FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI-
TIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-14112
JACK HENRY & ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1128385
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
663 Highway 60, P. O. Box 807, Monett, MO 65708
(Address of principal executive offices)
(Zip Code)
417-235-6652
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1996
Common Stock, $.01 par value 11,946,032
JACK HENRY & ASSOCIATES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item I - Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1996, (Unaudited) and June
30, 1996 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
September 30, 1996 and 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended September 30,
1996 and 1995 (Unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8
Part II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of
Security Holders 10
Item 5 - Other Information 11
Item 6 - Exhibits and Reports on Form 8-K 11
Part I. Financial Information
Item 1. Financial Statements
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
September 30,
1996 June 30,
(Unaudited) 1996
ASSETS
Current assets:
Cash $10,662 $ 4,952
Held-to-maturity securities 3,082 3,128
Receivables 8,429 15,990
Income taxes receivable - 889
Prepaid expenses and other 3,248 3,187
Total current assets $25,421 $28,146
Property and equipment, net 16,705 13,612
Other assets:
Intangible assets, net of amortization $16,694 $16,805
Computer software 1,348 1,375
Investments and other 618 463
Total other assets $18,660 $18,643
Total assets
$60,786 $60,401
September 30,
1996 June 30,
(Unaudited) 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,586 $ 2,238
Accrued expenses 1,716 2,945
Income taxes 1,807 -
Deferred revenue 13,694 16,068
Total current liabilities $18,803 $21,251
Deferred income taxes 1,732 1,732
Total liabilities $20,535 $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;
11,937,702 issued @ 9/30/96
11,867,593 issued @ 6/30/96 $ 119 $ 119
Additional paid-in capital 12,576 10,711
Retained earnings 27,556 26,588
Total stockholders' equity $40,251 $37,418
Total liabilities and
stockholders' equity $60,786 $60,401
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Quarter Ended
September 30,
1996 1995
Revenues:
Software licensing & installation $ 5,833 $ 4,842
Maintenance/support & service 6,277 5,451
Hardware sales & commissions 6,240 5,857
Total revenues $18,350 $16,150
Cost of sales:
Cost of hardware 4,318 4,007
Cost of services 4,025 3,904
Total cost of sales $ 8,343 $ 7,911
Gross profit $10,007 $ 8,239
55% 51%
Operating expenses:
Selling and marketing 2,202 1,832
Research and development 523 454
General and administrative 1,381 1,218
Total operating expenses $ 4,106 $ 3,504
Operating income 5,901 4,735
Other income (expense):
Interest income 177 163
Other, net 74 76
Total other income $ 251 $ 239
Income before income taxes $ 6,152 $ 4,974
Provision for income taxes 2,349 1,879
Net income $ 3,803 $ 3,095
Net income per share $ .30 $ .25
Weighted Average Shares Outstanding 12,693 12,342
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)
Three Months Ended
September 30,
1996 1995
Cash flows - operating activities:
Cash received from customers $24,315 $24,093
Cash paid to suppliers and employees (13,508) (14,856)
Interest and dividends received, net 222 191
Income taxes paid, net (343) (105)
Other, net 26 69
Net cash flow provided by operating
activities $10,712 $ 9,392
Cash flows from discontinued operations (107) -
Cash flows from investing activities:
Proceeds on sale of property & equipment $ 7 $ 2
Capital expenditures (3,524) (1,978)
Short-term investment activity, net - 1,023
Capitalized software development (41) (101)
Acquisition costs, net (314) (5,514)
Net cash used in investing activities $(3,872) $(6,568)
Cash flows from financing activities:
Proceeds from issuance of common stock
upon exercise of stock options $ 276 $ 229
Dividends paid (835) (673)
Payment of long-term debt (129) -
Purchase of Treasury Stock (335) (791)
Net cash used in financing activities $(1,023) $ (1,235)
Net increase (decrease) in cash $ 5,710 $ 1,589
Cash at beginning of period 4,952 3,423
Cash at end of period $10,662 $ 5,012
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Description of the Company - Jack Henry & Associates, Inc. ("JHA" or the
"Company") is a computer software company which has developed several banking
software systems. It markets those systems to financial institutions in the
United States along with the computer equipment (hardware) and provides the
conversion and software customization services necessary for a financial
institution to install a JHA software system. It also provides continuing
support and maintenance services to customers using the system. The Company
also processes ATM transactions for financial institutions in the U.S. All of
these related activities are considered a single business segment.
Consolidation - The consolidated financial statements include the accounts of
JHA and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in the consolidation.
Other Significant Accounting Policies - The accounting policies followed by
the Company are set forth in Note 1 to the Company's consolidated financial
statements included in its Annual Report on Form 10-K ("Form 10-K") for the
fiscal year ended June 30, 1996.
2. Interim Financial Statements
The accompanying condensed financial statements have been prepared in accor-
dance with the instructions to Form 10-Q of the Securities and Exchange Commis-
sion 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 September 30, 1996 and the results of its operations and its cash
flows for the three month period then ended.
The results of operations for the period ended September 30, 1996 are not
necessarily indicative of the results to be expected for the entire year.
3. Additional Interim Footnote Information
The following additional information is provided to update the notes to the
Company's annual financial statements for developments during the three months
ended September 30, 1996:
Effective September 1, 1996, the Company purchased all the outstanding stock
of Liberty Banking Services, Inc. (LBSI). LBSI's primary offering is service
bureau processing for financial institutions in the Rocky Mountain region. The
total consideration paid to LBSI's stockholders was $2,000,000 in Company
stock. The stock transaction was accounted for as a pooling of interests.
4. Income Per Share Information
Earnings per common share are computed by dividing income by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding for the three month period ended September 30, 1996 and 1995.
