FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI-
TIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-14112
JACK HENRY & ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1128385
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
663 Highway 60, P. O. Box 807, Monett, MO 65708
(Address of principal executive offices)
(Zip Code)
417-235-6652
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
Common Stock, $.01 par value 18,214,342
JACK HENRY & ASSOCIATES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item I - Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997, (Unaudited) and June
30, 1996 3-4
Condensed Consolidated Statements of
Income for the Quarter and Nine Months
Ended March 31, 1997
and 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended March 31,
1997 and 1996 (Unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8-9
Part II. OTHER INFORMATION
None 9
Part I. Financial Information
Item 1. Financial Statements
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
March 31,
1997 June 30,
(Unaudited) 1996
ASSETS
Current assets:
Cash $ 6,502 $ 4,952
Held-to-maturity securities 5,967 3,128
Receivables 8,293 15,990
Income taxes receivable 496 889
Prepaid expenses and other 3,231 3,187
Total current assets $24,489 $28,146
Property and equipment, net $18,938 $13,612
Other assets:
Intangible assets, net of amortization $15,867 $16,805
Computer software 1,267 1,375
Investments and other 761 463
Total other assets $17,895 $18,643
Total assets $61,322 $60,401
March 31,
1997 June 30,
(Unaudited) 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,123 $ 2,238
Accrued expenses 2,114 2,945
Deferred revenue 10,133 16,068
Total current liabilities $14,370 $21,251
Deferred income taxes 1,732 1,732
Total liabilities $16,102 $22,983
Stockholders' equity:
Preferred stock - $1.00 par value;
500,000 shares authorized;
none issued - -
Common stock - $0.01 par value;
30,000,000 shares authorized;
17,970,719 issued @ 3/31/97
17,801,389 issued @ 6/30/96 * $ 179 $ 119
Less Treasury Stock 27,902 shares 738 -
Additional paid-in capital 12,743 10,711
Retained earnings 33,036 26,588
Total stockholders' equity $45,220 $37,418
Total liabilities and
stockholders' equity $61,322 $60,401
The accompanying notes are an integral part of these consolidated financial
statements.
* Split adjusted
JACK HENRY & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
Quarter Ended Nine Months Ended
March 31, * March 31, *
Revenues 1997 1996 1997 1996
Software licensing & installation $ 5,072 $ 4,430 $16,293 $ 13,307
Maintenance/support & service 7,162 5,749 20,169 16,750
Hardware sales & commissions 9,827 6,382 25,297 19,173
Total revenues 22,061 16,561 61,759 49,230
Cost of sales:
Cost of hardware 7,041 4,551 17,758 12,989
Cost of services 4,708 4,170 13,844 11,913
Total cost of sales $11,749 $ 8,721 $31,602 $24,902
Gross profit $10,312 $ 7,840 $30,157 $24,328
47% 47% 49% 49%
Operating expenses:
Selling and marketing 2,279 1,785 6,628 5,424
Research and development 525 446 1,492 1,371
General and administrative 1,665 1,338 4,453 4,099
Total operating expenses $ 4,469 $ 3,569 $12,573 $10,894
Operating income $ 5,843 $ 4,271 $17,584 $ 13,434
Other income (expense):
Interest and dividend income 172 123 556 410
Other, net 26 77 155 102
Total other income $ 198 $ 200 $ 711 $ 512
Income before income taxes $ 6,041 $ 4,471 $18,295 $13,946
Provision for income taxes 2,306 1,710 6,979 5,331
Net income from continuing operations $ 3,735 $ 2,761 $11,316 $ 8,615
Net loss from discontinued operations 89 - 239 -
Net income $ 3,646 $ 2,761 $11,077 $ 8,615
Earnings per share from cont. oper. $ .20 $ .15 $ .59 $ .46
Net loss per share from discont. Oper. - - 0.01 -
Earnings per share $ .20 $ .15 $ .58 $ .46
Weighted average shares outstanding 19,136 18,766 19,100 18,650
* All prior period per share data have been adjusted for the 50% stock
dividend paid March 13, 1997.
