UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 22, 2006
JACK HENRY & ASSOCIATES, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 0-14112 43-1128385
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
663 Highway 60, P.O. Box 807, Monett, MO 65708
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (417) 235-6652
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a.-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4 (c) under
the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 22, 2006, Jack Henry & Associates, Inc. issued a press
release announcing 2006 fourth quarter results, the text of which is
attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated August 22, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
(Registrant)
Date: August 22, 2006 By: /s/ Kevin D. Williams
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Kevin D. Williams
Chief Financial Officer
EXHIBIT 99.1
Company: Jack Henry & Associates, Inc. Analyst Contact: Kevin D. Williams
663 Highway 60, P.O. Box 807 Chief Financial Officer
Monett, MO 65708 (417) 235-6652
IR Contact: Jon Seegert
FOR IMMEDIATE RELEASE Director of Investor Relations
--------------------- (417) 235-6652
JACK HENRY & ASSOCIATES FISCAL YEAR ENDS WITH 19 PERCENT INCREASE
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IN NET INCOME
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Monett, MO. August 22, 2006 - Jack Henry & Associates, Inc. (Nasdaq: JKHY),
a leading provider of integrated technology solutions and outsourced data
processing for financial institutions, today announced fiscal 2006 results.
Total revenue increased 11 percent over prior fiscal year to $592.2 million,
gross profit grew 15 percent to $256.4 million, and net income increased to
$89.9 million or 19 percent over the prior fiscal year.
For the quarter ended June 30, 2006, the company generated total revenue of
$162.3 million compared to $141.4 million in the same quarter a year ago.
Gross profit increased to $70.7 million compared to $59.9 million in the
fourth quarter of last fiscal year. Net income totaled $25.4 million, or
$0.27 per diluted share, compared to $21.7 million, or $0.23 per diluted
share in the same quarter a year ago.
In fiscal 2006, total revenue was $592.2 million compared to $535.9 million
in fiscal 2005. Gross profit increased to $256.4 million compared to $222.5
million during last fiscal year. Net income for the current year was $89.9
million, or $0.96 per diluted share, compared to $75.5 million, or $0.81 per
diluted share for the prior year.
According to Jack Prim, CEO, "We are pleased to announce record revenues and
net income for the quarter and year. Our revenue growth of 15% in the
quarter was primarily organic, led by core system sales to mid-tier
financial institutions, and by strong continued growth in our electronic
processing services including ATM/Debit Card, bill payment and remote
deposit. Our performance for the year was solid with 11% growth in
revenues. Our manager's strong focus on the business enabled us to leverage
that revenue growth into a 19% increase in net income and EPS. At the same
time our employees continued focus on our customers allowed us to further
improve on our industry leading customer satisfaction ratings."
Operating Results
"We continue to experience strong demand for our products and services in
both of our banking and credit union segments. Also, we are experiencing
continued increasing demand for the products marketed under our ProfitStars
brand to non-core customers, which are contributing to both our revenue and
earnings growth," stated Tony Wormington, President. "We believe this
demand is a direct result of our continued focus on our primary strengths
which are first providing our customers with powerful and flexible
technology either through a best-of-suite approach or individual best-of-
breed point products, and secondly our fundamental commitment to provide
each of our clients with outstanding service. "
License revenue for the fourth quarter was $25.7 million, or 16 percent of
fourth quarter total revenue, compared to $19.7 million, or 14 percent of
the fourth quarter total revenue a year ago. Support and service revenue
increased 13 percent to $113.7 million, or 70 percent of total revenue in
fourth quarter of fiscal 2006 from $100.2 million, or 71 percent of total
revenue for the same period a year ago. The increase in support and service
revenue was mainly due to the continued quarter over quarter growth in our
electronic transactions processing, outsourcing and our in-house support.
The only component of this line of revenue that had a small decrease in the
fourth quarter compared to the prior year was implementation services, which
were down primarily due to the timing of implementations during the quarter
compared to the prior year. Hardware sales in the fourth quarter of fiscal
2006 increased 7 percent to $22.9 million, or 14 percent of total revenue,
from $21.5 million, or 15 percent of total revenue in the fourth quarter of
last fiscal year.
