS PROXY IS SOLICITED
663 HIGHWAY 60 ON BEHALF OF THE BOARD
P.O. BOX 807 OF DIRECTORS
MONETT, MISSOURI 65708 The undersigned hereby
appoints Michael E.
Henry and Michael R.
Wallace as Proxies, each
with the power to
appoint his or her
substitute, and hereby
authorizes them to
represent and to vote,
as designated below, all
the shares of common
stock of Jack Henry &
Associates, Inc. held of
record by the
undersigned on September
22, 1998, at the annual
meeting of shareholders
to be held on October
29, 1998 or any
adjournment thereof.
1. ELECTION OF DIRECTORS
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(Except as marked to the to vote for all nominees listed
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below)
J. Henry, J. Hall, M. Henry, J. Ellis, B. George, G. Curry, M. Wallace
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted FOR Proposal 1.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED 1998
Signature
Signature if held jointly
PLEASE MARK SIGN DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE
JACK HENRY ANNUAL REPORT
COVER THEME:
Where Tradition Meets Technology
SUB-THEME: (MISSION STATEMENT)
Leading Through Technology
Guiding Through Support.
JACK HENRY MISSION
Our mission is to protect and to increase the value of our stockholders'
investment by providing quality products and services to our customers. To
accomplish this, we intend to:
* Concentrate on what we know and do best information systems and
services for banks and financial institutions.
* Provide outstanding commitment and service to our customers, so
the perceived value of our products and services is consistent
with their real value.
* Maintain a work environment that is personally and financially
rewarding for our employees.
TABLE OF CONTENTS
Jack Henry at A Glance
Founded in 1976, Jack Henry & Associates, Inc. (JHA), is a leading provider of
integrated computer systems and services for the banking industry. JHA provides
data processing solutions through proprietary applications software, operating
primarily on the IBM AS/400 computer. We offer a total-solution approach: JHA
typically sells both hardware and software. We also provide installation,
conversion, software customization, training, customer support, and related
services. Our core software products offer basic functions such as checking,
time deposits, loans, and general ledger. Ancillary offerings consist of loan
servicing, cash management, and customer profitability analysis among others.
All ancillary software offerings are integrated into JHA s host systems.
JHA s Customer Base and Market
We sell our products and services to over 1,550 banks and other financial
institutions, primarily located in the United States. The advanced capabilities
of the IBM AS/400 have expanded our market to include banks with assets up to
$10 billion.
We provide the following solutions to our customers:
IN-HOUSE:
A total turnkey solution software, hardware, installation services, and
ongoing customer support allows customers to manage data processing at
their own sites.
OUTSOURCE:
This solution provides customers the same capabilities, using JHA s data
centers for processing. Customers pay monthly usage fees on multi-year
service contracts. We also offers facilities-management services for large
banks through IBM Global Services.
Strategy
Our growth plan includes:
Additional customers for our core systems
Increased penetration of our customer base with ancillary product
offerings
Introduction of new products and services
Acquisitions that expand our existing customer base
Core-Systems
CIF 20/20
For community banks, typically with assets up to $400 million
SILVERLAKE SYSTEM
For banks with assets up to $10 billion
IBM Hardware
Through our remarketing of the successful IBM AS/400 computer, JHA is the
largest provider of IBM mid-range computers to the banking industry. We also
offers ancillary IBM products and services. For the sixth consecutive year, we
have been named an IBM Premier Business Partner.
Core-Systems Ancillaries:
Check Imaging
ITEM PROCESSING
PLATFORM AUTOMATION
PAYROLL SOFTWARE
TELLER SOFTWARE
INTERNET BANKING
FORMS AND SUPPLIES
DISASTER RECOVERY SERVICES
ATM SERVICES
Locations:
Monett, Missouri (headquarters)
Albuquerque, New Mexico
Angola, Indiana
Birmingham, Alabama
Charlotte, North Carolina
Cleburne, Texas
Danbury, Connecticut
Englewood, Colorado
Houston, Texas (2 offices)
Overland Park, Kansas
Rogers, Arkansas
St. Paul, Minnesota
Picture of Michael E. Henry and Michael R. Wallace
TO OUR SHAREHOLDERS:
Fiscal 1998 has been another year of record at JHA. We are proud of our
accomplishments and pleased with our competitive positioning for the years
ahead. In the past year, we again achieved excellent growth in revenues and
earnings. We added new customers for our core systems through both in-house
sales and outsource offerings. Additionally, we realized strong demand for each
of our ancillary products and services. Hardware sales have shown exceptional
growth as well. We made several strategic acquisitions each providing assets
to promote future growth. We continued to upgrade the features and functions of
each of our products and placed an increasing focus on exceptional service to
our customers.
Results
Fiscal 1998 was JHA s eighth consecutive year of record revenues, net income
and earnings per share from continuing operations. Since fiscal 1990, we have
seen compounded annual growth rates of 28% in revenues and 48% in net earnings
per share from continuing operations. The fourth quarter of 1998 marked the 34th
consecutive period that year-to-year quarterly comparisons have shown increased
earnings results.
