SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission Number 0-14112
JACK HENRY & ASSOCIATES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1128385
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
663 Highway 60, P. O. Box 807, Monett, MO 65708
------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (417) 235-6652
Securities registered pursuant to Section 12(b) of the Act:
None
-----------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
-----------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of August 24, 2001, Registrant had 89,043,335 shares of Common Stock
outstanding ($.01 par value). On that date, the aggregate market value
of the Common Stock held by persons other than those who may be deemed
affiliates of registrant was $2,271,050,259 (based on the average of the
reported high and low sales prices on NASDAQ on such date).
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 2001 and of the registrant's Notice of Annual
Meeting of Stockholders and Proxy Statement for its Annual Meeting of
Stockholders, as described in the Footnotes to the Table of Contents
included herewith, are incorporated herein by reference into Parts II and
III of this Report.
TABLE OF CONTENTS
PAGE
REFERENCE
(1)
---------
ITEM 1. BUSINESS ............................................. 3
ITEM 3. LEGAL PROCEEDINGS .................................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS... 12
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS .................................. 13
ITEM 6. SELECTED FINANCIAL DATA .............................. 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................. 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK .................................... 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (2) ............................................. 19
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE ............................. 37
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (3) 37
ITEM 11. EXECUTIVE COMPENSATION (4) ........................... 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (5) ....................................... 37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........ 37
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K ............................................. 37
(1) Certain information is incorporated by reference, as indicated below,
from the Annual Report to Stockholders for the fiscal year ended June 30,
2001 (the "Annual Report") and the Company's Notice of Annual Meeting of
the Stockholders and Proxy Statement (the "Proxy Statement").
(2) Annual Report, page 20 under the section entitled "Quarterly Financial
Information."
(3) Proxy Statement sections entitled "Election of Directors" and "Executive
Officers and Significant Employees."
(4) Proxy Statement sections entitled "Executive Compensation", "Compensation
Committee Report", "Audit Committee Report" and "Company Performance."
(5) Proxy Statement sections entitled "Stock Ownership of Certain
Stockholders" and "Election of Directors."
PART I
Item 1. Business
Jack Henry & Associates, Inc. ("JHA" or the "Company") is a leading provider
of integrated computer systems to banks with under $10.0 billion of total
assets, credit unions and other financial institutions in the United States.
We offer a complete, integrated suite of data processing system solutions
to improve our customers' management of their entire back-office and
customer interaction processes. We believe our solutions enable our
customers to provide better service to their customers and compete more
effectively against larger banks and alternative financial institutions.
Our customers either install and use our systems in-house or outsource these
operations to us. We perform data conversion, hardware and software
installation and software customization for the implementation of our
systems and applications. We also provide continuing customer support
services to ensure proper product performance and reliability, which
provides us with continuing client relationships and recurring revenue.
For our customers who prefer not to acquire hardware and software, we
provide outsourcing services through eight data centers and 14 item
processing centers located across the United States.
Our gross revenue has grown from $126.3 million in fiscal 1997 to $345.5
million in fiscal 2001, representing a compound annual growth rate over this
five-year period of 29.6%. Net income from continuing operations has grown
from $18.5 million in fiscal 1997 to $55.6 million in fiscal 2001, a
compound annual growth rate of 32%.
Industry Background
According to the Automation in Banking 2001 report, all financial
institutions, including commercial banks, thrifts and credit unions in the
United States, increased spending on hardware, software, services and
telecommunications to $38.3 billion in 2000 from $27.2 billion in 1996,
representing a compound annual growth rate of 11.4%. An industry survey
shows that 93% of financial institutions believe upgrading technology is the
most important issue to their continued success. We believe that the market
opportunity for providers of hardware and software systems, maintenance,
support and related outsourcing services targeted toward community banks and
credit unions will continue to grow as a result of the competitive pressure
on financial institutions.
There are approximately 8,300 commercial banks and 10,500 credit unions in
the United States. Our primary market has historically been commercial
banks with less than $10.0 billion in assets, of which there were
approximately 8,200 at December 31, 2000. As of December 31, 2000, banks
with under $10.0 billion in assets had aggregate assets of approximately
$1.9 trillion. Consolidation within the financial services industry has
resulted in a 3.7% compound annual decline in the population of community
banks and a 1.4% compound annual decline in their aggregate assets between
1995 and 2000. We also serve credit unions in the United States. These are
cooperative, not-for-profit financial institutions organized to promote
savings and provide credit to their members. As of December 31, 2000,
there were 10,538 federally insured credit unions in the United States.
Although the number of these credit unions has declined at a 2.6% compound
annual rate between 1995 and 2000, their aggregate assets have increased at
a 7.3% compound annual rate to $449.8 billion in 2000.
We believe that community/regional banks and credit unions play an important
role with the geographic and demographic communities and customers they
serve. Typically, customers of these banks and credit unions rely on these
financial institutions because of their ability to provide personalized,
relationship-based service and their focus on local community and business
needs. We believe these core strengths will allow community/regional banks
and credit unions to effectively compete with larger banks and alternative
financial institutions. In order to succeed and to maintain strong customer
relationships, we believe these banks and credit unions must continue to:
* focus on their primary products and services;
* respond rapidly to customer demand for new products and services;
* implement advanced technologies, such as Imaging and Internet
banking;
* use advanced technologies in back-office operations to improve
operating efficiency and control costs while increasing service
and lowering costs to their customers; and
* integrate products and services into their core service offerings
and data processing infrastructure, to provide the same wide range
of services as are offered by larger banks.
In 2000, approximately 59% of commercial banks utilized in-house hardware
and software systems to perform all of their core systems and data
processing functions. Off-site data processing centers provided systems
services on an outsourced basis for the remaining 41% of banks. Since the
mid-1980s, banks have tended to shift their data processing requirements in-
house from outsourcing such functions to third-party data centers. Of the
community banks in the United States with in-house installations,
approximately 53%, 21%, and 7% utilize IBM, Unisys and NCR hardware,
respectively. No other specific hardware platform had more than a 5% share
of the market.
The Internet continues to become a more powerful and efficient medium for
the delivery of financial services, including Internet banking, bill
payment, bill presentment and other services for individuals, and cash
management and other services for the commercial customers of financial
institutions. Financial institutions provide Internet banking solutions to
retain customers, attract new customers, reduce operating costs, and gain
non-interest sources of revenue. According to industry sources,
approximately 30% of banks in the United States offer Internet banking. We
believe that community/regional financial institutions risk losing customers
to larger or alternative financial institutions if they do not offer
competitive Internet banking services.
Our Solution
We are a single-source provider of a comprehensive and flexible suite of
integrated products and services that address the information technology and
data processing needs of financial institutions. Our business derives
revenues from three primary sources:
* software licensing and installation services;
* support and services; and
* hardware sales.
We develop software applications designed primarily for use on hardware
supporting the IBM OS/400 and UNIX/NT operating systems. Our product and
service offerings are centered on four proprietary software applications,
each comprising the core data processing and information management
functions of a commercial bank or credit union. Key functions of each of
our core software applications include deposits, loans, and general ledger.
Our software applications make extensive use of parameters allowing our
customers to tailor the software to their needs. Our software applications
are designed to provide maximum flexibility in meeting our customer data
processing requirements within a single, integrated system. Our core
proprietary software applications are:
* Silverlake System[R], which operates on the IBM AS/400 and is used
primarily by banks with total assets up to $10.0 billion;
* CIF 20/20[TM], which operates on the IBM AS/400 and is used
primarily by banks with total assets up to $300.0 million;
* Core Director[TM], which operates on hardware supporting a
UNIX/NT environment and is used by banks employing client-server
technology; and
* Symitar System[TM], which operates on the IBM RS/6000 with a
UNIX/NT operating system and is used by credit unions.
To complement our core software applications, we provide a variety of
complementary products and services for use on an in-house or an outsourced
basis by community/regional financial institutions.
We believe that our solution provides strategic advantages to our customers
by enabling them to:
* Implement Advanced Technologies with Full Functionality. Our
comprehensive suite of products and services is designed to meet
our customers' information technology needs through custom-
tailored solutions using proprietary software products. Our
clients can either perform these functions themselves on an in-
house basis through the installation of our hardware and software
systems or outsource those functions to us.
* Rapidly Deploy New Products and Services. Once a financial
institution has implemented our core software, either in-house or
on an outsourced basis, we can quickly and efficiently install
additional applications and functions. This allows our customers
to rapidly deploy new products and services.
* Focus on Customer Relationships. Our products and services allow
our customers to stay focused on their primary business of
gaining, maintaining and expanding their customer relationships
while providing the latest financial products and services.
* Access Outsourcing Solutions to Improve Operating Efficiency.
Customers utilizing our outsourcing solutions benefit from access
to all of our products and services without having to maintain
personnel to develop, update and run these systems and without
having to make large up-front capital expenditures to implement
these advanced technologies.
Our Strategy
Our objective is to grow our revenue and earnings internally, supplemented
by strategic acquisitions. The key components of our business strategy are
to:
* Provide High-Quality, Value-Added Products and Services to Our
Clients. We compete on the basis of providing our customers with
the highest-value products and services in the market. We believe
we have achieved a reputation as a premium product and service
provider.
* Continue to Expand Our Product and Service Offerings. We
continually upgrade our core software applications and expand our
complementary product and service offerings to respond to
technological advances and the changing requirements of our
clients. For example, we offer a turn-key Internet banking
solution that enables financial institutions to rapidly deploy
sophisticated new products and services. Our integrated solutions
enable our customers to offer competitive services relative to
larger banks and alternative financial institutions. We intend to
continue to expand our range of Internet banking and other
products and services as well as provide additional services such
as network services and computer facilities design.
* Expand Our Existing Customer Relationships. We seek to increase
the information technology products and services we provide to
those customers that do not utilize our full range of products and
services. In this way, we are able to increase revenues from
current customers with minimal additional sales and marketing
expenses.
* Expand Our Customer Base. We seek to establish long-term
relationships with new customers through our sales and marketing
efforts and selected acquisitions. As of June 30, 2001, we had
over 2,800 customers, up from 1,240 in 1996.
* Build Recurring Revenue. We enter into contracts with customers
to provide services that meet their information technology needs.
We provide ongoing software maintenance and support for our in-
house customers. Additionally, we provide data processing for our
outsourcing customers and ATM transaction switching services, both
on contracts that typically extend for periods of five years.
* Maximize Economies of Scale. We strive to develop and maintain a
sufficiently large client base to create economies of scale,
enabling us to provide value-priced products and services to our
clients while expanding our operating margins.
* Attract and Retain Capable Employees. We believe that attracting
and retaining high-quality employees is essential to our continued
growth and success. Our corporate culture focuses on the needs of
employees, a strategy that we believe has resulted in low employee
turnover. In addition, we selectively use employee stock options
to serve as a strong incentive and retention tool.
Our Acquisitions
To complement and accelerate our internal growth, we selectively acquire
companies that provide us with one or more of the following:
* new customers;
* products and services to complement our existing offerings;
* additional outsourcing capabilities; and
* entry into new markets related to financial institutions.
When evaluating acquisition opportunities, we focus on companies with a
strong employee base and management team and excellent customer
relationships. Since fiscal 1995, we have completed the following
acquisitions:
Fiscal
Year Company Products and Services
---- ------- ---------------------
2000 Symitar Data processing systems and services
for credit unions
2000 Sys-Tech Uninterruptible power supply systems
and computer facilities design
2000 BancData Systems Outsourcing services
2000 Open Systems Group UNIX/NT-based data processing
systems for banks
1999 Peerless Group Data processing systems for banks
and credit unions
1999 Digital Data Services Outsourcing services
1999 Hewlett Computer Services Outsourcing services
1998 Vertex Teller software
1998 Financial Software Systems Payroll software
1998 GG Pulley Image and item processing products
and services
1997 Liberty Banking Services Outsourcing services
1996 Central Interchange ATM network services
1995 Liberty Data processing systems for banks
and outsourcing services
1995 Sector Data processing systems for banks
1995 CommLink ATM network services
Our Products and Services
Changing technologies, business practices and financial products have
resulted in issues of compatibility, scalability and increased complexity
for the hardware and software used in many financial institutions. We have
responded to these issues by developing a fully integrated suite of products
and services consisting of core software systems, hardware and complementary
products and services. These address virtually all of a commercial bank or
credit union's customer interaction, back-office data and information
processing needs.
