FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURI-
TIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to
________________
Commission file number 0-14112
JACK HENRY & ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1128385
(State or other jurisdiction of incorporation) (I.R.S.
Employer
Identification No.)
663 Highway 60, P. O. Box 807, Monett, MO 65708
(Address of principal executive offices)
(Zip Code)
417-235-6652
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at October 31, 1997
Common Stock, $.01 par value 18,786,050
JACK HENRY & ASSOCIATES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item I - Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1997, (Unaudited) and June
30, 1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
September 30, 1997 and 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended September 30,
1997 and 1996 (Unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8
Part II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of
Security Holders 10
Part I. Financial Information
Item 1. Financial Statements
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
September 30,
1997 June 30,
(Unaudited) 1997
ASSETS
Current assets:
Cash $21,804 $ 7,948
Held-to-maturity securities 3,850 5,919
Receivables 11,816 22,703
Income taxes receivable - 1,982
Prepaid expenses and other 4,310 4,177
Total current assets $41,780 $42,729
Property and equipment, net 22,930 21,869
Other assets:
Intangible assets, net of amortization $15,072 $15,469
Computer software 1,178 1,226
Investments and other 912 776
Total other assets $17,162 $17,471
Total assets $81,872 $82,069
September 30,
1997 June 30,
(Unaudited) 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,302 $ 2,911
Accrued expenses 2,207 3,648
Income taxes 2,144 -
Deferred revenue 17,456 20,680
Total current liabilities $24,109 $27,239
Deferred income taxes 2,048 2,048
Total liabilities $26,157 $29,287
Stockholders' equity:
Preferred stock - $1.00 par value;
500,000 shares authorized;
none issued - -
Common stock - $0.01 par value;
30,000,000 shares authorized;
18,785,586 issued @ 9/30/97
18,517,309 issued @ 6/30/97 $ 188 $ 185
Less treasury shares 6/30/97 - 15,410 - (293)
Additional paid-in capital 14,723 14,744
Retained earnings 40,804 38,146
Total stockholders' equity $55,715 $52,782
Total liabilities and
stockholders' equity $81,872 $82,069
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Quarter Ended
September 30,
1997 1996 *
Revenues:
Software licensing & installation $ 6,122 $ 5,833
Maintenance/support & service 8,509 6,277
Hardware sales & commissions 5,428 6,240
Total revenues 20,059 18,350
Cost of sales:
Cost of hardware 3,395 4,318
Cost of services 5,423 4,025
Total cost of sales $ 8,818 $ 8,343
Gross profit $11,241 $ 10,007
56% 55%
Operating expenses:
Selling and marketing 2,172 2,202
Research and development 671 523
General and administrative 1,800 1,381
Total operating expenses $ 4,643 $ 4,106
Operating income 6,598 5,901
Other income (expense):
Interest income 278 177
Other, net 111 74
Total other income $ 389 $ 251
Income before income taxes $ 6,987 $ 6,152
Provision for income taxes 2,560 2,349
Income from continuing operations $ 4,427 -
Loss from discontinued operations 261 -
Net income $ 4,166 $ 3,803
Per share data:
Income from continuing operations .23 .20
Loss from discontinued operations .02 -
Net income $ .21 $ .20
Weighted Average Shares Outstanding 19,533 19,040
* Adjusted for split
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Three Months Ended
September 30,
1997 1996
Cash flows - operating activities:
Cash received from customers $27,714 $24,315
Cash paid to suppliers and employees (14,971) (13,508)
Interest and dividends received, net 345 222
Income taxes paid, net 1,423 (343)
Other, net 10 26
Net cash flow provided by operating
activities $14,521 $10,712
Cash flows from discontinued operations (397) (107)
Cash flows from investing activities:
Proceeds on sale of property & equipment $ 51 $ 7
Capital expenditures (1,424) (3,524)
Proceeds from sales of investments 2,000 -
Computer software development (36) (41)
Business acquisition, net 25 (314)
Net cash used in investing activities $ 616 $(3,872)
Cash flows from financing activities:
Principal payment on notes payable $ (119) $ (129)
Proceeds from issuance of common stock
upon exercise of stock options 222 276
Proceeds from sale of common stock 46 -
Dividends paid (1,033) (835)
Purchase of treasury stock - (335)
Net cash used in financing activities $ (884) $(1,023)
Net increase in cash $13,856 $ 5,710
Cash at beginning of period 7,948 4,952
Cash at end of period $21,804 $10,662
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Description of the Company - Jack Henry & Associates, Inc. ("JHA" or the
"Company") is a computer software company which has developed several
banking software systems. It markets those systems to financial institutions in
the United States along with the computer equipment (hardware) and
provides the conversion and software customization services necessary for a
financial institution to install a JHA software system. It also provides
continuing support and maintenance services to customers using the system.