Total revenues for fiscal 1998 increased to $113.4 million, compared with $82.6
million in fiscal 1997 a gain of 37%. Although records were achieved in all
three of our revenue areas (software, hardware, and maintenance/support and
services), the strongest gains were realized in the software segment. This
displays the confidence in our systems by a significant number of new customers;
additionally, upgrades and migrations from acquired systems were an important
part of those gains. The Year 2000 (Y2K) issue has fueled new business activity
as a number of new customers chose JHA as the provider to help them achieve
their Y2K solution.
Our gross profit benefitted from the larger proportion of software as a
percentage of sales and rose to 51% of total revenues from the 50% gross margin
level of fiscal 1997. Net income from continuing operations totaled $22.2
million, or $1.13 per share, an increase of 36% in earnings per share from the
$0.83 per share earned in fiscal 1997. Our discontinued BankVision operation
incurred a loss of $668,000 or $0.04 per share. We have further solidified the
BankVision international unit and continue to examine alternatives for the
divestiture of this operation.
We completed fiscal 1998 with an order backlog of $56.7 million. All three
components of JHA s in-house business software, hardware and service made
important contributions to this increased level. The service bureau segment also
made a contribution. Strong demand was registered with orders for both our in-
house systems and our service bureau offerings.
Last year all of JHA s products and services experienced record sales. In most
areas, we exceeded our expectations. We were particularly pleased with the
demand for our Silverlake System, which benefitted not only from an increased
number of units sold, but also from the larger-than-anticipated average
transaction size. We continued to show solid sales gains in CIF 20/20. In
conjunction with the core system software installations, we sold substantially
higher levels of new hardware and the related equipment maintenance. Service
bureau demand exceeded our objectives, as we benefitted from both strong unit
growth and several contracts with large banks. We experienced excellent gains in
each of our ancillary product and service areas, led by gains in proof-of-
deposit (POD) software, NetTeller, ATM switch processing, forms and supplies,
and platform automation.
Acquisitions
Acquisitions continue to be a major element of our growth strategy. We
completed four acquisitions between July 1997 and July 1998 - each one providing
opportunities to expand our product offerings and add new customers.
GG Pulley Associates, Inc. Image and Item-Processing Solutions
Financial Software Systems, Inc. Payroll Systems
Vertex, Inc. Teller Systems
Hewlett Computer Systems Service Bureau
Side Bar -
JHA s growth in revenue and profitability will be driven by the addition of new
core systems customers, the increased penetration of ancillary products and
services within our customer base, and the related recurring maintenance and
service revenues that accompany the sales of both new systems and ancillary
products.
Outlook
JHA s partnership with its customers lays the foundation for future growth. We
are gaining increased recognition for the superior capability and reliability of
our broad product and service offerings, and we continually strive to improve
our already exceptional service to our customers.
JHA s growth in revenue and profitability will be driven by the addition of new
core systems customers, the increased penetration of ancillary products and
services within our customer base, and the related recurring maintenance and
service revenues that accompany the sales of both new systems and ancillary
products. Anticipated gains of our CIF 20/20 and Silverlake systems will include
sales to new banks, conversions from acquired legacy systems and the migration
from older JHA systems. Outsourcing, primarily through our service bureau
operations, is a relatively new market for JHA and provides excellent growth
opportunities through internal expansion and further acquisitions. Next year, we
also expect important contributions from our recent acquisitions. Our overall
profit margins have the potential to increase from current levels as software
becomes a larger part of total revenues.
Our excellent excess cash generation will fund our internal growth and help
finance future acquisitions. We continue to have an exceptionally strong balance
sheet: $73 million in shareholders equity, no debt, and $26 million in cash and
investments at fiscal year-end 1998.
The approach of Y2K has already benefitted our growth; this scenario is
expected to continue over the next several quarters. The challenge in fiscal
1999 will be to effectively plan JHA s potential growth for the following year.
We expect to continue to have excellent core product sales, but believe that
ancillary products and services will account for a higher portion of our growth
in future years.
We appreciate the contributions that all Jack Henry employees have made to
achieve the outstanding growth we have experienced. Their enthusiastic spirit,
hard work, expertise, experience and exceptional service to our customers are
the basis for JHA s future success.