We provide our full range of products and services to financial institutions
through both in-house and outsourced delivery models. For those customers
who prefer to purchase systems for their in-house facilities, we contract to
sell computer hardware, license core and complementary software and contract
to provide installation, training and ongoing maintenance and support and
other services.
We also offer our full suite of software products and services on an
outsourced basis to customers who do not wish to maintain, update and run
these systems or to make large up-front capital expenditures to implement
these advanced technologies. Our principal outsourcing service is the
delivery of mission-critical data processing services using our data centers
located within the United States. We provide our outsourcing services
through an extensive national data and service center network, comprised of
eight data centers and 14 item processing centers. We monitor and maintain
our network on a seven-day, 24-hour basis. Customers typically pay monthly
fees on multi-year service contracts for these services.
Hardware Systems
Our software operates on a variety of hardware systems. We have entered
into remarketing agreements with IBM, NCR and other hardware providers that
allow us to purchase hardware at a discount and sell (remarket) it to our
customers together with our software applications. We currently sell the
IBM AS/400, which is IBM's premier mid-range hardware system, the IBM
RS/6000, NCR servers and reader/sorters, BancTec reader/sorters and Unisys
reader/sorters.
We have a long-term strategic relationship with IBM, dating to the initial
design of our first core software applications more than 20 years ago. In
addition to our remarketing agreement with IBM, which we renew annually, we
have been named a "Premier Business Partner" of IBM for the last nine
consecutive years. Our relationship with IBM provides us with a substantial
and ongoing source of revenue.
Our remarketing strategy was expanded in 2001 to include Unisys
reader/sorter hardware products to allow us to respond to customer demand
for alternative hardware products and sell our complementary image software
applications to a broader-based market.
Core Software Applications
Each of our core software systems consists of several fully-integrated
application modules, such as deposits, loans, general ledger, and the
customer information file, which is a centralized file containing customer
data for all applications. We can custom-tailor these modules utilizing
parameters determined by our customer. The applications can be connected to
a wide variety of peripheral hardware devices used in bank operations. Our
software is designed to provide maximum flexibility in meeting our
customers' data processing requirements within a single system to minimize
data entry and improve efficiencies.
For our customers who choose to acquire in-house capabilities, we generally
license our core system under standard license agreements which provide the
customer with a fully-paid, nonexclusive, nontransferable right to use the
software on a single computer and at a single location. These same systems
can be delivered on an outsourced basis as well.
Our core software applications are differentiated broadly by size of
customer, scalability, customizable functionality, customer competitive
environment and, to a lesser extent, cost. Our core applications include:
* Silverlake System, which operates on the IBM AS/400 and is used
primarily by banks with total assets up to $10.0 billion;
* CIF 20/20, which operates on the IBM AS/400 and is used primarily
by banks with total assets up to $300.0 million;
* Core Director, which operates on hardware supporting a UNIX/NT
environment and is used by banks employing client-server
technology; and
* Symitar System, which operates on the IBM RS/6000 with a UNIX/NT
operating system and is used by credit unions.
Complementary Products and Services
To enhance our core software applications, we provide a number of
complementary products and services, including:
Vertex[TM] Teller Automation System is an online teller automation
system that enables tellers to process transactions more efficiently
and with greater accuracy.
Streamline Platform Automation[TM] is a fully-automated new account
origination solution that integrates new customer data, including
signature cards, disclosure statements, and loan applications into the
core customer data files on a real-time basis.
Alliance Check Image Solutions[TM] allow our customers to create and
store digital check images for inclusion in monthly statements and to
facilitate their customer support services.
4|sight[TM] Item Image Solutions is our new generation of imaging
products, which allows our customers to create and store digital check
images for inclusion in monthly statements, facilitate their customer
support services and leverage their investments with system
integration.
Silhouette Document Imaging[TM] utilizes digital storage and retrieval
technology to provide online instant access to document images, such as
loan documents and signature cards.
PinPoint Report Retrieval[TM] enables system-wide storage and retrieval
of computer-generated reports for simplified information access.
NetTeller[TM] and MemberConnect Web[TM] provides Internet-based home
banking and commercial cash management. See "Online Banking'' below.
InTouch Voice Response[TM] provides a fully-automated interactive voice
response system for 24-hour telephone-based banking and customer
service.
Centurion Disaster Recovery[TM] provides multi-tiered disaster recovery
protection, including comprehensive disaster planning and procedures.
TimeTrack Payroll System[TM] is a fully-integrated payroll accounting
and human resources software system.
FormSmart[TM] provides day-to-day operating forms, year-end tax forms
and other printing and office supplies.
CommLink[TM] ATM & Transaction Processing Solutions provides national
switching and processing services for ATM, debit card transactions and
point-of-sale transactions.
Other software products such as proof of deposit, secondary market loan
servicing, account reclassification, and investment sweeps further
complement our core systems.
Installation and Training
Although not a requirement of the software contract, virtually all of our
customers contract with us for installation and training services in
connection with their purchase of in-house systems. The complete
installation process of a core system typically includes planning, design,
data conversion, hardware set-up and testing. At the culmination of this
installation process, one of our installation teams travels to our
customer's facilities to ensure the smooth transfer of data to the new
system. Installation fees are charged separately to our customers on either
a fixed fee or hourly charge model depending on the system, with full pass-
through to our customers of travel and other expenses. Installation
services are also required in connection with new outsourcing customers, and
are billed separately at the time of installation.
Both in connection with installation of new systems and on an ongoing basis,
our customers need, and we provide, extensive training services and programs
related to our products and services. Training can be provided in our
regional training centers, at meetings and conferences or onsite at our
customers' locations, and can be customized to meet our customers'
requirements. The large majority of our customers acquire training services
from us, both to improve their employees' proficiency and productivity and
to make full use of the functionality of our systems. Generally, training
services are paid for on an hourly basis, however, we have recently been
successful in marketing annual subscriptions for training services,
representing blocks of training time that can be used by our customers in a
flexible fashion and the related revenue is recognized as the services are
provided.
Support and Services
Following the installation of our hardware and software systems at a
customer site, we provide ongoing software support services to assist our
customers in operating the systems and to periodically update the software.
We also offer support services for hardware, primarily through our hardware
suppliers, providing customers who have contracted for this service with
"one-call'' system support covering hardware and software applications.
Support is provided through a 24-hour telephone service available to our
customers seven days a week. Most questions and problems can be resolved
quickly by our experienced support staff. For more complicated issues, our
staff, with our customers' permission, can log on to our customers' systems
remotely. We maintain our customers' software largely through releases
which contain improvements and incremental additions. Updates also are
issued when required by changes in applicable laws and regulations. We
provide maintenance and support services on our core systems as well as our
complementary software products.
Nearly all of our in-house customers purchase support services from us.
These services are a significant source of recurring revenue, are contracted
for on an annual basis and are typically priced at approximately 18% of the
particular software product's license fee. These fees may be increased as
our customers' asset base increases and as they increase the level of
functionality of their system by purchasing additional complementary
products. Software support fees are generally paid in advance for the
entire year, with proration for new contracts which start during the year.
Hardware support fees are also paid in advance for the entire contract
period which ranges from one to five years. Most contracts automatically
renew annually unless we or our customer gives notice of termination at
least 60 days prior to expiration. Identical support is provided to our
outsourced customers, but are not separately priced in their overall monthly
fees.
Online Banking
We provide a suite of fully integrated Internet products and services that
enables financial institutions to offer Internet banking and e-commerce
solutions to their customers. Our offerings include:
NetTeller, an Internet-based home banking system for individual
customers and commercial cash management for business customers of
community banks;
MemberConnect Web, an Internet-based home banking system for credit
union members;
Bill Pay, which allows customers to pay bills online; and
NetHarbor, which provides our customers with a custom-branded web
portal that enables them to provide their customers with a variety of
customized information and e-commerce opportunities, including user-
defined content such as local or special interest events, weather,
financial news and other information.
Research and Development
We devote significant effort and expense to develop new software and service
products and continually upgrade and enhance our existing offerings.
Typically, we upgrade our core software applications and complementary
services once per year. We believe that our research and development
efforts are highly efficient because of the extensive experience of our
research and development staff and because our product development is highly
customer-driven. Through our regular contact with customers at user group
meetings, sales contacts and through our ongoing maintenance services, our
customers inform us of the new products and functionalities they desire.
Sales and Marketing
Our primary markets consist of commercial banks and credit unions. We have
not devoted significant marketing and sales efforts to other financial
institutions such as thrifts. Historically, we have primarily and most
successfully marketed to banks with up to $5.0 billion in total assets and
credit unions of all sizes.
Our sales efforts are conducted by a dedicated field sales force, an inside
sales team and a technical sales support team, all of which are overseen by
regional sales managers. Our dedicated field sales force is responsible for
pursuing lead generation activities and representing the majority of our
products and solutions to current and prospective clients. Our inside sales
force sells certain complementary products to our existing customers. All
sales force personnel have responsibility for a specific territory. The
sales support team writes business proposals and contracts and prepares
responses to request-for-proposals regarding our software and hardware
solutions. All of our sales professionals receive a base salary and
performance-based commission compensation.
Our marketing effort consists of attendance at trade shows, printed media
advertisement placements, internally developed and managed marketing
campaigns. We also conduct a number of field and national user group
meetings each year that enable us to keep in close contact with our
customers and demonstrate new products and services to them.
We have 24 installations in the Caribbean primarily through the marketing
efforts of our wholly-owned foreign sales subsidiary, Jack Henry
International Limited. Our international sales have historically accounted
for less than 1% of our revenues.
Backlog
Our backlog consists of contracted in-house products and services (prior to
delivery) and the minimum amounts due on the remaining portion of
outsourcing contracts, which are typically for five-year periods. Our
backlog at June 30, 2001 was $49.5 million for in-house products and
services and $77.6 million for outsourcing services, with a total backlog of
$127.1 million. Backlog at June 30, 2000 was $43.0 million for in-house
products and services and $61.4 million for outsourcing services, with a
total backlog of $104.4 million. Our backlog is subject to seasonal
variations and can fluctuate quarterly due to various factors, including
slower contract processing rates during the summer months.
Competition
The market for companies that provide technology solutions to financial
institutions is competitive and fragmented, and we expect continued
competition from both existing competitors and companies that enter our
existing or future markets. Some of our current competitors have longer
operating histories, larger customer bases and greater financial resources.
The principal competitive factors affecting the market for our services
include comprehensiveness of the applications, features and functionality,
flexibility and ease of use, customer support, references from existing
customers and price. We compete with large vendors that offer transaction
processing products and services to financial institutions, including Bisys,
Inc., AllTel Information Services, Fiserv, Inc. and Marshall and Ilsley
Corporation. In addition, we compete with a number of providers that offer
one or more specialized products or services. There has been significant
consolidation among providers of information technology products and
services to financial institutions, and we believe this consolidation will
continue in the future.
Intellectual Property, Patents and Trademarks
Although we believe that our success depends upon our technical expertise
more than on our proprietary rights, our future success and ability to
compete depends in part upon our proprietary technology. We have already
registered or filed applications for our primary trademarks. None of our
technology is patented. Instead, we rely on a combination of contractual
rights and copyrights, trademarks and trade secrets to establish and protect
our proprietary technology. We generally enter into confidentiality
agreements with our employees, consultants, resellers, customers and
potential customers. We restrict access to and distribution of our source
code and further limit the disclosure and use of other proprietary
information. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain or use our
products or technology. We cannot be sure that the steps taken by us in
this regard will be adequate to prevent misappropriation of our technology
or that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technology.
Government Regulation
The financial services industry is subject to extensive and complex federal
and state regulation. Our current and prospective customers, which consist
of financial institutions such as community/regional banks and credit
unions, operate in markets that are subject to substantial regulatory
oversight and supervision. We must ensure that our products and services
work within the extensive and evolving regulatory requirements applicable to
our customers, including those under the federal truth-in-lending and truth-
in-deposit rules, usury laws, the Equal Credit Opportunity Act, the Fair
Housing Act, the Electronic Funds Transfer Act, the Fair Credit Reporting
Act, the Bank Secrecy Act and the Community Reinvestment Act. The
compliance of our products and services with these requirements depends on a
variety of factors including the particular functionality, the interactive
design and the classification of customers. Our customers must assess and
determine what is required of them under these regulations and they contract
with us to ensure that our products and services conform to their regulatory
needs. It is not possible to predict the impact that any of these
regulations could have on our business in the future.