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Nine Months Ended
March 31,
1997 1996
Cash flows - operating activities:
Cash received from customers $64,352 $52,707
Cash paid to suppliers and employees (42,237) (36,110)
Interest and dividends received 603 482
Income taxes paid (7,272) (4,646)
Other, net (10) -
Net cash flow provided by operating
activities $15,436 $12,433
Cash flows from discontinued operations (371) -
Cash flows from investing activities:
Proceeds on sale of property & equipment $ 15 $ 2
Capital expenditures (6,792) (4,448)
Short-term investment activity, net (2,887) 1,946
Long-term investment activity, net 2 (3)
Software development (151) (327)
Acquisition costs, net (314) (5,807)
Net cash used in investing activities $(10,127) $(8,637)
Cash flows from financing activities:
Proceeds from issuance of common stock
upon exercise of stock options $ 1,249 $ 399
Dividends paid (2,630) (2,172)
Payment of acquired long term debt (132) -
Purchase of treasury stock (1,875) (873)
Net cash used in financing activities $(3,388) $ (2,646)
Net increase in cash $ 1,550 $ 1,150
Cash at beginning of period 4,952 3,423
Cash at end of period $ 6,502 $ 4,573
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
(Unaudited)
1. Summary of Significant Accounting Policies
Description of the Company - Jack Henry & Associates, Inc. ("JHA" or the
"Company") is a computer software company which has developed several banking
software systems. It markets those systems to financial institutions throughout
the United States along with the computer equipment (hardware) and provides the
conversion and software services necessary for a financial institution to
install a JHA software system. It also provides continuing maintenance and
support services to customers using the system. All of these related activities
are considered a single business segment.
Consolidation - The consolidated financial statements include the accounts of
JHA and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in the consolidation.
Other Significant Accounting Policies - The accounting policies followed by
the Company are set forth in Note 1 to the Company's consolidated financial
statements included in its Annual Report on Form 10-K ("Form 10-K") for the
fiscal year ended June 30, 1996.
2. Interim Financial Statements
The accompanying condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q of the Securities and Exchange
Commission and in accordance with generally accepted accounting principles
applicable to interim financial statements, and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The financial statements should be read in
conjunction with the audited consolidated financial statements and accompanying
notes of the Company for the year ended June 30, 1996, which are included in its
Form 10-K.
In the opinion of management of the Company, the accompanying condensed
financial statements reflect all adjustments necessary (consisting solely of
normal recurring adjustments) to present fairly the financial position of the
Company as of March 31, 1997, and the results of its operations and its cash
flows for the quarter and nine-month period then ended.
The results of operations for the periods ended March 31, 1997, are not
necessarily indicative of the results to be expected for the entire year.
3. Additional Interim Footnote Information
The following additional information is provided to update the notes to the
Company's annual financial statements for developments during the quarter ended
March 31, 1997:
None.
4. Income Per Share Information
Earnings per common share are computed by dividing income by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding for the quarters and nine month periods ended March 31, 1997 and
1996.
Item 2. - Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Background and Overview
Jack Henry & Associates, Inc. ("JHA" or the "Company"), is a leading provider
of integrated computer systems that perform data processing (available for in-
house or service bureau installations) for banks and related financial institu-
tions. The Company was founded in 1976. Its proprietary applications software,
which operates on IBM computers, is offered under two systems: CIF 20/20 ,
typically for banks with less than $300 million in assets, and the Silverlake
System , for banks with assets up to $10 billion. Domestically, JHA
frequently sells hardware with its software products. It also provides customer
support and related services. The Company's software systems have been
installed at over 1260 banks and financial institutions.
A detailed discussion of the major components of the results of operations for
the quarter and the nine months ended March 31, 1997, as compared to the same
periods in the previous year follows.
Revenues
Revenues increased 33% to $22,061,000 in the quarter ended March 31, 1997.
Software licensing and installation increased 14%. Maintenance, support and
service revenues increased 25%. Hardware sales were up 54% from last year's
quarter. The Company's non-hardware products and services (higher margin sales)
increased 20% over last year.
Nine month revenues this year were $61,759,000, up 25% over last year's
corresponding period. Each of the three major revenue categories increased by
20% or more with the largest increase (32%) in hardware sales and the smallest
in maintenance, support and service revenues.