Michael E. Henry Michael R. Wallace
Chairman and President and
Chief Executive Officer Chief Operating Officer
FINANCIAL HIGHLIGHTS (COMPARISON OVER 5 YEARS)
Pie Chart depicting Revenue Sources for FY '94:
Maintenance/Support 18%
Software & Installation 34%
Hardware 48%
Pie Chart depicting Revenue Sources for FY '98:
Maintenance/Support 31%
Software & Installation 29%
Hardware 40%
Bar Graph depicting "REVENUES" from continuing operations:
For FYE 98 - 113,400,000
For FYE 97 - 82,600,000
For FYE 96 - 67,558,000
For FYE 95 - 46,124,000
For FYE 94 - 38,390,000
Bar Graph depicting "INCOME FROM CONTINUING OPERATIONS":
For FYE 98 - 22,200,000
For FYE 97 - 15,755,000
For FYE 96 - 12,268,000
For FYE 95 - 7,978,000
For FYE 94 - 6,259,000
Bar Graph depicting "DILUTED EARNINGS PER SHARE" from continuing operations:
For FYE 98 - $1.13
For FYE 97 - $ .83
For FYE 96 - $ .65
For FYE 95 - $ .44
For FYE 94 - $ .35
Bar Graph depicting "TOTAL ASSETS":
For FYE 98 - 115,200,000
For FYE 97 - 82,069,000
For FYE 96 - 60,841,000
For FYE 95 - 58,721,000
For FYE 94 - 38,347,000
Bar Graph depicting "SHAREHOLDERS' EQUITY" in millions:
For FYE 98 - 73,500,000
For FYE 97 - 52,782,000
For FYE 96 - 37,858,000
For FYE 95 - 29,484,000
For FYE 94 - 23,650,000
Bar Graph depicting "DIVIDENDS DECLARED PER SHARE":
For FYE 98 - $.24
For FYE 97 - $.20
For FYE 96 - $.17
For FYE 95 - $.15
For FYE 94 - $.13
Sidebar
Jack Henry & Associates, Inc., was No. 42 on Forbes magazine s 1997 list of The
World s Best Small Companies. It was No. 49 in 1996.
JHA was No. 69 on Business Week magazine s 1998 list of hot growth stocks.
TRENDS & COMPETITION
OPPORTUNITIES ARISING FROM BANK CONSOLIDATIONS
The dynamics of community banking are changing and provide JHA with excellent
growth opportunities. Because of the high level of banking merger activity, many
of the super-regional banks now have branches in small communities. Large
banking organizations typically don t have the traditional personalized
approach, the service element appreciated by many community bank customers. This
presents a tremendous opportunity for locally owned community banks. Displaced
and opportunistic bankers have found capital readily available, and there has
been a significant trend in start-up, or de novo, banks in the past three years.
This is a market niche that is particularly attractive to JHA, which is winning
a significant portion of the systems business in these entrepreneurial forays.
Remaining viable in the banking industry involves significant investments in
computer technology. When larger banking institutions enter small communities,
small banks find they must become increasingly sophisticated and boost their
technology investments to compete effectively. JHA gives its customers this
capability. JHA keeps pace with technological development, adding products and
services in the areas where large portions of its customers express interest.
IN-HOUSE OR OUTSOURCE
JHA offers banks either in-house computer services or the ability to outsource,
primarily through service bureau offerings. Historically, JHA sold only in-house
systems. JHA s 1995 entry into outsourcing services has greatly expanded its
marketplace because JHA can now provide product offerings to customers who
weren t interested in managing their own systems. In-house systems are estimated
to account for 63% of total industry sales, while outsourcing accounts for 37%
(per an outside study, Automation in Banking 1998). JHA uses the same software
for both systems, so our bankers have the flexibility to change from in-house to
outsource, or vice versa, if need be. Our alliance with IBM Global Services
provides outsourcing capabilities for larger banks utilizing JHA s Silverlake
System.
More than 3,500 banks in the United States use outsourcing services. JHA has
barely scratched the surface in this market and sees excellent potential for
aggressive growth for many years to come. Even as a recent market entrant, we
already have 83 service bureau customers.
JHA s Year 2000 (Y2K) Advantage
JHA is in an excellent competitive position with regard to Y2K. From the
outset, our core products CIF 20/20 and Silverlake were written to
accommodate functionality into the century 2000. Our Y2K focus in the past
fiscal year has been on the preparedness of our customers; in contrast to many
competitors, the expense and distractions of having to fix our existing systems
have not hampered us. We have been proactive in delivering information to our
customers related to their need to demonstrate their Y2K compliance to
regulators. In April 1998, we issued a Year 2000 Software Warranty to our
customers of Silverlake System, CIF 20/20 and Liberty 400.
We have performed extensive internal testing of our products and have provided
our customers with timely and relevant information regarding our software and
the regulatory environment. We are assisting our customers in helping them
specifically determine their own testing procedures. The JHA program provides a
testing methodology for JHA core products, JHA complementary products, and the
products of the JHA Business Partners. JHA has provided its customers with
general guidelines to follow and is offering off-site testing environments
through JHA s own Bank Business Recovery Service and IBM Business Recovery
Services.
JHA s time commitment to Y2K will be substantially completed by calendar year-
end 1998. Thus, JHA will be able to focus on decisions related to aggressively
growing its business beyond calendar 1999. This gives us an important edge over
our competitors many are still mired in the complexities of moving their own
systems towards Y2K compliance. Because JHA has worked diligently to simplify
Y2K procedures, our customers have had limited expense and problems related to
Y2K on JHA s systems.
One possible result to the Y2K situation is an increased level of acquisition
activity by JHA customers. We believe this type of activity Y2K compliant
banks acquiring non-compliant banks would be beneficial to JHA s competitive
position.
PRODUCTS & SERVICES
Leading Through Technology
CORE SYSTEMS
Our core software products provide basic functions such as checking, time
deposits, loans and general ledger to our customers. The strength of our core
systems continues to be an important asset to our success, as customers look to
establish strong foundations from which to build their data processing systems.