We are not chartered by the Office of the Comptroller of Currency, the Board
of Governors of the Federal Reserve System, the National Credit Union
Administration or other federal or state agencies that regulate or supervise
depository institutions. The services provided by our OutLink Data Centers
are subject to examination by the Federal depository institution regulators
under the Bank Service Company Act. On occasion these services are also
subject to examination by state banking authorities.
We provide outsourced data and item processing through our geographically
dispersed OutLink Data Centers, electronic transaction processing through
CommLink ATM and Transaction Processing Solutions, Internet banking through
NetTeller online banking, and bank business recovery services through
Centurion Disaster Recovery. As a service provider to financial
institutions, our operations are governed by the same regulatory
requirements as those imposed on financial institutions. We are subject to
periodic review by federal depository institution regulators who have broad
supervisory authority to remedy any shortcomings identified in such reviews.
The privacy requirements in Title V of the Gramm-Leach-Bliley Act ("the
Act"), adopted in November of 1999, represent a significant change in the
federal legal framework governing how providers of financial services in
this country interact with their customers. Regulations implementing
Title V established standards for financial institutions relating to
administrative, technical and physical safeguards for customer records and
information. Financial institutions are required to evaluate their controls
on access to customer information and their policies for encrypting customer
information while it is being transmitted or stored on networks to which
unauthorized persons may have access. As a software company that provides
services to financial institutions, we are covered under these regulations
and may have to adopt additional safeguards within our software to ensure
that we and our customers are in compliance with the Act.
Employees
As of June 30, 2001 and 2000, we had 1,910 and 1,589 full time employees
respectively . Our employees are not covered by a collective bargaining
agreement and there have been no labor-related work stoppages. We consider
our relationship with our employees to be good.
RISK FACTORS
The Company's business and the results of its operations are affected by
numerous factors and uncertainties, some of which are beyond their control.
The following is a description of some of the important risk factors and
uncertainties that may cause the actual results of the Company's operations
in future periods to differ materially from those currently expected or
desired.
We may not be able to continue or effectively manage our rapid growth. We
have grown at a rapid pace, both internally and through acquisitions. Our
expansion has and will continue to place significant demands on our
administrative, operational, financial and management personnel and systems.
We cannot assure you that we will be able to enhance and expand our product
lines, manage costs, adapt our infrastructure and modify our systems to
accommodate future growth.
If we fail to adapt our products and services to changes in technology, we
could lose existing customers and be unable to attract new business. The
markets for our software and hardware products and services are
characterized by changing customer requirements and rapid technological
changes. These factors and new product introductions by our existing
competitors or by new market entrants could reduce the demand for our
existing products and services and we may be required to develop or acquire
new products and services. Our future success is dependent on our ability
to enhance our existing products and services in a timely manner and to
develop or acquire new products and services. If we are unable to develop
or acquire new products and services as planned, or fail to achieve timely
market acceptance of our new or enhanced products and services, we may incur
unanticipated expenses, lose sales or fail to achieve anticipated revenues.
Acquisitions may be costly and difficult to integrate. We have acquired
several businesses and will continue to explore possible business
combinations in the future. We may not be able to successfully integrate
acquired companies. We may encounter problems in connection with the
integration of new businesses including: financial control and computer
system compatibility; unanticipated costs; unanticipated quality or customer
problems with acquired products or services; diversion of management's
attention; adverse effects on existing business relationships with suppliers
and customers; loss of key employees; and significant amortization expenses
related to identifiable intangible assets. Without additional acquisitions,
we may not be able to grow and to develop new products and services as
quickly as we have in the past to meet competitive challenges. If our
integration strategies fail, our business, financial condition and results
of operations could be materially and adversely affected.
If our strategic relationship with IBM were terminated, it could have a
negative impact on the continuing success of our business. We have
developed a strategic relationship with IBM. As part of this collaborative
relationship, we market and sell IBM hardware and equipment to our customers
under an industry remarketer agreement and resell maintenance on IBM
hardware products to our customers. Much of our software is designed to be
compatible with the IBM hardware that is run by a majority of our customers.
If IBM were to terminate or fundamentally modify our strategic relationship,
our relationship with our customers and our revenues and earnings would
suffer. We could also lose software market share or be required to redesign
existing products or develop new products that would be compatible with the
hardware used by our customers.
Competition may result in price reductions and decreased demand for our
products and services. We expect that competition in the markets we serve
will remain vigorous. We compete on the basis of product quality,
reliability, performance, ease of use, quality of support and pricing. We
cannot guarantee that we will be able to compete successfully with our
existing competitors or with companies that may enter our markets in the
future. Certain of our competitors have strong financial, marketing and
technological resources and, in some cases, a larger customer base than we
do. They may be able to adapt more quickly to new or emerging technologies
or to devote greater resources to the promotion and sale of their products
and services.
The loss of key employees could adversely affect our business. We depend to
a significant extent on the contributions and abilities of our senior
management. Our Company has grown significantly in recent years and our
management remains concentrated in a small number of key employees. If we
lose one or more of our key employees, we could suffer a loss of sales and
delays in new product development, and management resources would have to be
diverted from other activities to compensate for this loss. We do not have
employment agreements with any of our executive officers, however, we
currently have a management succession plan in place and are naming specific
managers successors.
Consolidation of financial institutions could reduce the number of our
customers and potential customers. Our primary market consists of
approximately 8,300 commercial banks and 10,500 credit unions. The number
of commercial banks and credit unions has decreased as a result of mergers
and acquisitions and is expected to continue to decrease as more
consolidation occurs, which will reduce our number of potential customers.
As a result of this consolidation, some of our existing customers could
terminate, or refuse to renew their contracts with us and potential
customers could break off negotiations with us.
The services we provide to our customers are subject to government
regulation that could hinder our ability to develop portions of our business
or impose additional constraints on the way we conduct our operations. The
financial services industry is subject to extensive and complex federal and
state regulation. As a supplier of services to financial institutions, some
of our operations are examined by the Office of the Comptroller of the
Currency, the Federal Reserve Board and the Federal Deposit Insurance
Corporation, among other regulatory agencies. These agencies regulate
services we provide and the manner in which we operate, and we are required
to comply with a broad range of applicable laws and regulations. In
addition, existing laws, regulations and policies could be amended or
interpreted differently by regulators in a manner that has a negative impact
on our existing operations or that limits our future growth or expansion.
Our customers are also regulated entities, and the form and content of
actions by regulatory authorities could determine both the decisions they
make concerning the purchase of data processing and other services and the
timing and implementation of these decisions. The development of financial
services over the Internet has raised concerns with respect to the use,
confidentiality and security of private customer information. Regulatory
agencies, Congress and state legislatures are considering numerous
regulatory and statutory proposals to protect the interests of consumers and
to require compliance by the industry with standards and policies that have
not been defined.
Network or Internet security problems could damage our reputation and
business. We rely on standard network and Internet security systems, most
of which we license from third parties, to provide the security and
authentication necessary to effect secure transmission of data. Computer
networks and the Internet are vulnerable to unauthorized access, computer
viruses and other disruptive problems. In addition, advances in computer
capabilities, new discoveries in the field of cryptography or other events
or developments may render our security measures inadequate. Someone who is
able to circumvent security measures could misappropriate proprietary
information or cause interruptions in our operations or those of our
customers. Security risks may result in liability to us and also may deter
financial institutions from purchasing our products. We may need to expend
significant capital or other resources protecting against the threat of
security breaches or alleviating problems caused by breaches. Eliminating
computer viruses and alleviating other security problems may result in
interruptions, delays or cessation of service to users, any of which could
harm our business.
As technology becomes less expensive and more advanced, purchase prices of
hardware may decline and our revenues and profits from remarketing
arrangements may decrease. Computer hardware technology is rapidly
developing. Hardware manufacturers are producing less expensive and more
powerful equipment each year, and we expect this trend to continue into the
future. As computer hardware becomes less expensive, revenues and profits
derived from our hardware remarketing may decrease and become a smaller
portion of our revenues and profits.
An operational failure in our outsourcing facilities could cause us to
lose customers. Damage or destruction that interrupts our provision of
outsourcing services could damage our relationship with certain customers
and may cause us to incur substantial additional expense to repair or
replace damaged equipment. Although we have installed back-up systems and
procedures to prevent or reduce disruption, we cannot assure you that we
will not suffer a prolonged interruption of our transaction processing
services. In the event that an interruption of our network extends for more
than several hours, we may experience data loss or a reduction in revenues
by reason of such interruption. In addition, a significant interruption of
service could have a negative impact on our reputation and could lead our
present and potential customers to choose service providers other than us.
Item 2. Properties
We own approximately 138 acres located in Monett, Missouri on which we
maintain six office buildings. We also own buildings in Houston, Texas;
Allen, Texas; Albuquerque, New Mexico; Angola, Indiana; Lenexa, Kansas and
Shawnee, Kansas. Our owned facilities represent approximately 240,000
square feet of office space. We have 33 leased office facilities in 20
states which total approximately 258,000 square feet.
We own five aircraft that are utilized for business purposes. Many of our
customers are located in communities that do not have an easily accessible
commercial airline service. We primarily use our airplanes in connection
with installation, sales of systems and internal requirements for day to day
operations. Transportation costs for installation and other customer
services are billed to our customers. We lease property, including real
estate and related facilities, at the Monett, Missouri municipal airport.
Item 3. Legal Proceedings
We are subject to various routine legal proceedings and claims arising in
the ordinary course of business. We do not expect that the results in any of
these legal proceedings will have a material adverse effect on our
business, financial condition, results of operations or cash flows.
Item 4. Submission of Matters To a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is quoted on the Nasdaq National Market under the
symbol "JKHY". The following table sets forth, for the periods indicated,
the high and low sales price per share of the common stock as reported by
the Nasdaq National Market. All prices have been adjusted to give effect to
the 2 for 1 split of the common stock which occurred on March 2, 2001.
Fiscal 2001 High Low
----------- ----- -----
First Quarter $27.25 $19.41
Second Quarter 33.13 20.69
Third Quarter 31.38 19.81
Fourth Quarter 31.19 18.75
Fiscal 2000
-----------
First Quarter $11.35 $ 7.75
Second Quarter 14.13 8.19
Third Quarter 20.00 12.06
Fourth Quarter 26.50 15.00
The Company established a practice of paying quarterly dividends at the end
of fiscal 1990 and has paid dividends with respect to every quarter since
that time. Quarterly dividends per share paid on the common stock for the
two most recent fiscal years ended June 30, 2001 and 2000, as adjusted to
reflect the 2 for 1 stock split in March 2001 and 2000, are as follows:
Fiscal 2001 Dividend
----------- --------
First Quarter $.025
Second Quarter .025
Third Quarter .030
Fourth Quarter .030
Fiscal 2000
-----------
First Quarter $.020
Second Quarter .020
Third Quarter .025
Fourth Quarter .025
The declaration and payment of any future dividends will continue to be at
the discretion of our Board of Directors and will depend upon, among other
factors, our earnings, capital requirements, contractual restrictions, and
operating and financial condition. The Company does not currently foresee
any changes in its dividend practices.
On August 17, 2001, there were 25,283 holders of the Company's common
stock. On that same date the last sale price of the common shares as
reported on NASDAQ was $24.70 per share.
Item 6. Selected Financial Data
Selected Financial Information (*)
(In Thousands, Except Per Share Information)
Year Ended June 30,
-------------------
Income Statement Data 2001 2000 1999 1998 1997
--------------------- ------- ------- ------- ------- -------
Revenue (1) $345,468 $225,300 $193,527 $148,235 $126,256
Income from continuing
operations $ 55,631 $ 34,350 $ 32,726 $ 24,205 $ 18,492
Loss from discontinued
operations $ - $ 332 $ 758 $ 668 $ 450
Net income $ 55,631 $ 34,018 $ 31,968 $ 23,537 $ 18,042
Diluted income per share (2):
Income from continuing
operations $ .61 $ .40 $ .39 $ .29 $ .23
Loss from discontinued $ - $ - $ .01 $ .01 $ -
operations
Net income $ .61 $ .40 $ .38 $ .28 $ .23
Dividends declared per
share (2) $ .11 $ .09 $ .08 $ .06 $ .05
June 30,
--------
Balance Sheet Data 2001 2000 1999 1998 1997
------------------ ------- ------- ------- ------- -------
Working capital $ 65,032 $(47,990) $ 24,133 $ 35,758 $ 16,387
Total assets $433,121 $321,082 $177,823 $133,830 $100,476
Long-term debt $ 228 $ 320 $ 211 $ 654 $ 651
Stockholders' equity $302,504 $154,545 $115,798 $ 83,591 $ 60,549
* Selected financial information for all prior periods have been restated to
include all acquisitions that have been accounted for as pooling-of-interest
as if each had occurred at the beginning of the earliest period reported.