The Company also processes ATM transactions for financial institutions in
the U.S. All of these related activities are considered a single business
segment.
Consolidation - The consolidated financial statements include the
accounts of JHA and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
Other Significant Accounting Policies - The accounting policies followed
by the Company are set forth in Note 1 to the Company's consolidated
financial statements included in its Annual Report on Form 10-K ("Form 10-K")
for the fiscal year ended June 30, 1997.
2. Interim Financial Statements
The accompanying condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q of the Securities and
Exchange Commission and in accordance with generally accepted accounting
principles applicable to interim financial statements, and do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
statements should be read in conjunction with the audited consolidated
financial statements and accompanying notes of the Company for the year
ended June 30, 1997, which are included in its Form 10-K.
In the opinion of management of the Company, the accompanying condensed
financial statements reflect all adjustments necessary (consisting solely
of normal recurring adjustments) to present fairly the financial position
of the Company as of September 30, 1997 and the results of its operations
and its cash flows for the three month period then ended.
The results of operations for the period ended September 30, 1997 are not
necessarily indicative of the results to be expected for the entire year.
3. Additional Interim Footnote Information
The following additional information is provided to update the notes to
the Company's annual financial statements for developments during the three
months ended September 30, 1997:
Effective July 1, 1997, the Company purchased all the outstanding stock
of G G Pulley & Associates, Inc. (GGPA). GGPA's primary offering is image
and item processing software and services for financial institutions in the
United States. The total consideration paid to GGPA's stockholders was
$5,000,000 in Company stock. The stock transaction was accounted for as a
pooling of interests.
Effective September 2, 1997, the Company acquired Financial Software
Systems, Inc. (FSS). FSS is a vendor of payroll software and services.
FSS has been a Jack Henry Business Partner for several years and the FSS
payroll system is already integrated with the Jack Henry application
software. The $600,000 stock transaction will be accounted for as a
pooling of interests.
4. Income Per Share Information
Earnings per common share are computed by dividing income by the weighted
average number of shares of common stock and dilutive common stock equiva-
lents outstanding for the three month period ended September 30, 1997 and
1996.
Item 2. - Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Background and Overview
Jack Henry & Associates, Inc. ("JHA" or the "Company"), is a leading
provider of integrated computer systems that perform data processing for
banks and related financial institutions. These systems are available for
in-house or outsourced applications. The Company was founded in 1976. Its
proprietary applications software, which operates on IBM computers, is
offered under two systems: CIF 20/20(TM), typically for banks with less
than $300 million in assets, and the Silverlake System(R), for banks with
assets up to $10 billion. JHA frequently sells hardware with its software
products. It also provides customer support and related services. The
Company's software systems have been installed at over 1450 banks and
financial institutions nationwide.
A detailed discussion of the major components of the results of operations for
the quarter ended September 30, 1997, as compared to the same
period in the previous year follows.
Revenues
Revenues increased 9% to $20,059,000 in the quarter ended September 30,
1997. Software licensing and installation increased 5%. Maintenance,
support and service revenues increased 36%. Hardware sales were down 13%
from last year's quarter. The Company's non-hardware products and services
(higher margin sales) increased 21% over last year. The increases reflect
continued growth and demand for the Company's products and services. The
hardware decrease was due principally to the timing of the announcement of
a new model AS/400 by IBM, the Company's hardware supplier.