CIF 20/20
This integrated software system is specifically designed for the community
finance industry. Its modular design and user-defined parameters provide
customers the flexibility needed in today s marketplace. This unique user-
defined architecture allows for quick creation of new financial products without
costly custom programming.
Silverlake System
This innovation has earned JHA the reputation of delivering software solutions
that are specifically written to take advantage of the most current
technological developments from IBM. Silverlake is an integrated solution rich
in feature and function for all sectors of the banking industry.
Hardware
As customers needs grow, they need to add more processing power. Thus, to a
large measure, our customers, moving to a new stage of technology create our
hardware success. JHA is the largest remarketer of IBM AS/400 computers in the
finance industry. Our IBM partnership is an important asset to JHA because of
the breadth and quality of its product offerings and the scope, the consistency
and quality of its nationwide service. This gives us a distinct advantage over
competitors who resell other hardware lines. IBM has a strong commitment to the
AS/400 and continually seeks to make it more open and significantly faster to
accommodate an increasingly interconnected world.
JHA is also a leading provider of item-processing hardware by BancTec,
Incorporated. BancTec sorting and imaging equipment is considered to be the
finest in the industry.
Ancillary Products
Most banks don t have the time or the resources to keep up with the fast pace
of technology yet require affordable, technology solutions to compete in
today s marketplace. JHA customers are able to build their technology solutions
through a single-vendor relationship. Each of our ancillary product offerings
are fully integrated with our core systems, providing reliability and efficiency
to our customers operations.
JHA focuses development on those products that customers specifically indicate
they want. By delivering our new products to built-in demand, we have a
remarkably high product acceptance. We expect to achieve further penetration of
our customer base with these offerings.
Demand for CHECK IMAGING is steadily growing within the industry. This
technology provides significant cost savings by reducing costs of errors in
initial check handling, storage, shipping, and postage. It also provides
improved responsiveness for customers needing research and payment verification.
We continue to enhance the features and capabilities of our imaging product and
believe that imaging will be an increasingly important element of our overall
growth in future years. One measure of our customers interest in check imaging
is the exceptionally high demand for proof of deposit (POD) or ITEM PROCESSING
software and hardware. A POD system is required as the foundation for a bank s
image solution. When customers purchase POD, we know that they are committing to
JHA should they choose to implement imaging in the future.
NetTeller, JHA s INTERNET BANKING product, was introduced two years ago.
NetTeller provides real-time, online information. It is integrated into our core
systems and is sold only to JHA customers. NetTeller is the market leader in
installations for home banking offerings, with almost three times the
installations as its nearest. It is an excellent example of the ready acceptance
by our customers of high-quality, affordable JHA ancillary products. One of the
attractions is that NetTeller integrates well with all JHA applications,
including check imaging, so that banks customers can download account detail,
including images of checks, on their own personal computers for viewing.
NetTeller is our highest-profile ancillary product and of great interest to both
potential and existing customers.
We offer DISASTER RECOVERY SERVICES through our Bank Business Recovery Service
(BBRS) organization. We have equipped these eight sites to be used by many of
our customers for Y2K testing. The increasing number of locations and advanced
capability of our sites is an attractive feature to our customers. In addition
to these JHA sites, we market IBM Business Recovery Services.
CommLink a JHA subsidiary offers national ATM SWITCHING SERVICES to JHA
banks, non-JHA banks and non-financial businesses. CommLink continues to
experience excellent growth. We are a PC-based provider and thus are able to
offer price-competitive services to our customers. CommLink has enhanced
customer service significantly and is gradually expanding its geographic
coverage. Because CommLink also sells to banks outside the JHA customer base, it
is an excellent vehicle for generating new banking relationships for JHA s core
systems business.
Our FORMS AND SUPPLIES operation The Single Source experienced excellent
growth last year. Our focus is on the value-added, data processing needs of our
customers, such as specialized forms. Professional telemarketing is used to
build and maintain direct customer contact. Our inventory system keeps track of
customer use of products, helping in the management of their business. For
example, our JHA telemarketers make service calls to our customers several weeks
before we anticipate they will run out of forms.
JHA s Platform Automation System continues to experience high growth. Our
Platform System delivers a fully automated solution for account opening. Forms
and paperwork are generated automatically, thus saving time, while eliminating
errors that typically occur when having to re-key handwritten information.
We have provided another solution to our customers PAYROLL SOFTWARE through
the FSS acquisition completed this year. Fully-integrated, payroll software is
another ancillary offering where demand is meeting our expectations. Payroll
allows our customers to provide value-added services to important commercial
accounts.
Also new to our product offerings this year is TELLER SOFTWARE gained through
our Vertex acquisition. This fully-integrated system provides greater efficiency
to a wide range of teller activities.
Growth & Acquisitions
JHA s Acquisition Strategy
Acquisitions continue to play an important role in our growth strategy. We
continue to pursue acquisition opportunities that will:
1) Increase our customer base,
2) Expand our market,
3) Add a needed product or service, or
4) Expand our outsource business.