(1) Revenues include software licensing and installation revenues; support
and service revenues; and hardware sales; less sales returns and
allowances.
(2) Prior period amounts have been adjusted to reflect the 100% stock
dividends paid March, 2001 and 2000.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the consolidated financial statements and
related notes included elsewhere in this report.
OVERVIEW
We provide integrated computer systems for in-house and outsourced data
processing to commercial banks with under $10.0 billion in total assets,
credit unions and other financial institutions. We have developed and
acquired banking application software systems that we market, together with
compatible computer hardware, to financial institutions throughout the
United States. We also perform data conversion and software installation for
the implementation of our systems and provide continuing customer
maintenance and support services after the systems are installed. For our
customers who prefer not to make an up-front investment in software and
hardware, we provide our full range of products and services on an
outsourced basis through our eight data centers and fourteen item processing
centers located across the United States.
We derive revenues from three primary sources:
- sales of software licenses and installation services;
- support and services fees; and
- hardware sales.
Over the last five fiscal years, our revenues have grown from $126.3 million
in fiscal 1997 to $345.5 million in fiscal 2001. Income from continuing
operations has grown from $18.5 million in fiscal 1997 to $55.6 million in
fiscal 2001. This growth has resulted primarily from internal expansion
supplemented by strategic acquisitions, allowing us to develop new products
and expand the number of customers who use our core software systems to
approximately 2,425 as of June 30, 2001.
Since July 1994, we have completed 15 strategic acquisitions. Ten of these
acquisitions were accounted for using the purchase method of accounting and
our consolidated financial statements include the results of operations of
the acquired companies from the dates of their respective acquisitions. The
remaining five acquisitions were accounted for as poolings-of-interests.
The comparisons set forth below reflect the fact that the consolidated
financial statements for fiscal years 2000 and 1999 have been restated to
include all acquisitions accounted for as poolings-of-interests as if each
had occurred at the beginning of the earliest period reported.
Software sales and installation revenue includes the licensing of
application software systems and the conversion and installation services
contracted with us by the customer. We license our proprietary software
products under standard license agreements which typically provide the
customer with a non-exclusive, non-transferable right to use the software on
a single computer and for a single financial institution location upon
payment of the license fee. Generally, 25% to 50% of license fees are
payable upon execution of the license agreement with additional payments due
upon either delivery of the software or the installation of the last
application module. We recognize 100% of software license revenue upon
delivery of the software and documentation. We recognize installation
services each month as services are performed under hourly contracts and at
the completion of the installations under fixed fee contracts.
Support and services fees are generated from ongoing services to assist the
customer in operating the systems and to modify and update the software and
from providing outsourced data processing services. Revenues from software
support are generated pursuant to annual agreements and are recognized
ratably over the life of the agreements. Outsourcing services are performed
through data centers. Revenues from outsourced data processing are derived
from monthly usage fees typically under five-year service contracts with our
customers. We recognize the revenues under these outsourcing contracts as
services are performed.
Cost of services represents direct costs associated with conversion and
installation efforts, ongoing support for our in-house customers and
operation of our data centers providing services for our outsourced
customers. These costs are recognized as they are incurred.
We have entered into remarketing agreements with several hardware
manufacturers under which we sell computer hardware and related services to
our customers along with our in-house banking software systems. Revenues
from hardware sales are recognized when the manufacturers ship the hardware.
Cost of hardware consists of the direct costs of purchasing the equipment
from the manufacturers. These costs are recognized at the same time as the
related revenue.
The Company has two business segments: bank systems and services and credit
union systems and services. The respective segments include all related
software, installation, support and service and hardware sales, along with
related cost of services and hardware.
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED TO FISCAL 2000
REVENUE - Revenues increased by 53% from $225.3 million in fiscal 2000 to
$345.5 million in fiscal 2001. Software licensing and installation increased
76%; support and service revenues increased 38% and hardware sales increased
57% compared to fiscal 2000. The significant increase is due to organic
growth in comparison to the prior year, which was directly impacted by the
Y2K slowdown, and a full year impact on the current year of acquisitions
made during fiscal 2000.
Non-hardware revenues, which includes software licensing and installation,
support and services revenues increased 52% to $235.4 million and
accounted for 68% of this years' revenues, compared to $155.2 million or 69%
of revenues for fiscal 2000.
Hardware sales increased 57% to $110.1 million, and accounted for 32% of
revenues, compared to $70.1 million, or 31% of total revenues for fiscal
2000. The increase in hardware sales was in line with the increase in non-
hardware revenues for the same reasons.
COST OF SALES - Cost of sales increased 52% from $127.2 million in fiscal
2000 to $193.8 million in fiscal 2001, compared to a 53% increase in
revenues. Cost of hardware increased 48% compared with the 57% increase in
hardware revenue. Cost of services increased 55% compared to the 52%
increase in non-hardware revenues. This is primarily due to operations
acquired in the prior year, whose gross margins are less than the rest of
the Company's.
GROSS PROFIT - Gross profit increased 55% from $98.1 million in fiscal 2000
to $151.6 million in fiscal 2001. Gross margin on non-hardware revenue was
50% compared to 51% last year. Gross margin on hardware revenues was 31%
compared to 27% last year primarily due to sales mix. The total gross
margin percentage for fiscal 2001 was 44%, up slightly from fiscal 2000.
OPERATING EXPENSES - Operating expenses increased 40% from $47.1 million
in fiscal 2000 to $65.8 million in fiscal 2001. Selling and marketing
expenses increased 46%, research and development increased 36% and general
and administrative expenses increased 36% during fiscal 2001. Operating
expenses increased due to higher commissions related to stronger sales,
continued development and refinement of new and existing products and higher
overhead related to prior acquisitions and overall growth.
OTHER INCOME (EXPENSE) - Other income increased from $755,000 in fiscal
2000 to $1.2 million in fiscal 2001. The primary change is due to the debt
related to acquisitions in fiscal 2000 being retired in August 2000 with
operating cash flows and the proceeds from the secondary offering in August
2000. Interest income increased $.5 million, interest expense decreased
$1.0 million and other decreased by $1.1 million due to a gain on sale of
stock investment in the prior year.
PROVISION FOR INCOME TAXES - The provision for income taxes was $31.2
million, or 36% of income from continuing operations before income taxes in
fiscal 2001, compared with $17.4 million, or 34% of income from continuing
operations before income taxes in fiscal 2000. The rate increase is due to
the federal and state tax benefits realized in the prior year from the
disposition of specific assets.
INCOME FROM CONTINUING OPERATIONS - Income from continuing operations
increased 62% from $34.4 million, or $.40 per diluted share in fiscal 2000
to $55.6 million, or $.61 per diluted share in fiscal 2001.
DISCONTINUED OPERATIONS - None this year compared to $332,000 loss from
discontinued operations in fiscal 2000, all of which was realized in the
three months ended September 30, 1999.
FISCAL 2000 COMPARED TO FISCAL 1999
REVENUE - Revenues increased by 16% from $193.5 million in fiscal 1999 to
$225.3 million in fiscal 2000. Software licensing and installation increased
22%; support and service revenues increased 37% and hardware sales decreased
7% compared to fiscal 1999. The changes in revenues from the prior year are
a direct result of the Y2K induced slow down of system sales during the
first half of fiscal 2000, the significant increase in post-Y2K demand for
our products and services and the contribution of $21.1 million from our
Open Systems Group ("OSG") acquisition in September 1999.
COST OF SALES - Cost of sales increased 19% from $107.2 million in fiscal
1999 to $127.2 million in fiscal 2000, compared to a 16% increase in
revenues. Cost of hardware decreased 7% compared with the 7% decrease in
hardware revenue. Cost of services increased 45% compared to the 31%
increase in non-hardware revenues, with the most significant increase in
costs resulting from the addition of OSG.
GROSS PROFIT - Gross profit increased 14% from $86.3 million in fiscal 1999
to $98.1 million in fiscal 2000. The gross margin percentage for fiscal 2000
was 44%, down from 45% during 1999, primarily because of changes in sales
mix due to the impact of Y2K.
OPERATING EXPENSES - Operating expenses increased 29% from $36.6 million in
fiscal 1999 to $47.1 million in fiscal 2000. Selling and marketing expenses
increased 36%, research and development increased 55% and general and
administrative expenses increased 16% during fiscal 2000. These expenses
grew more rapidly than revenue because, despite the impact of Y2K referred
to above, we continued operations and staffing levels necessary to meet
anticipated demand in the second half of fiscal 2000. The most significant
increase was in research and development, a large portion of which was a
result of the continued development of our Internet-related products.
OTHER INCOME (EXPENSE) - Other income decreased 60% from $1.9 million in
fiscal 1999 to $755,000 in fiscal 2000. The $1.1 million gain on sale in
September 1999 of a stock investment, acquired in the Peerless acquisition,
in large part offset the increase in interest expense of $1.8 million and
the decrease in interest income of $756,000 from cash investments in fiscal
2000 compared to fiscal 1999.
PROVISION FOR INCOME TAXES - The provision for income taxes was $17.4
million, or 34% of income from continuing operations before income taxes in
fiscal 2000, compared with $18.9 million, or 37% of income from continuing
operations before income taxes in fiscal 1999. This decrease in the
effective tax rate reflects benefits derived from our tax planning efforts
to reduce state income taxes.
INCOME FROM CONTINUING OPERATIONS - Income from continuing operations
increased 5% from $32.7 million, or $.39 per diluted share in fiscal 1999 to
$34.4 million, or $.40 per diluted share in fiscal 2000.
DISCONTINUED OPERATIONS - We incurred a $332,000 loss from discontinued
operations in fiscal 2000, all of which was realized in the three months
ended September 30, 1999. This was $426,000 less than the loss from
discontinued operations for fiscal 1999.
Business Segment Discussion
Revenues in the bank systems and services business segment increased from
$220.7 million in fiscal 2000 to $298.3 million in fiscal 2001, or 35%
increase. Gross profit in this business segment increased from $96.1
million in fiscal 2000 to $138.1 million, or 44% increase for the year ended
June 30, 2001. The changes in revenue and gross profit from the prior year
are a direct result of the impact of Y2K on the prior year and the full year
benefit in the current year of acquisitions made during fiscal 2000.
Revenues in the credit union systems and services business segment increased
from $4.7 million in fiscal 2000 to $47.2 million in fiscal 2001, or 916%
increase. Gross profit in this business segment increased from $2.1 million
in fiscal 2000 to $13.5 million, or 15% increase for the year ended June 30,
2001. The increases are due to the acquisition of Symitar Systems, Inc. on
June 7, 2000, which enhanced the Company's position in the credit union
marketplace.
Revenues in the bank systems and services business segment increased from
$191.3 million in fiscal 1999 to $220.7 million in fiscal 2000, or 15%
increase. Gross profit in this business segment increased from $84.7
million in fiscal 1999 to $96.1 million, or 13% increase for the year ended
June 30, 2000. The changes in revenue and gross profit from the prior year
are a direct result of the Y2K induced slowdown of system sales during the
first half of fiscal 2000 and acquisitions made during the respective years.
Revenues in the credit union systems and services business segment increased
from $2.2 million in fiscal 1999 to $4.7 million in fiscal 2000, or 111%
increase. Gross profit in this business segment increased from $1.6 million
in fiscal 1999 to $2.1 million, or 27% increase for the year ended June 30,
2000. The increases are primarily due to the acquisition of Symitar
Systems, Inc. on June 7, 2000, which enhanced the Company's position in the
credit union marketplace.