For the fiscal year 2006, license revenue increased to $84.0 million, or 14
percent of total revenue, compared to $82.4 million, or 15 percent of total
revenue a year ago. Support and service revenue contributed 72 percent of
total revenue or $425.7 million of the total revenue for the current fiscal
year, compared to $364.1 million, or 68 percent of total revenue for the
prior fiscal year. The increase in support and service revenue is due to
solid increases in every component of this revenue line for the fiscal year
2006 compared to fiscal year 2005. Hardware sales for the fiscal year were
$82.5 million compared to $89.4 million for the same period last year.
Hardware revenue was 14 percent of total revenue for fiscal 2006 compared to
17 percent of revenue in fiscal 2005.
Cost of sales for the fourth quarter increased to $91.6 million from $81.6
million for the fourth quarter in fiscal 2005. Fourth quarter gross profit
increased 18 percent to $70.7 million with a 44 percent gross margin,
compared to $59.9 million and a 42 percent gross margin for the same period
a year ago.
Cost of sales for fiscal year 2006 increased 7 percent to $335.8 million
from $313.4 million for fiscal year 2005. Gross profit for fiscal 2006
increased 15 percent to $256.4 million with a 43 percent gross margin
compared to $222.5 million with a 42 percent gross margin for fiscal 2005.
Gross margin on license revenue for the fourth quarter of fiscal 2006 was 98
percent compared to 94 percent a year ago for the same period. Gross
margins on license revenue for fiscal 2006 and fiscal 2005 were 97 percent
and 93 percent, respectively. Increase in this gross margin is directly
attributable to the sales mix of third party products delivered.
Support and service gross margin increased to 35 percent in the fourth
quarter of fiscal 2006 from 34 percent in the fourth quarter of the prior
year. Support and service gross margin increased to 36 percent in fiscal
2006 from 33 percent for fiscal 2005. Support and service gross margins have
improved due to the continued increase in electronic processing transactions
and process improvements primarily in the credit union segment. Hardware
gross margins were lower for the fourth quarter at 25 percent compared to 31
percent for the same quarter last year. The hardware gross margin for
fiscal year 2006 was 27 percent, while fiscal year 2005 hardware gross
margin was 29 percent, primarily due to sales mix along with reduced vendor
rebates received on hardware sold during the current year.
Operating expenses increased 18 percent in the final quarter of fiscal 2006
compared to the same quarter a year ago primarily due to increased
commissions related to license revenue, employee related expenses from
increased headcount and depreciation expense. Selling and marketing expenses
rose 13 percent in the current year fourth quarter to $14.0 million, or 9
percent of total revenue, from $12.4 million, also 9 percent of prior year
fourth quarter revenue. Research and development expenses increased 23
percent to $8.7 million from $7.0 million, while remaining at 5 percent of
total revenue for the fourth quarters in fiscal 2006 and 2005. General and
administrative costs increased 22 percent in the current year fourth quarter
to $8.0 million from $6.6 million in the fourth quarter of fiscal 2005. The
fourth quarter in both fiscal years remained at 5 percent of revenue.
Operating expenses increased 13 percent for the 2006 fiscal year to $117.1
million from $103.4 million for fiscal 2005, primarily due to employee
related expenses from increased headcount, depreciation expense, and
acquisitions. Selling and marketing expenses rose 7 percent for the current
year to $50.0 million, or 8 percent of total revenue from $46.6 million or 9
percent of total revenue compared to a year ago. Research and development
expenses increased 15 percent to $31.9 million from $27.7 million, while
remaining at 5 percent of total revenue for both fiscal years. General and
administrative costs increased 21 percent to $35.2 million or 6 percent of
revenue for the current fiscal year from $29.1 million, or 5 percent of
revenue for 2005 fiscal year.
Operating income increased 18 percent to $40.0 million, or 25 percent of
fourth quarter revenue, compared to $33.9 million, or 24 percent of revenue
in the fourth quarter of fiscal 2005. Operating income increased 17 percent
to $139.4 million, or 24 percent of 2006 fiscal revenue, compared to $119.1
million, or 22 percent of revenue in fiscal 2005.
Provision for income taxes increased 21 percent in the current fourth
quarter compared to the same quarter in fiscal 2005. Provision for income
taxes for the current fiscal year increased 13 percent and is 35.8 percent
of income before income taxes compared to 37 percent of income before income
taxes for fiscal 2005. The effective tax rate change is due to the
manufacturing deduction and the reevaluation of effective state tax rates.