We appreciate the special skills, knowledge and relationships that acquired
principals and employees bring to JHA. We seek people who want to grow with the
company, who fit in culturally, who are extremely customer-service oriented, who
have the same mentality as owners. We encourage them to make the necessary
equipment, facilities and staff investments to enable them to expand their
product area aggressively. Our actions reveal our commitment and convey the
message that JHA is serious about the newly-acquired team being an integral part
of JHA.
G.G. PULLEY & ASSOCIATES, INC. (GGPA)
In July 1997, JHA acquired G.G. Pulley, a leading provider of image and item
processing products and services for banks, thrifts, and other financial
institutions with approximately $6 million in annual revenues. The acquisition
price was $5 million in JHA stock. GGPA, located in Albuquerque, New Mexico,
provides the necessary item-processing products and capability for institutions
that have high transaction volume. Less than 20% of GGPA s annual maintenance
contracts are with JHA customers. JHA already offers its own integrated item-
processing solution to its own customers, but GGPA enables JHA to sell item
processing software outside our customer base under the G.G. Pulley name. Thus,
we can establish new banking relationships through GGPA. We have completed the
transition of Pulley s sales organization into the JHA organization and expect
to show improved sales levels in fiscal 1999.
FINANCIAL SOFTWARE SYSTEMS, INC. (FSS)
In September 1997, JHA acquired Financial Software Systems, a vendor of payroll
s o ftware, for $.6 million in JHA stock. FSS has annualized sales of
approximately $.4 million. The FSS software runs on the AS/400 hardware and is
fully-integrated into JHA s core systems. At the time of acquisition, JHA
customers accounted for more than 90% of the 91 installations. We anticipate
that FSS will grow rapidly, as bank customers prefer in-house payroll processing
through integrated systems.
VERTEX, INC.
In December 1997, JHA acquired Vertex, Inc, based in Birmingham, Alabama, for a
total of $3 million ($1.1 million in cash and $1.9 million in JHA shares).
Vertex is a leading provider of teller software to community banks. This
acquisition added a much-needed teller solution to our growing line of ancillary
products. The Vertex teller system runs on the IBM AS/400 and is fully-
integrated with the JHA application software. Vertex had approximately $1
million in annualized revenue at the time of acquisition. We have incorporated
the Vertex sales activities into the JHA sales infrastructure and have
aggressively increased resources to meet the high demand of this product from
our customer base.
HEWLETT COMPUTER SERVICES
On July 1, 1998, JHA purchased Hewlett Computer Services for $2.25 million in
cash. Hewlett is a provider of a variety of service bureau options using the IBM
AS/400 and has more than $1.4 million in revenues. Hewlett is located in
Cleburne, Texas, which is located 50 miles south of the Dallas/Fort Worth
metropolitan area. This becomes JHA s fifth service bureau location, adding to
Houston, Texas; Charlotte, North Carolina; Englewood, Colorado; and St. Paul,
Minnesota. Hewlett adds ten service bureau customers and has a specialization in
item and back-room processing. This operation enhances our resources in
outsourcing. Additionally, it gives us a base for providing data processing
services in the Dallas area, complementary to our well-established operation in
Houston. At Hewlett, we anticipate that our business and profitability will grow
significantly as we leverage our capabilities in item processing and add more
core processing capability.
Connecting People
Guiding Through Support
JHA'S CUSTOMER SERVICE FOCUS
The message begins at the executive level and travels throughout our entire
company: "Do whatever it takes to make our customers happy and earn their
business. If we can accomplish that, our business will flourish."
One of the most important factors in our company's continued success is this
focus on customer service. A large portion of our revenue each year comes from
existing customers; we must be able to deliver outstanding new products along
with the support they need for those products. Our customers see us as their
technology partner and rely heavily on us to give them the tools they need to
compete in today's (and tomorrow's) marketplace. We know that satisfied
customers are essential to our business.
User Group Meetings
Our most important communication vehicle our user group meetings happens
twice a year when our customers get together with us for a four-day seminar.
During this time, we update our customers on what is happening with JHA, hold
breakout sessions for education and training, show our new products, and talk
about important issues. The ideas we get from these meetings are crucial in
running our business the right way.
In Nashville this spring, over 900 customers and 120 JHA employees proved once
again how invaluable it is to get our employees talking with customers and our
customers talking with each other. There is no better way of finding out what's
important to our customers and what's happening in the banking marketplace than
to spend four days together.
The JHA Team Attitude: Small Company Mentality
Everyone's job is important from sales to support to the folks who keep our
facilities looking nice.
We encourage stock ownership by awarding stock options and through our stock
purchase plan. As owners, our employees' views are aligned more with
shareholders they're no longer simply employees getting a paycheck. Through
our annual Employee Survey, we encourage employees to be critical of how we run
our business so we can do a better job of retaining both customers and
employees. We tend to reward outstanding performance rather than basing bonuses
on seniority or job position, and we work hard on internal communications so
everyone knows what's going on and how decisions are made.
We expect a great deal from our employees, but we give them the tools and
resources they need to get the job done.