Liquidity and Capital Resources
JHA has historically generated positive cash flow from operations and has
generally used existing resources and funds generated from operations to
meet capital requirements. The Company expects this trend to continue in
the future.
Our cash and cash equivalents increased to $18.6 million at June 30, 2001,
from $5.2 million at June 30, 2000. Net cash from continuing operations was
$72.9 million, $48.9 million and $37.8 million for the years ended June
30, 2001, 2000 and 1999, respectively. The cash used in the year ended June
30, 2001, was primarily attributable to capital expenditures of $57.8
million and to retire outstanding debt. The cash used during fiscal 2000 was
primarily attributable to acquisition costs of $93.3 million and capital
expenditures of $32.6 million. The cash used in the year ended June 30,
1999, was primarily attributable to capital expenditures of $38.9 million.
On August 16, 2000, the Company completed a secondary offering of 1.5
million shares (pre-split) of its common stock at $43.00 per share (pre-
split) less a 5% underwriters' discount and offering expenses paid by the
Company. The net proceeds of approximately $60.5 million, plus the
proceeds from sale of common stock and issuance of stock options exercised
was used to retire all outstanding debt that had been incurred during
fiscal 2000. The balance remained available for working capital, capital
expenditures and other general corporate purposes. Cash from financing
activities was $69.4 million for the year ended June 30, 2000 and was
primarily line-of-credit advances used for acquisitions.
JHA currently has two bank credit lines upon which it can draw an aggregate
amount at any one time outstanding of $58.0 million. The major credit line
provides for funding of up to $50.0 million and bears interest at variable
LIBOR-based rates (4.49% at June 30, 2001). The second credit line
provides for funding of up to $8.0 million and bears interest at the prime
rate (6.75% at June 30, 2001).
Subsequent to June 30, 2001, the Company's Board of Directors declared a
cash dividend of $.03 per share on its common stock payable on September
20, 2001, to stockholders of record on September 6, 2001. Current funds
from operations are adequate for this purpose. The Board has indicated that
it plans to continue paying dividends as long as the Company's financial
picture continues to be favorable.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations. This standard eliminates the pooling method of accounting for
business combinations initiated after June 30, 2001. In addition, SFAS No.
141 addresses the accounting for intangible assets and goodwill acquired in
a business combination. SFAS No. 141 is effective for business combinations
completed after June 30, 2001. Adoption of this standard is not expected to
have a material effect on the Company's consolidated financial position or
results of operations.
In July 2001, the FASB also issued SFAS No. 142, Goodwill and Intangible
Assets, which revises the accounting for purchased goodwill and intangible
assets. Under SFAS No. 142, goodwill and intangible assets with indefinite
lives will no longer be amortized, but will be tested for impairment
annually and also in the event of an impairment indicator. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001, with early
adoption permitted for companies with fiscal years beginning after March 15,
2001, if their first quarter financial statements have not previously been
issued (i.e., as of July 1, 2001, for the Company). The impact of adoption
of this standard will be the Company's cessation of the amortization of
goodwill beginning July 1, 2001.
Forward Looking Statements
Except for the historical information contained herein, the matters
discussed in the Management's Discussion and Analysis of Financial Condition
and Results of Operations and other portions of this report contain forward-
looking statements within the meaning of federal securities laws. Actual
results are subject to risks and uncertainties, including both those
specific to the Company and those specific to the industry, which could
cause results to differ materially from those contemplated. The risks and
uncertainties include, but are not limited to, the matters detailed herein
at "Risk Factors", above. Undue reliance should not be placed on the
forward-looking statements. The Company does not undertake any obligation to
publicly update any forward-looking statements.
Item 7A. Quantitatives and Qualitative Disclosure about Market Risk
Market risk refers to the risk that a change in the level of one or more
market prices, interest rates, indices, volatilities, correlations or other
market factors such as liquidity, will result in losses for a certain
financial instrument or group of financial instruments. We are currently
exposed to credit risk on credit extended to customers, interest risk on
investments in U.S. government securities and long-term debt. We actively
monitor these risks through a variety of controlled procedures involving
senior management. We do not currently use any derivative financial
instruments. Based on the controls in place, credit worthiness of the
customer base and the relative size of these financial instruments, we
believe the risk associated with these instruments will not have a material
adverse affect on our consolidated financial position or results of
operations.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
-----------------------------
Independent Auditors' Report.................................20
Financial Statements:
Consolidated Statements of Income,
Years Ended June 30, 2001, 2000 and 1999.....................21
Consolidated Balance Sheets,
June 30, 2001 and 2000.......................................22
Consolidated Statements of Changes in Stockholders' Equity,
Years Ended June 30, 2001, 2000 and 1999.....................23
Consolidated Statements of Cash Flows,
Years Ended June 30, 2001, 2000 and 1999.....................24
Notes to Consolidated Financial Statements...................25
Financial Statement Schedules:
There are no schedules included because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
Supplementary Data:
The information required by this item is contained under the caption
"Quarterly Financial Information" on page 20 of the 2001 Annual Report.
Such information is hereby incorporated by reference.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Jack Henry & Associates, Inc.:
We have audited the accompanying consolidated balance sheets of Jack Henry &
Associates, Inc. and Subsidiaries (the "Company") as of June 30, 2001 and
2000, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the
period ended June 30, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Jack Henry & Associates,
Inc. and Subsidiaries at June 30, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period
ended June 30, 2001 in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
August 21, 2001
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
YEAR ENDED JUNE 30,
-----------------------------
2001 2000 1999
------- ------- -------
REVENUES
Software licensing and installation $101,259 $ 57,688 $ 47,181
Support and service 134,138 97,519 71,278
Hardware sales 110,071 70,093 75,068
------- ------- -------
Total $345,468 $225,300 $193,527
COST OF SALES
Cost of hardware 75,629 51,045 54,661
Cost of services 118,242 76,139 52,582
------- ------- -------
Total $193,871 $127,184 $107,243
------- ------- -------
GROSS PROFIT $151,597 $ 98,116 $ 86,284
OPERATING EXPENSES
Selling and marketing 27,770 19,015 14,030
Research and development 10,871 8,022 5,183
General and administrative 27,216 20,069 17,347
------- ------- -------
Total $ 65,857 $ 47,106 $ 36,560
------- ------- -------
OPERATING INCOME FROM CONTINUING
OPERATIONS $ 85,740 $ 51,010 $ 49,724
OTHER INCOME (EXPENSE)
Interest income 1,386 863 1,619
Interest expense (920) (1,910) (93)
Other, net 717 1,802 363
------- ------- -------
Total $ 1,183 $ 755 $ 1,889
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES $ 86,923 $ 51,765 $ 51,613
PROVISION FOR INCOME TAXES 31,292 17,415 18,887
------- ------- -------
INCOME FROM CONTINUING OPERATIONS $ 55,631 $ 34,350 $ 32,726
LOSS FROM DISCONTINUED OPERATIONS,
net of taxes - 332 758
------- ------- -------
NET INCOME $ 55,631 $ 34,018 $ 31,968
======= ======= =======
Diluted income per share:
Income from continuing operations $ .61 $ .40 $ .39
Loss from discontinued operations - - .01
------- ------- -------
Net income $ .61 $ .40 $ .38
======= ======= =======
Diluted weighted average shares 91,344 85,278 85,282
======= ======= =======
Basic income per share:
Income from continuing operations $ .64 $ .42 $ .41
Loss from discontinued operations - - .01
------- ------- -------
Net income $ .64 $ .42 $ .40
======= ======= =======
Basic weighted average shares
outstanding 86,834 81,766 80,674
======= ======= =======
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
JUNE 30,
-------------------
2001 2000
ASSETS ------- -------
CURRENT ASSETS:
Cash and cash equivalents $ 18,589 $ 5,186
Investments, at amortized cost 985 946
Trade receivables 116,573 73,940
Income taxes receivable 537 3,478
Prepaid cost of product 17,191 10,645
Prepaid expenses and other 17,425 8,130
Deferred income taxes 750 825
------- -------
Total $172,050 $103,150
PROPERTY AND EQUIPMENT 176,193 118,749
Accumulated depreciation 37,754 25,464
------- -------
$138,439 $ 93,285
OTHER ASSETS:
Intangible assets, net of amortization 101,389 109,282
Computer software, net of amortization 5,806 5,813
Prepaid cost of product 12,007 7,694
Other non-current assets 3,430 1,858
------- -------
Total $122,632 $124,647
------- -------
Total assets $433,121 $321,082
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,846 $ 9,255
Short-term borrowings - 70,500
Accrued expenses 9,595 9,750
Current portion of long-term debt 87 123
Deferred revenues 79,490 61,512
------- -------
Total $107,018 $151,140
LONG-TERM DEBT 228 320
DEFERRED REVENUES 15,514 9,945
DEFERRED INCOME TAXES 7,857 5,132
------- -------
Total liabilities $130,617 $166,537
STOCKHOLDERS' EQUITY:
Preferred stock - $1 par value; 500,000 - -
shares authorized; none issued
Common stock - $.01 par value; shares
authorized 2001 - 250,000,000;
2000 - 50,000,000; shares issued 2001 -
88,846,710; 2000 - 41,357,853 888 414
Additional paid-in capital 145,211 43,753
Retained earnings 156,405 110,378
------- -------
Total stockholders' equity $302,504 $154,545
------- -------
Total liabilities and stockholders' equity $433,121 $321,082
======= =======
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
YEAR ENDED JUNE 30,
------------------------------------
2001 2000 1999
---------- ---------- ----------
PREFERRED SHARES: - - -
========== ========== ==========
COMMON SHARES:
Shares, beginning of year 41,357,853 20,517,090 20,194,870
Shares issued upon exercise of options 3,097,363 500,792 314,277
Shares issued for Employee Stock
Purchase Plan 21,267 11,466 7,943
Shares issued in secondary offering 1,500,000 - -
Stock dividend 42,870,227 20,328,505 -
---------- ---------- ----------
Shares, end of year 88,846,710 41,357,853 20,517,090
========== ========== ==========
COMMON STOCK - PAR VALUE $.01 PER SHARE:
Balance, beginning of year $ 414 $ 205 $ 202
Shares issued upon exercise of options 30 5 3
Shares issued in secondary offering 15 - -
Other - 1 -
Stock dividend 429 203 -
---------- ---------- ----------
Balance, end of year $ 888 $ 414 $ 205
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year $ 43,753 $ 32,210 $ 26,267
Shares issued upon exercise of options 18,274 6,394 3,264
Shares issued for Employee Stock
Purchase Plan 818 488 312
Shares issued in secondary offering 60,510 - 150
Stock dividend (429) (203) -
Tax benefit on exercise of options 22,285 4,864 2,217
---------- ---------- ----------
Balance, end of year $ 145,211 $ 43,753 $ 32,210
---------- ---------- ----------
RETAINED EARNINGS:
Balance, beginning of year $ 110,378 $ 83,383 $ 57,122
Net loss for the three months ended
September 30, 1999 - Sys-Tech, Inc. - 264 -
Retained deficit of acquired businesses - - (19)
Net income 55,631 34,018 31,968
Dividends (2001- $.11 per share;
2000 - $.09 per share; 1999 - $.07
per share) (9,604) (7,287) (5,688)
---------- ---------- ----------
Balance, end of year $ 156,405 $ 110,378 $ 83,383
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY $ 302,504 $ 154,545 $ 115,798
========== ========== ==========
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
YEAR ENDED JUNE 30,
2001 2000 1999
------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 55,631 $ 34,350 $ 32,726
Adjustments to reconcile income from continuing
operations to cash from operating activities:
Depreciation and amortization 21,888 15,473 7,901
Provision for deferred income taxes 2,800 2,400 221
Gain on sale of investments - (1,105) -
Other (3) 175 157
Changes in:
Trade receivables (42,633) (11,870) (8,540)
Prepaid expenses and other (22,069) (9,451) (6,397)
Accounts payable 8,591 3,080 (3,308)
Accrued expenses (155) (1,781) 2,716
Income taxes (including tax benefit from
exercise of stock options) 25,225 2,483 805
Deferred revenues 23,547 15,106 11,568
------- -------- --------
Net cash from continuing operations $ 72,822 $ 48,860 $ 37,849
CASH FLOWS FROM DISCONTINUED OPERATIONS $ - $ 700 $ (608)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (57,781) (32,619) (38,884)
Purchases of investments (982) (946) (6,708)
Proceeds from sale of investments - 3,605 -
Proceeds from maturity of investments 1,000 6,702 3,100
Purchase of customer contracts - - (7,105)
Computer software developed/acquired (1,447) (875) (867)
Business acquisition costs, net of cash acquired - (93,280) (5,905)
Other, net 375 (6) (241)
------- -------- --------
Net cash from investing activities $(58,835) $(117,419) $ (56,610)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
upon exercise of stock options 18,304 6,399 3,267
Proceeds from sale of common stock 61,344 488 462
Dividends paid (9,604) (7,287) (5,688)
Short-term borrowings, net (70,500) 70,101 (2)
Principal payments on long-term debt ( 128) (296) (27)
------- -------- --------
Net cash from financing activities $ (584) $ 69,405 $ (1,988)
------- -------- --------
Net cash activity for the three months ended
September 30, 1999 - Sys-Tech, Inc. $ - $ 264 $ -
------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 13,403 $ 1,810 $ (21,357)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,186 3,376 24,733
------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 18,589 $ 5,186 $ 3,376
======= ======== ========
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND 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 or acquired several banking and credit
union software systems. The Company's revenues are predominately earned by
marketing those systems to financial institutions nationwide along with the
computer equipment (hardware) and by providing the conversion and software
customization services for a financial institution to install a JHA
software system. JHA also provides continuing support and services to
customers using the systems either in-house or outsourced.