Fourth quarter net income totaled $25.4 million, or $0.27 per diluted share,
compared to $21.7 million, or $0.23 per diluted share in the fourth quarter
of fiscal 2005. Fiscal year 2006 net income totaled $89.9 million, or
$0.96 per diluted share, compared to $75.5 million, or $0.81 per diluted
share in the prior year.
According to Kevin Williams, CFO, "The net results of the quarter and the
year were in-line with our expectations. We received an increase in net
income from the change in the effective tax rate during our third fiscal
quarter which had a positive impact on the fiscal year; however the tax rate
increased slightly in the fourth quarter due to the expiration of the R&D
credit in December 2005, which has not been reinstated yet. Our future
effective tax rate will be dependent somewhat on whether this credit is
reinstated and if it is retro-active to the beginning of the calendar year,
we should have another reduction in our effective tax rate in the quarter
that it is approved."
For the fourth quarter of 2006, the bank systems and services segment
revenue increased 18 percent to $133.6 million, with a gross margin of 45
percent from $113.3 million and a gross margin of 43 percent in the same
quarter a year ago. The credit union systems and services segment revenue
increased 2 percent to $28.7 million with a gross margin of 37 percent for
the fourth quarter of 2006 from $28.1 million and a gross margin of 41
percent in the same period a year ago.
In fiscal year 2006, the bank systems and services segment revenue increased
13 percent to $482.9 million, with a gross margin of 44 percent from $428.7
million and a gross margin of 42 percent a year ago. The credit union
systems and services segment revenue increased 2 percent to $109.3 million
for the fiscal 2006 year, from $107.2 million in fiscal 2005. Both years
ended with a gross margin of 38 percent.
Balance Sheet, Cash Flow, and Backlog Review
At June 30, 2006, cash and cash equivalents increased to $74.1 million from
$11.6 million at June 30, 2005. Trade receivables decreased 14 percent, or
$29.6 million, to $180.3 million compared to $209.9 million a year ago. The
increase in cash and the decrease in receivables are due primarily to the
timing of annual maintenance billings and the related collection for the
upcoming fiscal year. Note payable increased from $45.0 million a year ago
to $50.2 million at June 30, 2006. Deferred revenue increased $14.8 million
or 9 percent to $185.7 million at June 30, 2006, compared to $170.9 million
a year ago. Stockholders' equity grew 11 percent to $575.2 million at June
30, 2006, from $517.2 million a year ago.
Backlog increased 11 percent at June 30, 2006 to $221.9 million ($66.4
million in-house and $155.5 million outsourcing) from $199.1 million ($64.0
million in-house and $135.1 million outsourcing) at June 30, 2005. Backlog
increased 4 percent when compared to March 31, 2006, at $213.3 million
($62.8 million in-house and $150.5 million outsourcing).
Cash provided by operating activities totaled $169.4 million for fiscal year
2006 compared to $108.3 million last year. In the current year, cash
provided by operating activities consisted of $89.9 million in net income,
depreciation and amortization expense of $43.8 million plus the combined
increase of $8.5 million in deferred income taxes and the loss on disposal
of property. Stock-based compensation was $0.5 million in expense. The
balance of items which comprise cash provided from operating activities
consists of the change in receivables of $30.4 million less the change of
$16.8 million for prepaid and accrued expenses, and accounts payable, plus
$10.6 million for the change in deferred revenues and the change in income
taxes of $2.6 million. For fiscal year 2005, cash flow from operations
consisted of $75.5 million in net income, depreciation and amortization
expense of $38.9 million, plus a combined increase of $6.3 million in
deferred income taxes and the loss on disposal of property and equipment.
The balance of items which comprise cash provided from operating activities
consisted of a decrease in the change in receivables of $35.0 million, plus
the change of $5.6 million for prepaid and accrued expenses, accounts
payable, and income taxes, plus $16.9 million change in deferred revenues.
Net cash used in investing activities for fiscal year 2006 was $77.2 million
and included payment for the Profitstar acquisition of $19.3 million, plus
$1.6 million paid on earn-outs and other adjustments from acquisitions made
in fiscal 2005, capital expenditures of $45.4 million, and capitalized
software development of $16.1 million. The proceeds from sale of equipment
and property provided $4.3 million in cash. In fiscal 2005, net cash used
in investing activities was $185.1 million and consisted mainly of $119.5
million in payment for acquisitions, $58.0 million in capital expenditures
and $7.8 million for capitalized software development.