QUARTERLY FINANCIAL INFORMATION
(In thousands, except QUARTERS
per share data)
FY 1998 FIRST SECOND THIRD FOURTH TOTAL
Revenues 20,059 27,384 27,247 38,733 113,423
Cost of sales 8,818 13,743 12,731 20,338 55,630
Income before income taxes 6,987 8,138 8,612 11,627 35,364
Income from continuing
operations 4,427 5,073 5,397 7,340 22,237
Income (loss) from discontinued
operations (261) 54 (191) (270) (668)
Net income 4,166 5,127 5,206 7,070 21,569
Diluted earnings per share: Net
income per share from .23 .26 .27 .37 1.13
continuing operations
Net income per share .22 .26 .26 .35 1.09
FY 1997 FIRST SECOND THIRD FOURTH TOTAL
Revenues 18,350 21,348 22,061 20,841 82,600
Cost of sales 8,505 11,348 11,749 9,474 41,076
Income before income taxes 6,152 6,102 6,041 6,792 25,087
Income from continuing 3,803 3,778 3,735 4,439 15,755
operations
Income (loss) from
discontinued operations 0 (150) (89) (211) (450)
Net income 3,803 3,628 3,646 4,228 15,305
Diluted earnings per share:
Net income per share from .20 .20 .20 .23 .83
continuing operations
Net income per share .20 .19 .19 .22 .80
Selected Financial Information
(In Thousands, Except Per Share Information)
Year Ended June 30,
INCOME STATEMENT DATA 1998 1997 1996 1995 1994
Revenue (1) $113,423 $82,600 $67,558 $46,124 $38,390
Income from continuing opera- $ 22,237 $15,755 $12,268 $ 7,978 $ 6,259
tions
Loss from discontinued
operations (net of applicable
income taxes)(2) $ (668) $ (450) $(2,620) $ - $ -
Net Income $ 21,569 $15,305 $ 9,648 $ 7,978 $ 6,259
Income(loss) per share(3):
Continuing Operations $ 1.13 $ .83 $ .65 $ .44 $ .35
Discontinued Operations $ (.04) $ (.03) (.14) - -
Net Income $ 1.09 $ .80 $ .51 $ .44 $ .35
Dividends Declared Per Share $ .24 $ .20 $ .17 $ .15 $ .13
JUNE 30,
BALANCE SHEET DATA 1998 1997 1996 1995 1994
Working capital $ 29,878 $15,490 $ 6,895 $ (666) $11,181
Total assets $115,286 $82,069 $60,401 $58,721 $38,347
Long-term debt - - - - -
Stockholders' equity $ 73,500 $52,782 $37,418 $29,484 $23,650
Notes:
(1) Revenue includes software licensing and installation revenues; support
revenues; and hardware sales and commissions.
(2) Losses from any discontinued operations is reported as such from the
appropriate date.
(3) Prior year amounts have been adjusted to reflect the 50% stock dividends
paid in prior years. Earnings per share are based on diluted weighted average
shares outstanding and calculated in accordance with FASB #128.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Jack Henry & Associates, Inc.
We have audited the consolidated balance sheets of Jack Henry & Associates, Inc.
and its subsidiaries (the "Company") as of June 30, 1998 and 1997 and the
related consolidated statements of income, stockholders equity, and cash flows
for the years then ended. Such consolidated financial statements and our report
thereon dated August 18, 1998, expressing an unqualified opinion (which are not
included herein), accompany the proxy statement for the 1998 annual meeting of
stockholders and are incorporated therein by reference. The accompanying
condensed consolidated financial statements are the responsibility of the
Company s management. Our responsibility is to express an opinion on such
condensed consolidated financial statements in relation to the complete
consolidated financial statements. The consolidated financial statements of the
Company for the year ended June 30, 1996 were audited by other auditors whose
report, dated August 22, 1996, expressed an unqualified opinion on those
statements (which are not included herein).
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheets as of June 30, 1998 and 1997 and the related
condensed consolidated statements of income and of cash flows for the years then
ended is fairly stated in all material respects in relation to the basic
consolidated financial statements from which it has been derived.