CONSOLIDATION
The consolidated financial statements include the accounts of JHA and all
of its wholly-owned subsidiaries and all significant intercompany accounts
and transactions have been eliminated.
POOLING OF INTERESTS TRANSACTIONS
The consolidated financial statements for all periods presented include
Peerless Group, Inc. ("Peerless"), acquired on December 16, 1998, and Sys-
Tech, Inc. ("Sys-Tech"), acquired on June 1, 2000. These acquisitions were
accounted for as poolings of interests, and therefore, all appropriate prior
periods have been restated to reflect the acquisitions as if they had
occurred at the beginning of the earliest period reported (see Note 13).
Prior to the consummation of the Sys-Tech acquisition, Sys-Tech's year end
was September 30. Therefore, the consolidated statements of income and cash
flows for the year ended June 30, 1999 reflect the results of operations and
cash flows for the Company for the years then ended combined with Sys-Tech
for the year ended September 30, 1999. As a result of the Company and Sys-
Tech having different fiscal year ends, Sys-Tech's results of operations for
the three month period ended September 30, 1999 were included in the
consolidated statement of income for the year ended June 30, 1999.
Revenues, net loss from operations and net loss of Sys-Tech for the three
month period ended September 30, 1999 were $1,402,000, $378,000 and
$264,000, respectively.
COMMON STOCK
On January 29, 2001 and January 31, 2000, the Company's Board of Directors
declared 100% stock dividends on its common stock, effectively 2 for 1
stock splits. The stock dividends were paid March 2, 2001 and 2000 to
stockholders of record at the close of business on February 15, 2001 and
February 17, 2000, respectively. All per share and shares outstanding data
in the consolidated statements of income and the notes to the consolidated
financial statements have been retroactively restated to reflect the stock
splits.
On October 31, 2000, the stockholders voted to increase the number of shares
of common stock which the Company is authorized to issue from 50,000,000 to
250,000,000.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
REVENUE RECOGNITION
In October, 1997, the Accounting Standards Executive Committee of the
American Institute of Public Accountants ("AcSEC") issued Statement of
Position ("SOP") 97-2, "Software Revenue Recognition". The Company adopted
SOP 97-2 effective July 1, 1998. SOP 97-2 generally requires revenue earned
on software arrangements involving multiple elements to be allocated to each
element based on the relative fair values of the elements. In March 1998,
AcSEC issued SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2, Software Recognition", which deferred portions of SOP 97-2 for one
year. Revenues in fiscal year 1999 from the sales of software are
recognized in accordance with the enacted portions of SOP 97-2 and revenues
in fiscal 2000 from the sale of software are recognized in accordance with
SOP 98-4. These adoptions did not have a material effect on revenue
recognition or results of operations.
The Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," on
December 3, 1999. SAB No. 101, as amended, provides the SEC Staff's views
on selected revenue recognition issues and was adopted by the Company in the
fourth fiscal quarter of fiscal year 2001. The adoption of SAB No. 101 did
not have a material effect on the Company's consolidated financial
statements.
The Company's various sources of revenue and the methods of revenue
recognition are as follows:
Software licensing fees - Initial licensing fees are recognized upon
delivery of the unmodified software.
Software installation and related services - Fees for these services are
recognized as the services are performed on hourly contracts and at
completion on fixed-fee contracts.
Support and service fees - Fees from these contracts are recognized
ratably over the life of the in-house support or outsourcing service
contract.
Hardware - Revenues from sales of hardware are recognized upon direct
shipment by the supplier to the Company's customers. Costs of items
purchased and remarketed are reported as cost of hardware in cost of
sales.
PREPAID COST OF PRODUCT
Costs for these remarketed hardware and software maintenance contracts,
which are prepaid, are recognized ratably over the life of the contract,
generally one to five years, with the related revenue amortized from
deferred revenues.
DEFERRED REVENUES
Deferred revenues consist primarily of prepaid annual software support fees
and prepaid hardware maintenance fees. Hardware maintenance contracts are
multi-year, therefore, the deferred revenue and prepaid cost of product are
classified in accordance with the terms of the contract. Software and
hardware deposits are also reflected as deferred revenues.
COMPUTER SOFTWARE DEVELOPMENT
The Company capitalizes new product development costs incurred from the
point at which technological feasibility has been established through the
point at which the product is ready for general availability. The
capitalized costs, which include salaries and benefits, equipment costs and
other direct expenses, are amortized to expense based on the estimated
product life (generally five years).
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
INVESTMENTS
The Company invests its cash that is not required for current operations
primarily in U.S. government securities and money market accounts. The
Company has the positive intent and ability to hold its debt securities
until maturity and accordingly, these securities are classified as held-to-
maturity and are carried at historical cost adjusted for amortization of
premiums and accretion of discounts. Premiums and discounts are amortized
and accreted, respectively, to interest income using the level-yield method
over the period to maturity. The held-to-maturity securities typically
mature in less than one year. Interest on investments in debt securities is
included in income when earned.
The amortized cost of held-to-maturity securities is $985,000 and $946,000
at June 30, 2001 and 2000, respectively. Fair market values of these
securities did not differ significantly from amortized cost due to the
nature of the securities and minor interest rate fluctuations during the
periods.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated principally using
the straight-line method over the estimated useful lives of the assets.
INTANGIBLE ASSETS
Intangible assets consist of excess purchase price over the fair value of
net assets acquired, customer relationships, software and trade names
acquired in business acquisitions. The amounts are amortized over an
estimated economic benefit period, generally five to twenty years using the
straight-line method.
The Company reviews its long-lived assets and identifiable intangibles for
impairment whenever events or changes in circumstances have indicated that
the carrying amount of its assets might not be recoverable.
COMPREHENSIVE INCOME
Comprehensive income for each of the three years ended June 30, 2001 equals
the Company's net income.
BUSINESS SEGMENT INFORMATION
In accordance with Statements of Financial Accounting Standards (" SFAS")
No. 131, "Disclosure About Segments of an Enterprise and Related
Information," the Company's operations are classified as two business
segments: bank systems and services and credit union systems and services
(see Note 14). Revenue by type of product and service is presented on the
face of the consolidated statements of income. Substantially all the
Company's revenues are derived from operations and assets located within the
United States of America.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance would be established to reduce deferred
tax assets if it is likely that a deferred tax asset will not be realized.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137 and 138 was adopted
July 1, 2000 and did not have a material effect on the Company's
consolidated financial position and results of operations.
In July 2001, the FASB issued SFAS No. 141, Business Combinations. This
standard eliminates the pooling method of accounting for business
combinations initiated after June 30, 2001. In addition, SFAS No. 141
addresses the accounting for intangible assets and goodwill acquired in a
business combination. SFAS No. 141 is effective for business combinations
completed after June 30, 2001. Adoption of this standard is not expected to
have a material effect on the Company's consolidated financial position or
results of operations.
In July 2001, the FASB also issued SFAS No. 142, Goodwill and Intangible
Assets, which revises the accounting for purchased goodwill and intangible
assets. Under SFAS No. 142, goodwill and intangible assets with indefinite
lives will no longer be amortized, but will be tested for impairment
annually and also in the event of an impairment indicator. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001 with early
adoption permitted for companies with fiscal years beginning after March 15,
2001 if their first quarter financial statements have not previously been
issued (i.e., as of July 1, 2001, for the Company). The impact of adoption
of this standard will be the Company's cessation of the amortization of
goodwill beginning July 1, 2001.
RECLASSIFICATION
Where appropriate, prior years' financial information has been reclassified
to conform with the current years' presentation.
NOTE 2: FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values for held-to-maturity securities are based on quoted market
prices. For all other financial instruments, including amounts receivable
and payable, short-term borrowings and long-term debt, fair values
approximate carrying value, based on the short-term nature of the assets and
liabilities and the variability of the interest rates on the borrowings.
NOTE 3: PROPERTY AND EQUIPMENT
The classification of property and equipment, together with their estimated
useful lives is as follows:
(In Thousands)
Year Ended June 30,
-------------------
2001 2000 Estimated useful life
------- ------- ---------------------
Land $ 6,519 $ 4,602
Land improvements 4,731 3,795 5-20 years
Buildings 39,290 29,810 25-30 years
Equipment and Furniture 79,892 55,412 5-8 years
Aircraft and Equipment 31,737 21,915 8-10 years
Construction in Process 14,024 3,215
------- -------
$176,193 $118,749
Less accumulated Depreciation 37,754 25,464
------- -------
Property & Equipment, net $138,439 $ 93,285
======= =======
NOTE 4: OTHER ASSETS
Intangible assets relate to acquisitions and consist of the following:
(In Thousands)
Year ended June 30,
--------------------
2001 2000
------- -------
Goodwill $ 32,355 $ 32,355
Customer relationships 90,612 90,612
Tradenames 3,915 3,915
------- -------
$126,882 $126,882
Less accumulated amortization 25,493 17,600
------- -------
Balance, end of year $101,389 $109,282
======= =======
Computer software includes the unamortized cost of software products
developed or acquired by the Company which were required to be capitalized
by accounting principles generally accepted in the United States of America.
Following is an analysis of the computer software costs:
(In Thousands)
Year ended June 30,
-------------------
2001 2000
----- -----
Balance, beginning of year $5,813 $3,015
Acquired software - 3,000
Capitalized development costs 1,447 875
----- -----
$7,260 $6,890
Less amortization expense 1,456 1,077
----- -----
Balance, end of year $5,806 $5,813
===== =====
NOTE 5: LINES OF CREDIT AND LONG-TERM DEBT
LINES OF CREDIT
JHA currently has two bank credit lines upon which it can draw an aggregate
amount at any one time outstanding of $58.0 million. The major credit line
provides for funding of up to $50.0 million and bears interest at variable
LIBOR-based rates (4.49% at June 30, 2001, and weighted average interest
rates of 7.79% and 6.72% for the years ended June 30, 2001 and 2000,
respectively and expires December 15, 2001). At June 30, 2000, this line
allowed for up to $75.0 million of funding, and was amended on September 7,
2000 to reduce the maximum to the aforementioned amount. There were no
amounts outstanding under this line at June 30, 2001. At June 30, 2000,
there was $70.5 million outstanding of which the balance outstanding on
August 16, 2000 was retired with the proceeds from the secondary offering
(see Note 15). The second credit line provides for funding of up to $8.0
million and bears interest at the prime rate (6.75% at June 30, 2001 and
expires March 15, 2002), and is secured by $1.0 million of investments with
the remainder unsecured. There were no amounts outstanding under this line
at June 30, 2001 or 2000.
Sys-Tech had a line of credit with a maximum loan amount of $400,000,
bearing interest at the lender's prime rate plus one-half (10.0% throughout
June 30, 1999). Amounts outstanding were none and $399,000 as of June 30,
2000 and 1999, respectively. The line was secured by the accounts
receivable and other current assets of Sys-Tech. Subsequent to the
acquisition of Sys-Tech and prior to June 30, 2000, the line was repaid and
canceled.