Net cash from financing activities for the current fiscal year used cash of
$29.7 million and included payment of dividends of $18.4 million and the
purchase of treasury stock of $41.8 million. Cash used was offset by
proceeds of $20.6 million from the exercise of stock options and sale of
common stock, an additional $5.1 million in the revolving bank credit
facility, plus the excess tax benefit from stock-based payments of $4.7
million. For fiscal 2005, cash provided by financing activities was $34.6
million and included $45.0 million for the revolving bank credit facility,
plus the proceeds from the exercise of stock options and sale of common
stock of $15.1 million, offset by $15.5 million for dividends paid and $10.0
million used for the purchase of treasury stock.
About Jack Henry & Associates
Jack Henry & Associates, Inc. is a leading provider of integrated computer
systems and processor of ATM/debit card/ACH transactions for banks and
credit unions. Jack Henry markets and supports its systems throughout
the United States, and has more than 8,700 customers nationwide. For
additional information on Jack Henry, visit the company's Web site
at www.jackhenry.com. The company will hold a conference call on August
23rd; at 7:45 a.m. Central Time and investors are invited to listen at
www.jackhenry.com.
Statements made in this news release that are not historical facts are
forward-looking information. Actual results may differ materially from
those projected in any forward-looking information. Specifically, there are
a number of important factors that could cause actual results to differ
materially from those anticipated by any forward-looking information.
Additional information on these and other factors, which could affect the
Company's financial results, are included in its Securities and Exchange
Commission (SEC) filings on Form 10-K, and potential investors should review
these statements. Finally, there may be other factors not mentioned above
or included in the Company's SEC filings that may cause actual results to
differ materially from any forward-looking information.
Condensed Consolidated Statements of Income (Unaudited)
(In Thousands, Except Per Share Data)
Three Months Ended Twelve Months Ended
June 30, % Change June 30, % Change
-------------------- -------- -------------------- --------
2006 2005 2006 2005
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REVENUE
License $ 25,704 $ 19,732 30% $ 84,014 $ 82,374 2%
Support and service 113,653 100,193 13% 425,661 364,076 17%
Hardware 22,953 21,500 7% 82,530 89,413 -8%
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Total 162,310 141,425 15% 592,205 535,863 11%
COST OF SALES
Cost of license 583 1,119 -48% 2,717 5,547 -51%
Cost of support and service 73,828 65,685 12% 272,383 244,097 12%
Cost of hardware 17,172 14,759 16% 60,658 63,769 -5%
-------- -------- -------- --------
Total 91,583 81,563 12% 335,758 313,413 7%
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GROSS PROFIT 70,727 59,862 18% 256,447 222,450 15%
Gross Profit Margin 44% 42% 43% 42%
OPERATING EXPENSES
Selling and marketing 13,974 12,380 13% 50,006 46,630 7%
Research and development 8,687 7,043 23% 31,874 27,664 15%
General and administrative 8,035 6,580 22% 35,209 29,087 21%
-------- -------- -------- --------
Total 30,696 26,003 18% 117,089 103,381 13%
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OPERATING INCOME 40,031 33,859 18% 139,358 119,069 17%
INTEREST INCOME (EXPENSE)
Interest income 467 173 >100% 2,066 1,162 78%
Interest expense (458) (261) 75% (1,355) (388) >100%
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Total 9 (88) <100% 711 774 -8%
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INCOME BEFORE INCOME TAXES 40,040 33,771 19% 140,069 119,843 17%
PROVISION FOR INCOME TAXES 14,634 12,065 21% 50,145 44,342 13%
-------- -------- -------- --------
NET INCOME $ 25,406 $ 21,706 17% $ 89,924 $ 75,501 19%
======== ======== ======== ========
Diluted net income per share $ 0.27 $ 0.23 $ 0.96 $ 0.81
======== ======== ======== ========
Diluted weighted avg shares
outstanding 93,124 93,127 93,787 $ 92,998
======== ======== ======== ========
Consolidated Balance Sheet Highlights
(In Thousands-unaudited) June 30, % Change
---------------------- --------
2006 2005
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Cash, cash equivalents and investments $ 76,320 $ 12,601 506%
Receivables 180,295 209,922 -14%
TOTAL ASSETS 906,067 814,153 11%
Accounts payable and accrued expenses $ 46,849 $ 43,978 7%
Note payable 50,241 45,000 12%
Deferred revenue 185,719 170,936 9%
Stockholder's Equity 575,212 517,154 11%
(THIRTY)