DELOITTE & TOUCHE LLP
August 18, 1998
St Louis, Missouri
Jack Henry & Associates, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
Year Ended June 30,
1998 1997 1996
Revenues $113,423 $82,600 $67,558
Cost of sales 55,630 41,076 33,593
GROSS PROFIT $ 57,793 $41,524 $33,965
OPERATING EXPENSES 24,017 17,283 14,759
OPERATING INCOME FROM CONTINUING OPERATIONS $ 33,776 $24,241 $19,206
OTHER INCOME, NET 1,588 846 667
INCOME FROM CONT. OPERATIONS BEFORE INCOME TAXES $ 35,364 $25,087 $19,873
PROVISION FOR INCOME TAXES 13,127 9,332 7,605
INCOME FROM CONTINUING OPERATIONS $ 22,237 $15,755 $12,268
LOSS FROM DISCONTINUED OPERATIONS 668 450 2,620
NET INCOME $ 21,569 $15,305 $ 9,648
DILUTED EARNINGS PER SHARE:
INCOME FROM CONTINUING OPERATIONS $ 1.13 $ .83 $ .65
LOSS FROM DISCONTINUED OPERATIONS $ .04 $ .03 $ .14
NET INCOME $ 1.09 $ .80 $ .51
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 19,761 19,072 18,726
BASIC EARNINGS PER SHARE:
INCOME FROM CONTINUING OPERATIONS $ 1.18 $ .88 $ .70
LOSS FROM DISCONTINUED OPERATIONS $ .04 $ .03 $ .15
NET INCOME $ 1.14 $ .85 $ .55
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 18,850 17,977 17,656
* The accompanying notes are an integral part of these condensed consolidated
financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
S>
JUNE 30,
ASSETS 1998 1997
Current assets:
Cash and cash equivalents $ 23,306 $ 7,948
Investments 3,217 5,919
Trade receivables 36,826 22,703
Income taxes receivable - 1,982
Prepaid expenses and other 5,789 4,177
TOTAL CURRENT ASSETS $ 69,138 $42,729
Property and equipment, net 26,855 21,869
Other assets 19,293 17,471
Total assets $115,286 $82,069
Liabilities and stockholders equity
Current liabilities:
Accounts payable and accrued expenses $ 10,958 $ 6,559
Deferred revenue 28,302 20,680
Total current liabilities $ 39,260 $27,239
Deferred income taxes 2,526 2,048
Total liabilities $ 41,786 $29,287
Stockholders Equity:
Common stock 189 185
Less treasury shares - (293)
Additional paid-in capital 18,599 14,744
Retained earnings 54,712 38,146
Total stockholders equity $ 73,500 $52,782
Total liabilities and stockholders equity $115,286 $82,069
* The accompanying notes are an integral part of these condensed consolidated
financial statements.
Jack Henry & Associates, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended June 30,
1998 1997 1996
Cash flows from continuing operating activities $25,869 $19,480 $14,671
Cash flows to discontinued operations (1,075) (819) (151)
Cash flows to investing activities (6,217) (13,691) (9,767)
Cash flows to financing activities (3,219) (1,974) (3,224)
Net increase in cash $15,358 $ 2,996 $ 1,529
Cash and cash equivalents at beginning of year 7,948 4,952 3,423
Cash and cash equivalents at end of year $23,306 $ 7,948 $ 4,952
* The accompanying notes are an integral part of these condensed consolidated
financial statements.
* NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These financial statements have been condensed from the audited consolidated
financial statements of Jack Henry & Associates, Inc. The footnotes to the
audited financial statements, and the Statement of Changes in Stockholders'
Equity, are not included in this presentation.
Management's Discussion and Analysis of the Financial Statements, which is
included in this summary annual report, describes the impact on these condensed
consolidated financial statements of the significant events and activities of
the Company. The discussion provides additional information to assist in
understanding the Company's results of operations and financial position,
although it is not a part of the condensed consolidated financial statements.
Jack Henry & Associates, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Introduction - All of the revenues (and costs and expenses) in the statements of
income relate to JHA's continuing operations, i.e., the installation and support
of banking software systems that JHA developed and the marketing of the JHA
software along with computer hardware manufactured by others to provide a
complete data processing system for in-house or outsourced operations in finan-
cial institutions.
The Company has established a Year 2000 (Y2K) Committee. This Committee has
prepared a documented, systematic approach (the Y2K Plan) to review all products
and internal systems for Y2K compliance. The Company s Board of Directors has
reviewed and approved the Plan as required by the banking regulators of all
service bureau providers. The Company believes the products it currently sells
to be Y2K ready and that the majority, if not all, of its internal systems will
be Y2K ready by March 31, 1999. The estimated cost of the above efforts is not
reasonably determinable at the current time and is not expected to be material
to the Company s financial position or results of operations.
Total revenues, presented in the statements of income, include software
licensing and installation revenues; maintenance/support and services revenues;
and hardware sales and commissions which includes revenues from the sale of
forms and supplies.
Business operations for FY '98 and '97 continue to reflect JHA's success in its
market niche. JHA s approach of expanding its product and service offerings to
provide a top quality, comprehensive data processing installation for its
customers helps to drive its success. Results of operations for JHA's banking
system business in each of the last two fiscal years are discussed separately
below.
FY 98
REVENUE - The Company continued significant growth with each major component of
revenue contributing to the record $113.4 million, - a 37% increase over FY 97.
Continued demand for the Company s core products and related hardware was a
driving force in the revenue growth. Acquisitions, electronic transaction fees,
service bureau, forms sales and customer support fees also contributed to the
significant growth with increases at similar levels.
COST OF SALES - Cost of sales increased 35%, reflecting the strong revenue
growth. Cost of hardware increased 38% while cost of services only increased
33%, both mirroring the related revenue.
GROSS PROFIT - Gross profit increased 39%, relatively consistent with the
revenue growth. Minor changes in product mix helped to improve the gross margin
to 51% - a 1% increase above FY 97.
OPERATING EXPENSES - The 39% increase in operating expenses was consistent with
the increase in gross profit. The selling and marketing increase of 29% was
directly related to the increase in revenues. Research and development costs
experienced the largest increase at 53%. General and administrative costs
increased by 49%, supporting the overall growth of the Company and acquisitions.