The backlog of sales at March 31, 1997, was $22,935,000. Backlog at April 30,
1997 was $ 23,845,000.
Cost of Sales
The 35% increase in cost of sales for the third quarter of FY '97 is
relatively consistent with the increase in revenues. A large portion of the
increase results from the increase in hardware revenues and the related increase
in cost of hardware sales. Cost of services increased 13% primarily due to
growth in the Company's core business, less than the 20% increase in non-
hardware revenues.
Cost of sales increased 27% for the first nine months of fiscal '97,
relatively consistent with the 25% increase in revenues. Cost of hardware
increased 37% while cost of services increased 16%, both more favorable than the
corresponding revenue increases.
Gross Profit
Gross profit increased to $10,312,000 in the third quarter ended March 31,
1997, a 32% increase over last year. The gross margin percentage was 47% of
sales, consistent with last year.
The nine month gross profit this year was up 24% at $30,157,000. The gross
margin percentage for the first nine months was 49%, similar to last year's
rate.
Operating Expenses
Total operating expenses increased 25% in the quarter ended 3/31/97. This
continues the favorable trend, considering gross profit increased 32%.
Thus, the Company continues to gain efficiencies through growth. Selling
expenses increased 28% while research and development expenses increased 18%.
1
CIF 20/20 is a trademark of Jack Henry & Associates,
Inc.
2
Silverlake System is a registered trademark of Jack
Henry & Associates, Inc.
General and administrative expenses increased by 24%.
Operating expenses were $12,573,000 in the first nine months of fiscal '97,
15% increase. Since gross profit increased 24%, this continues to reflect
the Company's ability to leverage more to the bottom line as revenues increase.
Other Income and Expense
Other income and expense for the quarter and year-to-date periods ended March
31, 1997, were down when compared to the same periods last year.
Net Income
Net income from continuing operations for the third quarter was $3,735,000, or
$.20 per share, an increase of 33%, compared to $2,761,000, or $.15 per share in
the same period last year.
Net income from continuing operations for the nine months ended March 31, 1997
was $11,316,000, or $.59 per share (up 28%), compared to $8,615,000, or $.46 per
share.
FINANCIAL CONDITION
Liquidity
The Company's cash and held-to-maturity securities increased to $12,469,000 at
March 31, 1997, up from $8,080,000 at June 30, 1996.
JHA has available credit lines totaling $4,000,000, although the Company
expects their use to be minimal during FY '97. The Company currently has no
short-term or long-term debt obligations.
Capital Requirements and Resources
JHA generally uses existing resources and funds generated from operations to
meet its capital requirements. Capital expenditures totaling $6,792,000 for the
period ended March 31, 1997, were made for expansion of its facilities and
additional equipment. These were funded from cash generated by operations. The
consolidated capital expenditures of JHA could exceed $9,000,000 for FY '97.
The Company paid an $.08 per share cash dividend on March 13, 1997 to
stockholders of record February 21, 1996 which was funded from working capital.
Further, the Company's Board of Directors paid a 50% stock dividend on its
common stock, effectively a 3 for 2 split, on March 13, 1997 to stockholders of
record February 24, 1997. In addition, subsequent to March 31, 1997, the
Company's Board of Directors, declared a quarterly cash dividend of $.055 per
share on its common stock payable May 28, 1997 to stockholders of record on May
14, 1997. This will be funded out of working capital.
CONCLUSION
JHA's results of operations and its financial position continued to be quite
favorable during the quarter ended March 31, 1997. This reflects the continuing
attitude of cooperation and commitment by each employee, management's ongoing
cost control efforts and commitment to deliver top quality products and services
to the markets it serves.
PART II. OTHER INFORMATION
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
behalf by the undersigned thereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
Date: May 14, 1997 /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board and
Chief Executive Officer
Date: May 14, 1997 /s/ Terry W. Thompson
Terry W. Thompson
Vice President and
Chief Financial Officer
5
3-MOS
JUN-30-1997
MAR-31-1997
6502
5967
8293
0
0
24489
26741
7803
61322
14370
0
179
0
0
45041
61322
22061
22061
11749
4469
(198)
0
0
6041
2306
3735
(89)
0
0
3646
20
20