LONG-TERM DEBT
The Company has notes payable which were assumed during the acquisition of
BancData Solutions, Inc. (See Note 15), bearing interest at 10%, payable
monthly. The notes are secured by equipment. Sys-Tech had a note payable
with an original loan amount of $400,000, bearing interest at 10%, payable
monthly, due August 4, 2001. The note was secured by specific real estate.
The note was repaid subsequent to the acquisition of Sys-Tech and prior to
June 30, 2000.
(In Thousands)
Year ended June 30,
---------------------
2001 2000
----- -----
Long-term debt $ 315 $ 443
Less current maturities 87 123
----- -----
$ 228 $ 320
===== =====
Future maturities of long-term debt as of June 30, 2001, is as follows:
(In Thousands)
--------------
2002 $ 87
2003 89
2004 96
2005 43
------
$ 315
======
The Company paid interest of $1,150,000, $1,600,000, and $93,000 in 2001,
2000 and 1999, respectively.
NOTE 6: LEASE COMMITMENTS
The Company leases certain property under operating leases which expire over
the next six years. As of June 30, 2001, net future minimum lease payments
under non-cancelable terms are as follows: $3,675,000, $3,612,000,
$2,340,000, $1,254,000, $395,000 and $250,000 in 2002, 2003, 2004, 2005,
2006, and thereafter, respectively. Rent expense for all operating leases
amount to $3,400,000, $2,200,000 and $1,800,000 in 2001, 2000 and 1999,
respectively.
NOTE 7: INCOME TAXES
The provision for income taxes on income from continuing operations consists
of the following:
(In Thousands)
Year ended June 30,
--------------------------
2001 2000 1999
------ ------ ------
Current:
Federal $26,817 $14,050 $16,860
State 1,675 965 1,806
Deferred:
Federal 2,200 1,900 204
State 600 500 17
------ ------ ------
$31,292 $17,415 $18,887
====== ====== ======
The tax effects of temporary differences related to deferred taxes shown on
the balance sheets were:
(In Thousands)
Year ended June 30,
-------------------
2001 2000
------ ------
Deferred tax assets:
Carryforwards (operating losses, capital
losses, credits, etc.) $ 314 $ 615
Expense reserves (bad debts, insurance,
franchise tax, vacation, etc.) 516 825
Intangible assets 1,742 1,548
Other, Net 200 -
------ ------
2,772 2,988
Deferred tax liabilities:
Accelerated tax depreciation (8,157) (6,173)
Accelerated tax amortization (1,722) (1,060)
Other, net - (62)
------ ------
(9,879) (7,295)
------ ------
Net deferred tax liability $(7,107) $(4,307)
====== ======
The deferred taxes are classified on the balance sheet as follows:
(In Thousands)
Year ended June 30,
-------------------
2001 2000
------ ------
Deferred income taxes (current) $ 750 $ 825
Deferred income taxes (long-term) (7,857) (5,132)
------ ------
$(7,107) $(4,307)
====== ======
The following analysis reconciles the statutory federal income tax rate to
the effective income tax rates reflected above:
Year ended June 30,
-------------------------
2001 2000 1999
---- ---- ----
Computed "expected" tax expense (benefit) 35% 35% 35%
Increase (reduction) in taxes resulting from:
State income taxes, net of
federal income tax benefits 2% 2% 3%
Research and development credit (1%) (1%) -
Other - (2%) (1%)
36% 34% 37%
Net operating loss carryforwards of $847,000 (from acquisitions) expire
through the year 2014. The Company paid income taxes of $3,300,000,
$13,280,000 and $13,988,000 in 2001, 2000 and 1999, respectively.
NOTE 8: INDUSTRY AND SUPPLIER CONCENTRATIONS
The Company sells its products to banks and financial institutions
throughout the United States and generally does not require collateral.
Reserves (which are insignificant at June 30, 2001 and 2000) are maintained
for potential credit losses.
In addition, the Company purchases most of its computer hardware and related
maintenance for resale in relation to installation of JHA software systems
from one supplier. There are a limited number of hardware suppliers for
these required materials. If this relationship were terminated, it could
have a significant negative impact on the future operations of the Company.
NOTE 9: STOCK OPTION PLANS
The Company currently issues options under two stock option plans: the 1996
Stock Option Plan ("1996 SOP") and the Non-Qualified Stock Option Plan
("NSOP").
The 1996 SOP was adopted by the Company on October 29, 1996, for its
employees. This plan replaced the terminating 1987 SOP. Terms and vesting
periods of the options are determined by the Compensation Committee of the
Board of Directors when granted and for options outstanding include vesting
periods up to 2 2 years. Shares of common stock are reserved for issuance
under this plan at the time of each grant which must be at or above fair
market value of the stock at the grant date. The options terminate 30 days
after termination of employment, three months after retirement, one year
after death or ten years after grant. As of June 30, 2001, there were
1,412,940 shares available for future grants under the plan from the
original 13,000,000 shares approved by the stockholders.
The NSOP was adopted by the Company on October 31, 1995, for its outside
directors. Options are exercisable beginning six months after grant at a
price equal to 100% of the fair market value of the stock at the grant date.
The options terminate when director status ends, upon surrender of the
option or ten years after grant. A total of 1,200,000 shares of common
stock have been reserved for issuance under this plan with a maximum of
300,000 for each director. As of June 30, 2001, there were 660,000 shares
available for future grants under the plan.
A summary of the activity of all of the Company's stock option plans is:
Year ended June 30,
-------------------------------------
2001 2000 1999
---------- ---------- ----------
Options outstanding, beginning of year 13,257,568 8,832,760 8,800,368
Options granted 1,422,280 5,969,000 1,389,548
Options exercised (3,285,433) (1,416,392) (1,291,556)
Options forfeited (104,616) (127,800) (65,600)
---------- ---------- ----------
Options outstanding, end of year 11,289,799 13,257,568 8,832,760
========== ========== ==========
Weighted-average exercise price
for options outstanding $12.68 $10.12 $ 5.40
====== ====== ======
Weighted-average exercise price for
options granted $23.57 $15.75 $10.65
====== ====== ======
Weighted-average exercise price for
options exercised $ 6.89 $ 4.72 $ 2.59
====== ====== ======
Weighted-average fair value of
options granted $ 9.58 $ 6.69 $ 4.79
====== ====== ======
Following is an analysis of stock options outstanding (O) and
exercisable (E) as of June 30, 2001:
Range of Weighted-Average
Exercise Remaining Contractual Weighted-Average
Prices Shares Life in Years Exercise Price
O E O O E
-------- --------- ----- ----- -----
$ 1 to 6 3,424,445 3,424,445 4.92 $ 4.29 $ 4.29
6 to 13 1,865,574 1,602,646 7.40 9.51 9.54
13 to 17 4,490,000 2,159,000 8.76 16.88 16.88
17 to 30 1,479,780 182,000 9.31 23.00 23.53
30 to 32 30,000 - 10.00 31.06 -
-------- -------- --------- ----- ----- -----
$ 1 to 32 11,289,799 7,368,091 7.45 $12.68 $ 9.59
OPTIONS FORFEITED
Fiscal Range of Weighted-Average
Year Exercise Shares Exercise Price
Price
2001 $12 to 22 104,616 $18.39
==== ========= ======= ======
2000 $ 4 to 17 127,800 $ 6.19
==== ========= ======= ======
1999 $ 6 to 11 65,600 $ 9.35
==== ========= ======= ======
As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company has elected to continue to follow Accounting Principles Board
("APB") No. 25, "Accounting for Stock Issued to Employees", in accounting
for stock-based awards to employees. Under APB No. 25, the Company generally
recognizes no compensation expense with respect to such awards, since the
exercise price of the stock options awarded are equal to the fair market
value of the underlying security on the grant date.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 for awards granted after December 31, 1994, as if
the Company had accounted for its stock-based awards to employees under the
fair value method of SFAS No. 123. The fair value of the Company's stock-
based awards to employees was estimated as of the date of the grant using a
Black-Scholes option pricing model.
The Company's pro forma information for continuing operations follows:
(In Thousands, Except Per Share Data)
Year ended June 30,
-----------------------------------
2001 2000 1999
------- ------- -------
Net income
As reported $ 55,631 $ 34,350 $ 32,726
======= ======= =======
Pro forma $ 36,450 $ 26,503 $ 27,453
======= ======= =======
Diluted income per share
As reported $ .61 $ .40 $ .38
======= ======= =======
Pro forma $ .40 $ .31 $ .32
======= ======= =======
Basic income per share
As reported $ .64 $ .42 $ .40
======= ======= =======
Pro forma $ .42 $ .32 $ .34
======= ======= =======
Assumptions:
Expected life (years) 2.92 2.95 2.97
Volatility 54% 56% 56%
Risk free interest rate 4.4% 6.2% 5.0%
Dividend yield .36% .36% .35%
NOTE 10: EARNINGS PER SHARE
The following table reflects a reconciliation between Basic and Diluted net
income per share:
(In Thousands, Except Per Share Data)
Year ended June 30,
-------------------
2001 2000 1999
Net Weighted Per Share Net Weighted Per Share Net Weighted Per Share
Income Average Amount Income Average Amount Income Average Amount
Shares Shares Shares
Basic Income Per
Share:
Net income
available to
Stockholders $55,631 86,834 $0.64 $34,018 81,766 $0.42 $31,968 80,674 $0.40
Effect of
dilutive
securities:
Stock options - 4,510 $0.03 - 3,512 $0.02 - 4,608 $0.02
------ ------ ---- ------ ------ ---- ------ ------ ----
Diluted Income
Per Share:
Net income
available to
common
stockholders $55,631 91,344 $0.61 $34,018 85,278 $0.40 $31,968 85,282 $0.38
NOTE 11: EMPLOYEE BENEFIT PLANS
Stock Purchase Plan - The Company established an employee stock purchase
plan on January 1, 1996. The plan allows the majority of employees the
opportunity to directly purchase shares of the Company. Purchase prices for
all participants are based on the closing bid price on the last business day
of the month.
401(k) Employee Stock Ownership Plan ("ESOP") - The Company has a 401(k)
Employee Stock Ownership Plan (the "Plan") covering substantially all
employees of the Company and its subsidiaries. As of July 1, 1987, the plan
was amended and restated to include most of the existing ESOP provisions, to
add salary reduction contributions allowed under Section 401(k) of the
Internal Revenue Code and to require employer matching contributions. The
Company matches 100% of employee contributions up to 5% of compensation
subject to a maximum of $5,000. The Company has the option of making a
discretionary contribution to the Plan, however, none has been made for any
of the three most recent fiscal years. The Company assumed responsibility
for the Peerless Employee 401(k) Plan as of the acquisition date, and merged
it into the Plan as of July 22, 2000. The Company assumed responsibility
for the Symitar Employee 401(k) Plan as of the acquisition date (see Note
13), and plans to merge it into the Plan as of December 31, 2001. The total
expense related to the Plans was $2,986,000, $2,430,000 and $1,321,000 for
2001, 2000 and 1999, respectively.
NOTE 12: DISCONTINUED OPERATIONS
In the last quarter of 1996, the Company discontinued the operations of its
BankVision Software, Ltd. subsidiary ("BankVision") which it planned to sell
by December 31, 1996. The estimated loss on disposal recorded in 1996 was
$2,620,000.
On September 7, 1999, the Company completed the sale of BankVision for
$1,000,000. Under the terms of the agreement, the purchaser made a $500,000
down payment and executed promissory notes to pay $250,000 (plus interest)
in September of 2000 and 2001. The net assets of the subsidiary, as of that
date, approximately equal the sales proceeds, and as a result, the
transaction had minimal effect on its financial results for fiscal year
2000. Total loss from discontinued operations was none, $332,000 and
$758,000 for the years ended June 30, 2001, 2000 and 1999, respectively.
NOTE 13: BUSINESS ACQUISITIONS
POOLING OF INTERESTS TRANSACTIONS:
The Company acquired all the outstanding shares of Peerless on December 16,
1998, for approximately $36,000,000 (3,308,000 shares split adjusted) in
Company stock.
The 1999 consolidated financial statements were restated for the effect of
this pooling transaction. The following table presents a reconciliation of
revenue and net income previously reported by the Company and Peerless to
those presented in the accompanying consolidated financial statements.