OTHER INCOME - Other income rose 88% over last year, primarily due to the
increased amount of invested funds throughout the current year compared to last
year.
DISCONTINUED OPERATIONS - The Company incurred a $668,000 loss from discontinued
operations, a $218,000 increase compared to last year. Several issues which
were raised during negotiations for the sale of BankVision caused a delay in the
Company s plan for disposing of this subsidiary. These issues have now been
addressed. The Company is currently honoring commitments to existing customers
and anticipates final resolution regarding its discontinued operations by June
30, 1999.
FY '97
REVENUE - The Company continued great strides forward with each major component
of revenue contributing to the record $82.6 million, - a 22% increase.
Increased demand for the Company s flagship products continued to be a driving
force in the revenue growth. Other significant growth contributors were
electronic transaction fees, service bureau and customer support fees - all
increasing at similar levels.
COST OF SALES - Cost of sales increased 22%, equaling the rate of revenue
growth. Cost of hardware increased 26% while cost of services only increased
18%.
GROSS PROFIT - Gross profit increased 22%, consistent with the revenue increase.
This change helped to keep the gross margin at 50%, the same level as FY 96.
OPERATING EXPENSES - The 17% increase in operating expenses was favorable when
compared to the revenue and gross profit increase. The selling and marketing
increase (21%) was directly related to the increase in revenues.
OTHER INCOME - Other income rose 27% over last year, primarily due to the
increased amount of invested funds throughout the year than was the case the
previous year.
DISCONTINUED OPERATIONS - The Company incurred a $450,000 loss from discontinued
operations, down significantly from last year. Due to a planned sale not
closing within the expected timeframe, the Company continued to support and
maintenance with its existing customers.
FINANCIAL CONDITION
Liquidity - JHA's liquidity position (cash plus short-term investments minus
working capital borrowings) at June 30, 1998 increased significantly to
$26,523,000 versus $13,867,000 last year. The Company generated significantly
higher cash flows from operations, but the additional outlays for capital
expenditures (some of which resulted from acquisitions) and dividends held
liquidity growth to its current level. Working capital increased significantly
from $15,490,000 last year to $29,878,000 in the current year.
The Company believes its liquid assets on hand and those generated from
operations are sufficient to meet its cash requirements for FY '99. Cash and
investments are expected to increase during the first quarter of FY '99 as the
annual software maintenance billings in trade receivables at June 30, 1998 are
collected. The Company expects to utilize its $5,000,000 credit line minimally
during the next fiscal year.
Capital Requirements and Resources - JHA generally uses existing resources and
funds generated from operations to meet its capital requirements. Capital
expenditures of $7,755,000 were made for expansion of facilities and additional
equipment to provide for the Company's current and future growth. The most
significant individual outlays were for upgrades and additions to the corporate
aircraft. The Company has no long-term debt and anticipates capital
expenditures could approach $10,000,000 during the next fiscal year. These will
be paid with funds from operations.
Subsequent to June 30, 1998, the Company's Board of Directors declared a cash
dividend of $.065 per share on its common stock payable on September 24, 1998 to
stockholders of record as of September 8, 1998. Current funds from operations
are adequate for this purpose. The Board has indicated that it plans to
continue paying dividends so long as the Company's financial picture continues
to be favorable.
CORPORATE DIRECTORY
BOARD OF DIRECTORS:
MICHAEL E. HENRY, Chairman and Chief Executive Officer
MICHAEL R. WALLACE, President and Chief Operating Officer
JOHN W. "JACK" HENRY, Vice Chairman and Senior Vice President
JERRY D. HALL, Executive Vice President
*JAMES J. ELLIS, Managing Partner Ellis/Rosier Financial Services
Dallas, TX
*BURTON O. GEORGE, Former Chairman
First National Bank of Berryville
Berryville, AR
*GEORGE R. CURRY, Chairman
Central Bank
Lebanon, MO
*Member of Audit & Compensation Committees
OTHER INFORMATION:
TRANSFER AGENT & REGISTRAR:
UMB Bank, N.A.
P.O. Box 419226
Kansas City, MO 64141-6226
816-860-7761
EXECUTIVE OFFICERS:
MICHAEL E. HENRY, Chairman and Chief Executive Officer
MICHAEL R. WALLACE, President and Chief Operating Officer
JOHN W. "JACK" HENRY, Senior Vice President
JERRY D. HALL, Executive Vice President
TERRY W. THOMPSON, Chief Financial Officer, Vice President and Treasurer
MARGUERITE P. BUTTERWORTH, Vice President
COMPANIES:
PARENT COMPANY:
JACK HENRY & ASSOCIATES, INC.
663 Highway 60
P.O. Box 807
Monett, MO 65708
417-235-6652 (FAX) 417-235-4281
SUBSIDIARIES:
JACK HENRY INTERNATIONAL, LTD.
Monett, MO
BANKVISION SOFTWARE, LTD.
Monett, MO
COMMLINK CORP.
Houston, TX
G.G. PULLEY, INC.
Albuquerque, NM
VERTEX, INC.
Birmingham, AL
FORM 10K
A copy of the Company's 10-K is available upon request to the Chief Financial
Officer at the address above.