Item 2. - Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Background and Overview
Jack Henry & Associates, Inc. ("JHA" or the "Company"), is a leading provider of
integrated computer systems that perform data processing for banks and related
financial institutions. These systems are available for in-house or outsourced
applications. The Company was founded in 1976. Its proprietary applications
software, which operates on IBM computers, is offered under two systems: CIF
20/20(TM), typically for banks with less than $300 million in assets, and the
Silverlake System(R), for banks with assets up to $10 billion. JHA frequently
sells hardware with its software products. It also provides customer support
and related services. The Company's software systems have been installed at
over 1260 banks and financial institutions worldwide.
A detailed discussion of the major components of the results of operations for
the quarter ended September 30, 1996, as compared to the same period in the
previous year follows.
Revenues
Revenues increased 14% to $18,350,000 in the quarter ended September 30,
1996. Software licensing and installation increased 20%. Maintenance, support
and service revenues increased 15%. Hardware sales were up 7% from last year's
quarter. The Company's non-hardware products and services (higher margin sales)
increased 18% over last year.
The backlog of sales at September 30, 1996 was $16,547,000. This is down from
the record June 30, 1996 level, and is consistent with management's expectations
for the first quarter. Backlog at October 31, 1996 was $16,744,000.
Cost of Sales
The 5% increase in cost of sales for the first 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 significantly due to growth in
the Company's core business.
Gross Profit
Gross profit increased to $10,007,000 in the first quarter ended September 30,
1996, a 21% increase over last year. The gross margin percentage was 55% of
sales compared to 51% last year.
Operating Expenses
Total operating expenses increased 17%. This is a favorable picture, since
gross profit increased 21%. Thus, the Company continues to gain efficiencies
through growth. Selling expenses increased 20% while research & development and
general & administrative expenses increased 15% and 13%, respectively.
Other Income and Expense
Other income for the quarter ended September 30, 1996 reflects a small
increase when compared to the same period last year.
Net Income
Net income from continuing operations for the first quarter was $3,803,000, or
$.30 earnings per share compared to $3,095,000, or $.25 earnings per share in
the same period last year.
FINANCIAL CONDITION
Liquidity
The Company's cash and held-to-maturity securities increased to $13,744,000 at
September 30, 1996, from $8,080,000 at June 30, 1996.
JHA has available credit lines totaling $2,215,000, 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 $3,524,000 for the
quarter ended September 30, 1996, were made for additional equipment. These
were funded from cash generated by operations. The consolidated capital
expenditures of JHA could exceed $4,500,000 for FY '97.
The Company paid a $.07 per share cash dividend on September 24, 1996 to
stockholders of record September 9, 1996 which was funded from working capital.
In addition, the Company's Board of Directors, subsequent to September 30, 1996,
declared a quarterly cash dividend of $.07 per share on its common stock payable
December 10, 1996 to stockholders of record on November 19, 1996. This will be
funded out of working capital.
CONCLUSION
JHA's results of operations and its financial position continued to be quite
favorable during the quarter ended September 30, 1996. This reflects the
continuing attitude of cooperation and commitment by each employee, management's
ongoing cost control efforts and commitment to deliver top quality products and
services to the markets served.
Silverlake System(R) is a registered trademark of Jack Henry & Associates, Inc.
CIF 20/20(TM) is a trademark of Jack Henry & Associates, Inc.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Stockholders of Jack Henry & Associates, Inc. was
held on October 29, 1996, for the purpose of electing a board of directors, to
approve the adoption of the 1996 Stock Option Plan, to amend the Certificate of
Incorporation to require two-thirds stockholder vote for stockholder amendment
of By-Laws, to amend the Certificate of Incorporation to prohibit stockholder
action by written consent and to amend the Certificate of Incorporation regard-
ing consideration of relevant factors in certain business combinations. Proxies
for the meeting were solicited pursuant to Section 14(a) of the Securities and
Exchange Act of 1934 and there was no solicitation in opposition to management's
solicitations. Management's nominees for director, all incumbents, were elected
with the number of votes for and withheld as indicated below:
For Withheld
John W. Henry 10,286,767 283,833
Jerry D. Hall 10,286,767 283,833
Michael E. Henry 10,286,767 283,833
James J. Ellis 10,285,067 285,533
Burton O. George 10,286,717 283,883
George R. Curry 10,284,917 285,683
Michael R. Wallace 10,286,767 283,833
Also approved was the adoption of the 1996 Stock Option Plan with the number of
votes as indicated below:
For Against Withheld Broker Non-Votes
6,076,401 2,177,685 50,880 2,265,634
Also approved was to amend the Certificate of Incorporation to require two-
thirds stockholder vote for stockholder amendment of By-Laws with the number of
votes as indicated below:
For Against Withheld Broker Non-Votes
7,200,120 1,063,116 41,730 2,265,634
Also approved was to amend the Certificate of Incorporation to prohibit stock-
holder action by written consent with the number of votes as indicated below:
For Against Withheld Broker Non-Votes
6,206,673 2,082,110 54,410 2,227,407
Also approved was to amend the Certificate of Incorporation regarding consider-
ation of relevant factors in certain business combinations with the number of
votes as indicated below:
For Against Withheld Broker Non-Votes
6,214,456 2,073,632 112,735 2,169,777
SIGNATURES
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
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 of the undersigned thereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
Date: November 13, 1996 /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board
Chief Executive Officer
Date: November 13, 1996 /s/ Terry W. Thompson
Terry W. Thompson
Vice President and
Chief Financial Officer
5
3-MOS
JUN-30-1997
SEP-30-1996
10662
3082
8429
0
0
25421
23204
6499
60786
18803
0
119
0
0
40132
60786
18350
18350
8343
4106
(251)
0
0
6152
2349
3803
0
0
0
3803
.30
.30