The backlog of sales at September 30, 1997 was $32,550,000. This is up
from the record June 30, 1997 level, and is consistent with management's
expectations for the first quarter. Backlog at October 30, 1997 was
$30,981,000.
Cost of Sales
The 6% increase in cost of sales for the first quarter of FY '98 is
relatively consistent with the increase in revenues. Cost of services
increased significantly due to growth and planned expansion in the Company's
core business plus acquisitions were a sizable portion of the
increase.
Gross Profit
Gross profit increased to $11,241,000 in the first quarter ended September 30,
1997, a 12% increase over last year. The gross margin percentage
was 56% of sales compared to 55% last year.
Operating Expenses
Total operating expenses increased 13%. This is consistent with the
gross profit increase of 12%. Selling and marketing expenses decreased
slightly while research & development and general & administrative expenses
increased 28% and 30%, respectively. Acquisitions contributed a significant
portion of both increases.
Other Income and Expense
Other income for the quarter ended September 30, 1997 reflects an
increase when compared to the same period last year due primarily to the
level of cash invested being much higher this year than last.
Net Income
Net income from continuing operations for the first quarter was
$4,427,000, or $.23 earnings per share compared to $3,803,000, or $.20
earnings per share in the same period last year.
FINANCIAL CONDITION
Liquidity
The Company's cash and held-to-maturity securities increased to
$25,654,000 at September 30, 1997, from $13,867,000 at June 30, 1997. This
is reflecting the seasonal influx of cash due to the receipt in the first
quarter of annual maintenance fees billed June 30, 1997.
JHA has an available credit line totaling $4,000,000, although the
Company expects their use to be minimal during FY '98. The Company
currently has no short-term or long-term debt obligations.
Capital Requirements and Resources
JHA generally uses existing resources and funds generated from operations
to meet its capital requirements. Capital expenditures totaling $1,424,000
for the quarter ended September 30, 1997, were made for additional equipment.
These were funded from cash generated by operations. The consolidated capital
expenditures of JHA could exceed $6,000,000 for FY '98.
Silverlake System(R) is a registered trademark of Jack Henry & Associates,
Inc. CIF 20/20(TM) is a trademark of Jack Henry & Associates, Inc.
The Company paid a $.055 per share cash dividend on September 23, 1997 to
stockholders of record September 8, 1997 which was funded from working
capital. In addition, the Company's Board of Directors, subsequent to
September 30, 1997, declared a quarterly cash dividend of $.055 per share
on its common stock payable December 9, 1997 to stockholders of record on
November 18, 1997. This will be funded out of working capital.
CONCLUSION
JHA's results of operations and its financial position continued to be
quite favorable during the quarter ended September 30, 1997. This reflects
the continuing attitude of cooperation and commitment by each employee,
management's ongoing cost control efforts and commitment to deliver top
quality products and services to the markets served.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Stockholders of Jack Henry & Associates, Inc.
was held on October 30, 1997, for the purpose of electing a board of
directors and to amend the Certificate of Incorporation to increase
authorized shares from 30 million to 50 million common shares. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities and
Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitations. Management's nominees for director, all
incumbents, were elected with the number of votes for and withheld as
indicated below:
For Withheld
John W. Henry 16,088,748 107,400
Jerry D. Hall 16,096,348 99,800
Michael E. Henry 16,088,748 107,400
James J. Ellis 16,096,171 99,977
Burton O. George 16,091,606 104,542
George R. Curry 16,081,586 114,562
Michael R. Wallace 16,088,973 107,175
Also approved was to amend the Certificate of Incorporation to increase
authorized shares from 30 million to 50 million common shares with the
number of votes as indicated below:
For Against Abstain
15,945,010 216,820 34,318
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed
on behalf of the undersigned thereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
Date: November 14, 1997 /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board
Chief Executive Officer
Date: November 14, 1997 /s/ Terry W. Thompson
Terry W. Thompson
Vice President and
Chief Financial Officer
5
3-MOS
JUN-30-1998
SEP-30-1997
2804
3850
11816
0
0
41780
32223
9293
81872
24109
0
188
0
0
55527
81872
20059
20059
8818
4643
(389)
0
0
6987
2560
4427
(261)
0
0
4166
.23
.21