(In Thousands)
Three Months Ended
September 30, 1998
-------
Revenues:
JHA $ 40,728
Peerless 8,921
-------
Combined $ 49,649
=======
Net Income
JHA $ 8,296
Peerless 497
-------
Combined $ 8,793
=======
On June 1, 2000, the Company acquired all the outstanding shares of Sys-Tech
for approximately $16,000,000 (834,000 shares split adjusted) in Company
stock.
The 2000 and 1999 consolidated financial statements were restated for the
effect of this pooling transaction. The following table presents a
reconciliation of revenue and net income previously reported by the Company,
and Sys-Tech to those presented in the accompanying consolidated financial
statements.
(In Thousands)
Nine Months Ended
March 31, 2000 Fiscal 1999
------- -------
Revenues:
JHA $150,239 $184,504
Sys-Tech 5,692 9,023
------- -------
Combined $155,931 $193,527
======= =======
Net Income
JHA $ 22,588 $ 31,768
Sys-Tech (4) 200
------- -------
Combined $ 22,584 $ 31,968
======= =======
PURCHASE TRANSACTIONS:
On September 8, 1999, the Company's wholly-owned subsidiary Open System
Group, Inc. ("OSG"), completed the acquisition of BancTec, Inc.'s community
banking business, providing software, account processing capabilities and
data center operations to over 700 community banks throughout the United
States and the Caribbean. Revenues from these acquired community banking
operations totaled approximately $17,000,000 for the six months ended June
30, 1999. The total value of the transaction was approximately $56,136,000,
made up of $50,000,000 paid in cash, the assumption of approximately
$5,475,000 liabilities and $661,000 in transaction costs. The Company
allocated the purchase price to the assets and liabilities acquired based
on their estimated fair value at the acquisition date, resulting in
allocations of $39,000,000, $5,315,000 and $1,000,000 to acquired
customer relationships, goodwill and software, respectively. The customer
relationships, goodwill and software are being amortized on a straight-line
basis over 20, 20 and 10 years, respectively. The purchase price was paid
with approximately $25,000,000 in cash from operations and $25,000,000 in
proceeds from a line of credit with a commercial lender (see Note 5).
On April 1, 2000, the Company acquired all the outstanding shares of
BancData Solutions, Inc. ("BDS"), for $5,000,000 in cash. BDS is a provider
of a variety of service bureau options to community banks, primarily in
southern California. Their systems are AS/400 based and are already using a
JHA core application system. The excess purchase price over the fair value
of net assets acquired of $3,963,000 was allocated to customer relationships
and is being amortized on a straight-line basis over 20 years.
On June 7, 2000, the Company completed the acquisition of Symitar Systems,
Inc. ("Symitar"), a provider of in-house data processing solutions for
credit unions. Symitar provides 237 credit unions throughout the United
States with its comprehensive line of software and services that run on the
IBM RS/6000. Revenues from these operations totaled approximately
$33,000,000 and $36,000,000 for Symitar's fiscal years ended December 31,
1999 and 1998, respectively. The purchase price of $44,000,000 in cash was
paid with proceeds from a line of credit with a commercial lender (see Note
5). The purchase price for Symitar was allocated to the assets and
liabilities acquired based on their estimated fair values at the acquisition
date, resulting in allocation to acquired customer relationships of
$21,800,000, tradename of $3,900,000, goodwill of $15,689,000 and software
of $2,000,000 which are being amortized on a straight-line basis over 20,
20, 20 and 10 years, respectively.
The three acquisitions discussed above were accounted for using the purchase
method. Accordingly, the accompanying consolidated financial statements do
not include any revenues and expenses related to these acquisitions prior to
their respective closing dates.
The following unaudited proforma condensed information is presented as if
the OSG and Symitar acquisitions had occurred at the beginning of the
earliest period presented. The pro forma results for BDS were not included
as amounts are not material.
(In Thousands, Except
Per Share Data)
Year Ended June 30,
---------------------
2000 1999
------- -------
Revenues $253,106 $274,682
Income from continuing operations 30,478 33,205
Net income 30,146 32,447
Diluted Income Per Share:
Income from continuing operations $ .36 $ .39
Net income $ .36 $ .38
NOTE 14: BUSINESS SEGMENT INFORMATION
The Company is a leading provider of integrated computer systems that
perform data processing (available for in-house or service bureau
installations) for banks and credit unions. The Company's operations were
classified as one business segment in the prior year. The acquisition of
Symitar Systems, Inc. enhanced the Company's position in the credit union
marketplace. The Company's operations have now been classified into two
business segments: bank systems and services and credit union systems and
services, with information for 2000 and 1999 reclassified to conform to the
current business segment presentation. The Company evaluates the
performance of it segments and allocates resources to them based on various
factors, including prospects for growth, return on investment and return on
revenue.
(In Thousands)
For the Year Ended
June 30,
-----------------------------------
2001 2000 1999
------- ------- -------
Revenues:
Bank systems and services $298,266 $220,655 $191,329
Credit Union systems and services 47,202 4,645 2,198
------- ------- -------
Total $345,468 $225,300 $193,527
======= ======= =======
Gross Profit:
Bank systems and services $138,143 $ 96,062 $ 84,668
Credit Union systems and services 13,454 2,054 1,616
------- ------- -------
Total $151,597 $ 98,116 $ 86,284
======= ======= =======
The Company has not disclosed asset information by segment, as the
information is not produced internally and its preparation is impracticable.
NOTE 15: SECONDARY OFFERING
On August 16, 2000, the Company completed a secondary offering of 3.0
million shares of its common stock at $21.50 per share less a 5%
underwriters discount and offering expenses paid by the Company. The net
proceeds of approximately $60.5 million was used to retire all outstanding
debt under lines of credit as of that date (see Note 5), with the remaining
balance available for working capital, capital expenditures and other
general corporate purposes.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
See the information under the captions "Election of Directors" and
"Executive Officer and Significant Employees" in the Company's definitive
Proxy Statement which is incorporated herein by reference.*
Item 11. Executive Compensation
See the information under captions "Executive Compensation", "Compensation
Committee Report" and "Company Performance" in the Company's definitive
Proxy Statement which is incorporated herein by reference.*
Item 12. Security Ownership of Certain Beneficial Owners and Management
See the information under the captions "Stock Ownership of Certain
Stockholders" and "Election of Directors" in the Company's definitive Proxy
Statement which is incorporated herein by reference.*
Item 13. Certain Relationships and Related Transactions
See the information under the caption "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement which is
incorporated herein by reference.*
*Incorporated by reference pursuant to Rule 12b-23 and General Instruction
G(3) to Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
The following Consolidated Financial Statements of the Company and its
subsidiaries and the Report of Independent Auditors' thereon appear under
Item 8 of this Report:
- Independent Auditors' Report.
- Consolidated Statements of Income for the Years Ended June 30, 2001,
2000 and 1999.
- Consolidated Balance Sheets as of June 30, 2001 and 2000.
- Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended June 30, 2001, 2000 and 1999.
- Consolidated Statements of Cash Flows for the Years Ended June 30,
2001, 2000 and 1999.
- Notes to Consolidated Financial Statements.
The following Financial Statement Schedules filed as part of this Report
appear under Item 8 of this Report:
There are no schedules included because they are not applicable or the
required information is shown in the Consolidated Financial Statements
or Notes thereto.
Except as otherwise specifically noted, the following documents are
incorporated by reference as exhibits hereto pursuant to Rule 12b-32:
Exhibit No. Description
----------- -----------
3.1.1 Certificate of Incorporation, attached as Exhibit 3.1 to the
Company's Registration Statement on Form S-1, filed November
17, 1985.
3.1.2 Certificate of Amendment of Certificate of Incorporation
attached as Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the Quarter ended December 31, 1987.
3.1.3 Certificate of Amendment of Certificate of Incorporation,
attached as Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the Year Ended June 30, 1993.
3.1.4 Certificate of Amendment of Certificate of Incorporation,
attached as Exhibit 3.5 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1997.
3.1.5 Certificate of Amendment of Certificate of Incorporation,
attached as Exhibit 3.6 to the Registrant's Annual Report
on Form 10-K for the year ended June 30, 1998.
3.2.1 Amended and Restated Bylaws, attached as Exhibit A to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended March 31, 1996.
10.1 The Company's 1987 Stock Option Plan, as amended as of
October 27, 1992, attached as Exhibit 19.1 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended September
30, 1992.
10.2 The Company's Non-Qualified Stock Option Plan, as amended
as of October 26, 1993, attached as Exhibit 19.2 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1993.
10.3 The Company's 1995 Non-Qualified Stock Option Plan, attached
as Exhibit 10.3 to the Company's Annual Report on Form 10-K
for the Year Ended June 30, 1996.
10.4 IBM Remarketer Agreement dated May 21, 1992, attached as
Exhibit 10.1 to the Company's Annual Report on Form 10-K
for the Year Ended June 30, 1992; renewed for a two year
term on January 1, 1997.
10.5 Form of Indemnity Agreement which has been entered into
as of August 27, 1996, between the Company and each of its
Directors, attached as Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the Year Ended June 30, 1996.
10.6 The Company's 1996 Stock Option Plan, attached as Exhibit
10.9 to the Registrant's Annual Report on Form 10-K for the
Year Ended June 30, 1997.
10.7 Agreement and Plan of Merger regarding acquisition of
Peerless Group, Inc. dated August 18, 1998, attached as
Exhibit 10.7 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1998.
10.11 Line of Credit Agreement dated September 7, 1999, between the
Company and Commerce Bank, N.A., attached as Exhibit 10.11 to
the Company's current report on Form 8-K filed September 20,
1999.
10.12 Agreement for Sale and Purchase of Assets dated September 1,
1999, by and among the Company, Open Systems Group, Inc. and
BancTec, Inc. attached as Exhibit 2.1 to the Company's
current report on Form 8-K filed September 20, 1999.
10.13 Agreement and Plan of Merger regarding acquisition of Sys-
Tech, Inc. of Kansas and Big Sky Marketing, Inc. dated June
1, 2000, attached as Exhibit 2.1 to the Company's current
report on Form 8-K filed June 14, 2000.
10.14 Stock Purchase Agreement dated May 14, 2000, between the
Company and the Stockholders of Symitar Systems, Inc.,
attached as Exhibit 2.1 to the Company's current report
on Form 8-K filed June 19, 2000.
10.15 Line of Credit Loan Modification Agreement dated June 6,
2000, between the Company and Commerce Bank, N.A. attached
as Exhibit 10.11 to the Company's current report on Form 8-K
filed June 19, 2000.
21.2 A list of the Company's subsidiaries , attached as Exhibit 21
to Amendment No. 1 to the Company's Registration Statement
on Form S-1, filed August 4, 2000.
23.1 Consent of Independent Auditors' is attached as Exhibit 23.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the last quarter of
the period covered by this report:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized this 25th
day of September, 2001.
JACK HENRY & ASSOCIATES, INC., Registrant
By /s/ Michael E. Henry
--------------------
Michael E. Henry
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Capacity Date
/s/ Michael E. Henry Chairman of the September 25, 2001
Michael E. Henry Board and Chief
Executive Officer
and Director
/s/ Terry W. Thompson President and September 25, 2001
Terry W. Thompson Chief Operating
Officer
/s/ John W. Henry Vice Chairman, Senior September 25, 2001
John W. Henry Vice President and
Director
/s/ Jerry D. Hall Executive Vice September 25, 2001
Jerry D. Hall President and
Director
/s/ Kevin D. Williams Treasurer and September 25, 2001
Kevin D. Williams Chief Financial Officer
(Principal Accounting Officer)
/s/ James J. Ellis Director September 25, 2001
James J. Ellis
/s/ Burton O. George Director September 25, 2001
Burton O. George
/s/ George R. Curry Director September 25, 2001
George R. Curry
Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Numbers 33-16989, 33-65231, 33-65251, and 33-63912 all on Form S-8 pertaining to the Jack Henry & Associates, Inc. 1996 Stock Option Plan, Employee Stock Purchase Plan, Non-Qualified Stock Option Plan and 401(k) Employee Stock Ownership Plan, respectively, of our report dated August 21, 2001, appearing in the Annual Report on Form 10-K of Jack Henry & Associates, Inc. for the year ended June 30, 2001. /s/ Deloitte & Touche LLP St Louis, Missouri September 25, 2001